Flintel Pty Ltd v Flexible Telecommunications Pty Ltd
[2024] WASC 63
•11 MARCH 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FLINTEL PTY LTD V FLEXIBLE TELECOMMUNICATIONS PTY LTD [2024] WASC 63
CORAM: MASTER RUSSELL
HEARD: 29 FEBRUARY 2024
DELIVERED : 11 MARCH 2024
FILE NO/S: COR 139 of 2023
BETWEEN: FLINTEL PTY LTD
Plaintiff
AND
FLEXIBLE TELECOMMUNICATIONS PTY LTD
Defendant
FILE NO/S: COR 140 of 2023
BETWEEN: FLINTEL GROUP PTY LTD
Plaintiff
AND
FLEXIBLE TELECOMMUNICATIONS PTY LTD
Defendant
Catchwords:
Corporations - Application to set aside statutory demand - Failure to comply with requirements of s 459G - Application not made in accordance with s 459G - Application not served within statutory period - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 459G
Result:
Applications dismissed
Category: B
Representation:
COR 139 of 2023
Counsel:
| Plaintiff | : | M Tolcon |
| Defendant | : | M Paterson |
Solicitors:
| Plaintiff | : | Forbes Kirby |
| Defendant | : | Michael Paterson & Associates |
COR 140 of 2023
Counsel:
| Plaintiff | : | M Tolcon |
| Defendant | : | M Paterson |
Solicitors:
| Plaintiff | : | Forbes Kirby |
| Defendant | : | Michael Paterson & Associates |
Cases referred to in decision:
Accommodation West Pty Ltd v Innis [2009] WASC 337
Chief Commissioner of State Revenue v Boss Constructions (NSW) Pty Ltd [2018] NSWCA 270
David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265
PCM Nominees (WA) Pty Ltd v 063 291 430 Pty Ltd [2017] FCA 848
MASTER RUSSELL:
Introduction
By originating process filed in each of COR 139 of 2023 and COR 140 of 2023 (Corporations Proceedings) on 5 September 2023, the plaintiffs, Flintel Pty Ltd and Flintel Group Pty Ltd respectively, applied to set aside a statutory demand served on each of them by the defendant, Flexible Telecommunications Pty Ltd (together the Applications).
On 29 February 2024, I dismissed the Applications as they were not made in accordance with s 459G(3) of the Corporations Act 2001 (Cth).
I gave brief oral reasons for my decision at the hearing on 29 February 2024 and said I would provide written reasons. These are my reasons.
The Applications
The Applications are said to be made pursuant to s 459G of the Corporations Act to set aside statutory demands served on each of the plaintiffs by the defendant on 15 August 2023, on the grounds that:
(a)there is a genuine dispute between the plaintiff and the defendant as to the amount of the debt claimed in the statutory demand;
(b)the plaintiff has an offsetting claim against the defendant; and
(c)on other grounds stated in the supporting affidavit, including that the statutory demand is an abuse of process.
The plaintiffs rely on affidavits sworn by Gillian Lesley Robb on 5 September 2023 and 29 February 2024 and written submissions filed on 19 October 2023.
The defendant relies on affidavits sworn by Michael Edward Paterson on 22 September 2023 and 12 October 2023 and substituted written submissions filed on 12 October 2023.
The Applications were initially listed for a special appointment to be heard together on 4 December 2023.
On 1 December 2023, the parties filed a memorandum of consent orders in each proceeding confirming their consent to the special appointment being adjourned to a date after 1 February 2024, stating:
The parties have reached an in-principle settlement in this matter, but the terms of this settlement require action to be taken on the part of the defendant on or before 31 January 2024. In the event these actions are unfulfilled as at 31 January 2023 (sic), this matter will be brought back on.
The joint hearing of the Applications was adjourned to 29 February 2024.
In the written submissions filed on behalf of the defendant, it was submitted, in effect, that the Applications should be dismissed because there was a failure to comply with the strict provisions of s 459G of the Corporations Act as to the service of the Applications on the defendant.
Plaintiffs' application for an adjournment
When the Applications were called on for hearing on 29 February 2024, the plaintiffs presented two further affidavits in support of an oral application for a stay or adjournment of the hearing. They were:
(a)a supplementary affidavit of Gillian Lesley Robb sworn and filed on 29 February 2024; and
(b)an affidavit of Zoe Cassandra Thornton affirmed and filed on 29 February 2024 (Further Affidavits).
After hearing from counsel for the plaintiffs and for the defendant, I stood the matter down to consider the Further Affidavits in more detail.
