Lee, Debra Maria v National Recruitment Pty Ltd

[1997] FCA 1244

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3195 of 1997

BETWEEN:	DEBRA MARIA LEE APPLICANT
AND:	NATIONAL RECRUITMENT PTY LTD RESPONDENT

COURT:	NORTHROP ACJ
DATE:	31 OCTOBER 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

This is the hearing of an application issued on 8 July 1997. The application is brought under s 459P of the Corporations Law.  Relevantly, that section provides:-

“459 P.(1)Any one or more of the following may apply to the Court for a company to be wound up in insolvency:

(a)the company;

(b)a creditor ....”

Sub-section 459R provides that:-

“459 R.(1)An application for a company to be wound up in insolvency is to be determined within six months after it is made.”

This application is being heard well within that period of six months.

Section 459A confers jurisdiction on the Court to make a winding up order.  The section reads:-

“459A.On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency.”

Section 459C relates to presumptions. The section has effect with respect to applications including an application under s 459P. Sub-section (2) provides:-

“(2)The Court must presume that the company is insolvent if during or after the three months ending on the day when the application was made:

(a)the company failed (as defined in section 459F) to comply with a statutory demand; or

(b)....”

In the present case, the applicant is Debra Maria Lee. The respondent is National Recruitment Proprietary Limited, a company under the Corporations Law. Section 459Q prescribes what must be set out in the application for a winding up order, based on a failure to comply with a statutory demand:-

“459Q.If an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the application:

(a)must set out particulars of service of the demand on the company and of the failure to comply with the demand; and

(b)must have attached to it:

(i)a copy of the demand; and

(ii)if the demand has been varied by an order under subsection 459H(4) - a copy of the order; and

(c)unless the debt, or each of the debts, to which the demand relates is a judgment debt - must be accompanied by an affidavit that:

(i)verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

(ii)complies with the rules.”

Order 71 of the Rules of the Court contain provisions relating to corporations. Form 93C is the form required for an application for a winding up order against a company. The application as issued in this case contained a fatal flaw. It complied with s 459Q. It set out that the applicant claims an order that the company be wound up. It made reference to the fact, that pursuant to s 459Q of the Corporations Law,

“(a)On 29 May 1997 the applicant's solicitors ascertained from records maintained by the Australian Securities Commission that the registered office of National Recruitment Pty Ltd ACN 007 378 207 (“the company”) was situated at Suite 15, 20 Commercial Road, Melbourne, Victoria.  On 2 June 1997 a statutory demand in the form annexed and marked “A” was left at the registered office of the company.”

Apart from formal parts, there was no further mention of the statutory demand. There was no allegation or complaint or mention of the fact that there had been a non-compliance with the statutory demand or compliance with the provisions of the Corporations Law relying upon the bringing it to an end. There was no complete compliance with s 459Q or with O 71 r 37 of the Federal Court Rules and in particular no compliance with form 93C of the Federal Court Rules.

The respondent did not apply to have the application struck out as disclosing no cause of action.  Apparently the parties were not aware of the defect until the Court drew attention to it at the commencement of the hearing of this matter on Monday 27 October.  On that day the Court granted leave to the applicant to amend its application to include a paragraph 2(b) as follows:

“The company did not comply with the requirement of the statutory demand which is annexure A within the period of compliance, being a period of 21 days after the demand was served.”

The respondent was equally at fault. It did not comply with the requirements of s 465C of the Corporations Law.  That section provides:

“465C.On the hearing of an application under section 459P, 462 or 464, a person may not, without the leave of the Court, oppose the application unless, within the period prescribed by the rules, the person has filed and served on the applicant:

(a)notice of the grounds on which the person opposes the application; and

(b)       an affidavit verifying the matters stated in the notice.”

