In the matter of Citiline Developments Pty Ltd

[2021] NSWSC 690

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Citiline Developments Pty Ltd [2021] NSWSC 690

Hearing dates:

4 June 2021

Date of orders:

4 June 2021

Decision date:

04 June 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Application to set aside creditor’s statutory demand dismissed. Plaintiff to pay Defendant’s costs of the proceedings. Defendant to pay Plaintiff’s costs of the application for indemnity costs.

Catchwords:

CORPORATIONS — Winding up — Statutory demand — Application to set aside — Date of service of creditor’s statutory demand — Whether Court has jurisdiction to hear application to set aside creditor’s statutory demand.

COSTS — Party/Party — Exceptions to general rule that costs follow the event — Offers of compromise/Calderbank offers — Whether unreasonable not to have accepted Calderbank offer.

Legislation Cited:

- Corporations Act 2001 (Cth), s 459G

Cases Cited:

-Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463

Calderbank v Calderbank [1975] 3 All ER 333

-David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; [1995] HCA 43

-Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322

- Nu Line Construction Group Pty Ltd v Fowler (aka -Grippaudo) [2012] NSWSC 816

- Re Alsafe Security Products Pty Ltd atf Alsafe Trust (in liq) [2016] NSWSC 575

- Re Boss Constructions (NSW) Pty Ltd [2019] NSWSC 543

Category:

Principal judgment

Parties:

Citiline Developments Pty Ltd (Plaintiff)
Old Mate Elevators Pty Ltd (Defendant)

Representation:

Counsel:
J Frangi (Solicitor) (Plaintiff)
N Simpson (Defendant)

Solicitors:
Fortis Law Group (Plaintiff)
Southern Waters Legal (Defendant)

File Number(s):

2021/63807

Judgment – EX TEMPORE (Revised 9 June 2021)

1. This is an application in very small compass, which turns on the date a creditor’s statutory demand (“Demand”) was served, as to which the Court needs to reach a factual finding. By Originating Process filed on 5 March 2021, the Plaintiff, Citiline Developments Pty Limited (“Citiline”), applies to set aside the Demand served by Old Mate Elevators Pty Limited (“Old Mate”). Citiline contends that Demand was served on 12 February 2021 and Old Mate contends that Demand was served on 11 February 2021. If the Demand was served on 11 February, and not counting the date of service, then the Originating Process filed by Citiline on 5 March 2021 is outside the 21-day period available to file an application to set aside a creditor’s statutory demand under s 459G of the Corporations Act 2001 (Cth). It is always unfortunate where that occurs because the Court is then unable to determine the merits of an application to set aside that creditor’s statutory demand. However, the operation of the statutory regime is clear and there is no doubt as to the relevant authorities in that respect.

Affidavit and other evidence

2. Turning now to the affidavit evidence, Old Mate relies on an affidavit of Ms Neilson dated 31 March 2021 which records enquiries made of Australia Post, which in turn elicited the document to which I have referred above. The affidavit of Ms Taylor dated 1 April 2021 also refers to the enquiries made of Australia Post, again, in order to establish delivery, which produced correspondence from Australia Post, which, again, appears to me to be in the nature of a business record of Australia Post. That correspondence indicates that the Australia Post driver, not surprisingly, does not exactly recall the delivery of the article but advised the article should have been accepted by the person at that business. That is, of course, consistent with the reference to Mr or Mrs Marfatia on Australia Post's delivery record. Australia Post there describes its practice of placing an article requiring a signature at the door of the relevant premises (notably, as distinct from a mailbox at the premises) after sighting the occupant at the address who can take possession of that article. A further document, dated 24 March 2021, issued by Australia Post (which again appears to be a business record) confirms that Australia Post's record of GPS data indicates the relevant envelope was delivered at Rosebery, the location of the relevant accountant's office, and that that does not refer to delivery to a mail centre since there is no such mail centre in Rosebery. A further document dated 30 March 2021 from Australia Post records, as the delivery record to which I referred above also makes clear, that the item was delivered and signed by an "S Marfatia" on 11 February 2021 at 1.39 pm.

3. Old Mate also relies on an affidavit of Ms Ellis dated 1 April 2021, which refers to the steps taken to post the Demand, although posting is not in issue, where it is common ground that that Demand was received at the registered office, either on 11 February or 12 February, 2021. Ms Ellis also refers to subsequent steps taken, including the first search which indicated delivery to Rosebery, the address of the accounting firm, on 11 February 2021 at 1.39pm. A further affidavit dated 27 April 2021 refers to further enquiries made of Australia Post and to documents produced on subpoena by Australia Post, which are consistent with the description of Australia Post's processes to which I have referred above. An affidavit dated 28 April 2021 refers to further documents in that respect.

