Murphy v Teakbridge

[1999] NSWSC 1231

CITATION:	Murphy & Ors v Teakbridge [1999] NSWSC 1231
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	3837/99
HEARING DATE(S):	1 and 3 November 1999
JUDGMENT DATE:	17 December 1999
PARTIES :	Murphy & Ors v Teakbridge Pty Limited
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr P. Braham for plaintiff Mr J. Johnson for defendant
SOLICITORS:	J.J. Woodward & Co., Newcastle for plaintiff McDonald Johnson, Newcastle for defendant
CATCHWORDS:	Corporations Law. Proof of non-delivery of statutory demand. In the circumstances non-delivery proved. Issue of parallel proceedings to recover amount claimed as a debt in the winding up proceedings. Held present proceedings are an abuse of process. Summons dismissed.
CASES CITED:	Wilson Market Research & Corporations Law (1996) 39 NSWLR 311; Howship Holdings P/L v Leslie 14 ACLC 1549; DCT v Barroleg (1997) 25 ACSR 167; Fancourt v Merchantile Credits Ltd (1983) 154 CLR 87; L&D Audio Acoustic P/L v Pioneer Electronic Aust P/L (1982) 7 ACLR 180 at 183; Portfolio Projects P/L v Oakes Building Co P/L (1987) 5 ACLC 911 at 913; Mala P/L v Johnston (1995) 13 ACLC 100 at 102.
DECISION:	Paragraph 33

- 1-

IN THE SUPREME COURT

OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

Friday 17 December 1999

3837/99 FRANCIS EDWARD MURPHY & ANOR v TEAKBRIDGE PTY LIMITED

JUDGMENT

1 MASTER: The present proceedings before me are an application to wind up the defendant. There is also a notice of motion brought by the defendant seeking leave under s 459S of the Corporations Law to raise certain matters by way of defence. The summons which commenced the proceedings sought the winding up based upon a failure to comply with a statutory demand. At the commencement of the hearing it was also made clear that the plaintiff seeks to wind up the company on the basis of actual insolvency in the event that the failure to comply with the demand was not available. The statutory demand was made by Francis Edward Murphy and Laraine Lee Murphy and sought repayment of $43,220 being monies due under a contract for the sale of business dated 17 September 1998. The demand was dated 23 July 1999. At the hearing and following amendment of the notice under s 465C of the Corporations Law the following defences were raised.

1. Abuse of process.

2. Non-delivery of the statutory demand.

3. The Court’s general discretion as to whether the company should be wound up.

4. Non compliance with part 80A rule 16.

5. Lack of relevant parties, namely, Shelltex Pty Limited.

2 In respect of this last matter the defect has been cured by Shelltex becoming a party to the proceedings. In respect of the second last matter appropriate evidence was available and thus the point does not arise. 3 In respect of the notice of motion under s 459S the matters sought to be raised if leave is granted are:

1. A dispute as to the indebtedness of the defendant.

2. Offsetting claims in respect of retention of four trucks owned by the defendant.

3. Failure to have the statutory demand issued by all necessary joint debtors.

4. Abuse of process.

4 Given this variety of defences and matters which arise under the notice of motion seeking leave under s 459S, it necessary to give some consideration as to how the matter ought to be approached. I seems to me that I should first deal with the defence that there was non-delivery of the statutory demand. If there was no delivery then there was no non-compliance and therefore no presumption of insolvency that would arise under the law. 5 It would then be necessary to move to the abuse of process point to see whether - 6 (a) The plaintiff establishes the necessary standing as a creditor. In the event that there is a dispute as to the existence of the debt, ie the whole of the debt, it may be appropriate to conclude that the plaintiff has no standing and thus the proceedings are an abuse. In this event one does not get to consider the question of actual insolvency. See Wilson Market Research & Corporations Law (1996) 39 NSWLR 311.

(b) There are parallel proceedings in which case the court may conclude that the present proceedings are an abuse of process.

