New South Wales Supreme Court CITATION : Everkind Pty Ltd v Hazenforn Pty Ltd [2010] NSWSC 1031 HEARING DATE(S) : 08/09/10 JUDGMENT DATE : 8 September 2010 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J EX TEMPORE JUDGMENT DATE : 8 September 2010 (1) Order that the Originating Process filed on 21 June 2010 be dismissed. DECISION : (2) Order that the plaintiff pay the defendant's costs of the proceedings. (3) Order that the said costs be a gross sum of $5,909.24 instead of assessed costs. CATCHWORDS : CORPORATIONS - winding up - statutory demand - application for order setting aside - service of originating process in another State - Service and Execution of Process Act not complied with - no effective service - application doomed to fail - PROCEDURE - costs - how costs discretion should be exercised where plaintiff's ineffective service was at address specified by defendant otherwise than in accordance with applicable requirement LEGISLATION CITED : Corporations Act 2001 (Cth), form 509H, ss 109X(1)(a), 109X(1)(b), 459G Service and Execution of Process Act 1992 CATEGORY : Principal judgment Daewoo Australia Pty Ltd v Suncorp Metway Ltd (2000) NSWSC 35; (2000) 48 NSWLR 692 David Grant & Company v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 Elan Copra Trading Pty Limited v J K International Pty Limited [2005] SASC 501; (2005) 195 FLR 229 CASES CITED : Energy Conservation Systems Pty Limited v Downer EDI Engineering Electrical Pty Limited [2008] NSWSC 1139; (2008) 221 FLR 393 Fresh Express Australia Pty Limited v MP (NT) Pty Limited [2009] NSWSC 277 Marlan Financial Services Pty Limited v New England Agricultural Traders Pty Limited [1999] VSC 435; (1999) 158 FLR 256 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 PARTIES : Everkind Pty Ltd - Plaintiff Hazenforn Pty Ltd - Defendant FILE NUMBER(S) : SC 2010/154674 COUNSEL : Mr R D Newell - Plaintiff Mr D P M Ash - Defendant SOLICITORS : Simmons & McCartney Lawyers - Plaintiff Mahony Dominic Lawyers - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WEDNESDAY 8 SEPTEMBER 2010 2010/154674 - EVERKIND PTY LTD v HAZENFORN PTY LTD JUDGMENT 1 A preliminary question arose in this case, namely, whether the plaintiff had made a valid and effectual application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 27 May 2010 served on it by the defendant. 2 An originating process, dated 18 June 2010, and a supporting affidavit of the same date were filed on 21 June 2010. The plaintiff accepts that the statutory demand was served on it on 31 May 2010. 3 The plaintiff also accepts that its purported service of the originating process was not effective service and that for that reason the court has no jurisdiction to make an order setting aside the statutory demand: see s 459G(3)(b) and David Grant & Company v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265. The plaintiff concedes, therefore, that the originating process must be dismissed. 4 There are, however, competing submissions on the subject of costs. The plaintiff's position is that the defendant should be ordered to pay the plaintiff's costs of the proceedings or, in the alternative, that there should be no order as to costs. The defendant's position is that the plaintiff should pay the defendant's costs, such costs to be assessed on the indemnity basis from 29 June 2010. 5 The circumstance that has caused the plaintiff to accept that the proceedings must inevitably be dismissed is that the purported service of the originating process filed with this court was effected in Victoria without compliance with s 9 and s 16 of the Service and Execution of Process Act 1992 with the result that there was no "service" as required by s 459G(3)(b) of the Corporations Act: see Marlan Financial Services Pty Limited v New England Agricultural Traders Pty Limited [1999] VSC 435; (1999) 158 FLR 256; Elan Copra Trading Pty Limited v J K International Pty Limited [2005] SASC 501; (2005) 195 FLR 229; Energy Conservation Systems Pty Limited v Downer EDI Engineering Electrical Pty Limited [2008] NSWSC 1139; (2008) 221 FLR 393; Fresh Express Australia Pty Limited v MP (NT) Pty Limited [2009] NSWSC 277. 6 The respective submissions as to the appropriate outcome on costs require attention to certain factual matters. 7 The statutory demand was served on the plaintiff at its registered office at Bella Vista in New South Wales. The demand specified, in its paragraph 6, the address of the defendant's solicitors in Melbourne, Victoria as the "address of the defendant for service of copies of any application and affidavit". The originating process and supporting affidavit were, in fact, forwarded to that Melbourne address, but as I have said without compliance with the Service and Execution of Process Act provisions essential to valid service where an initiating process of a court in one State is served in another State. Delivery to the Melbourne address of the defendant's solicitors was apparently by facsimile, sent and received on 21 June 2010. No point is taken about this method of service from which I infer that each party accepts the efficacy of the particular method of transmission subject, of course, to the Service and Execution of Process Act point. 8 On 24 June 2010, the defendant's solicitors wrote to the plaintiff's solicitors disputing the efficacy of service. They did so by specific reference to failure to take the steps required by the Service and Execution of Process Act. The letter of 24 June 2010 invited withdrawal of the plaintiff's application or consent to its dismissal. The plaintiff's solicitors replied on 28 June 2010. They said: "Unfortunately, we do not accept your principal's assertion regarding service. The address for service in your principal's statutory demand was their offices. Service was on their offices in accordance with the address for service contained in that demand. We are, therefore, at a loss to understand the point that is being made regarding service. If it continues to be an issue, we can make application for an order that service was properly effected." 9 This, of course, failed entirely to come to grips with the Service and Execution of Process Act issue clearly raised by the defendant's solicitor's letter. That issue was spelt out in greater detail in a letter from the defendant's solicitors, dated 29 June 2010. That letter offered settlement on the basis that the originating process would be dismissed and the plaintiff would within 14 days pay the defendant's costs which were then $2,710.42. That offer was not accepted. 