Supreme Court New South Wales Medium Neutral Citation: In the matter of Watson Road Moss Vale Developments Pty Limited [2013] NSWSC 783 Hearing dates: 20 March 2013 Decision date: 20 March 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Defendant wound up in insolvency under s 459P Corporations Act 2001 (Cth). Liquidator appointed to the defendant. Catchwords: CORPORATIONS - winding up - winding up in insolvency - presumption of insolvency arising from non-compliance with a statutory demand. PROCEDURE - service - whether statutory demand was served so as to give rise to a presumption of insolvency arising from non-compliance with it - where conflicting evidence about the sending and receipt of mail - where mail diverted from registered office to post office by arrangement between the company and the post office - whether evidence sufficient to raise doubt about the presumption that mail is received on the fourth business day after it was posted. Legislation Cited: Acts Interpretation Act 1901 (Cth) s 29 Corporations Act 2001 (Cth) ss 109X, 459C(2), 459P, 459Q, 459R Evidence Act 1995 (NSW) s 160 Supreme Court (Corporations) Rules 1999 (NSW) r 5.4(4) Cases Cited: - Bellway Corporation Pty Ltd v Ausdrill Ltd (1995) 13 ACLC 1663 - Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd [2010] FCA 1223 - Deputy Commissioner of Taxation v Starpicket Pty Ltd [2012] FCA 1196 - Formosa House Pty Ltd v Ming Chien Chang [2010] VSC 474 - Renegade Rigging Pty Ltd v Hanlon Nominees Pty Ltd [2010] VSC 385 - Scope Data Systems Pty Ltd v Gorman [2007] NSWSC 278; (2007) 70 NSWLR 176 - Steel Building Systems Pty Ltd v Beks Constructions (NSW) Pty Ltd [2010] NSWSC 1405 - Tomic Industries Pty Ltd [2012] NSWSC 1478 Category: Principal judgment Parties: M & A Barlow and Co (Australia) Limited (Plaintiff) Watson Road Moss Vale Developments Pty Limited (Defendant) Representation: Counsel: P. Rodionoff (Plaintiff) D.A. Allen (Defendant) Solicitors: Ai Strategic Lawyers (Plaintiff) Proctor & Associates (Defendant) File Number(s): 2012/325986 Judgment 1By originating process dated 19 October 2012, the plaintiff, M & A Barlow and Company (Australia) Limited ("M & A Barlow") seeks an order that the defendant, Watson Road Moss Vale Developments Pty Limited ("Watson Road") be wound up in insolvency under section 459P of the Corporations Act 2001 (Cth). 2The winding up application is based on a statutory demand which M & A Barlow contends was posted on 3 July 2012 under cover of a letter from its solicitors of the same date, to the registered office of Watson Road situated at "Ash Corporate and Secretarial" at a specified suite, floor and address. The underlying debt is an amount of $25,326.53, described as a judgment debt for building work carried out by M & A Barlow for Watson Road. The statutory demand was verified by affidavit of a director of M & A Barlow dated 2 July 2012, although such verification was not necessary in respect of a judgment debt. A copy of the judgment in that amount given in the Local Court at New South Wales at Camden is in evidence. 3The only matter which now appears to be in dispute is whether the statutory demand was served on Watson Road, at its registered office, so as to give rise to a presumption of insolvency arising from non-compliance with it. Mr Niles, who is the solicitor acting for M & A Barlow, has given evidence as to service in his first affidavit dated 18 October 2012, in a somewhat short form statement that he sent the statutory demand and supporting affidavit by post to Watson Road. In his second affidavit dated 13 December 2012, by which time a dispute as to service of the demand had emerged, he gave somewhat more expanded evidence that, on 3 July 2012 at about 1.15pm, he attended a post office at Baulkham Hills and placed a pre-paid envelope containing a letter addressed to the Director, Watson Road, the statutory demand and the supporting affidavit, addressed to the specified address, in the letter box outside the post office. That address corresponds to the address of Watson Road's registered office from 23 November 2011, as recorded in a company search dated 17 September 2012 that is in evidence. 4Mr Niles further expanded that evidence by oral evidence-in-chief and in cross-examination that he had personally addressed the envelope and had checked the address on it corresponded to the address on his covering letter to Watson Road, which is in evidence (as I noted above) and is addressed to the address of Watson Road's registered office; that the envelope included a return address for his firm; and that his firm's practice was that returned mail was brought to his attention; and that he affixed postage to the value of $1 in accordance with a practice to affix additional postage when the weight of the envelope may be in question. 