7 If the answer to the question as to whether there was non-delivery of the statement of demand is that there was delivery, it would be necessary to move to the application under s 459S rather than the abuse of process point. This because the abuse point could have been relied upon under s 459J1(b) on the application to set aside the demand. The principal matter on the application under s 459S is whether the court is satisfied that the ground of opposition is material to proving that the company is insolvent. If the court is not satisfied then no leave will be granted and the abuse point would not be available to be dealt with in the proceedings. If the answer is, yes, then the court can move on to deal with such grounds as are material to proving that the company is solvent. These would only seem to be the dispute as to indebtedness and the offsetting claims. 8 It seems therefore that the first matter to be dealt with is whether or not there was delivery of the statutory demand and I will now turn to that matter. 9 According to the plaintiffs’ evidence the statutory demand was served by post by sending it by ordinary pre-paid post addressed to the defendant at its registered office which was Unit 2, 140 Nicholson Parade, Cronulla. Evidence was given by the Susanne Mary Clarke, a secretary in charge of mail who swore to the posting of the letter. Cross examination demonstrated she put letters in envelopes and then took the mail to be posted to the post office. A postage book was kept which recorded items being posted but did not record the addressees. Accordingly, it was apparent that the only reason that the plaintiff could depose to postage of a particular item was the fact that she had subsequently seen a copy of the letter enclosing the demand dated 26 July 1999 and that the regular practice was that mail was posted on the day of the letter. Given the usual course I would accept that the letter was posted by ordinary pre-paid post to the defendant at its registered office on 26 July 1997. 10 There was also evidence from an officer from Australia Post that in the ordinary course the letter would have been delivered on the second working day after posting. There is also evidence that the letter has not been returned in the post to the plaintiffs’ solicitor’s office. 11 Provision is made in s 160 of the Evidence Act relating to service and certain presumptions concerning service in the ordinary course of post. However, in Howship Holdings Pty Limited v Leslie & Anor 14 ACLC 1549 and in Deputy Commissioner of Taxation v Barroleg (1997) 25 ACSR 167 His Honour Mr Justice Young held that s 109Y (b) of the Corporations Law and not s 160 of the Evidence Act applied to postal service of a statutory demand. Under the provisions of the former s 220(1) and the present provisions of s 109X(1) of the Corporations Law a document may be served on a company, inter alia, by posting it to the company's registered office. Section 109Y deals with the meaning of service by post and is in the following terms.

""109Y Where a provision of this Law 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:

(a) the service is taken to be effected by properly addressing and posting (under pre-paid post) the document as a letter to the last known address of the person to be served; and

(b) unless the contrary is proved, the service is taken to have been effected at the time at which the letter would have been delivered in the ordinary course of post."

12 It can be seen by this section that the only requirement is that the postage be by prepaid post. 13 In Fancourt v Mercantile Credits Ltd (1983) 154 C.L.R. 87 the High Court had to deal with s 39 of the Acts Interpretation Act 1956 in Queensland. In terms that was very similar to s 109Y. At page 96 the Court had the following to say:-

"There is a line of cases, commencing with Reg. v. County of London Quarter Sessions Appeals Committee; Ex parte Rossi 19 [1956] 1 Q.B. 682, 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 (U.K.) . 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 20 [1958] 2 Q.B. 187; Hewitt v. Leicester Corporation 21 [1969] 1 W.L.R. 855; [1969] 2 All E.R. 802; Saga Ltd. v. Avalon Promotions 22 [1972] 2 Q.B. 325n; A./S. Cathrineholm v. Norequipment 23 [1972] 2 Q.B. 314; cf. Lombard Australia Ltd. V. Mohrwinkel 24 (1973) 21 FLR 277; 1 A.C.T.R.57. 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. There is here no evidence of non-delivery. it follows that the application of s. 39(1) of the Acts Interpretation Acts in no way affects the proof of service of the notices in this case in accordance with s. 42(1) (c) of the Hire-Purchase Act and that such service is deemed to have taken place in the due course of the post. It also follows that the appellants fail to establish any defence under s. 13(4) of the Hire-Purchase Act. 971"