4. I now turn to the strongest part of Old Mate's case, namely a printout from a proof of delivery browser maintained by Australia Post (which is plainly a business record of Australia Post), which records delivery of an item with the same barcode as the envelope which contained the Demand on 11 February 2021. That delivery record indicates, beside a reference to "scan and enter description", the words "delivered with signature from S Ma". That name is plainly an abbreviation, as the balance of the document makes clear, for "S Marfatia". It is unclear whether the reference to S Marfatia is a reference to Mr Sammy Marfatia, the managing director of the accounting firm for Citiline, at which its registered office is located, or to his wife who also has the first initial "S" and, on Mr Marfatia's evidence in cross-examination, generally works on Thursdays and Fridays when the relevant item was delivered. Little turns on that for present purposes. That delivery record also indicates that the item was "signed for" by "S Marfatia" and has, in place of a signature, the word "Covid". Information produced by Australia Post indicates that that refers to a practice by which it no longer obtains a physical signature from the person who receives such a document during the Covid-19 pandemic. The difficulty for Citiline, in respect of that delivery record, is that it supports an inference that the Australia Post delivery driver had contact with either Mr or Mrs Marfatia on that day, 11 February, and that questions the account which Mr Marfatia gives of events, to which I refer above.

5. Pausing there, the delivery information produced by Australia Post referrable to the envelope and tracking record for the relevant item plainly supplies an inference that the Demand was, in fact, delivered on 11 February 2021 and came to the attention of Mr or Mrs Marfatia at the accounting practice which is Citiline's registered office. Any suggestion to the contrary faces the obvious difficulty that it leaves unexplained how an Australia Post delivery driver would have known, without contact with Mr or Mrs Marfatia, that they were associated with the business or why an Australia Post delivery driver, who has no interest in the proceedings, would falsely record that one of them received the document on that date.

6. Turning now to the evidence led by Citiline, it relies on the affidavit of Ms Nasr sworn 5 March 2021, which refers to service of the Demand on 12 February 2021. Ms Nasr fairly acknowledged, in cross-examination, that she has no personal knowledge of the date of service and is reliant on information received from others, presumably including Mr Marfatia, in that respect.

7. In his affidavit dated 26 May 2021, Mr Marfatia refers to having checked the mailbox for his firm on 11 February 2021 and to there being no mail in relation to Citiline at that time, and to speaking to other employees of the firm, who indicated that they did not recall speaking to or seeing anyone from Australia Post on 11 February 2021. Mr Marfatia also indicates that he did not recall seeing or speaking to anyone from Australia Post on 11 February 2021. That is, of course, not inconsistent with either Mr or Mrs Marfatia having, in fact, spoken to the delivery driver on 11 February 2021 and having forgotten that that has occurred where this is evidence of non-recollection rather than a denial. Mr Marfatia also refers to having checked the mailbox of his firm after lunch, about 2 pm, on 12 February 2021, and having found an envelope on the floor that relates to Citiline, then returned to his office and marked the envelope "recvd 12/2/21", intending to mean that he received the envelope and the contents of it on 12 February 2021. There is evidence that Mr Marfatia sent an email to the director of Citiline attaching a copy of the Demand and its covering letter on that day. That email indicates that legal documents had been received from Old Mate's solicitors and identified them as relating to a creditor's statutory demand for Citiline, and the attached letter has on it the words "recd regd post 12/2/21".

8. Mr Marfatia was cross-examined at some length and it was put to him, in strong terms, that his evidence was either false or incorrect. Mr Marfatia took strong exception to that, and denied having deliberately misstated the receipt date on 12 February 2021, indicating the offence which he took as to that suggestion, and indicating, in respect of some other questions, a lack of recollection of relevant events. That is perhaps not surprising where he also referred to the volume of correspondence he received in respect of clients of the firm. I will not go so far as to find that Mr Marfatia was deliberately dishonest in saying that he opened and read the relevant letter when he marked it "recd regd post 12/2/21". That is possible, but it is also possible that there was a delay between the delivery of the Demand to the registered office on 11 February 2021, when the Australia Post delivery driver recorded the name of Mr or Mrs Marfatia and the point at which Mr Marfatia opened it, read it and forwarded it to Citiline on 12 February 2021. It seems to me that the alternative explanation, that an Australia Post delivery driver approached sufficiently close to the registered office to identify Mr or Mrs Marfatia as the person who received the document, then did not leave the document at the front door in accordance with Australia Post's usual process, but, instead, placed it in the wrong letterbox so as to allow it to be found on the floor the next day by Mr Marfatia is so incredible that it could not provide a rational explanation of events.

Determination

9. In these circumstances, and on the balance of probabilities, I am comfortably satisfied that the Demand was delivered to the registered office of Citiline on 11 February rather than 12 February 2021. It is not to the point whether it was received, in the sense of being opened by Mr Marfatia, or, indeed, Mrs Marfatia, on that date where delivery is sufficient to start the time period running for the purposes of s 459G of the Act.