Order 71 r 37(11) prescribes the form of appearance and the grounds of opposition.  Form 79, is the form to be used.  The respondent did not use this form of appearance and grounds of opposition including the affidavit. The normal appearance under Order 9 of the Rules of Court, being form 15, was filed.  That was very different from the form of appearance required by form 79.  This can be illustrated by referring to form 79.  That form is headed "Notice of intention to appear at hearing and of grounds of opposition to a winding up application".  The notice of intention to appear at the hearing should state that the company intends to appear and to oppose the application.  The grounds of opposition to the application are then set out.  This is not done in this case.  There is no affidavit as required by O 71 r 37(11).  Again, on the first day of the hearing of this matter last Monday, the respondent was given leave to rely upon one ground only of opposition as stated by the counsel for the company as follows:

“The statutory demand by the applicant dated 2 June 1997 was not served upon the company.”

That was the only ground sought to be relied upon by the respondent. Leave was granted to the respondent to rely upon that ground even though there had been a non-compliance with s 465C and with the provisions of O 71 r 37(11). It is noted in particular that the respondent did not seek to rely upon a ground of opposition that it was not insolvent. I will come back to deal with that matter again later, particularly having regard to s 459S of the Corporations Law. The parties agreed that the only issue before the Court was whether the statutory demand within Division 2 of Part 5.4 of the Corporations Law had been served on the respondent.  The parties agreed that if the Court found it had not been served, then the application should be dismissed.  They agreed that if it was found that it had been served then the Court should make the order for the winding up of the respondent.

Section 459E of the Act is of relevance in that it is the first of the sections dealing with statutory demands in Division 2 of Part 5.4. It empowers a creditor to initiate what is called a statutory demand. And I read the relevant parts; 459E(1):

“459E.(1)A person may serve on a company a demand relating to:

(a)a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or

(b).... ”

The section contains provisions relating to what must be contained in that demand.

In the present case the applicant prepared a statutory demand which for present purposes can be assumed to be in conformity with s 459E.  The applicant claims that the statutory demand, together with all documents connected to it, was served on the company on 2 June 1997 being the date of the statutory demand, and was served by leaving it at the registered office of the respondent company.

For service, the applicant relied upon s 220 of the Corporations Law, I read the relevant parts:-

“220.(1)A document may be served on a company by leaving it at, or by sending it by post to, the registered office of the company.

(2)For the purposes of subsection (1) the situation of the registered office of a company:

(a)in a case to which neither paragraph (b) nor paragraph (c) applies - shall be deemed to be the place notice of the address of which has been lodged under subsection 218(1);

(b)......”

Thus, under s 218, the registered address of the company is the address at which the documents may be left or to which they may be posted; the wording being "by leaving it at, or by sending it by post to, the registered office of the company".  The situation of the registered office in the present case was suite 15, 20 Commercial Road.  That is not in dispute. 

The respondent claims it did not receive the documents.  The issue before the Court therefore is a narrow issue; were the documents left at the registered office of the company or not?  On this narrow point some 20 affidavits have been filed, most of which were read.  Many of the affidavits contained hearsay matter, and evidence of facts not relevant to this issue.  To a large extent the issues had not been clearly defined by the documents filed in Court.  The Court draws attention to the need for the procedural provisions to be complied with.  The procedures are designed to identify the issues.  Here the issues became defined at the hearing.  The evidence is to be understood in the light of the facts not in dispute such as the address of the registered office.  On this point it can be accepted that suite 15 is one of a large number of suites with doors opening on to a common passageway open to the public.  In the area of suite 15, entry to the suite is through a wooden door.  Alongside the wooden door there are glass partitions which divide the suites from the common passageway.  Normally the name of the occupier is printed on the first of the glass panels alongside the entry doors.  The name of the respondent does not appear on the outside of suite 15, either on the door or on the glass partitions alongside the door.

