Merrill Lynch Equities (Australia) Ltd v Triangle Packing Case Pty Ltd

[1998] FCA 1364

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - winding up in insolvency - application relying on failure to comply with statutory demand - contest as to service of statutory demand - onus to satisfy court as to service - failure to discharge onus

Corporations Law ss 459A, 459F, 459P

Willshire-Smith:  Ex parte Randle and Taylor Services Pty Ltd (1994) 48 FCR 371

Highfield Woods -v- Bayview Crane (1996) 130 FLR 238

MERRILL LYNCH EQUITIES (AUSTRALIA) LIMITED (ACN 006 276 795)
-v - TRIANGLE PACKING CASE PTY LTD (ACN 000 036 671)
VG 3207 OF 1998

BEFORE:  RYAN JR
PLACE:  MELBOURNE
DATE:  28 OCTOBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3207  of   1998

BETWEEN:	MERRILL LYNCH EQUITIES (AUSTRALIA) LIMITED (ACN 006 276 795) APPLICANT
AND:	TRIANGLE PACKING CASE PTY LTD (ACN 000 036 671) RESPONDENT
JUDICIAL REGISTRAR:		RYAN
DATE OF ORDER:		28 OCTOBER 1998
WHERE MADE:		MELBOURNE

THE COURT ORDERS THAT:

1. The application of Merrill Lynch Equities (Australia) Limited claiming an order that Triangle Packing Case Pty Ltd be wound up is dismissed.

2. The applicant is to pay the respondent’s costs of and incidental to the application.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3207 of 1998

BETWEEN:	MERRILL LYNCH EQUITIES (AUSTRALIA) LIMITED (ACN 006 276 795) APPLICANT
AND:	TRIANGLE PACKING CASE PTY LTD (ACN 000 036 671) RESPONDENT

JUDICIAL REGISTRAR:	RYAN
DATE:	28 OCTOBER 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

APPLICATION TO WIND UP
On 22 June the applicant applied to wind up the respondent.  The applicant asserted that the respondent had failed to comply with the requirements of a statutory demand allegedly served on 19 March 1998.

OPPOSITION TO WIND UP
On 2 July the respondent filed a Notice of Appearance.  On 24 July the respondent filed a Notice of Intention to Appear at the hearing of the winding up application and to oppose that application.  “The ground (sic) of opposition” to the winding up was stated as follows:

“1.The company was not ever served with the creditor’s statutory demand annexed to the Application dated 22 June 1998 or a copy of that demand;

2.the company’s registered office is 2 Hepburn Road, Doncaster in the State of Victoria which address is also the Melbourne residential address of Barry James Rumpf the sole director of the company.”

ISSUE OF CONTESTED SERVICE
There is really only one ground of opposition.  If it succeeds, both counsel concede it is fatal to the application for an order to wind up the respondent company.  The ground of opposition is that the respondent company was not ever served with a copy of the demand annexed to the winding up application.

I have assumed that the inclusion of  “Ground 2”, a statement as to the address of the respondent’s registered office, is simply a statement as to the correct registered office address and a statement that that address is also the “Melbourne residential address” of the sole director of the respondent company.  This statement does not in itself constitute any ground of opposition to the winding up. 

The contested service issue has been subject to three affidavits sworn by a process server, Michael John Bookman, and three affidavits sworn by Barry James Rumpf, sole director of the respondent company.  Mr Rumpf adopted his affidavits and was cross-examined.  Apart from the oral evidence of Mr Rumpf, all other evidence was by affidavit.

THE EVIDENCE
On 17 March the applicant’s solicitors wrote to Mr Bookman.  The letter is annexure “A” to his affidavit of 21 August and reads as follows:

“Dear Michael

Merrill Lynch Equities (Australia) Limited / Triangle Packing Case Pty Ltd
Merrill Lynch Private (Australia) Limited / Triangle Packing Case Pty Ltd

We refer to the above matter and enclose, in respect of each of the above, in duplicate, Forms 509 for service on the debtor company at 2 Hepburn Road Doncaster..