In essence, the plaintiffs assert that an agreement was reached with the defendant, in communications between their respective lawyers, to settle the Corporations Proceedings, as referred to in the Further Affidavits (Agreement). It is said that by the Agreement, the parties were to sign a memorandum of consent orders dismissing the Applications with costs of $1,750 payable by the plaintiff to the defendant of $1,750 in respect of each application (a total of $3,500), and the defendant would forbear from bringing winding up applications in relation to the unsatisfied statutory demands upon:
(a)payment of $3,500 by the plaintiffs to the defendant's lawyers to be held in escrow in relation to the costs of the Applications; and
(b)payment by the plaintiffs of unpaid superannuation in relation to Mr Lyndon Croot, by 31 January 2024.
It is unclear on the material before the court in the Corporations Proceedings, how payment of superannuation to Mr Croot relates to the amounts stated to be owing to the defendant by the plaintiffs in the statutory demands. It appears Mr Croot was previously employed by the business operated by the plaintiffs and was a former director of the defendant. In her affidavit affirmed on 29 February 2024, Ms Thornton refers to separate proceedings issued in this court on 22 September 2023 (CIV 2096 of 2023) by the plaintiffs to the Corporation Proceedings, seeking declaratory relief and damages against the defendant. She says that those proceedings 'deal with' the debts the subject of the statutory demands, but she does not elaborate.
The plaintiffs say that the amount of $3,500 in relation to costs (together with a further amount in relation to costs) has been paid to the defendant's lawyers and payment has been made in relation to Mr Croot's superannuation, though not by the date specified.
The defendant accepts that an agreement was reached, but disputes that it has been performed. The defendant says there was non‑compliance with the terms of the Agreement relating to payment of Mr Croot's superannuation.
The plaintiffs sought an adjournment of the hearing of the Applications to enable them to make an application for a stay of the Corporations Proceedings, pending a determination of the validity and performance of the Agreement.
It was submitted, in effect, that the plaintiffs have made the payments required of them under the Agreement, and the only matter outstanding is the parties consenting to the Applications being dismissed on the terms of the Agreement. The plaintiffs say they will suffer irreversible prejudice if the special appointment proceeds before there has been a determination as to the validity and performance of the Agreement, because:
(1)To argue the merits of the Applications would be contrary to the Agreement.
(2)Any dismissal of the Applications other than on the terms of the Agreement would:
(a)be contrary to the Agreement; and
(b)expose the plaintiffs to winding up applications being brought by the defendants, contrary to the defendant's agreement to forbear from applying to wind up the plaintiffs on the unsatisfied statutory demands.
The defendant opposed the plaintiffs' application to adjourn the Applications and pressed its position in its written submissions, to the effect that the Applications have not been made in accordance with s 459G of the Corporations Act and should be dismissed.
Counsel for the defendant undertook, on behalf of the defendant, that no application would be made to wind up either of the plaintiff companies without first giving five business days written notice to their lawyers.
For the reasons that follow, I find that the Applications were not made in accordance with s 459G of the Corporations Act.
The operation of s 459G cannot be varied by any agreement of the parties or by order of the court. It requires strict compliance. If the criteria prescribed in s 459G are not met, the court cannot exercise jurisdiction under it.
There is no utility in adjourning the special appointment for any determination relating to the Agreement. The court's jurisdiction to determine the Applications is not enlivened, and the Applications should be dismissed.
Compliance with s 459G of the Corporations Act 2001 (Cth)
Written submissions were filed on behalf of the defendant and the plaintiffs on 12 and 19 October 2023 respectively addressing the need, or otherwise, for compliance with s 459G of the Corporations Act. Counsel for the defendant relied on and maintained the position set out in its written submissions. The plaintiffs' counsel made no further submissions, saying he was instructed not to do so as it would be contrary to the Agreement.
It is not disputed that the statutory demands were served on each of the plaintiffs on 15 August 2023.
Section 459G of the Corporations Act provides:
(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 the statutory period after the demand is so served.
(3)An application is made in accordance with this section only if, within that period:
(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.
It is uncontroversial that the statutory period is 21 days and that the last day for filing an application under s 459G to set aside the statutory demands was 5 September 2023.
The plaintiffs each filed their originating process and supporting affidavits through the electronic court management system (ECMS) on 5 September 2023. That is accepted by the defendant.
The defendant submits, in essence, that:
(1)There must be strict compliance with s 459G(3) of the Corporations Act.