There is no evidence to suggest that there is any sign within suite 15 indicating it is occupied by the respondent, or is the registered office of the respondent.  At the entrance to the common passage there is a series of letterboxes, but the name of the respondent is not endorsed on any of those letterboxes.  The name on the glass panel alongside the door to suite 15 is as follows:  “Strata Title Flat Management Co.”.  That company is a corporation.  Its affairs are managed by a Mr Alan Geoffrey Hollibone.  He normally attends suite 15 between 9 am and 5 pm, Monday to Friday, and his company employs a Mr Peter Doolan, who works in suite 15.  There are four desks in the suite:  one for Mr Hollibone, one for Mr Doolan and one for the receptionist.  The fourth desk appears to be used as required.  There is one telephone for each of the first three desks, there is none for the fourth.  Mr Doolan, at the time, was a director of the respondent, and conducted the activities of the respondent from suite 15.  He was also employed by Mr Hollibone.  Mr Doolan was overseas for the period 18 May 1997 to 12 June 1997.  During that time a Mr Lawrence Joseph Henrikson attended suite 15 from time to time to attend to the affairs of Mr Doolan and the respondent.

Evidence as to service of the statutory demand was given by Mr Kerry David Lewis.  By his affidavits he says he is a process server.  He is not a licensed process server, if there is such a requirement these days.  He swore four affidavits, and was cross-examined.  He did not present as a witness who could be relied upon to tell the truth.  In his first affidavit of 5 June 1997, he said that the documents constituting the statutory demand were served by attaching them to the front door of the registered office of the respondent at suite 15.  By his affidavit of 10 July 1997 he swore he served the application, that is the application for the winding up of the company, and the other documents required for that purpose, by delivering them to Peter Doolan at suite 15.  Soon after 15 July it became apparent that the respondent was denying receipt of the statutory demand.  An affidavit was sworn on 5 August by an occupier of suite 16 that on 2 June 1997, at about 5 pm, a man came into suite 16 and borrowed some masking tape "to stick some documents to the door next door", that is suite 15. 

Mr Lewis swore his third affidavit on 18 August.  In this affidavit he elaborates upon what occurred while he was at 20 Commercial Road on 2 June 1997.  He knocked on the door, no one was around.  He did this despite the fact that he could see inside; the glass partitions being quite obvious.  He rang the person who had instructed him to serve the statutory demand.  He decided to stick the statutory demand to the door of suite 15, to the outside of that door.  He went to suite 16 and borrowed some masking tape.  At about 5 pm he taped the statutory demand, including the accompanying documents, to the outside of the door, which he said was made of glass.  The documents were not in an envelope.  He said in cross-examination that he placed the front of the first document against the door and taped it with the rear of the documents outward facing.  On 5 September 1997 the occupier of suite 16 swore a further affidavit to the effect that she could not be certain that she had given the masking tape to the man on 2 June 1997, but that it was about that time.  Mr Lewis made his fourth affidavit on 8 September 1997.  In this affidavit he says he affixed the documents to the door of suite 15, and that the door "is made of wood adjoined to large glass windows". 

As I said before, I found Mr Lewis a most unsatisfactory witness.

Mr Doolan swore an affidavit that he had never received the statutory demand and the accompanying documents.  He was overseas.  That during his absence Mr Henrikson looked after the business of the respondent.  He said the first time he became aware of the statutory demand was on 2 July 1997 when he received a letter from the applicant's solicitors.

Mr Hollibone swore two affidavits on 21 July 1997, and on 4 September 1997 respectively.  He conducted the business of Strata Title Flat Management at suite 15.  Normally he was the first to arrive at the suite in the morning and the last to leave.  Normally between the hours of 9 am to 5 pm he was at the premises.  He says he was at suite 15 until 5 pm on 2 June 1997, which was a Monday, and no one came to the office to serve documents at about that time.  There were no documents on the door when he left at about 5 pm.  He says that he was the first person to arrive at suite 15 on Tuesday, 3 June at about 9 am.  There were no documents attached to the door at that time.  Mr Hollibone was cross-examined.  He presented as a witness of truth.  I accept his evidence.