Please let us have Affidavits of Service in due course.”

Yours faithfully,
FREEHILL HOLLINGDALE & PAGE”

On 20 March Mr Bookman deposed by affidavit (Annexure “B” to the affidavit of 21 August) that :

“1.      I am a process server over the age of 16 years.

2.On the 19^th day of March 1998 at 9.45 am I served TRIANGLE PACKING CASE PTY LTD  a Creditor’s Statutory Demand for Payment of Debt and an affidavit in support of Creditor’s Statutory Demand for Payment of Debt by leaving it in the letterbox of the above Respondent at the registered address of 2 Hepburn Road, Doncaster 3108.”

Annexure “B” to the affidavit of 20 March is a creditor’s statutory demand which identifies the respondent, Triangle Packing Case Pty Ltd, as the company owing Merrill Lynch Equities (Australia) Ltd $104,330.25.  In his affidavit of 20 March Mr Bookman deposes that he served a copy of this statutory demand by leaving it in the letterbox at 2 Hepburn Road Doncaster.  In a later affidavit he deposes that the affidavit of 20 March is a standard form affidavit.

Mr Bookman’s next affidavit is sworn in support of the application to wind up.  It was sworn before the respondent made any issue of the service of the statutory demand and before the applicant could have been aware that there was an issue in respect of the service of the demand.  Again, in this affidavit, there is a reference to “leaving …..a statutory demand and an affidavit …….. in the letterbox at ……… 2 Hepburn Road Doncaster.”  There is no reference in the affidavit of 9 June to a second demand and affidavit or to “demands and affidavits”. 

In his affidavit of 5 August and in oral evidence Mr Rumpf asserted that on or about 19 March he found an envelope on the ground between the security door and the front door of the premises at 2 Hepburn Road Doncaster.  The envelope was addressed to the respondent and to the best of Mr Rumpf’s recollection did not bear a postage stamp.  Mr Rumpf states that when he opened the envelope it did not contain any covering letter and it did not contain the statutory demand from Merrill Lynch Equities (Australia) Ltd but rather contained a statutory demand from Merrill Lynch Private (Australia) Ltd in the sum of $51,534.00.  (Such demand was annexed to the affidavit of 5 August).

In his third affidavit of 21 August Mr Bookman adopts three of the assertions made by Mr Rumpf, namely that there was no stamp on the envelope, no covering letter in the envelope and the envelope was “served under the door”.  At no stage has Mr Bookman offered any explanation as to why the earlier affidavits had asserted that that the material was left in the letterbox.  However, he does state in his affidavit of 21 August, for the first time, that on 19 March he served the respondent with the Merrill Lynch Equities and Merrill Lynch Private statutory demands and affidavits together and at the same time by leaving them together in the same envelope under the front door of 2 Hepburn Road Doncaster.  He also deposes, for the first time, that he placed the two demands and two affidavits in the same envelope before placing the envelope under the front door of the premises and he seeks to support this statement by deposing:

“whenever serving multiple documents on the one company at the one address, it is my invariable practice to place such multiple documents together into one envelope for service as I did in this case.”

The applicant did not produce any affidavit of service directly relating to the service of the Merrill Lynch Private statutory demand.   Given that such an affidavit of service from Mr Bookman dated 20 March was produced in respect of the service of the “Equities demand”, one might well assume that, if there is an affidavit of service relating to the “Private demand”, it would be dated about 20 March and would have referred specifically to the service of that demand on 19 March. 

Mr Havin, appearing for the applicant, submits that service of the Merrill Lynch Private demand is not in contest and is conceded and that there would be no relevance in the production of an affidavit of service referring to the service of that process.  I do not agree with that submission for reasons outlined later in these reasons for judgment.  There is no evidence before the Court in the form of an affidavit of service made by Mr Bookman in respect of the service of the Merrill Lynch Private demand.  Furthermore, there is no sworn evidence from the solicitors for the applicant to support or elaborate the letter of instructions to Mr Bookman dated 17 March. 

