Reported Decision : 220 FLR 328 73 NSWLR 95 New South Wales Supreme Court CITATION : James v Ash Electrical Services Pty Ltd [2008] NSWSC 1112 HEARING DATE(S) : 20/10/08 JUDGMENT DATE : 24 October 2008 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Separate question answered "No" CATCHWORDS : CORPORATIONS - winding up - application for winding up on grounds of insolvency - reliance on non-compliance with statutory demand - preliminary question whether statutory demand served on defendant company - whether left at registered office - registered office situated at an office suite inside an office building - statutory demand left at 8pm in letterbox on outside wall of office building - whether document later actually received LEGISLATION CITED : Corporations Act 2001 (Cth), ss 109X(1)(a), 459C(2)(a), 459F CATEGORY : Principal judgment Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 CASES CITED : Jin Xin Investment & Trade (Australia) Pty Ltd v ISC Property Pty Ltd [2006] NSWSC 7; (2006) 196 FLR 350 Macrae v St Margaret's Hospital [1999] NSWCA 381; (1999) 19 NSWCCR 1 Polstar Pty Ltd v Agnew [2007] NSWSC 114; (2007]; 208 FLR 226 PARTIES : Craig James - Plaintiff Ash Electrical Services Pty Ltd - Defendant FILE NUMBER(S) : SC 4308/08 COUNSEL : Mr D A Allen - Plaintiff Ms A Tsekouras - Defendant SOLICITORS : Proctor & Associates - Plaintiff Peter Merity Solicitor Pty Ltd - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY 24 OCTOBER 2008 4308/08 CRAIG JAMES v ASH ELECTRICAL SERVICES PTY LTD JUDGMENT 1 The plaintiff seeks an order that the defendant be wound up in insolvency and an order that a liquidator be appointed. 2 In pursuing these claims, the plaintiff intends to rely on a presumption of insolvency arising under s 459C(2)(a) of the Corporations Act 2001 (Cth) in consequence of alleged failure of the defendant to comply with a statutory demand a copy of which is attached to the originating process. 3 Essential to the plaintiff's case is proof that the statutory demand was served on the defendant, this being, under s 459F, an ingredient of proof of failure to comply with such a demand. 4 The question of service has been put in issue by the defendant. Although the plaintiff indicated that it would seek to prove insolvency without the aid of s 459C(2)(a) if the question of service was determined adversely to it, I took the view that the central importance of the availability or unavailability of the presumption was such that the issue of service should be determined as a separate question. The proceedings will take a radically different course if it is determined that the statutory demand was not served, assuming that they continue at all. 5 The separate question is: "Was the statutory demand dated 18 July 2008 served on the defendant on 21 July 2008?" 6 In approaching the separate question, I am conscious that the onus of establishing service rests with the plaintiff. 7 The central facts are straightforward. The registered office of the defendant, as recorded by ASIC, was at the relevant time: "Berkman, Suite 1A, 14 Pacific Highway, Wyong, NSW 2259" 8 The evidence shows that a public accounting practice known as "Berkmans" (of which Mr Anthony Berkman is the principal) operates in part of an office building at 14 Pacific Highway, Wyong. It is not disputed that the part of the building occupied by Berkmans is Suite 1A. The entrance to Suite 1A is through a door opening off an internal corridor running from the street entrance of 14 Pacific Highway towards the rear of the building. There is a door on the street frontage through which access may be obtained to the internal corridor. 9 At 8pm on 21 July 2008, Mr Toweel, a process server based at Kearns, in South Western Sydney, went to 14 Pacific Highway, Wyong on his way back from an assignment in Newcastle. It was dark. The door on the street frontage of the office building was closed and locked. The office of Berkmans was unattended. Mr Toweel gave evidence that he placed the statutory demand in an envelope, addressed the envelope to the defendant, care of Berkmans, and placed the envelope in a letterbox at the front of the office building. Mr Toweel then departed, leaving the envelope and its contents in the box. 10 It was established in cross-examination of Mr Toweel (with the aid of photographs) that there are eight letterboxes set into the outside wall of the office building near the street door. The boxes are recessed into what appears to be a brick wall, so that a panel with a slot for posting or depositing is flush with the wall. Each box has a keyhole on the panel, indicating that someone standing outside the building can unlock the box and remove items from it. 11 Mr Toweel gave evidence that one of these boxes had "1a" handwritten on its front panel in what he described as black Texta colour. A photograph in evidence shows that the top left box is marked in that way. Mr Toweel saw the handwritten "1a" with the aid of an electric torch that he had with him. I am satisfied that Mr Toweel, acting on behalf of the plaintiff, placed the statutory demand in the box marked "1a" at 8pm on 21 July 2008 and left it there when he departed. 