14   This is clear authority which is binding on the construction of s 109Y which is in material respects identical to the section under consideration by the High Court. 15   The question is whether in fact there is evidence of non-delivery. Clearly, in many cases there is evidence of non receipt. Frequently this occurs in cases where a registered office has been vacated and the document is served and not returned through the post. In such cases the mere fact of non receipt does not prove non delivery. 16   The present circumstances in this case are somewhat different and it is necessary to see whether there might be evidence which would suggest non delivery. The first thing to note about the present matter is that the registered office was at the address of a home unit in Sydney which was Mr Adams’ residence when in Sydney. He normally resided in Sydney from Friday over the weekend and sometimes on Monday. The rest of the time he would normally spend in Newcastle attending to his other business. He gave evidence that he was the person who received the mail except for an occasion when the letter box became too full when his next door neighbour would take it out and later give it to him. 17   He swears that the letter was not received. He also swears that he was in Sydney on 26, 30 and 31 July. Given these dates if the letter had been delivered in the ordinary course one could conclude that it would come to his attention. 18   Another matter to note is that being an accountant and having practised in insolvency areas he is aware of the importance of the statutory demand and would not have ignored it if it had been received. The fact that it was not delivered to him seems to be supported by Mr Adams’ reaction when he first heard of the fact that a statutory demand had been served. This occurred at the meeting between him and Mr Murphy when Mr Murphy wanted to talk about their disputes. The meeting was on 25 August 1999. Mr Murphy is alleged to have said:-

“Thanks for coming Robert. I want to talk about the business between us. My solicitor tells me that you have committed an act of bankruptcy.”

19   Mr Adams replied:-

“What the hell are you talking about?”
Mr Murphy said:

My solicitor sent you a Statutory Demand and gave you 21 days to pay and he didn’t get a reply to that demand. He wants me to take action on that but I’m willing to offer you one last chance.”

20   Mr Adams said:

“What are you talking about? I have never received anything from your solicitor and especially not a Statutory Demand.”

21   Although Mr Murphy filed an affidavit sworn after this one he did not deny the conversation nor was Mr Adams cross examined to suggest that the conversation was false. 22   It seems to me that it is important in this case that we are not dealing with a letter which was sent to a business address where other people may open mail or where there is a likelihood of it being mislaid. There is no doubt that the letter was posted but it seems to me that the evidence given by Mr Adams is sufficient evidence “to the contrary” to disprove delivery of the letter. 23   In these circumstances there is no proof of the time of delivery and, accordingly, there has been no compliance with the demand. In these circumstances I move on to the question as to whether there has been an abuse of process in respect of the present proceedings. 24   The first area for consideration on the abuse of process argument depends upon whether or not the plaintiff can prove that it is a creditor. The statutory demand in this matter claims an amount of debt being $43,220. The detail of that is referred to in the affidavit in support of the statutory demand which sets out special condition 2(b) of the contract between the parties. The contract was for the sale of a business and the relevant clause was in the following terms:-

“The parties acknowledge that as at the date of this agreement the sum of $200,000.00 has been paid. Of the balance of $50,000.00 the amount of $32,000.00 will be considered to have been repaid when the current leases over the two vehicles marked with * in clause two (2) of annexure “A” hereto have been repaid in full by the purchasers and the purchasers acknowledge that they will from the date of this agreement be responsible for the payment of the said leases. The balance of $18,000.00 is an interest free loan from the vendors to the purchasers repayable within six (6) months of the date of this agreement.”