In the result the Court is faced with this dilemma:  Mr Lewis said he taped the documents on the door.  There is no evidence that any other person saw the documents taped to the door.  The circumstantial evidence from the person in the suite next door was directed to the drawing of an inference that the documents were in fact left on the door.  There is possibly some assistance from that evidence, but it is not strong.  Mr Lewis was confused about the nature of the door.  Initially he said it was a glass door, but later he realised, after going back and looking at the place, it was a wooden door.  He said he could not see anyone in the suite, but he made no reference to the existence of these large glass panels along the common passageway which would enable him to look within the suite.  Nevertheless he banged on the door to try and attract attention when it should have been obvious to him that there was nobody there.  His first affidavit is completely misleading and in fact wrong.

Despite my reluctance to accept Mr Lewis as a witness of truth, the Court finds that the documents were affixed to the door of suite 15 on 2 June by Mr Lewis, but it must be remembered that they were in a position which was open to the public.  It must be remembered they were left of an evening when there was nobody within suite 15 and that should have been obvious to Mr Lewis.  It must be accepted that any unauthorised person could have removed those documents after 5 pm on 2 June and before 9 am on 3 June, the Court having accepted the evidence of Mr Hollibone that they were not there on the Tuesday morning at 9 o'clock.

The question arises; was this a valid service of the documents in conformity with s 220 of the Corporations Law? This involves the question of whether the service of the statutory demand required by s 459E was effective. Section 220 is the relevant provision which enables a person to serve documents on a company by leaving those documents at the registered office. It is in this context that the purpose of the service is of importance but at the same time it must be remembered that if there has been a compliance with the requirements of s 220, the fact that the documents might not have been received or delivered to a person apparently connected with the company is immaterial.

Companies are creatures of statute.  The statute may specify the method by which service on a company can be effected.  Nevertheless, it is accepted that the purpose of service is to bring to the attention of the person, whether corporate or a natural person, notice of those documents.  It is to warn or bring to the knowledge to the person what is likely to occur if demands contained in the documents are not satisfied.

The requirements of s 220, and equivalent provisions in other legislation, have been considered in many cases. In the course of submissions reference was made to some of those cases, but none of them really consider what is meant by the phrase, "leaving at" the registered office. The word, "leave" has many different meanings as can be illustrated by a reference to any dictionary. Some of the meanings of the word, "leave" appear to be contradictory. For instance, leave means to cause or allow something to remain. It also means to depart from, to go away from. They are certainly contradictory. A document may be served on a company by leaving it at the registered office of the company. It can also be served by sending it by post. Most of the authorities quoted to the Court related to the question of service by post but the Court does not find those authorities of much assistance since there are specific provisions contained in the CorporationsLaw, equivalent legislation, and also in the Acts Interpretation Act, s 28A and s 29, and in s 160 of the Evidence Act (Cwlth) 1995.  These special provisions are required because of the deeming provisions of service by post where normally a document is posted in a pre-paid envelope addressed to the recipient.  There is a deeming provision to the effect that it is deemed to have been delivered within a certain time but that presumption can now be overcome in certain cases.  Consideration was given to equivalent provisions by the High Court in the case of Fancourt v Mercantile Credit Limited (1983) 154 CLR 87. The importance of that decision is that it is the delivery to the address given which is the important part, not the fact that it may not have been received by the recipient.