5Mr Niles was cross-examined at some length and adhered to his evidence as to the manner in which the letter was addressed, consistent with the address on the letter to be enclosed within the envelope. That evidence is inherently plausible and I accept it. He was cross-examined at length as to the fact that his earlier affidavits were less precise, or at least less expansive, as to the circumstances in which the demand was posted. I give little weight to that matter, where a dispute as to service was not inevitable at the time the first affidavit was sworn and the second affidavit made clear that Mr Niles' position was that the demand had been placed in an envelope addressed to the particular address. 6It was put to Mr Niles in cross-examination that it would have been preferable if he had a copy of the envelope; he accepted that, with hindsight, that would have been preferable, and he is plainly correct in recognising that matter. It was also put to Mr Niles that he had no recollection of addressing that envelope; he denied the proposition and indicated that he took particular care in this matter and had a recollection of the matter for reasons he explained in part. I accept his evidence in that regard. 7Watson Road in turn relies on an affidavit from Mr Michael Lowe sworn 14 December 2012. Mr Lowe's evidence is that he is the office manager at Armstrong Scalisi Holdings Pty Limited which trades at the address shown as the registered office of Watson Road, and that another entity, CAP, which is associated with Armstrong Scalisi, are the accountants for Watson Road. He gives evidence as to the "regular procedure" maintained by that firm in respect of the receipt and filing of mail; as to a direction which he gave to a person who sorts the mail after Mr Lowe became office manager (in October 2011); as to the process for posting legal documents or "any other documents which are deemed urgent" to clients and recording them in an outgoing mail register and that mail is scanned into the firm's computer system when received; and as to a conversation, with the person who sorts the mail, who said that he would ensure that statutory demands were given to the receptionist for mailing to clients on the day they were received. Mr Lowe also gives evidence, in somewhat conclusory form, that he has checked the firm's computer system for mail received in the period between 3 July 2012 and 17 July 2012 and there is no record of the statutory demand or affidavit having been received in that period, and there is no record of that document having been posted to Watson Road during July 2012. In oral evidence, Mr Lowe confirmed that the practice he described also extended to Ash Corporate and Secretarial, which provided corporate and secretarial services, and was in place at the relevant time, July 2012. 8A difficulty with Mr Lowe's evidence is that it is, to a significant extent, evidence of the procedure that was intended to be followed (for example, that an employee "will peruse" the incoming mail and the receptionist "will do" certain things) and of a direction given by him as to that procedure. The weight of that evidence is reduced by the absence of direct evidence verifying that those steps were in fact taken at the relevant time, or any attempt to assess the extent to which they may fail from time to time by human error or other reasons, and by the fact that those who are responsible for undertaking those tasks did not give evidence as to what was done in fact. As I noted, Mr Lowe makes a conclusory statement that the relevant documents were not contained in the firm's computer system as received during the relevant period; however, the process adopted to check that system is not described, so as to allow the adequacy of that conclusion to be assessed. 9M & A Barlow in return rely on section 109X of Corporations Act which allows the service of a statutory demand to be effected by posting the document to a company's registered office and on the presumption of delivery arising under s 29 of the Acts Interpretation Act 1901 (Cth) which provides that, where an Act authorises a document to be served by post, then service is deemed to be effected by properly addressing, prepaying and posting the document as a letter and, unless the contrary is proved, to have been effected at the time the letter would be delivered in the ordinary course of post. There is here no evidence as to the ordinary course of post. However, s 160 of the Evidence Act 1995 (NSW) in turn allows a presumption that the demand was received on the fourth business day after being posted, unless evidence sufficient to raise doubt about that presumption is adduced. 