Piast Enterprises Pty Ltd (ACN 101 634 197) v Toorallie Holdings Pty Ltd (ACN 115 285 197)
[2010] ACTSC 116
PIAST ENTERPRISES PTY LTD (ACN 101 634 197) v TOORALLIE HOLDINGS PTY LTD (ACN 115 285 197)
[2010] ACTSC 116 (24 September 2010)
CORPORATIONS – statutory demand – application to set aside – service of demand not coming to attention of company – whether demand can be set aside for “some other reason” – whether lack of notice of demand constitutes “some other reason” for section 459J(1)(b) – demand set aside
Corporations Act 2001 (Commonwealth)
David Grant & Co Pty Limited v Westpac Banking Corporation (1995) 184 CLR 265
Dominion Capital Pty Limited v Pico Holdings Inc (2001) 4 VR 195
Joe Mangraviti Pty Limited v Lumley Finance Limited [2010] NSWSC 61 (Palmer J, 5 February 2010, unreported)
Woodgate v Garard Pty Limited [2010] NSWSC 508 (Palmer J, 24 May 2010, unreported)
No. SC 574 of 2010
Judge: Master Harper
Supreme Court of the ACT
Date: 24 September 2010
IN THE SUPREME COURT OF THE )
) No. SC 574 of 2010
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:PIAST ENTERPRISES PROPRIETRY LIMITED (ACN 101 634 197)
Plaintiff
AND:TOORALLIE HOLDINGS PROPRIETRY LIMITED (ACN 115 285 197)
Defendant
ORDER
Judge: Master Harper
Date: 24 September 2010
Place: Canberra
THE COURT ORDERS THAT:
The statutory demand dated 5 August 2010 be set aside.
The defendant pay the plaintiff’s costs.
This is an application to set aside a statutory demand. The defandant company, Toorallie Holdings Pty Limited, claims $7,177.50 from the plaintiff Piast Enterprises Pty Limited.
A statutory demand was signed on behalf of the defendant by Mr Peter Smith, who identified himself as the executive officer of the company. He identified the debt as being for commission, claimed in an invoice of 10 May 2010, and swore that the debt was due and payable by the plaintiff company and that in his belief there was no genuine dispute about the existence or amount of the debt.
In an affidavit of service sworn on 27 August 2010, Mr Smith swore that the statutory demand had been served on the plaintiff company on 8 August 2010 at 20 Gooda Creek Road, Murrumbateman, New South Wales by handing a copy to the occupier, Mr Paul Grebert, in the presence of his wife and son.
It is apparent from ASIC records in evidence that on 10 August 2010, a director of the plaintiff company signed a form 484 under the Corporations Act 2001 (Commonwealth) notifying a change in the registered office address from the Murrumbateman address to an address at Palmerston in the Australian Capital Territory. In the form, the director gave the effective date of change as 1 August 2010, and a subsequent company search shows that date as the “start date” for the Palmerston address being the registered office of the company. Inconsistently with this, a notation on the ASIC form states that a change to the registered office address of a company takes effect either seven days after lodgement or a later date specified in the notice. The notation correctly states the effect of subsection 142(3) of the Corporations Act. Subsection 2 of that section requires a company to lodge notice of a change of address of its registered office with ASIC not later than twenty-eight days after the date on which the change occurs. The two subsections appear inconsistent, but I am not required to resolve the inconsistency for the purpose of the present application. The issue of significance is that on 8 August 2010, the date of service of the statutory demand, ASIC had not yet been notified of the change of registered office. If it were necessary to do so, I would have no hesitation in holding that service at the Murrumbateman address was valid. There is a public interest in those intending to effect service of a statutory notice, or any other document, on a company being able to rely on a search of ASIC’s records to identify the registered office for that purpose.
The present application is supported by an affidavit by Mr Peter Christensen, solicitor for the plaintiff. Mr Christensen swears that the debt claimed is for commission said by the defendant to be payable for negotiating a loan for the plaintiff to purchase the Palmerston property. Mr Christensen acted for the plaintiff on the purchase. He says that the purchase was not reliant on any loan procured by the defendant. His instructions are that there was no written agreement between the plaintiff and the defendant about payment of commission. Prior to service of the demand, Mr Christensen had been in correspondence with Mr Smith, denying liability of the claim and asking for particulars of it.
Mr Christensen says that the statutory demand was served by being delivered in a sealed envelope to a tenant to whom the Murrumbateman property had been let. The tenant passed the envelope on to the real estate agent managing the property, who handed the envelope to a director of the plaintiff company on 26 August 2010.
Mr Christensen annexes to his affidavit copies of email correspondence between Mr Smith and Ms Leszczynska, a director of the plaintiff company, between 23 and 26 July 2010. It is clear from those emails that the plaintiff company, whether justifiably or not, denied liability for the commission claimed. On 3 August 2010 Mr Christensen wrote to Mr Smith on behalf of the plaintiff company, asking for copies for documents relied on in relation to the commission claim so that he could provide advice. Mr Smith replied by email on 6 August 2010, in somewhat emotional terms. He did not provide the documentation requested. He said that a statutory demand had been prepared and signed on 5 August 2010 and would be served on the registered office of the plaintiff company “in the next few days”.
Mr Christensen replied on the same date asking for a copy of the contractual document supporting the claim. Because of some error, this email was not sent until 19 August 2010. Mr Smith responded to it on 23 August 2010 but did not mention the fact that the statutory demand had by then been served. Mr Smith concluded the email “if you want documents from me, come and get them and bring $300.00 in cash.”. Mr Christensen replied on the same day, again asking for a copy of the contract. Mr Smith sent another email to Mr Christensen on 25 August 2010, again in terms which I would see as less than professional. In none of those emails did Mr Smith tell Mr Christensen that the statutory demand had been served. It seems to me more probable than not that Mr Smith omitted mentioning this intentionally, being aware of the strength of the defendant’s position if no application was made to set the demand aside within twenty-one days of service.