12 Relying on that central fact, the plaintiff maintains that the statutory demand was, at 8pm on 21 July 2008, served on the defendant in accordance with s 109X(1)(a) of the Corporations Act: "For the purposes of any law, a document may be served on a company by: (a) leaving it at … the company's registered office" 13 The question therefore is whether the leaving of the statutory demand in the letterbox as I have described requires the conclusion that the statutory demand was left "at" "Berkman, Suite 1A, 14 Pacific Highway, Wyong, NSW 2259". 14 Ms Tsekouras of counsel, who appeared for the defendant, submitted that the letterbox on the outside wall of the office building cannot be regarded as part of the registered office. She referred to observations in Polstar Pty Ltd v Agnew [2007] NSWSC 114; (2007]; 208 FLR 226 at [17] – [18] as to the meaning of "registered office": "[17] … Provisions of the Corporations Act imposing requirements with respect to a company's 'registered office' elucidate the meaning of 'office' in the expression 'registered office'. Those provisions make it clear that such an office may only be at a location capable of being 'open to the public': see s 145(1). It must also be a location at which it is possible to display prominently the company's name (s 144(1)) and the words 'Registered Office' (s 144(2)). Furthermore, it is contemplated that there will be 'premises at the address of' the registered office (see s 143(1)) and that 'premises' will be used 'as the address of the company's registered office' (s 143(2)(a)). [18] In short, the Corporations Act's concept of 'office', in the references to 'registered office', is one centred on a physical location in the nature of premises (that is, a building or a room in or section of a building) to which persons may go and which can be identified by prominent display as a company's registered office. I am of the opinion that the Acts Interpretation Act reflects a similar concept of "office" in its references to 'registered office', 'head office' and 'principal office'." 15 On this basis, it was submitted that the act of "leaving" a document "at" a company's registered office involves placing it inside the premises particularly designated as the registered office; and that leaving it in a letterbox outside those premises is something different. 16 Ms Tsekouras also relied on the decision in Jin Xin Investment & Trade (Australia) Pty Ltd v ISC Property Pty Ltd [2006] NSWSC 7; (2006) 196 FLR 350, the circumstances in which, she submitted, are relevantly indistinguishable from those of this case. 17 In the Jin Xin case, the question was whether the placing of a document in a letterbox on the ground floor of a multi-storey office building at 370 Pitt Street, Sydney amounted to service of it at "David Kam & Co, Solicitors and Migration Agents, Suite 103, Level 1, The Chambers, 370 Pitt Street, Sydney, NSW 2000". 18 It is sufficient to quote paragraphs [16] to [24] of the judgment: "[16] A question posed by the contentions regarding service on 19 September 2005 by depositing in a letterbox in the ground floor foyer of the office building at 370 Pitt St, Sydney is whether, even if that depositing were proved, it would amount to service at Suite 103, Level 1, 370 Pitt St. It is, of course, obvious that to leave documents in a letterbox on the ground floor of an office building is not to leave them at a particularly numbered suite on the first floor of that building. But it might nevertheless be the case that leaving them in that box is to be regarded as the equivalent of leaving them at that suite. [17] There is some broad similarity between the circumstances of this case and those considered by the Court of Appeal in Macrae v St Margaret's Hospital (1999) 19 NSWCCR 1. That case concerned a statutory provision under which service was taken to be effected if the relevant document was 'delivered or sent by post to … any place of business' of an employer. The document in question was sent by post to the post office box of the employer hospital. This was held to amount to service in accordance with the provision. [18] Meagher JA was of the view that the post office box was either part of the place of business or a means of access to the place of business. Davies AJA (with whom Priestley JA agreed) held that a post office box was not a place of business but that sending of the document to the post office box achieved appropriate substantial