De Pellegrin P/L v Reinforced Earth P/L
[1994] FCA 105
•11 MARCH 1994
DE PELLEGRIN PTY LTD and REINFORCED EARTH PTY LTD
No. VG3421 of 1993
FED No. 105/94
Number of pages - 7
Corporations Law
(1994) 12 ACLC 242
(1994) 13 ACSR 54, (1994) 120 ALR 459
(1994) 48 FCR 567
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
OLNEY J
CATCHWORDS
Corporations Law - statutory demand - application to set aside demand - application served out of time - whether Court has power to extend time for service.
Corporations Law, ss 459G, 1322
Re Cavetina Pty Ltd (1994) 12 ACLC 44
CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd 11 ACSR 772
Texel Pty Ltd v Commonwealth Bank of Australia 11 ACSR 537
HEARING
MELBOURNE, 2 March 1994
#DATE 11:3:1994
Mr J. Ribbands (instructed by Kempson and Co) appeared for the applicant.
Mr H.W. Fraser (instructed by Herbert Geer and Rundle) appeared for the respondent.
ORDER
THE COURT ORDERS THAT:
1. The application be struck out as incompetent.
2. The applicant pay the respondent's costs of the application including reserved costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
OLNEY J The applicant seeks the following relief:
1. An order pursuant to s 459G of the Corporation Law as amended by the Corporate Law Reform Act, 1992 setting aside a statutory demand served on the Applicant by the Respondent.
2. Alternatively to 1, an Order extending the period for compliance with the Statutory Demand pursuant to s 459F(2) of the Corporation Law as amended by the Corporate Law Reform Act.
3. Such further or other Orders as may be just and necessary.
The application was filed on 8 December 1993. On the same day, the applicant filed an affidavit supporting the application.
The supporting affidavit refers to the service on the applicant of a Creditor's Statutory Demand for Payment of Debt pursuant to s 459E(2) of the Corporations Law and an affidavit of Roger Wilkins sworn 16 November 1993 but neither the date on which service was effected nor the creditor who served the notice is identified. However, from the contents of the affidavit it appears that the statutory demand was served by the respondent and that the applicant claims that there is a genuine dispute about the existence and the amount of the debt to which the demand relates.
The respondent has filed an affidavit which establishes that the statutory demand and supporting affidavit were duly served on the applicant on 17 November 1993.
The address for service of the respondent (creditor) as stated in the statutory demand is Gilbert and Tobin, Solicitors, 50 Carrington Street Sydney NSW 2000 DX 10348 Sydney Stock Exchange. The applicant asserts that on 9 December 1993 its solicitors sent copies of the application and supporting affidavit by ordinary post addressed to Messrs Gilbert and Tobin, 50 Carrington Street Sydney NSW 2000. For the respondent it is said that the documents were received by its solicitors in the post on 14 December 1993.
The respondent has raised as a preliminary issue the question of whether the application has been made in accordance with s 459G of the Corporations Law.
The time limited by s 459G(2) for the making of the application and by s 459G(3) for the service of the application and supporting affidavit is "within 21 days after the demand is served". As service of the demand was effected on 17 November 1993, the 21 day period expired on 8 December 1993. Accordingly, the application was filed within the time prescribed by s 459G(2) but service was not effected until after the expiration of the time prescribed by s 459G(3). On a literal construction of s 459G(3) the application was not made in accordance with s 459G.
To assist in more readily understanding the question in issue the provisions of s 459G and the relevant portions of s 1322 of the Corporations Law Act are set out:
459G(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.
1322(1) In this section, unless the contrary intention appears:
(a) a reference to a proceeding under this Law is a reference to any proceeding whether a legal proceeding or not; and
(b) a reference to a procedural irregularity includes a reference to:
(i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation or at a joint meeting of creditors and members of a corporation; and
(ii) a defect, irregularity or deficiency of notice or time.
(2) A proceeding under this Law is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.
(3) ...
(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Law, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a) any order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Law or in relation to a corporation is not invalid by reason of any contravention of a provision of this Law or a provision of the constitution of a corporation;
(b) ...
(c) ...
(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Law or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
(5) ...
(6) The Court shall not make an order under this section unless it is satisfied:
(a) in the case of an order referred to in paragraph (4)(a):
(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii) that it is in the public interest that the order be made;
(b) ...
(c) in every case - that no substantial injustice has been or is likely to be caused to any person.
There have been several recent cases in which the construction of s 459G has been discussed.
In re Cavetina Pty Ltd (1994) 12 ACLC 44 the facts were closely similar to, but not identical with, the facts of this case. In that case, on the second last day before the expiration of 21 days after the service of a statutory demand an application to set aside the demand and supporting affidavit were filed in the Supreme Court of Queensland. On the same day as the application was filed copies of the application and affidavit were sent to the company by post but were not received until three days later. There was evidence that in the ordinary course of post they would have been delivered two days after posting. It was common cause that service was effected after the period prescribed by s 459G(3) had expired. The company sought an extension of time under s 1322(4)(d) of the Corporations Law. There was no suggestion that there was any likelihood of prejudice or injustice arising if time was extended.
In his reasons Derrington J said (at p 45):
The only argument that learned counsel for the respondent seriously raises is a proposition that the limitation required by s 459G is not amendable to any extension by the Court because of the use of the word "only" in its context. However, the use of that word is made necessary by the way in which the limitation is expressed for without it the limitation would not be fully and exclusively expressed as a limitation at all.
Consequentially there is no reason to feel that the use of that word is in some ambiguous way designed to diminish the power of the Court to grant an extension of time where the justice of the case demands it. Moreover, it would be difficult to understand any good reason why such an impediment to justice by the grant of an extension of time in a suitable case should be intended. Consequentially, the power of the Court to extend time is not removed by that provision, and the power may therefore be exercised in this case, there being no good reason why the extension should not be granted subject to appropriate conditions as to costs and any other consequential factors.