Mr Havin sought to rely on an affidavit sworn by Mr Rumpf on 3 September 1998 (Exhibit “A”) and on a letter of 6 April 1998 from Mr Rumpf to Ella Kotler, Merrill Lynch Equities (Australia) Ltd (Exhibit “B”).

The affidavit of 3 September was in support of an application by the respondent in this matter as an applicant to set aside a Merrill Lynch Private statutory demand served on 14 August 1998.  The contents of the affidavit of 3 September and the contents of the letter of 6 April, suggest that Mr Rumpf well understood the differences between Merrill Lynch Equities and Merrill Lynch Private.  In my view, Mr Havin succeeded in reflecting adversely on the credit of Mr Rumpf in respect of his alleged lack of appreciation of the difference between Merrill Lynch Equities and Merrill Lynch Private.

In cross-examination (T 7, lines 35 and 36) Mr Rumpf was asked whether he understood the difference, broadly, between Merrill Lynch Equities and Merrill Lynch Private.  He responded as follows (T 7, lines 36 - 40):

“No, I don’t particularly.  As far as I was concerned I was originally a client of McIntosh & Co.  They were taken over by Merrill Lynch and as far as I was ever concerned, I was only dealing with Merrill Lynch.  Whether it was Merrill Lynch this or Merrill Lynch that, I wouldn’t have any idea what the significance of it was.  I just dealt with Merrill Lynch.”

This response is not consistent with the appreciation the respondent displays of the differences between the two Merrill Lynch entities.  Mr Rumpf displayed this appreciation in his affidavit of 3 September and in his letter of 6 April.  Be that as it may, and despite that adverse reflection on Mr Rumpf, his evidence on receipt only of the Merrill Lynch Private demand on 19 March is preferred to the evidence of Mr Bookman and all that evidence of the applicant, such as it is, which goes to the assertion that the “Equities demand” was served on the respondent on 19 March.

Mr Havin also seeks to rely on the letter to Ella Kotler at Merrill Lynch Equities on 6 April as evidence that Mr Rumpf received the “Equities demand” and was served with that demand.  I do not accept that the letter of 6 April constitutes any evidence or indication or concession of service of the “Equities demand” at any time, let alone 19 March.

The letter of 6 April refers to a letter from Ms Kotler to Mr Rumpf dated 4 February.  The letter of 6 April addresses a variety of matters relating to what the writer describes as “the Rumpf accounts”.  Mr Havin seeks comfort from the first sentence of the sixth paragraph which reads:

“I note that in the interim you have undertaken some formalities via Freehills which will be responded to as the system requires.”

Mr Havin asserts that in a letter written a little over two weeks after service of a statutory demand (no doubt he would continue to assert after service together of two statutory demands), and in a letter addressed to Merrill Lynch Equities, the reference to “some formalities” is a reference to the “Equities demand” allegedly served on 19 March. 

This assertion is not accepted.  The words are broad and indefinite and given that I have found that Mr Rumpf well appreciated the difference between Merrill Lynch Equities and Merrill Lynch Private, it is possible that he quite deliberately used such broad and indefinite wording.  He has given evidence that he knew as soon as he opened the envelope he found under the door on 19 March that he knew that the demand therein was on behalf of Merrill Lynch Private.  I am inclined to accept Mr Rumpf’s evidence as to this point and I believe he is astute enough to seek to take advantage of the failure of the applicant to serve the “Equities demand” on 19 March.

POSSIBILITIES AND PROBABILITIES
There are at least “three possibilities” as to what happened on 19 March in terms of service of process.  There may be other “possibilities” but three are outlined below:

1. Mr Rumpf received both demands and has given false evidence when asserting that the envelope under the door only contained the Merrill Lynch Private demand and affidavit;

2. The envelope under the door only contained the Merrill Lynch Equities demand and affidavit and both Mr Rumpf and Mr Bookman have given false or mistaken evidence. 

