Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Ltd
[2005] SASC 48
•10 February 2005
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
DERMA PHARMACEUTICALS PTY LTD v HSBC BANK AUSTRALIA LTD
Judgment of The Full Court
(The Honourable Justice Duggan, The Honourable Justice Besanko and The Honourable Justice White)
10 February 2005
CORPORATIONS - WINDING UP - WINDING UP BY COURT - GROUNDS FOR WINDING UP - INSOLVENCY - STATUTORY DEMAND
Appeal against Master's order to dismiss an application to set aside a statutory demand - whether application was made within 21 days after service of statutory demand - where statutory demand delivered to post office box of appellant's accountants - where statutory demand subsequently taken to registered office of appellant - where statutory demand arrived at registered office of appellant at some time between 21 and 30 days before appellant made its application - where appellant could not establish when statutory demand arrived at registered office of appellant within that period - where appellant could not therefore establish that application was made within 21 days after service - whether time limit of 21 days constitutes an essential pre-condition to the jurisdiction to set aside a statutory demand - appeal dismissed.
Therapeutic Goods Act 1989 (Cth); Corporations Act 2001 (Cth) ss 5C, 109X, 459C, 459E, 459G, 459J, 459S; Acts Interpretation Act 1901 (Cth) ss 29, 36; Australian Postal Corporation (Performance Standards) Regulations 1988 (SA) reg 6, referred to.
David Grant & Co Pty Ltd (Receiver Appointed) v Westpac Banking Corporation (1995) 184 CLR 265; Fancourt & Anor v Mercantile Credits Ltd (1983) 154 CLR 87; Bellway Corporation Ltd v Ausdrill Ltd (1995) 13 ACLC 1663; Deputy Commissioner of Taxation v Barroleg Pty Ltd (1997) 25 ACSR 167; Howship Holdings Pty Ltd v Leslie & Anor (1996) 41 NSWLR 542, considered.
DERMA PHARMACEUTICALS PTY LTD v HSBC BANK AUSTRALIA LTD
[2005] SASC 48Full Court: Duggan, Besanko and White JJ
DUGGAN J. I agree that the appeal must be dismissed for the reasons given by Besanko J.
BESANKO J: This is an appeal from an order made by a Master of this Court. The Master heard an application to set aside a Creditor’s Statutory Demand for Payment of Debt (“the statutory demand”) issued under s 459E of the Corporations Act 2001. The application to set aside the statutory demand was made under s 459G of the Corporations Act. The Master dismissed the application and the applicant appeals against that order.
The appellant is Derma Pharmaceuticals Pty Limited. Mr Detlef Friedrichs is the managing director of that company. The company is the manufacturer and supplier of various pharmaceutical products registered under the Therapeutic Goods Act1989 (Cth). It supplies wholesale and retail pharmacies in Australia and other countries with goods. The respondent is HSBC Bank Australia Limited. It provided credit facilities to the appellant. In 2003 it withdrew those facilities and sought payment of the monies owing to it. The appellant alleges that the respondent was not entitled to withdraw the facilities, and that by reason of the withdrawal of the facilities it suffered losses in excess of the monies allegedly owed by it.
The respondent’s statutory demand is dated 9th October 2003 and it asserts that the sum of $207,176.71 is due and owing to it by the appellant. An affidavit sworn on 9th October 2003 by Mr John Christian Alexander, executive of credit risk management of the respondent, accompanies the statutory demand. He deposes to the debt and to his belief that there is no genuine dispute about the existence or amount of the debt. The statutory demand was served on the appellant. On 13th November 2003 the appellant applied for an order setting aside the statutory demand.