A different conclusion was reached by Hayne J in the Supreme Court of Victoria in Texel Pty Ltd v Commonwealth Bank of Australia 11 ACSR 535. Texel was decided on 14 September 1993, some seven weeks before the decision in re Cavetina but it does not appear that Dennington J was referred to the earlier decision.
In Texel no application to set aside the statutory demand was made within the prescribed period. Some four days after the 21 day period had expired the company applied for an order under s 1322(4)(d) of the Corporations Law extending the period for making application to set aside the statutory demand. In his reasons (at p 536-7) Hayne J, after canvassing the legislative scheme contained in Part 5.4 of the Corporations Law, said:
In my view the intent of Pt 5.4 is clear. It is to prescribe a scheme regulating the winding up of companies in insolvency and the whole of the statutory demand procedure: the making of such demands, their setting aside, their variation.
In those circumstances I do no consider that the general provisions of s 1322 may be applied to extend the time so emphatically prescribed in s 459G(2) even if, as I assume, s 1322 is ordinarily to be given a wide construction. The operation of the general provisions of s 1322 would be repugnant to the special scheme enacted by Div 2 of Pt 5.4 and in particular s 459G(2) ...
And at p 537-8 he continued:
In my view the language of the provisions of the Corporations Law shows a clear legislative intention that the special provisions made by s 459G(2) and (3) are not to be extended by resort to s 1322. Otherwise the limitations imposed in such clear and emphatic language by s 459G(2) and (3) would be rendered nugatory.
Where the legislature has wished to provide a power in the court to extend time in relation to winding up in insolvency it has done so expressly - see for example s 459R. The absence of such an express power in s 459G gives further emphasis to the limitation indicated by the repeated use of the word "only" in s 459G.
No doubt one would be repelled by such a conclusion if it meant that in all circumstances the company would, by simply allowing the effluxion of 21 days face certain corporate death with no opportunity of demonstrating that it should be permitted to survive. Two things should be said of this point: first it is to be noted that there is power under s 459S to grant leave to rely on grounds that could be used to set aside a statutory demand. As the Act says, that leave is not to be granted unless the ground is material to proving that the company is solvent, but clearly there is as counsel for the bank put it, a safety net provided by s 459S in the sense that there are cases in which a dispute as to the existence of the debt may be litigated at the time of the application for winding up in insolvency, even if there has been no application under s 459G.
Now in the case of an alleged debt as large as this one it would seem probable that the question whether the debt is due would likely bear upon the company's solvency but that is a matter for another day and I say no more about it.
The second point is that made in para 688 of the explanatory memorandum published at the time of the introduction of the Corporate Law Reform Bill 1992 into the parliament. There it was said: The provisions in relation to the setting aside of a statutory demand are intended to be a complete code for the resolution of disputes involving statutory demands and to do so on the basis of the commercial justice of the matter rather than on the basis of technical deficiencies. In particular, it is intended to remove the present difficulties which are experienced where difficulties in estimating the extent of the debt may lead to an invalidating of the statutory demand on the basis of a minor overstatement of the amount due.
In my view s 1322 does not give power to extend the time for applications under s 459G.
The decision in Texel was referred to by Mildren J in the Supreme Court of the Northern Territory in CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd 11 ACSR 772. In that case an application to set aside a statutory demand was filed within time and on the last day of the 21 day period copies of the application and the affidavit were sent to, and received by, the company by facsimile transmission. Although neither the Corporations Law nor the Supreme Court Rules make provision for the service of documents by facsimile, Mildren J was of the view that the mode of service was a mere irregularity. At p 774 after referring to the facts in Texel he said:
But in this case, there was service of the summons and the supporting affidavit required by the section, within the time limited by the section, albeit irregular service. The mode of service to be used is not prescribed by the provisions of Pt 5.4 of the Corporations Law. Nor do the provisions of the Corporations Law elsewhere to be found in that Act prescribe any exclusive mode of service. The mode of service of such an application, being a matter of practice and procedure, is left to the rules of this court. Accordingly it is my view that the method of service used in this case was a mere irregularity which could be waived by the defendant: see ATCO Industries (Aust) Pty Ltd v Ancla Maritama SA (1984) 34 SASR 408 at 413-14. As, in my opinion, nothing in the Act precludes the court from prescribing the mode of service of an application, nothing in the Act prevents a court from making an order, pursuant to r 6, confirming irregular service of the application and the supporting affidavit on the defendant. It is clear that an order under r 6.10 may be made at anytime after informal service and I consider that I now have power to make such an order.
The type of order made by Mildren J is contemplated by s 109X(2)(b) of the Corporations Law which preserves the power of courts to authorise service of a document otherwise than as provided in s 109X(1).
It is clear that the question which was decided in CFC Corporation has no application in this case. Nor are the facts of either Cavetina or Texel completely identical with the present facts. Nevertheless, it appears to me, for the same reasons as have been expressed by Hayne J, that the conclusion reached in Texel is the preferable construction to be applied to s 459G(2) and (3).
This is not a case in which it can be said that there has been an irregularity in the service of the application which could be cured as in CFC Corporation. In this case no attempt to effect service was made until after the prescribed time had expired. There simply had been no service, regular or irregular, within time. It may well be that in an appropriate case the Court could treat the mere posting of the application within time as sufficient service, but that case is not this case and I express no concluded view.
In my opinion, the Court does not have power to extend the time for service of the application as sought by the applicant. Accordingly, the application will be struck out as incompetent.
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