3. The envelope under the door only contained the Merrill Lynch Private demand and affidavit, although it may have been intended to contain both demands and affidavits.  If that be so, Mr Rumpf has given truthful evidence and Mr Bookman has given false, or at least mistaken, evidence. 

In terms of assessing likelihood and balance of probability the onus is on the applicant to satisfy the Court that the Merrill Lynch Equities demand and affidavit were served on 19 March by leaving the documents at the respondent’s registered office at 2 Hepburn Road Doncaster.   Using the civil test of balance of probabilities, either of the “possibilities” outlined as 1 and 2 above, if found to be the most likely and probable, would lead to the conclusion that the Merrill Lynch Equities demand and affidavit had been correctly served.  The “possibility” outlined in 3 above, if found the most likely and probable, would lead to the conclusion that the Merrill Lynch Equities demand and affidavit were never served and that the Court has no jurisdiction to deal with the application to wind up the respondent company.  The lack of jurisdiction, if the Court finds non-service of the relevant demand, or is unsatisfied of service of the relevant demand, is conceded by both Mr Havin and Ms McLeod.

CONCLUSION AND FINDINGS
The applicant has failed to satisfy me that “possibility” 1 or 2 is probable.  Mr Bookman has changed his earlier evidence about leaving a demand and an affidavit in the letterbox, presumably the Merrill Lynch Equities demand and affidavit.  He has changed that evidence to evidence of leaving an envelope containing both demands and affidavits under the door.  In his later evidence he finally agrees with Mr Rumpf that the envelope went under the door, bore no stamp and contained no covering letter.

The applicant has not produced an affidavit in the conventional form which Mr Bookman claims he makes, to establish the service on 19 March of the Merrill Lynch Private demand and affidavit, or more importantly, to establish the service on 19 March of both demands and affidavits. 

If an affidavit of service in similar form to the affidavit of 20 March relating to the service of the “Equities demand” had been produced in respect of the “Private demand”, that would have at least provided some contemporaneous evidence of service of both demands on or about 19 March.  Even had that been done, and if, in that sense, the Court had had contemporaneous evidence of service of both demands, I still find it somewhat curious that Mr Bookman did not refer in his affidavit of 20 March, allegedly relating to the Merrill Lynch Equities demand, to the service of both demands.  On the balance of the evidence I am not satisfied that the applicant served the respondent with the “Equities demand” and affidavit in support thereof.  I prefer the evidence of Mr Rumpf that the envelope contained only one demand, the Merrill Lynch Private demand.

The Court’s jurisdiction to deal with a proceeding is founded on valid service:  Highfield Woods -v- Bayview Crane (1996) 130 FLR 238 at 241.

“The service of the writ, or something equivalent thereto, is absolutely essential as the foundation of the Court’s jurisdiction:Laurie -v- Carroll (1958) 98 CLR 310 at 323.

It is a fundamental precept of adjectival law that the process which initiates a claim be brought to the attention of the defendant thereby giving the opportunity to make answer to the claim.  This principle is met by a requirement that the originating process be served”:  re Willshire-Smith:  Ex parte Randle and Taylor Services Pty Ltd (1994) 48 FCR 371 at 374.

The applicant seeks an order to wind up the respondent company but has failed to satisfy me that the statutory demand grounding the application to wind up was served on the respondent. In such circumstances the Court lacks jurisdiction to make the order sought and the application must be dismissed.

ORDERS

1. The application of Merrill Lynch Equities (Australia) Limited claiming an order that Triangle Packing Case Pty Ltd be wound up is dismissed.

2. The applicant is to pay the respondent’s costs of and incidental to the application.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Judicial Registrar Ryan

Associate:

Dated:             

Appearing on behalf of the Applicant:	Mr D Havin
Solicitor for the Applicant:	Freehill Hollingdale & Page
Counsel for the Respondent:	Ms F Mcleod
Solicitor for the Respondent:	Batten Sacks
Date of Hearing:	19 October 1998
Date of Judgment:	28 October 1998