10 On 2 July 2010, the plaintiff's solicitors raised the point that the statutory demand was irregular in that the address in its paragraph 6 was a Melbourne address, whereas the prescribed form 509H says that the address for service inserted in paragraph 6 must be in the State or Territory in which the statutory demand is served, in this case New South Wales. The plaintiff's solicitors said: "There would never have been an issue in this regard [I interpolate that is as to validity of the service of the originating process] if you had properly specified an address for service in NSW as required by the regulations." 11 The message in that email was reinforced in another of the same day: "It would be an extremely odd day where the court gave relief to a claimant who was seeking to use the defects in their process to claim a following/resultant defect in the response. I believe an estoppel is established by your initial defective form". 12 The email correspondence of 2 July 2010 included an offer by the defendant to settle on the basis that the statutory demand be set aside and the plaintiff pay the defendant's costs in a fixed sum of $4,917.34 within 14 days. 13 No latitude had been given on either side when, on 5 July 2010, the matter came before me for allocation of a hearing date in relation to the preliminary question concerning service. The hearing date allocated was today, 8 September 2010. 14 The defendant, by its solicitors, put a formal offer by letter dated 9 July 2010. The offer was to the effect that the statutory demand be withdrawn and the plaintiff pay the defendant's costs in the fixed sum specified in the letter. 15 On 6 September 2010, that is two days before the allocated hearing date, the plaintiff formally conceded that its originating process had not been properly served and it would not pursue its application. At the same time, however, the plaintiff's solicitors emphasised the point that "the difficulties associated with the question of the s 459G application arise from your client's failure to comply with the Corporations Rules and in particular the requirements of form 509H". 16 The defendant's principal contention is that the plaintiff had an array of possibilities open to it regarding service of the originating process, that it was for the plaintiff to make a choice and that, to the extent that that choice entailed compliance with the Service and Execution of Process Act, the plaintiff had to take the steps prescribed by that Act. 17 The plaintiff's position is that it was invited to serve the originating process at the Melbourne address stated in paragraph 6 of the statutory demand, being an address which, had the statutory demand been properly completed, would have been a New South Wales address not giving rise to any Service and Execution of Process Act requirement. For that reason, it is said that the plaintiff was, in a sense, misled by the defendant in a way that is relevant to the exercise of the discretion with respect to costs. 18 I regard the resolution of this matter as relatively straightforward. The plaintiff chose a method of service that entailed service in Victoria. Other possibilities were available to it. Leaving the document at or posting it to the registered office in New South Wales was one such possibility: s 109X(1)(a). Personal delivery to a director residing in Australia was another possibility: s 109X(1)(b). If the method in fact chosen involved cross-border aspects affected by the Service and Execution of Process Act, then the plaintiff had the task of complying with that Act. 19 The inclusion of a Victorian address in paragraph 6 of the statutory demand involved non-compliance with the prescribed requirement that the address for service be in the State or Territory in which the statutory demand itself is served. But that non-compliance certainly did not cause the statutory demand to be a nullity; nor would it have been a basis on which the court would have ordered that the statutory demand be set aside: see Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; Daewoo Australia Pty Ltd v Suncorp Metway Ltd (2000) NSWSC 35; (2000) 48 NSWLR 692. 20 In short, it is for the plaintiff, faced with a need to serve an originating process, to choose a mode of service and observe whatever rules and formalities are required to make that mode of service effective. It follows, in my view, that the plaintiff should have recognised and accepted its predicament at an early stage and given up attempts to persist with proceedings that were obviously doomed to fail. 21 The inevitable order that the originating process be dismissed should, therefore, be accompanied by an order that the plaintiff pay the defendant's costs of the proceedings. 22 There is then the question whether these costs should be on the indemnity basis from 29 June 2010. It is true that the outcome I have indicated accords with the proposal in the defendant's solicitor's letter of 29 June 2010, which proposal the plaintiff did not accept. But I am not satisfied that non-acceptance within the time allowed by the letter can be said to have been unreasonable. 23 The letter shows that it was faxed at 11.46am on 29 June 2010. Acceptance was required by 2pm, just over two hours later. True it is that the substantive point had been aired in earlier correspondence. But the solicitors receiving the offer still had to contact their client, explain the position and give the client some opportunity to consider and reflect and, as necessary, activate any internal decision making processes before giving instructions. A period of a little over two hours, including what is for many businesses a lunch hour from 1pm to 2pm, was inadequate. 24 Assessment of the indemnity basis is, therefore, not warranted. 25 The orders are as follows: (1) Order that the Originating Process filed on 21 June 2010 be dismissed. (2) Order that the plaintiff pay the defendant's costs of the proceedings. [Further submissions on costs] (3) Order that the said costs be a gross sum of $5,909.24 instead of assessed costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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