New South Wales Supreme Court CITATION : Pearlburst Pty Ltd v Summers Resort Group Pty Ltd; Landmark Leisure Group Pty Ltd v Summers Resort Group Pty Ltd [2007] NSWSC 1126 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 08/10/07 JUDGMENT DATE : 11 October 2007 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order that originating process be dismissed; Order that plaintiff pay defendant's costs CATCHWORDS : CORPORATIONS - winding up - application by plaintiff for order setting aside statutory demand - application by defendant for summary dismissal - where no affidavit in support of plaintiff's application both filed under s.459G(3)(a) and served under s.459G(3)(b) - where defendant had not proved service of statutory demand in any manner specified in s.109X - where statutory demand received by plaintiff, treated as statutory demand and acted upon LEGISLATION CITED : Corporations Act 2001 (Cth), ss.109X(1)(a), 459E(3), 459G, 459H(1), 459J(1) Uniform Procedure Rules 2005, rules 13.4, 35.8 David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 Dwyer v Canon Australia Pty Ltd [2007] SASC 100 Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305 CASES CITED : Howship Holdings Pty Ltd v Leslie (No 2) (1996) 41 NSWLR 542 Italiano v Carbone [2005] NSWSC 177 Northumbrian Ice Cream Co Ltd v Breakaway Vending Pty Ltd [2006] NSWSC 1216 Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 Pearlburst Pty Ltd - Plaintiff PARTIES : Summers Resort Group Pty Ltd - Defendant Landmark Leisure Group Pty Ltd - Plaintiff Summers Resort Group Pty Ltd - Defendant FILE NUMBER(S) : SC 4405/07; 4403/07 COUNSEL : Mr P.M. Carlisle, Solicitor - Plaintiffs Mr H.N. Newton - Defendants SOLICITORS : Carlisle Attorneys - Plaintiffs Gells Lawyers - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY, 11 OCTOBER 2007 4405/07 PEARLBURST PTY LTD v SUMMERS RESORT GROUP PTY LTD 4403/07 LANDMARK LEISURE GROUP PTY LTD v SUMMERS RESORT GROUP PTY LTD JUDGMENT 1 These reasons relate to proceedings 4405/07. The circumstances in proceedings 4403/07 are identical. It is accepted by the parties that the outcome in each must be the same. I confine myself to 4405/07 but on the footing that the same orders will be made in 4403/07. 2 On 5 September 2007, the plaintiff filed an originating process Section A of which is as follows: "This application is made under section 459G and 459J of the Corporations Act 2001. It is an application by the plaintiff for an order setting aside a Statutory Demand served on it by the Defendant. On the facts stated in the supporting affidavit, the plaintiff claims: 1 an order that the statutory Demand dated 15 August 2007 served by the Defendant be set aside. 2 An order that the Defendant pay the Plaintiff's costs. Date: 5 September 2007" 3 The defendant filed a notice of motion on 27 September 2007 seeking an order that the proceedings be dismissed pursuant to rule 13.4 of the Uniform Civil Procedure Rules 2005. It is the contention of the defendant that no cause of action exists or that the proceedings represent an abuse of process. 4 The basis on which the defendant seeks peremptory termination of the proceedings is that the application embodied in the originating process of 5 September 2007 is not "an application under section 459G" as referred to in each of s.459H(1) and s.459J(1). That being so, the defendant says, the application is not one in response to which it is open to the court to make an order setting aside the relevant statutory demand. 5 The contention of the defendant is that the several steps contemplated by s.459G were not taken within the period to which the section refers. Section 459G is as follows: " Company may apply (1) A company may apply to the Court for an order setting aside a statutory demand served on the company. (2) An application may only be made within 21 days after the demand is so served. (3) An application is made in accordance with this section only if, within those 21 days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company." 6 The High Court held in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 that s.459G imposes a time requirement as an essential condition of the right to apply for an order setting aside a statutory demand. If all things which, according to the section, are to happen within the specified period of 21 days do not so happen, the court has no jurisdiction to order that the statutory demand be set aside. 7 It is the contention of the defendant that the plaintiff did not meet the specification in s.459G relating to "an affidavit supporting the application". That specification is twofold: first, that the affidavit be "filed with the Court"; and, second, that a copy of the affidavit be "served on the person who served the demand on the company". Both those things are to happen within the specified period of 21 days. The defendant maintains that they did not so happen. 