10. That factual finding has the consequence that this action is not within the Court's jurisdiction. The relevant principles were helpfully summarised by Rees J in Re Boss Constructions (NSW) Pty Ltd [2019] NSWSC 543. Her Honour there referred to the terms of s 459G of the Act, which requires that an application may only be made within 21 days after a creditor's statutory demand is served, and to the manner in which that time is calculated, as summarised in Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463 at [5]ff. Her Honour noted that, where the timing requirement imposed by the Act is not met, by the filing of the application within 21 days, excluding the day of service, then there is no application before the Court and the Court's jurisdiction is not enlivened. There is also no jurisdiction to extend that time under s 459G of the Act, or otherwise, as the High Court made clear in David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; [1995] HCA 43. It is not to the point that an application might have been meritorious, had it been filed within the 21-day period, where the Court does not have jurisdiction to determine it where it is not filed outside that period.

Orders

11. For these reasons, I must find that the Court does not have jurisdiction to determine the application to set aside the Demand. In those circumstances, I order that:

1. The Originating Process filed on 5 March 2021 be dismissed.

2. Note that the Defendant seeks an order for indemnity costs and direct that the Defendant file and serve its submissions as to indemnity costs by 2 pm on 7 June 2021 and the Plaintiff serve and send to the Associate to Black J submissions in response by 4 pm on 9 June 2021.

Costs

12. The parties made subsequent submissions as to costs. Old Mate relied on a “Calderbank” [Calderbank v Calderbank [1975] 3 All ER 333] offer made to Citiline on 14 December 2021 and contended that Citiline should pay its costs on the indemnity basis from 14 April 2021. That offer referred to the matters on which Old Mate relied to contend that the Court had no jurisdiction to deal with the application to set aside the Demand and, particularly, on the records of Australia Post to which I have referred above, which recorded delivery on 11 February 2021. That letter stated that Citiline’s costs to that point were $17,700 and offered a “compromise” by which the proceedings would be dismissed and Citiline would pay Old Mate’s costs in the amount of $15,000. That offer was left open for acceptance for nearly two weeks, and expressly relied on the principles in Calderbank v Calderbank above.

13. Mr Simpson, who appears for Old Mate, refers to the circumstances in which an indemnity costs order can be made, including by reference to a “Calderbank” offer. He submits that the offer made by Old Mate was reasonable where it identified the basis on which it contended the Originating Process was filed outside the 21–day period; the Court ultimately accepted that position; and it provided a reduction of Old Mate’s costs by around 16%. He submits that Citiline’s failure to accept that offer was unreasonable for reasons including that it had caused the parties to incur additional legal costs.

14. Mr Frangi, who appears for Citiline, rightly responds that a failure to accept a Calderbank offer will only justify an order for costs if it constituted a genuine offer of compromise and it was not reasonable for the offeree to accept it: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99]. He submits that Old Mate’s offer was not a genuine compromise, where it required dismissal of the application and the payment of a larger amount of costs than would be allowed on an ordinary basis, and that offer was also not more favourable than the Court’s determination. Mr Frangi also submits that Citiline’s not accepting that offer was not unreasonable where it had reasonable prospects of success on the merits of its application to set aside the Demand, and relied on the advice it had received from its accountant as to the date on which the Demand was served.

15. The relevant principles arising from the decision in Calderbank v Calderbank above were summarised by Ward J (as her Honour then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]–[15] and, in Re Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liq) [2016] NSWSC 575 at [8], I summarised those principles as follows:

“[T]he fact that a party ultimately achieves a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the other party should be awarded indemnity costs, unless it can be said that it was unreasonable for the first party not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [above] at [9]–[15]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14] , [16] . In Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26], Stevenson J observed that:

“If a Calderbank offer is made, but not accepted, the court’s discretion to make a special order is enlivened. The court’s discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7] –[8].”

16. I am not persuaded that the basis for an order for indemnity costs against Citiline is established. First, it does not seem to me that the offer made by Old Mate involved any real element of compromise, as distinct from inviting Citiline to capitulate; and, second, it seems to me that it was not unreasonable for Citiline not to accept that offer, where there was a genuine factual contest as to the date on which the Demand was served; the Court could have preferred the evidence of Citiline’s accountant to the Australia Post records, although it ultimately did not do so; and, as Mr Frangi pointed out, Citiline was reliant on the information provided by its accountant as to the date on which the Demand was served, and that accountant has throughout maintained that it was delivered (or at least received) on 12 February rather than 11 February 2021.

17. For these reasons, Old Mate’s application for indemnity costs is not established. Having brought that application, Old Mate must now pay the costs of it. I make the following additional orders as to costs:

1. The Plaintiff pay the Defendant’s costs of the proceedings, up to and including the hearing on 4 June 2021, on an ordinary basis as agreed or as assessed.

2. The Defendant pay the Plaintiff’s costs of and incidental to the Defendant’s application for indemnity costs, on an ordinary basis as agreed or as assessed.

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Decision last updated: 29 June 2021