10I should say something further as to the operation of these sections, which raise matters of considerable complexity, although they were not addressed in detail in the parties' submissions. In Scope Data Systems Pty Ltd v Gorman [2007] NSWSC 278; (2007) 70 NSWLR 176 at [38], White J did not follow earlier cases that had doubted the application of s 160 of the Evidence Act in this context and noted that, if the evidence did not establish the time at which delivery was effected, then, unless the contrary was proved, delivery was deemed to be affected in the ordinary course of post; and, in the absence of evidence on the topic, s 160 of the Evidence Act afforded a presumption as to when the article was taken to be delivered. That analysis has subsequently been followed in Formosa House Pty Ltd v Ming Chien Chang [2010] VSC 474; Renegade Rigging Pty Ltd v Hanlon Nominees Pty Ltd [2010] VSC 385; Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd [2010] FCA 1223 and Steel Building Systems Pty Ltd v Beks Constructions (NSW) Pty Ltd [2010] NSWSC 1405. 11There is, however, a further complexity where, as here, mail delivery has been diverted from a company's registered address so that mail addressed to that registered address is directed to a post office box. That complexity creates an issue, considered in the case law, where there is evidence of the time when an item of mail was in fact collected from the post office box and delivered to the registered office. In my view, that complexity does not arise in this case, where there is no such evidence. The position here corresponds to that considered in Bellway Corporation Pty Ltd v Ausdrill Ltd (1995) 13 ACLC 1663 where a demand was correctly addressed by post to the company's registered office but was diverted to a post office by arrangement between the company and the post office (although here the arrangement was between the accountant who occupied the registered office and the post office). Owen J there held that the term "ordinary course of post" for the purpose of the deeming provision would apply to the ordinary course of post for the company concerned, since otherwise a person effecting service by post would not know whether some arrangement had intervened that would otherwise prevent reliance on the deeming provision. I would adopt the same approach. 12The position here therefore differs from that which arose in Scope Data Systems, where there was evidence of date of the receipt of the demand, being the date on which the employee of the accounting firm collected evidence from the post office box to which it had been diverted and took it back to the registered office. In that case, White J accepted that the presumption under s 160 of the Evidence Act could apply to establish the date of receipt that the company's registered office, but held that presumption was rebutted where there was proof of the time of collection in that case. Subsequently, in Tomic Industries Pty Ltd [2012] NSWSC 1478, White J appears to have treated the presumptions in s 29 of the Acts Interpretation Act and s 160 of Evidence Act as applicable where a statutory demand was posted to the company's registered office, located at its accountant's office, notwithstanding that mail addressed to the accountant's street office was being diverted to and collected from the post office. 13It follows that, notwithstanding the diversion of mail to the accountant's post office box, I would treat the presumptions in s 29 of the Acts Interpretation Act and s 160 of the Evidence Act as applicable to establish both the fact of and the date of delivery to the registered office in the absence of evidence as to when it was received, unless rebutted by evidence to establish non receipt or raising doubt as to the presumption for the purposes of s 160 of the Evidence Act. 14Returning now to the submissions, Mr Rodionoff, who appears for M & A Barlow relied in oral submissions on Mr Niles' evidence as to his having addressed and stamped the envelope in which the statutory demand, affidavit in support and covering letter were contained; and submitted that Mr Lowe's evidence was not sufficient to demonstrate that the system he described was implemented, in the absence of the evidence of those tasked to implement it. Mr Rodionoff also submitted that I should draw a Jones v Dunkel inference that the evidence of those persons would not assist Watson Road; I do not consider it necessary to draw that inference since it is sufficient to assess the evidence on the basis that Mr Lowe's evidence sets out the system to be implemented, but the only evidence as to its implementation is in the general terms addressed in Mr Lowe's affidavit. Mr Rodionoff also submitted, and I accept, that evidence that the envelope contained a return address and was not returned to M & A Barlow's solicitors supports an inference, at least, that it was properly stamped and also provides some support for an inference that it was properly addressed and delivered in the ordinary course. 