There are other authorities to the effect that if documents are posted and are returned by the post office as not being delivered, there is no service in conformity with the posting requirements.  I refer in particular to Re Rustic Homes Pty Limited (1988) 19 ACLC, 931, Re Future Life Enterprises Pty Limited, (1994) 12 ACLC 274.  F P Leonard Advertising v K D Travel Services Pty Limited (1993) 11 ACLC at 1203. Those cases really do not help in the present case except to the extent that they illustrate that it is a compliance with the requirements of, for present purposes, s 220, which is the important aspect of service, and that the non-receipt by the addressee is immaterial except when the documents are returned by the post office. The reason behind that is that if it is proved that the documents had been posted in the appropriate way, then prima facie there is deemed to be service. But if the post office does not deliver them - or returns them I should say - then that prima facie case disappears. No such similar requirements relate to the “leaving at” provisions of s 220. There is one case where Sackville J considered the matter. It was the case of Chains & Power (Australia) Pty Limited v Commonwealth Bank of Australia (1995) 13 ACLC, 73. This was a “leaving at” case not a “service by post” case. In that case Sackville J, by dicta, held that the leaving of the documents at the registered office by taping them to the outside of the door of the office was a sufficient compliance with s 220 of the Corporations Law. In that case, the person controlling the company gave evidence that he had not received the documents. He was disbelieved on that evidence. But, in any event, his Honour accepted the proposition that by taping the documents to the door was a sufficient service for the purposes of s 220. That case is very different from the present. There the actual building itself was within a boundary fence consisting of a high wire fence. In order to get to the building the process server had to climb over the fence and go to the door of the building within the fence. There was nobody there and therefore the process server taped the documents to the door. His Honour held that this was a sufficient compliance with s 220. In so doing his Honour relied on a number of authorities, all based on the posting provisions which do not really help for the purposes of this case. In any event, on any view the documents were left at the registered office in the sense of being left within the private land area of the registered office.

There is one other authority, which the Court found, of the New South Wales Supreme Court, namely the case of Emeritus Pty Ltd and The Company's Act 1961 (1968) 1 NSWR 458, a judgment of McLelland CJ in the Equity Division of the Supreme Court of New South Wales. There, pursuant to orders of the Court and under the company's legislation then in operation, documents could be served by leaving them at the office of the company. When the petition for the winding up came on for hearing, counsel appeared on behalf of the respondent and made submissions but no evidence was presented on behalf of the respondent at all. Three arguments were put in support of the dismissal of the petition, the relevant one being that the notice of demand had not been effectively served under s 222 sub-s (2) of the Company's Act.  Therefore it was submitted the respondent could not be deemed to be unable to pay its debts under the provisions of that section.  That argument was rejected.  There the documents had been served by pushing them under the door of the building in which the registered office was situated.  It was in a public area of the building but there is no evidence it had been left at, in the sense of within, the registered office at all of the company concerned.

His Honour said at page 460:-

“I am of opinion that the service of the notice of demand did comply with the provision of s 222(2) and that, in consequence, the respondent should be deemed to be unable to pay its debts.  It is not without relevance to note that no evidence has been placed before me on behalf of the respondent to indicate that the debt alleged or any part of it is not in fact owing by it and nothing has been said by counsel on its behalf that any evidence could be brought before the Court to show that it did not receive the notice of demand.”

This passage seems to suggest that the fact of leaving the documents in a public area may be a sufficient requirement of leaving documents at the registered office but reference is made to the last sentence of the quotation.

Regard must be given to the word "leave" and the word "at".  The word "at" itself is a difficult word to construe.  In the Macquarie Dictionary it is defined as:-

“A particle specifying a point occupied, attained, sought or otherwise concerned as in place, among other things.”

Here it is in the phrase "leaving at". The court must construe the phrase "leaving at". In my opinion, leaving it outside the registered office is not leaving it at the registered office. Leaving it carries a connotation that it must be left within the confines of the registered office itself. If it were pushed under the door that would be leaving it at. If it were placed in a letter box with the name of the company on it, that would be leaving it at, an inference being drawn that the letterbox was placed there by the company for the purposes of receiving documents addressed to it. That did not happen here. But the mere fact of taping documents to the outside of the door is not a compliance with s 220 of leaving it at where the area in which the documents are placed is open to the public.