compliance with the statutory provision. His Honour said: 'In my opinion, the sending of a document by post to a business person's post office box is an appropriate and possibly the most appropriate way of sending the document by post to that person's place of business. That is because post office boxes are used by businesses to achieve greater reliability in the delivery of postal articles. Documents sent by post to a post office box will be placed in the appropriate post office box ready for collection by the recipient. Documents which are addressed to a place of business are liable to be lost by being slipped under doors of business premises and so on. Very often, business premises do not provide a convenient box for the collection of mail or it is inconvenient for postal officials to find their way through a building to use it. In my opinion, the sending of mail to a nominated post office box is the appropriate and efficient means of sending mail to a business person and it is common practice for businesses to have a post office box and for their customers and other persons dealing with them to use it.' [19] Then, after referring to the fact that the hospital's letterhead carried a request that all correspondence be addressed to the post office box, Davies AJA said: 'One can see that the employer wished correspondence to be addressed to it at the post office box and one can understand why that is so. Anything might happen to business letters put into a letterbox at the gate of the hospital or received at the hospital's reception desk.' [20] Also instructive in a general sense is the decision of Cohen J in Swerus v Central Mortgage Registry of Australia Pty Ltd [1989] ANZ ConvR 169 which concerned a provision under which service might be effected by leaving the document at 'the last known place of abode' of the person to be served. The relevant person's abode was a flat on the upper floor of a strata title building. The relevant document was placed in a letterbox mounted on a brick wall at ground level outside the building but within the grounds. The letterbox was not part of the unit and was not included within the strata lot. Cohen J held that the letterbox formed part of the abode: '[I]t seems to me that if a mortgagor provides a means whereby mail may be left at his place of abode, that is to say by having a letter box in close proximity to the building in which he abides, then he has provided an extension of his abode for the purpose of mail or other material being left at the home for him. This is not the same situation as might occur if a letter were merely left in a hallway which is common to the use of a number of occupiers of a building. Here unit 3 had its own locked letter box identified as being appropriate to that unit. In my opinion it can properly be said that the specified letter box was incorporated in the use of the home unit as part of the ordinary living facilities of those who live in it Accordingly I regard the leaving of a notice in that designated letter box as sufficiently complying with the means of service by leaving it at the place of abode.' [21] Both these cases show that a place of business or a place of abode may be taken to include or to be accessible by means of delivery facilities not within its physical boundaries. But the question before me is not whether there was service on 19 September 2005 at a place of business or place of abode. It is whether there was service at "David Kam & Co, Solicitors and Migration Agents, Suite 103 Level 1 The Chambers, 370 Pitt St Sydney NSW 2000". I am not satisfied that an affirmative answer can or should be given to that question in this case. Leaving documents in a letterbox on the ground floor of an office building cannot be regarded as (or as the equivalent of) leaving them at a particular numbered suite on the first floor of the building. Had it been intended that the ground floor letterbox might be used, para 6 of the statutory demand would not have referred to Suite 103 or to Level 1. Instead of giving the address for service as 'David Kam & Co, Solicitors and Migration Agents, Suite 103 Level 1 The Chambers, 370 Pitt St Sydney NSW 2000', it would have specified merely 'David Kam & Co, Solicitors and Migration Agents, The Chambers, 370 Pitt St Sydney NSW 2000': compare Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Ltd (2005) 188 FLR 373 where the question in issue was as to service at a registered office described as 'care of Luestner and Associates, 553 Magill Rd, Magill in the State of South Australia, 5072' without reference to floor number, suite number or room number. [22] Before the advent of the provision which is now s 100(1)(c) of the Corporations Act, there was reference in a number of cases to the need for a registered office within an office building to be