8 Three documents embodying affidavits were placed before the court on the present application. The content of each of them is such as to cause the affidavit to answer the description "an affidavit supporting the application", where "the application" is understood to be the application in the originating process of 5 September 2007. One affidavit is dated 5 September 2007. Each of the other two is dated 12 September 2007. 9 In relation to the affidavit of 5 September 2007, there is evidence that it was presented at the registry for filing on that day together with the originating process. While it appears that the original was dealt with in such a way to cause a copy to be stamped "The original of this document was filed on 5 Sep 2007", part of the court record has been tendered containing in respect of the affidavit a notation dated 5 September 2007 stating "Affidavit not filed, rejected incorrectly sworn". It may be that, in these circumstances, the affidavit of 5 September 2007 is not properly to be regarded as having been "filed with the Court" as referred to in s.459G(3)(a). But even if it was "filed with the Court", there is no evidence that a copy of it was, within the specified period of 21 days or at all, served on the defendant as contemplated by s.459G(3)(b). It follows that the plaintiff cannot look to the affidavit of 5 September 2007 as an affidavit in respect of which there was compliance with both of the requirements imposed by s.459G(3), that is, the requirement that it be filed and the requirement that a copy of it be served. 10 In relation to each of the affidavits of 12 September 2007, there is evidence that a copy of it was served on the defendant. But there is no evidence that the affidavit was "filed with the Court". Again, therefore, the plaintiff cannot look to either of these affidavits as one in respect of which there was compliance with both the s.459G(3) requirements. 11 Mr P.M. Carlisle, solicitor, who appeared for the plaintiff, pointed to what was perceived to be a prejudicial effect of the rules of court in this situation. The requirement under s.459G is that filing of the supporting affidavit occur within the specified period of 21 days. The general thrust of rule 35.8 of the Uniform Civil Procedure Rules 2005, however, is to discourage the filing of affidavits. As relevant to proceedings in this court, the rule imposes a prohibition upon the filing of an affidavit unless the court grants leave for the filing or the filing is effected in accordance with a provision of the Uniform Civil Procedure Rules, other rules of this court or a practice note of the court. 12 This regime was perceived as creating an inhibition upon fulfilment of the s.459G condition concerned with filing of an affidavit. It is not, in reality, the source of any such inhibition. In the first place, a practice note of this court (Practice Note SC Gen 4) states that, subject to any order or direction of the court, "an affidavit must always be filed before it can be relied on in … proceedings in the Corporations List of the Equity Division". This is such a proceeding. More fundamentally s.459G itself, by creating a condition of jurisdiction dependent on the filing of an affidavit, obviously permits such filing and, as a provision of a Commonwealth statute, does so in a way that causes any prohibition under State law to be invalid to the extent of the inconsistency. Any practical problem could, in any event, be solved by an urgent application to the Corporations Judge for leave to file. Such leave would, in the circumstances, be granted in respect of an affidavit in proper form. 13 Whatever the reason may be, neither of the affidavits of 12 September 2007 was "filed with the Court" as referred to in s.459G(3)(a). 14 The situation in the present case is thus one in which the steps contemplated by s.459G(3) with respect to supporting affidavit were not taken in relation to any of the three documents I have mentioned. Having regard to the David Grant & Co Pty Ltd case, therefore, the conclusion must be that – subject to the matter I am about to mention – the originating process does not embody an application made in accordance with s.459G and therefore does not constitute a foundation for the making of an order setting aside the statutory demand. 15 There is, however, an important matter to which the plaintiff refers in support of the proposition that summary dismissal should not be ordered. It is said by the plaintiff that the defendant has not proved service of the statutory demand. That being so, it is argued, it cannot be said that the period identified in ss.459G(2) and (3) – the period described by the words "within 21 days after the demand is so served" (that is, "served on the company" as referred to in s.459G(1)) – has expired. If that is correct, the relevant deadline cannot be seen to have been missed. 