There were two issues before the Master who heard the application. First, the application to set aside the statutory demand may only be made within 21 days after the service of the statutory demand (s 459G(2)). The application is made in accordance with s 459G only if, within those 21 days an affidavit supporting the application is filed with the Court and a copy of the application and affidavit are served on the person who served the demand on the company (459G(3)). As I have said, the application was made on 13th November 2001. If service of the statutory demand took place before 23rd October 2003, or, on the respondent’s submission, it was not established that it had not taken place before 23rd October 2003, then the application was not made within 21 days after the service of the statutory demand. That conclusion follows from the provision in the Acts Interpretation Act1901 (Cth) which deals with the reckoning of time (s 36). The Master found that it had not been established that the application was made within 21 days after the service of the statutory demand. There is no power to extend the time limit of 21 days and if the application is not made within that time it must be dismissed (David Grant & Co Pty Ltd (Receiver Appointed) v Westpac Banking Corporation (1995) 184 CLR 265). In that case Gummow J (with whom the other Justices of the Court agreed) said (at 277):
“The force of the term ‘may only’ is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G. An integer or element of the right created by s 459G is its exercise by application made within the time specified.”
The Master’s finding led him to make an order dismissing the application. Secondly, although the Master said his finding that it had not been established that the application was made within 21 days after service of the statutory demand was sufficient to justify the order he made, he nevertheless went on to consider if the applicant had a sufficient off-setting claim to justify the setting aside of the statutory demand (s 459J). The Master found in favour of the appellant in relation to that issue and there is no challenge by the respondent to that conclusion.
The effect of the Master’s order dismissing the application to set aside the statutory demand is that on an application made by the respondent for the winding up of the appellant made within three months of the failure to comply with the statutory demand, the Court must presume that the appellant is insolvent. The presumption operates except in so far as the contrary is proved for the purposes of the application (s 459C). The appellant may not, without the leave of the Court, oppose the application for winding up on a ground that the appellant could have relied on for the purposes of an application by it for the statutory demand to be set aside (whether the appellant made an application or not) and the Court is not to grant leave unless it is satisfied that the ground is material to proving that the appellant is solvent (s 459S).
If, on the other hand, the Master erred in concluding that it had not been established that the application had been made within 21 days after service of the statutory demand, then the appropriate order is that the statutory demand be set aside.
The issue on the appeal then is a narrow one. The application to set aside the statutory demand was made on 13th November 2003 and the issue on the appeal is whether the Master erred in concluding that it had not been established that that was within 21 days after the statutory demand had been served. In other words, the issue is whether the Master erred in concluding that it had not been established that the appellant had not been served prior to 23rd October 2003. It is also said that even if the Master was right to reach that conclusion he was wrong to dismiss the application.
I turn now to the particular findings of fact made by the Master.
The registered office of the appellant at the relevant time was care of Luestner and Associates, 553 Magill Road, Magill, in the State of South Australia, 5072. I will refer to this address as the Magill address. Luestner and Associates is a firm of accountants and I think it may be inferred that the Magill address is that of the premises from which the firm conducts its business. The business address of the appellant at the relevant time was 8 Stepney Street, Stepney in the State of South Australia. I will refer to this address as the business address. The solicitors for the respondent in New South Wales are Blake Dawson Waldron. On 13th October 2003 an employee of that firm placed in an express post envelope addressed to the appellant care of Luestner and Associates at the Magill address, a letter from the firm to the appellant care of Luestner and Associates at the Magill address, the statutory demand which was addressed to the appellant care of Luestner and Associates at the Magill address, and the affidavit of Mr Alexander sworn on 9th October 2003. At approximately 4.40 pm another employee of Blake Dawson Waldron collected the express post envelope and at approximately 5.20 pm he placed it in the express post box at the Wynyard post office located on George Street, Sydney, New South Wales.
The Master found that the envelope containing the statutory demand was received at the relevant post office in the State of South Australia on 14th October 2003 and that the envelope was addressed to the appellant at its registered office, namely, care of Luestner and Associates at the Magill address. At the relevant time, Luestner and Associates had the facility of a post office box at the relevant post office and the Master found that the practice of the post office was to place letters in the post office box held by the addressee even where letters were addressed to the addressee at an address to which mail might otherwise be sent. The Master found that on 14th October 2003 the envelope containing the statutory demand was placed in the post office box held by Luestner and Associates by an employee of Australia Post. To this point, there is no challenge by either party to the Master’s findings of fact.