25   The undisputed evidence before me is that the leases of the two trucks which were referred to in the clause, which were entered into by the vendors, have in fact been replaced by leases entered into by the purchaser, the defendant in this matter. This would seem to fulfil the requirements of clause 2(b) and, accordingly, there is no doubt that $32,000 is not payable. The balance which appears to be either $18,000 or $18,020 is said to be an interest free loan. Mr Adams, on behalf of the defendant, has not sworn any evidence about repayment of that loan. The only evidence that goes to the matter is a letter from the plaintiffs’ former solicitors Messrs Burgess Foat in which they make demands for various amounts. The demand included the loan of $18,000 but referred to a payment of $8,000 on 3 March 1999. The letter which was not clear that this amount was paid in relation to the $18,000 loan. In the absence of evidence either from Mr Adams or Mr Murphy that the $18,000 has been paid in reduction of the loan, I would not conclude that the $18,000 has been repaid in part. 26   The other area which should be mentioned is the offsetting claims which are raised in the evidence. These offsetting claims relate to the retention by the plaintiff of vehicles belonging to the defendant. The vehicles were in a leased area occupied by the defendant when the plaintiff took possession of it apparently after issuing a notice to quit. The plaintiff secured the vehicles and then subsequently removed them from the site. No basis for the retainer of any satisfactory nature has been advanced. There is evidence before me that the damages for retention of the vehicle PAR107 of $37,500 and the vehicle PAY422 of $22,5000. This is a total of $59,500. 27   However for the purposes of considering whether the creditor has standing it is only appropriate to consider the claim in debt and the potential set off evidenced by the offsetting claim cannot be taken into account. See L & D Audio Acoustic Pty Limited v Pioneer Electronic Australia Pty Limited (1982) 7 ACLR 180 at 183 or (1982) 1 ACLC 538 at 539. Accordingly in the present case since the set off does not affect the standing of the plaintiffs as creditor one could not conclude there is an abuse of process by virtue of the fact that the creditor has no standing. There is at least an admitted debt due of $18,000. 28 The next matter to consider is the parallel proceedings point. Shelltex Pty Limited who is now a plaintiff in these proceedings commenced proceedings in the Local Court at Newcastle to recover $10,000 from the defendant. The claim was issued on 8 April 1999. The statutory demand in these proceedings was dated 23 July 1999 and it will be recalled that in a letter of 18 June 1999 a demand had been made for a payment in relation to a loan of $18,000. These proceedings were discontinued on 30 September 1999 which is after the issue of the summons in these proceedings on 6 September 1999. 29 In Portfolio Projects Pty Ltd v Oakes Building Co Pty Ltd (1987) 5 ACLC 911 at 913, His Honour Mr Justice Needham was concerned with a case of a parallel set of proceedings. He concluded at 913 that:-

"It seems to me to be an abuse of the process of this Court to make the claim for that sum of money as included in its Common Law claim, and then to seek to wind the company up by parallel proceedings in the Equity Division because of the failure to pay to the plaintiff the same sum of $78,930."

30   His Honour’s comments were adopted by Santow J in Roy Morgan Research v Wilson Market Research (1996) 14 ACLC 925. There was also reference with approval to what was said by the late Master Adams in Mala Pty Ltd v Johnston (1995) 13 ACLC 100 at 102. There the Master said:-

"As to abuse of process, it is prima facie an abuse of process for any party to institute two proceedings for the one claim. That much, I think, appears from a case cited to me this morning, Portfolio Projects Pty Ltd v Oakes Building Co Pty Ltd (1987) 5 ACLC 911. I use the words `prima facie' because there can be an explanation why two proceedings are issued and it is a matter for the court to determine whether the explanation is sufficient. That, I think, appears from Re Bond Corporation Holdings Ltd (1990) 8 ACLC 153; (1990) 1 WAR 465 where there was at the time of the filing of a petition civil proceedings in the court which involved a dispute as to the same amount."

31   In the present case there has been cross examination of Mr Murphy one of the principals of the other plaintiff Shelltex Pty Limited. That cross examination demonstrated that the proceedings commenced by Shelltex were for part of the same sum as was sought to be recovered in the present statutory demand. As I have earlier indicated the chronology indicates that the proceedings for recovery of the debt by Shelltex were commenced well before the issue of the statutory demand and the commencement of these proceedings. Clearly they were part of a recovery process which also included the letter of 18 June 1999 to which I have referred. Mr Murphy seems to have changed solicitors some time after that letter was written and a procedure was adopted by the new solicitors of issuing a statutory demand and then commencing these proceedings. In my view the change of solicitors does not excuse what has happened. It seems to me that the issue of the statutory demand is another step in the debt collection process adopted by Mr Murphy. There is of course nothing intrinsically wrong with a debt collecting process. However, to issue proceedings for the winding up of a company when there are already proceedings on foot for the recovery of the debt is, as has been pointed out in the cases, prima facie an abuse. There is nothing in the evidence that provides an explanation in respect of the matter. 32   In these circumstances I am satisfied that the commencement of these proceedings is an abuse of process and that, accordingly, the summons should be dismissed. 33   The orders that I make are:-

1. That the summons be dismissed.

2. That the plaintiff pay the defendant’s costs.

Last Modified: 06/30/2000