16 The defendant's response is that the originating process itself, as well as correspondence between the solicitors, proceeded on the clear footing that the document dated 15 August 2007 referred to in the originating process was "a statutory demand" that had, in the words of the originating process, been "served by the defendant". The plaintiff, it was said, has, as part of the basis for seeking the relief envisaged by the originating process, embraced and accepted the proposition that the document in question is a "statutory demand" and that it was "served on" the plaintiff. 17 The position in which the plaintiff is placed in this respect is, I think, that described by Mandie J in Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305 at p.308: "I consider that the plaintiff cannot seek an order pursuant to s 459G(1) of the Act setting aside a statutory demand where it wishes to say that it has not been served with the demand. The appropriate mode of dealing with that situation would have been either to apply for a declaration that the purported service was ineffective or to rely upon the point in opposition to any winding-up application based upon the statutory demand." 18 I proceed nevertheless to consider the evidence on which the defendant relies as to service of the statutory demand. There is, in the first instance, a passage in the affidavit of its solicitor (Mr Bailey of Gells Lawyers) as follows: "Annexed to this Affidavit and marked with the letters which appear directly opposite are true copies of the following documents, which are relevant for the purposes of the defendant's accompanying notice of motion: … 'C' Letter that I caused to be sent, by pre-paid ordinary post, to the plaintiff at its registered office on 15 August 2007, which enclosed the original of the document a true copy of which appears as Annexure 'B' to this affidavit." 19 The annexure "B" consists of a copy of the demand dated 15 August 2007 and a copy of the s.459E(3) affidavit accompanying it. 20 The letter which is annexure "C" to Mr Bailey's affidavit refers to an enclosed statutory demand and affidavit and is addressed as follows: "Pearlburst Pty Limited ACN 114 815 413 Suite 55 2 O'Connell Street Parramatta NSW 2150" 21 ASIC searches in evidence show that the registered office of the plaintiff was, at all relevant times, at Suite 55, 2 O'Connell Street, Parramatta. 22 Section 109X(1)(a) of the Corporations Act says that a document may be served on a company by "posting it to the company's registered office". Proof of service of a document on a company by "posting it to the company's registered office" involves proof of the several elements identified by Debelle J in Dwyer v Canon Australia Pty Ltd [2007] SASC 100 (at [6]): "In order to be able to establish service by post upon a company, it is therefore necessary to prove that the letter was: • properly addressed, • pre-paid, • posted as a letter, and • sent to the registered office of the company. Service by post will not be established unless each of those facts has been proved." 23 To like effect are observations of Brereton J in Northumbrian Ice Cream Co Ltd v Breakaway Vending Pty Ltd [2006] NSWSC 1216 at [12] concerning service by post: "Proof of service by post requires, at least: · Proof that the envelope bore the correct name and address; · Proof that the envelope contained the relevant document to be served; · Proof that the envelope bore the correct cost of postage; and · Proof that the envelope was placed in the post." 24 In the present case, there is no direct evidence about what appeared on the face of the envelope; there is only evidence of what appeared on the letter of 15 August 2007. Indeed, there is no direct evidence of the existence of any envelope, in that, while it is said in Mr Bailey's affidavit that the letter was sent by prepaid post there is no explicit statement that the letter (and the annexure "B" documents said to have been enclosed with it) were put into any envelope. There is no evidence of the amount or value of any stamp or franking affixed to any such envelope. And there is no direct evidence that anyone lodged any stamped or franked envelope (and contents) at any post office or in any post box. 25 With the evidence in this state, I cannot find that the statutory demand was, as contemplated by s.109X(1)(a), posted to the plaintiff's registered office. But it does not follow that I should proceed on the basis that the statutory demand was not served. As was recognised in Howship Holdings Pty Ltd v Leslie (No 2) (1996) 41 NSWLR 542 and confirmed in several later cases, the s.109X provisions are facultative only. They are not exclusive or mandatory and do not render unavailable or irrelevant other modes of service. 26 Mr Townhill is the deponent of the three affidavits to which I have referred. He is shown by ASIC records to have been a director of the plaintiff at material times. In each of the three affidavits, all of which were obviously prepared by Carlisle Attorneys, Mr Townhill deposed: "1. I am a Director of the Plaintiff and as such I am very familiar with the affairs of the Plaintiff and its records and I am authorized to swear this Affidavit on its behalf. 