The Master identified the relevant statutory provisions in relation to service of documents on a company.
Section 109X of the Corporations Act 2001 relevantly provides:
“(1) For the purposes of any law, a document may be served on a company by:
(a) leaving it at, or posting it to, the company’s registered office; or
(b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory;”
Section 5C(1) of the Corporations Act2001 provides that the Acts Interpretation Act1901 (Cth) (as at 1st November 2000) applies to the Act.
Section 29(1) of the Acts Interpretation Act1901 (Cth) deals with service by post and it provides:
“(1)Where an Act authorises or requires any document to be served by post, whether the expression ‘serve’ or the expression ‘give’ or ‘send’ or any other expression is used, then unless the contrary intention appears the service shall be 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 at which the letter would be delivered in the ordinary course of post.”
The Master found that the effect of the act of placing the envelope containing the statutory demand in the post office box was to exclude the deeming provision as to delivery by post in s 29(1) of the Acts Interpretation Act1901 (Cth).
The Master nevertheless concluded that the appellant had failed to establish that the application was made within 21 days after the service of the statutory demand. There were two steps in his reasoning. First, in the absence of direct evidence he drew an inference that the envelope containing the statutory demand was collected by an employee of Luestner and Associates between 14th October and 23rd October 2003 and taken to the Magill address which was the business address of Luestner and Associates and the registered office of the appellant. The Master drew an inference that the envelope containing the statutory demand was opened at the Magill address and then placed in another envelope addressed to the appellant at its business address and that it was then posted by Luestner and Associates to the appellant at its business address. As I understand the Master’s reasoning, in those circumstances he held that at some point the statutory demand was held at the registered office of the appellant and that that constituted service on the appellant. The second step in the Master’s reasoning was that he found that the appellant had not established that that had occurred no earlier than 23rd October 2003 and therefore had not established that the application was made within 21 days of service of the statutory demand. In other words, the Master said that the statutory demand could have been held at the Magill address at any time between 14th and 23rd October 2003 and therefore the appellant had failed to establish an essential pre-condition to the jurisdiction to set aside a statutory demand under s 459G of the Corporations Act 2001, namely, that the application was made within 21 days after service of the statutory demand. The appellant challenges the Master’s findings and conclusions.
Mr Friedrichs gave evidence, which was accepted by the Master, that he received the statutory demand at the business address of the appellant on 24th October 2003. It was in an envelope that arrived by postal delivery at the business address on 24th October 2003. The respondent does not challenge those findings.
I turn now to consider the submissions put on the appeal.
Logically it is appropriate to start with an argument put by the respondent and rejected by the Master. It is raised by the respondent on the appeal by a notice of alternative contention. The submission is that by reason of s 29(1) of the Acts Interpretation Act 1901 (Cth) the statutory demand was deemed to have been delivered in the ordinary course of post on 15th October 2003. The respondent submits that it can rely on the deeming provision in s 29(1) and that the statutory demand would have been delivered in the ordinary course of post within two days and it refers to the Australian Postal Corporation (Performance Standards) Regulations 1988, reg 6. As I have said, the Master rejected the submission because he found that the contrary had been proved within the terms of s 29(1) because it was clear that the envelope containing the statutory demand was placed in the post office box of Luestner and Associates and not delivered by Australia Post to the Magill address of that firm which was the registered office of the appellant. In light of the evidence of the two employees of Australia Post which was placed before the Master by way of affidavit, the finding that the envelope containing the statutory demand was placed in the post office box of Luestner and Associates and not delivered by Australia Post to the business address of that firm was correct.