(2)The plaintiffs served a copy of the affidavit supporting the application by email sent to the defendant's lawyer at 6.26 pm on 5 September 2023.
(3)A copy of the application to set aside the statutory demand was not served by 5 September 2023, as required by s 459G(3).
(4)A copy of the originating process was not served or sent to the defendant's lawyer until 19 September 2023, when it was sent as an attachment to an email from the plaintiffs' lawyers to the defendant's lawyer.
(5)The plaintiffs' failure to comply with the requirement in s 459G(3)(b) to serve a copy of the application within the 21 day time limit is fatal to the plaintiff's application in each case.
(6)The Applications should be dismissed.
In the written submissions filed on behalf of the plaintiffs it is submitted, in essence, that:
(1)Service of the supporting affidavit was sufficient notice to the defendant of the plaintiffs' intention to apply to set aside the statutory demand.
(2)In circumstances where the defendant is taken to have received notice of the originating process, it should be estopped from denying service.
(3)The defendant has suffered no prejudice as a result of the plaintiffs' delay in service.
(4)The defendant took unconscientious advantage of a technicality in circumstances where they were aware of the plaintiffs' application.
The terms of s 459G(2) of the Corporations Act are clear. An application by a company to set aside a statutory demand 'may only be made within the statutory period after the demand is so served'.
For an application to be made 'in accordance with' s 459G, the plaintiff must not only file an affidavit supporting the application within the 21 day period, but must also serve a copy of the application and of the supporting affidavit on the person who served the demand on the plaintiff.[1]
[1] Corporations Act 2001 (Cth), s 459G(3).
A copy of the application was not served on the defendant until 19 September 2023, which was 14 days outside the statutory period of 21 days from the date of service of the statutory demand.
It is well recognised that if an application is made outside the 21 day period, the court cannot exercise jurisdiction under s 459G. The authorities relating to compliance with s 459G of the Corporations Act make clear that strict compliance is required and the statutory period cannot be extended by the court.[2] Service of both the supporting affidavit and the application to set aside the demand are essential to invoke jurisdiction.[3] The plaintiffs have not identified any authority to the contrary.
[2] David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265, 276 ‑ 278. See also Accommodation West Pty Ltd v Innis [2009] WASC 337 [5] ‑ [7] (Sanderson M) and the authorities referred to; PCM Nominees (WA) Pty Ltd v 063 291 430 Pty Ltd [2017] FCA 848 [34] ‑ [35] and [41] (McKerracher J).
[3] PCM Nominees (WA) Pty Ltd v ACN 063 291 430 Pty Ltd [2017] FCA 848 [41] (McKerracher J).
In Chief Commissioner of State Revenue v Boss Constructions (NSW) Pty Ltd,[4] the New South Wales Court of Appeal held that an estoppel could not operate to effectively extend the time limit imposed by s 459G(2). In that case, the court stated that the requirement that an application under s 459G(1) be made within the time prescribed defined the jurisdiction of the court to entertain such an application, and neither the agreement of the parties, nor the operation of any estoppel could confer jurisdiction which was withheld by the section. I respectfully agree that both the text of s 459G and the policy behind the legislation supports that conclusion.
[4] Chief Commissioner of State Revenue v Boss Constructions (NSW) Pty Ltd [2018] NSWCA 270 [25] ‑ [27] (Bathurst CJ), [37] (Leeming JA) and [38] (Sackville AJA).
Conclusion and orders
As a consequence of the plaintiff's failure in each case to serve a copy of the application to set aside the statutory demand within the 21 day period, there is no valid application before the court and the Applications must be dismissed.
The defendant has undertaken through its counsel not to bring any application to wind up either of the plaintiff companies without first giving five business days written notice to its lawyers. I have made an order to that effect.
Should the defendant give such notice, it is open to the plaintiffs to take steps, if appropriate, to restrain winding up proceedings being brought by the defendant in breach of any agreement. It is also open to them to apply under s 459S of the Corporations Act for leave to rely, in any winding up application, on any grounds they could have relied upon to set aside the statutory demand had they made a valid application.
I have not made any orders as to costs at this stage. The Further Affidavits refer to some payment having already been made in relation to the costs of the Applications under the terms of the Agreement.
The parties should confer about the costs of the Applications and, if they are able to reach agreement, file a memorandum of consent orders. If agreement cannot be reached, I have made orders for the filing of submissions in relation to the costs of the Applications.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AM
Associate to Master Russell
11 MARCH 2024
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