identified by room number, floor number or other feature. In Re Alpina Pty Ltd (1977) SASR 528, for example, Hogarth J said that the relevant part of a multi-storey building should be described, in the specification of registered office, in a manner 'sufficient to enable any person wishing to serve a document on the company to identify it exactly'. Part and parcel of this thinking is the notion that persons serving documents by physical delivery should have the advantage of knowing with certainty where they are to go. As a corollary, someone armed with that certainty who chooses to leave the document at a place other than that specified with precision acts otherwise than in the way the specification of precise location is intended to ensure. [23] The risks to which Davies AJA referred in Macrae's case as involved in methods of service other than post (for example, 'anything might happen to business letters put into a letterbox at the gate of the hospital') must be taken to have played a part in the specification of the address for service by means of express reference to a suite number and express reference to a floor number. If service by physical delivery was to be effected, the clear intention behind the express references meant that the person effecting delivery had to be physically present at Suite 103 on Level 1 of the building. [24] In this case, there was precise specification by reference to Suite 103 and Level 1. The documents put into the ground floor letterbox on 19 September 2005 were not delivered to Suite 103 on Level 1. Paragraph 6 of the statutory demands cannot be regarded as causing the issuers of the statutory demands to be bound by purported service by deposit in the ground floor letterbox. On this basis, I would hold that service of the copies of the originating processes and supporting affidavits did not take place on 19 September 2005, even if I were satisfied that Mr Lu senior had placed them in the letterbox on the ground floor on that day." 19 I accept the submission of Ms Tsekouras that this analysis is directly applicable to the present case and supports the contentions of the defendant. 20 Mr Allen of counsel, who appeared for the plaintiff, submitted that the letterbox marked "1a" outside the building at 14 Pacific Highway, Wyong must be regarded as part of Suite 1A. When regard is had to the statutory scheme, that cannot be so. 21 There is reference in the extract from the judgment in Polstar v Agnew (above) to the concept that the "registered office" is a place consisting of "premises" – such as a building or a room in a section of a building; also that the registered office must be capable of being "open to the public". Section 145 sets times during which a registered office must be "open to the public" on "each business day": either at least the four hours 10am to 12 noon and 2pm to 4pm or, if the company prefers, at least three hours chosen by the company between 9am and 5pm. In the latter event, the chosen hours must be notified to ASIC (s 145(2)) and are available by means of a search of ASIC records (as, of course, is the situation of the registered office). 22 Section 109X(1)(a), to the extent that it contemplates the leaving of documents "at" the registered office, must be taken to recognise and have in contemplation the provisions about registered offices. The provisions make it clear that a registered office will be "open to the public" at certain times. A document will be regarded as left "at" the registered office if it is deposited at the premises that constitute the registered office by someone who enters the premises at a time when they are open to the public. I am prepared to think that a document would also be regarded as left "at" the registered office if, at a time when those premises were not open, it was deposited inside them by being slipped under the door, or put through a mail slot in the door, so that it came to rest inside. 23 In this case, however, the actions taken on the plaintiff's behalf did not, of themselves, cause the statutory demand to be deposited inside the part of the building at 14 Pacific Highway, Wyong described as: "Berkman, Suite 1A, 14 Pacific Highway, Wyong, NSW 2259". 24 Rather, the actions taken on behalf of the plaintiff caused the statutory demand to be deposited in a letterbox outside the part of the building so described (indeed, outside the building as a whole). For reasons corresponding with those stated in the Jin Xin case, there was no service "at" that part of the building in terms of s 109X(1)(a). And as Davies AJA observed in Macrae v St Margaret's Hospital [1999] NSWCA 381; (1999) 19 NSWCCR 1 in a passage quoted at paragraph [23] of the Xin Jin judgment (above): "[A]nything might happen to business letters put into a letterbox at the gate of the hospital." 