In Fancourt & Anor v Mercantile Credits Ltd (1983) 154 CLR 87 the High Court considered the operation of s 39(1) of the Acts Interpretation Act 1954 to 1962 (Q) which for present purposes is in similar terms to s 29(1) of the Acts Interpretation Act 1901 (Cth). The issue in that case was whether the credit provider had served by post notices required under the Hire-Purchase Act of 1959 (Q). The High Court discussed the operation of the deeming provision in cases in which non-delivery is proved and cases in which all that is proved is non-receipt. The Court said (at 96 – 97 and omitting footnote references):
“There is a line of cases, commencing with Reg v County of London Quarter Sessions Appeals Committee: Ex parte Rossi, which deal with the effect of proof of non-delivery where service by post is permitted and used, having regard to s 26 of the Interpretation Act 1889 (UK). That section is the equivalent of s 39(1) of the Queensland Acts Interpretation Acts. The effect of the cases appears to be that proof of non-delivery means that service cannot be deemed to have taken place under the second limb of the section at the time of delivery in the ordinary course of the post and cannot be established as having taken place at any other time. The consequence is that where it is necessary to establish service at a particular time, proof of non-delivery is as effective as proof of non-service, notwithstanding that service by post is in the circumstances permitted and the requirements of the Interpretation Act are observed: see Beer v Davies; Hewitt v Leicester Corporation; Saga Ltd v Avalon Promotions; A/S Cathrineholm v Norequipment; cf Lombard Australia Ltd v Mohrwinkel. It may be thought that there is an anomaly in such a result because it means that, notwithstanding the adoption of a permitted means of service, the service is nevertheless ineffective if there is proof of non-delivery. It is, however, unnecessary to pursue these decisions here save to remark that they are all cases in which delivery was disproved. Despite remarks in the judgments about non-receipt, it was non-delivery which was significant because the second limb of s 26 of the Interpretation Act refers to proof of the contrary of delivery. As the present case shows, delivery may be different from receipt by the intended recipient and, provided that delivery is not disproved, the fact of non-receipt does not displace the result that delivery is deemed to have been effected at the time at which it would have taken place in the ordinary course of the post.”
It is true that the High Court did not express a concluded view about the line of cases referred to in the above passage, but in my opinion it follows from the terms of s 29(1) that proof of non-delivery is proof to the contrary under s 29(1) of the Acts Interpretation Act1901 (Cth) and that without more, proof of non-delivery is as effective as proof of non-service, notwithstanding that service by post is, in the circumstances, permitted and that from the sender’s point of view the requirements of s 29(1) have been observed. At the conclusion of argument in this appeal I was disposed to think that there had been proof in this case that the envelope containing the statutory demand was not delivered in the ordinary course of post to the registered office of the appellant. The envelope containing the statutory demand was delivered in the ordinary course of post to a post office box held by the accountants whose business address was the registered office of the appellant. I was disposed to think that whilst it is true that that occurred without fault on the part of the respondent, the question of whether the contrary is proved under s 29(1) does not turn on whether the sender is at fault. I was disposed to think that the Master’s decision that the deeming provision in s 29(1) did not operate was correct. However, my researches have revealed two authorities which might suggest a contrary conclusion (Bellway Corporation Ltd v Ausdrill Ltd (1995) 13 ACLC 1663; Deputy Commissioner of Taxation v Barroleg Pty Ltd (1997) 25 ACSR 167). These cases were not referred to by either counsel in the course of submissions before this Court. As I have said, the cases might support a different conclusion in relation to the operation of s 29(1) from that reached by the Master. In other words, they might support an argument that the fact that Australia Post directed the envelope containing the statutory demand to a post office box rather than the address of the registered office of the appellant does not constitute proof to the contrary in terms of s 29(1). I have considered whether the Court should invite the parties to make submissions about these cases. I do not think it necessary to do so. If the cases assist any party to the appeal it is the respondent, and I have decided for reasons which I will give that the appeal should be dismissed. In those circumstances it is undesirable to put the parties to the cost and expense of further argument.
Under s 109X of the Corporations Act2001 a document may be served on a company by delivering a copy of the document personally to a director of the company who resides in Australia (s 109X(1)(b)). The admission by Mr Friedrichs that he received the statutory demand on 24th October 2003 is sufficient proof of service for the purposes of the Act either because there was service pursuant to s 109X(1)(b), or because the document came to the notice of the appellant and the means by which that occurred is immaterial (Howship Holdings Pty Ltd v Leslie and Anor (1996) 41 NSWLR 542 per Young J at 544). Mr Friedrichs’ admission that he received the statutory demand on 24th October 2003 is sufficient proof of service for the purposes of the Corporations Act2001.