15Watson Road in turn seeks to displace the presumption of s 29 of the Acts Interpretation Act and s 160 of the Evidence Act by establishing non-delivery, and therefore non-receipt, of the statutory demand and the affidavit at the company's registered office. Mr Allen, who appears for Watson Road, refers to Deputy Commissioner of Taxation v Starpicket Pty Ltd [2012] FCA 1196 where Greenwood J held on the particular facts that it had been established on the balance of probabilities that letters sent by pre-paid post and properly addressed were nonetheless not likely to have been delivered to the company's registered office. That decision does not, in my view, establish any novel proposition, but draws attention to whether, for the purposes of s 29 of the Acts Interpretation Act, the contrary has been proved so as to rebut the deemed service arising from properly addressing, pre-paying and posting the document; and for the purposes of s 160 of the Evidence Act, to whether there is evidence sufficient to raise doubt as to the presumption that the article was received at the specified address on the fourth day after posting. Mr Allen also submitted that the evidence of M & A Barlow's solicitor, Mr Niles, should, in effect, not be accepted in the absence of a copy of the envelope and given the lack of detail in his earlier affidavits; and that it should be found that the statutory demand was not delivered and had not been correctly addressed, or at least left sufficient doubt had been raised to displace the operation of the presumptions; and that Mr Lowe's evidence was sufficient to displace any presumption of delivery. I have dealt with the evidence of Mr Niles and Mr Lowe above. 16On balance, it seems to me that Mr Niles' evidence sufficiently establishes that the statutory demand and associated materials were sent to the address of Watson Road's registered office in a properly addressed and pre-paid envelope and the generality of Mr Lowe's evidence, particularly in the absence of evidence of those implementing the system to which he refers, is not sufficient to raise doubt about the presumption otherwise arising under s 29 of the Acts Interpretation Act and s 160 of the Evidence Act. With the aid of that presumption, I find that service has been established for the purposes of s 109X of the Evidence Act, by posting the statutory demand and supporting affidavit to the company's registered office. 17Once it is accepted that the statutory demand was properly served, then a presumption of insolvency arises from non-compliance with it. The winding up application was brought within three months of that non-compliance, as required by section 459C(2) of the Corporations Act. The originating service sets out particulars of service of the demand on the company and of the failure to comply with it and attaches a copy of the demand and verifying affidavit, as required by s 459Q of the Act. It would have been open to Watson Road, without leave, to seek affirmatively to establish its solvency in opposition to the winding up application. At one point, it appears to have foreshadowed that it would do so but it has ultimately not sought to do so in this application. 18There is evidence of service of the originating process filed by M & A Barlow; there is evidence that the amount due and payable by Watsons Road had not been paid at the date of commencement of the winding up application and has not now been paid. I note that the affidavit in support of the originating process was sworn more than seven days before the originating process was filed and therefore did not comply with rule 5.4(4) of the Supreme Court (Corporations) Rules 1999 (NSW); however, I will dispense with the operation of that rule, where there is no suggestion that that non-compliance gave rise to any prejudice and where there is no suggestion before me that the debt the subject of the demand has in fact been paid. Notification of the winding up was given to the Australian Securities and Investments Commission and the required notice was published. A consent of a liquidator to appointment is in evidence, and the winding up order will be made within six months of the filing of the winding up application, as required by section 459R of the Corporations Act. 19In these circumstances, where I have found that service has been established, by the aid of the evidence and the presumptions to which I have referred, a presumption of insolvency arises; that presumption has not been rebutted by evidence of solvency; and the procedural requirements in respect of the winding up are satisfied. Mr Allen, for Watson Road, has not contested any but the first of those matters. In these circumstances, it is appropriate that I make orders for the winding up of Watson Road. 20In this matter, I make the following orders: 1. The Defendant, Watson Road Moss Vale Developments Pty Limited, ACN 149 680 286 be wound up in insolvency under section 459P of the Corporations Act. 2. Mr Brent Kijurina of Hall Chadwick Accountants be appointed as liquidator of the defendant. 3. The defendant pay the plaintiff's costs as agreed or as assessed. ********** 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. Decision last updated: 21 June 2013