25 The conclusion that the actions taken by Mr Toweel did not cause the statutory demand to be left at "Berkman, Suite 1A, 14 Pacific Highway, Wyong, NSW 2259" means that s 109X(1)(a) cannot be relied upon by the plaintiff to establish service of the statutory demand. But that does not mean that those actions, coupled with later events, might not amount to service. 26 It is well established that, although particular steps may be insufficient to constitute service, the person to be served will be taken to have been served if it is shown that the relevant document came into the person's possession. Mr Allen referred, in that connection, to Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542. The matter is put thus in Polstar Pty Ltd v Agnew (above) at [24] – [25]: "[24] These conclusions do not mean that the statutory demand was never served. The evidence shows that, as a result of the posting effected by the defendant's solicitors, the statutory demand came into the actual possession of Ms Ursino who, since 14 September 2003, had been the sole director of the plaintiff. Despatch of the document by post to the Green Valley post office box by the defendant's solicitors thus caused the statutory demand to come into the possession of the person who was, at the time, the guiding mind and will of the plaintiff company. Furthermore, that person caused that company to take action in relation to the statutory demand consistent with an acceptance of its having been served. The plaintiff made an application for an order setting aside the statutory demand. Such an application is available, in terms of s 459G(1) only in relation to "a statutory demand served on the company". Where a company contends that a statutory demand cannot form the basis for a presumption of insolvency because it was not served, the appropriate course is to seek declaratory relief, not an order setting the demand aside: Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305. [25] The factual matters referred to in the immediately preceding paragraph mean that there was 'informal service' on the plaintiff company. This is because the document actually reached the sole director of the plaintiff and she dealt with it on the footing that it was a statutory demand duly served on the plaintiff. The relevant principles, as they emerge from a number of cases, are discussed in the judgment of Basten JA in Italiano v Carbone [2005] NSWCA 177 at [58] to [61]: 58 A similar issue was addressed by McInerney J in the Supreme Court of Victoria in Pino v Prosser [1967] VR 835. The case involved service of a writ, requiring personal service on the husband, by handing a copy to his wife, who handed it to him on the same evening. When, two days later, the process server returned to the house to recover the writ so as to effect personal service on the husband, he was told by the wife that her husband was not at home and had taken the writ to his solicitor. McInerney J noted authority for the proposition that 'service on the wife, or a known agent of the defendant is not good service': Ibid at 837 (30). His Honour continued: If that passage correctly states the law, the conclusion is, on the facts of this case, remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ on 28 March from his wife and instructed his solicitors on 10 April, should be held not to have been served. His Honour referred to a comment by the Lord Chancellor in Hope v Hope (1854) 4 De G.M. and G. 328 at 342 to the following effect: The object of all service is of course only to give notice to the party to whom it is made, so that he may be aware of and may be able to resist that which is sought against him; and when that has been substantially done, so that the court may feel perfectly confident that service has reached him, every has been done that is required. Following that, and other authority, his Honour was satisfied that, the writ having come into the possession of the defendant on the day on which it was given to his wife, there had been good personal service. 59 In Guss v Magistrate's Court at Victoria [2003] VSC 365, Osborn J considered a challenge to the valid service of a summons to answer a charge. The summons had not, as required by s 34 of the Magistrate's Court Act 1989 (Vic) been delivered to the defendant personally, nor had a true copy been left at the 'most usual place of residence or of business' with a person apparently not less than 16 years of age. The business address at which the summons had in fact been left was the address of a corporation of which the plaintiff was not a director and which did not satisfy the statutory description. Nevertheless, he agreed in cross-examination that he had been notified of receipt of the copy of the summons and had received a copy some days later. In following Pino , his Honour noted at [14]: It is perhaps a tribute to the plaintiff's determination to avoid a hearing on the merits that it appears that no court has previously been faced with the argument that despite sworn evidence that a person in fact received delivery of a summons left for him nevertheless such summons was not served in accordance with the Act and its predecessors.' 