The critical question is whether, in light of the fact that the application was made on 13th November 2003, there was service of the statutory demand, or may have been service of the statutory demand, prior to 23rd October 2003. A document may also be served on a company by “leaving it at” the registered office of the company (s 109X(1)(a)). The statutory demand was not left at the Magill address by the respondent or its agent. However, the appellant did not argue that that was a requirement of the section and the Master took the view that as long as the statutory demand was for a time, however briefly, held at the Magill address then at that point service on the appellant was effected. The appellant argued that the Master erred as a matter of fact in inferring that the statutory demand was ever taken to the registered office of the appellant.
I do not think the Master erred in drawing the inference that the envelope containing the statutory demand was taken to the Magill address at some point between 14th October and 23rd October, and that that was done by a partner or employee of Luestner and Associates. It is true that a number of other things might have happened. The envelope might have been opened at the post office at some point and the statutory demand and other documents posted from the post office to the business premises of the appellant. The envelope might have been collected from the post office box by a partner or employee of Luestner and Associates and taken to a place other than the Magill address from which in due course it was posted to the business premises of the appellant. These things are possible but I do not think that they are likely. As a matter of ordinary business practice it is likely the post office box was cleared by an employee of Luestner and Associates who was not aware of the business address of the appellant. It is likely that at some point the envelope containing the statutory demand was taken back to the Magill address and a search made at those premises for the business address of the appellant. The statutory demand and other documents were then posted on to the business address of the appellant. I would not interfere with the Master’s finding that at some point the statutory demand was held at the Magill address.
The next question is whether the Master erred in not concluding that the statutory demand was not held at the Magill address before 23rd October 2004. I did not understand the appellant to put this contention with any force. I would reject the contention in any event. It is true that one possible inference is that the statutory demand was not taken to the Magill address until 23rd October 2003 and was then immediately posted to the business address. However, that inference is no more likely than the inference that the envelope containing the statutory demand was collected from the post office box shortly after 14th October and taken to the Magill address where it remained for some days before being posted to the business address.
The appellant did submit that even if no inference could be drawn as to when between 14th October and 23rd October 2003 the statutory demand was held at the Magill address, the Master erred in the circumstances of this case in deciding that that conclusion was fatal to the appellant’s application. The circumstances the appellant emphasised were the fact that service on 24th October 2003 was clearly proved, the fact that the respondent had unsuccessfully sought to invoke the provisions of s 109X(1) of the Corporations Act2001 and s 29(1) of the ActsInterpretation Act 1901 (Cth) and the fact the time limit of 21 days is a strict time limit and cannot be extended. There is force in the appellant’s submissions, but I do not think they are sufficient to overcome the nature of the time limit in s 459G. The requirement as to time is an essential condition of the new right conferred by s 459G (David Grant & Co Pty Ltd) (Receiver Appointed) v Westpac Banking Corporation (supra) per Gummow J (at 277)). In other words, the requirement as to time is a condition of the jurisdiction of the Court to make an order under s 459G. In this case, although the statutory demand was received by the appellant on 24th October 2003 and the application to set aside the statutory demand was made within 21 days after that date, service of the statutory demand on the appellant took place at some point between 14th October and 23rd October 2003. If that service took place no earlier than 23rd October 2003 then the time limit in s 459G was met. If that service took place between 14th October and 22nd October 2003 then the time limit was not met. The evidence in this case did not allow any inference to be drawn other than the inference that the statutory demand was served on the appellant at some time between 14th October and 23rd October 2003. Whether it is appropriate to talk in terms of an onus on the appellant or simply in terms that the court must be satisfied that an essential condition of its jurisdiction is satisfied, on the evidence in this case an essential condition of the right to set aside the statutory demand was not established. The Master was right to dismiss the application.
In my opinion, the appeal must be dismissed.
WHITE J. I agree with the order proposed by Besanko J and with his reasons.
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