2. The Plaintiff makes this Application under Sections 459(g) and 459(j) of the Corporations Act 2001 and requests that the Court make an Order that the Statutory Demand issued by the Defendant and dated 15 August 2007 be set aside." 27 From this, I infer without hesitation that the demand dated 15 August 2007 came into the possession of a director of the plaintiff; that, in consequence of that, the plaintiff, as paragraph 1 of each affidavit states, authorised that director to swear an affidavit on the plaintiff's behalf; and that the plaintiff's purpose in conferring that authority was the initiation and pursuit by the plaintiff of an application of the kind mentioned in paragraph 2 of each affidavit, that is, an application under s.459G of the Corporations Act with a view to obtaining from the court an order that the demand dated 15 August 2007 be set aside. The position suggested by the filing and terms of the originating process is thus explicitly confirmed by a director of the plaintiff. 28 In these circumstances, it would be artificial in the extreme to conclude that the statutory demand had not been served. The defendant can be seen to have taken, through Mr Townhill, steps entirely consistent with the statutory demand's having been served on it – indeed, steps not explicable on any other basis. The evidence of the steps taken by the plaintiff amply justifies a finding that the statutory demand was received by it, at the latest, on the day on which the originating process was signed and filed and Mr Townhill's first affidavit was sworn and presented for filing, that is, 5 September 2007. 29 The principles concerning "informal service" discussed in the judgment of Basten JA in Italiano v Carbone [2005] NSWSC 177 at [56] to [62] mean that, even though the facultative procedures provided for in s.109X were not followed (or, at least, are not shown to have been followed), the evidence about the plaintiff's receipt of and dealings with the statutory demand establishes that the demand was served on the plaintiff on or after the date it bears (15 August 2007) and on or before the date of the originating process and Mr Townhill's first affidavit (5 September 2007). Those principles have been applied to statutory demands in a number of cases. 30 This conclusion on the matter of service of the statutory demand means that the period of 21 days referred to in ss.459G(2) and 459G(3) began on or after 15 August 2007 but not later than 5 September 2007, with the result that, whatever the actual day of service may have been within that range, the relevant period of 21 days had expired before the defendant filed its notice of motion on 27 September 2007. And since, on the last-mentioned day, the position with respect to filing with the court of an affidavit as described in s.459G(3)(a) and service of a copy as described in s.459G(3)(b) remained as I have described, the conclusion must be that, having regard to s.459G(3) as a whole, the originating process filed on 5 September 2007 did not embody an application in relation to the statutory demand made in accordance with s.459G. 31 The defendant is therefore entitled to the relief claimed in the notice of motion filed on 27 September 2007. In each of 4405/07 and 4403/07, the orders of the court will be: 1. Order that the originating process be dismissed. 2. Order that the plaintiff pay the defendant's costs of the proceedings. 32 I would add three observations. First, if this result seems harsh because it shuts the plaintiff out from pursuing what might be a meritorious case, the reality is, as was expressly recognised in the David Grant & Co Pty Ltd case (at p.279), that the relevant provisions will, in some cases, work in an apparently harsh way. That is part of the statutory scheme (see also the observations of Spigelman CJ in Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 at pp.671-2). Second, of course, the circumstance that a company served with a statutory demand does not succeed in having the demand set aside does not mean that the company must make payment in accordance with the demand. Nor does it mean that a financially sound company will be subjected to winding up. The consequence is that, if a winding up application follows within the relevant period, the company is put to proof of its solvency. Third, each plaintiff has given notice of an intention to seek to enjoin pursuit of a winding up application based on failure to comply with the statutory demand. That is a matter for the company concerned and does not call for comment here. ********** 12/10/2007 - Incorrect date - Paragraph(s) Date of judgment at top of page 1 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.