In the course of submissions counsel for the respondent contended that having regard to the need to bring to the attention of the person the existence of the documents something more had to be shown than leaving them at the registered office. Counsel disputed the assertion that if a document had been put inside suite 15 there would have been proper service in compliance with s 220. He contended that the word "may" was permissive only and could be overcome by evidence of non-receipt. I reject that argument. The statute provides a method of service by leaving documents at the registered office and by comparison to the deeming requirements of posting. If there is proof of the “leaving at” that is sufficient. Mere evidence of non-receipt is not of itself sufficient to defeat the evidence of service.

Accordingly, in my opinion, here the applicant has failed to prove service of the statutory demand upon the respondent. It is with some degree of regret that I have formed this view. The purpose of Part 5.4 of the Corporations Law is to provide for a speedy and efficient way of obtaining the winding up of a company which is insolvent.  This can be done without going to the court to prove a debt.  It can be done by the service of a statutory demand.  Under the provisions of the Corporations Law the debtor company can have the statutory demand set aside if there is a genuine dispute or some other reason for that to be done. If there has been a non-compliance with the statutory demand and it has not been set aside, there is a presumption that the company is insolvent. Insolvent means, by s 95A of the Corporations Law, unable to pay its debts as and when they become due and payable. But even then on an application for a winding up, the company has an opportunity to oppose the winding up on grounds which would include the ground that it is solvent.  If it is solvent that would be sufficient to refuse the making of a winding up order.

Section 459S was referred to earlier in these reasons. It is a section which places a limitation on the power of a company to raise questions of solvency. The section provides:-

“459S.(1)       In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:

(a)that the company relied on for the purpose of an application by it for the demand to be set aside; or

(b)that the company could have so relied on, but did not rely on (whether it made such application or not).

(2)The court is not to grant leave under sub-section (1) unless it is satisfied that the ground is material to proving that the company is solvent.”

This places a restriction on a company.  If it does not apply to have the statutory demand set aside, nevertheless it can rely upon that ground that it is solvent in limited circumstances, at the hearing of the application for winding up.  This is designed to overcome the company delaying matters.  But if in a case where the company was able to prove it did not receive or have knowledge of a statutory demand it may well be granted leave to rely upon the ground that it has a genuine dispute as to the existence of a debt or one of the other grounds for having a statutory demand set aside to be raised at the hearing of the application for a winding up without having to prove it is solvent, without regard to whether it owes the amount of the debt claimed in the demand.

In the present case the company has not taken any steps whatsoever to show it was solvent either absolutely or in the limited sense of s 459S and on the ground that it did not have notice of this statutory demand. One has suspicions that the company is insolvent but that is not relevant for present purposes. The way the case was argued before the court is solely on the question of had there been a proper compliance with s 220 of the Corporations Law in the leaving of the statutory demand at the registered office.  For the reasons given service has not been proved.  In these circumstances, the application must be dismissed and the Court so orders.

I propose to order that the applicant pay one half, or 50 per cent, of the respondent's costs. I do this on the basis of the fact that the proceedings were not in compliance with the rules. The applicant was at fault, so was the respondent, but because of the defects the case took much longer than it would normally have taken, the issues became obscured and the costs were much greater because of the absence of the grounds of opposition. I also rely to some extent upon the fact that the respondent has not sought to justify the opposition to the winding up order on the ground that it is solvent nor has it sought special leave under s 459S to challenge the question of whether it has a genuine claim or not. Accordingly the Court orders that:-

1. the application be dismissed;

1. the applicant pay 50 per cent of the respondent's costs.

I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R M Northrop

Associate:

Dated:             14 November 1997

Counsel for the Applicant:	Mr R Greenberger
Solicitor for the Applicant:	Robert James
Counsel for the Respondent:	Mr G D Bloch
Solicitor for the Respondent:	Dunhill Madden Butler
Date of Hearing:	27 October 1997 and 31 October 1997
Date of Judgment:	31 October 1997