60 A similar conclusion was accepted by Young J in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 . The defendants had sought a declaration that a summons had not been duly served on them in circumstances where, although they had received it, the mechanism by which it had come to their attention was by lodgement in a document exchange box. His Honour held (at 544B): The ordinary meaning of "service" is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope … Pino v Prosser .' 61 This approach was recently followed by Barrett J in Ketrim Pty Ltd v AS&L Pty Ltd (2004) 52 ACSR 252 at [16]–[18]. His Honour noted that a similar approach had been adopted in relation to service by facsimile transmission in Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 Qd R 140 and Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305. The latter case, a decision of Mandie J in the Supreme Court of Victoria, was, in a sense, the reverse of the present case in that proof of service upon a director was found to be proof of service on the company. At [28] his Honour noted: Of course, proof of service of a document upon one director will not necessarily constitute proof that the document has actually come to the attention of the company of which he or she is a director. But in the present case Mr Cook is the sole director and secretary (and indeed shareholder) of the plaintiff company, and thus he is that company's directing mind and will. Not only did service of the document upon Mr Cook of necessity bring the document to the actual attention of the plaintiff company, but the evidence here is that Mr Cook expressly accepted service of the statutory demand on behalf of the plaintiff. " 27 In the present case, the plaintiff will succeed in proving that the statutory demand was served on the defendant if it shows that the envelope left by Mr Toweel in the letterbox on the outside wall of 14 Pacific Highway, Wyong was actually received by the defendant (or, indeed, by Berkmans who must be regarded, for these purposes, as having the defendant's authority to receive documents). 28 Mr Berkman, the principal of the accounting practice at Suite 1A, gave evidence on affidavit and was cross-examined. He said that, as far as he was aware, the statutory demand had never been received within Suite 1A or come to the attention of any of the three or four other persons working there (nor had it come to his own attention). He gave evidence about the procedures employed to clear the outside letterbox and to deal with items taken from it, including entry of items of correspondence involving clients of the practice into a computerised record maintained in the office. He was shown print-outs of certain pages from this record but was unable to identify on those pages any reference to a document that was or might have been the statutory demand. 29 Annexed to Mr Berkman's affidavit is a letter of 12 September 2008 written by him to the plaintiff's solicitors which reads as follows: "Dear Sir RE: ASH ELECTRICAL SERVICES PTY LIMITED ats CRAIG JAMES I refer to an Affidavit of Service No. 4308/08 in the matter of Ash Electrical Services Pty Limited. The document states that on 21 July 2008 a Creditor's Statutory Demand for Payment of Debt was served by delivery to their registered office. This office was and remains the registered office of Ash Electrical Services Pty Limited and we have no record of receiving the document referred to. To the best of my knowledge and belief, the Sworn Statement on the Affidavit is incorrect. Yours faithfully" 30 This tends to suggest that an affidavit of service was received by Mr Berkman some time after commencement of these proceedings (4308/08). It might be inferred that no relevant document had been received by him at any earlier time. If that were so, it would tend to indicate that the statutory demand was not received at Berkmans' office. 31 But it is not for the defendant to disprove receipt. Rather, the plaintiff must show that the statutory demand was received. The plaintiff's failure to produce any evidence grounding a finding that the envelope left in the letterbox at 8pm on 21 July 2008 later entered Suite 1A so as to come to the attention of Berkmans (as agents of the defendant) or that it was otherwise received by the defendant means that the plaintiff has not discharged that onus. 32 The separate question is answered "No". ********** 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.