I am satisfied that neither Mr Christensen nor the directors of the plaintiff company were aware of the precise date of service at the time application was made to set the demand aside on 31 August 2010. By then the application was out of time by two days.
Section 459E of the Corporations Act provides that a person may serve on a company a demand relating to a debt that the company owes to the person that is due and payable, provided that the amount is not below the statutory minimum (the amount demanded in this case is not). Section 459F provides, for present purposes, that if at the end of twenty-one days after the demand is served, the company has not complied with it, the company is taken to have failed to comply with the demand. By virtue of section 459C, a court will presume that a company is insolvent if the company fails to comply with a statutory demand, and may order that the company be wound up in insolvency under section 459A.
A company served with a statutory demand may apply to the court under section 459G for an order setting it aside. Such an application may only be made within twenty-one days after service. The application to set aside must be supported by an affidavit filed within the twenty-one-day period. The requirements of the section must be strictly complied with: David Grant & Co Pty Limited v Westpac Banking Corporation (1995) 184 CLR 265. Ordinarily, the court has no jurisdiction to hear the application if the documents have not been filed and served within time: Dominion Capital Pty Limited v Pico Holdings Inc (2001) 4 VR 195. The supporting affidavit must disclose facts that evidence a genuine dispute between the parties, rather than simply asserting that there is a genuine dispute or that the debt is disputed: Graywinter Properties Pty Limited v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452.
These authorities would suggest that where application to set aside a statutory demand is made outside the twenty-one-day period, it is too late and the court has no jurisdiction to entertain it.
In the present application, Mr Christensen, appearing for the plaintiff, submits that the court nevertheless has jurisdiction to set the demand aside under section 459J if it is satisfied that “there is some other reason why the demand should be set aside.”. There is nothing in section 459J to support an argument that the power it confers on the court may be exercised notwithstanding that application was not made within the time fixed by 459G.
Mr Christensen, appearing for the plaintiff company, has taken me to two unreported decision by Palmer J sitting in the Equity Division of the Supreme Court of New South Wales. In Joe Mangraviti Pty Limited v Lumley Finance Limited [2010] NSWSC 61 (5 February 2010, unreported) his Honour set aside a statutory demand for “some other reason” under section 459J(1)(b) in circumstances where service had been validly effected but the notice of demand had not come to the attention of the company within the statutory period. This gave rise to an overriding ground for refusing relief notwithstanding that there had been effective service and constituted “some other reason” why the demand should be set aside. The ground existed quite independently of whether there was a genuine dispute about the debt.
Palmer J referred to this decision in Woodgate v Garard Pty Limited [2010] NSWSC 508 (24 May 2010, unreported), where his Honour expressed the principle at paragraph 44 as follows:
(iii) Where a creditor serves a statutory demand in a prescribed mode and:
- knows, at the time or service or before the s459G(3) period expires, that the demand has not actually come to the attention of the company;
- knows that the company would dispute the demand if made aware of it;
- refrains from bringing the demand to the actual notice of a responsible officer of the company within the s459G(3) period; and
- relies on good service of the demand and the presumption of insolvency arising under s459C(2)(a),
the court may, in its discretion and in the interests of justice, set aside the statutory demand under section 459J(1)(b), not for want of good service but for want of fair notice ---
Notwithstanding the apparent inconsistency with section 459G as to the essential requirement of an application to set aside a statutory demand that it be made within twenty-one days of service of the demand, I take the view that as a Master I should follow the decisions of Palmer J. I am accordingly persuaded that the court has the power to set aside the demand under section 459J despite the fact that application was not made within twenty-one days of service of the demand. The present case can be distinguished on its facts from those before Palmer J by reason of the circumstance that the demand came to the notice of the company within the twenty-one-day period (though only barely), but that seems to me to make no difference, because when the demand came to the attention of the company, there was no information as to the date of service available to it. The plaintiff company was to the knowledge of the defendant represented by a solicitor. The defendant intentionally refrained from informing the solicitor that a demand had been served and I find that the company adopted that course for forensic advantage. There accordingly exists an overriding ground for refusing relief notwithstanding that there had been effective service, to use the words quoted by Palmer J in Joe Mangraviti.
When the application came before the court on 10 September 2010, with some misgivings I permitted Mr Smith to appear for the defendant company. He informed me that he is not a director of the company. He handed up a “notice of appearance” apparently signed by a director and authorising him to appear to oppose the application. As I informed him, the general rule is that a company may appear only by solicitor. One of the reasons for this is that the court takes some assurance, from the fact that a company is represented by a solicitor, that submissions and statements of fact by the solicitor can be accepted, by reason of the solicitor’s ethical obligations and the fact that the solicitor is an officer of the court. These considerations do not apply where the person seeking to represent the company is not a lawyer. This is a fortiori the case where the person is not a director or statutory officer of the company. It should not be assumed that the court will grant leave as a matter of course to representation of a company by a non-lawyer. In the present case one hopes that a solicitor in Mr Smith’s position during his email communications with Mr Christensen would not have sought to conceal the fact of service of the statutory demand.
From the meagre information available to me on the hearing of the application, it appears to me that there may well be a genuine dispute about the claimed debt. I do not need to make a finding to that effect for the purpose of the present application.
This is an appropriate opportunity to remind creditors that the function of a statutory demand is to facilitate proof of insolvency in a winding-up application by creating a statutory presumption of insolvency. A statutory demand is not intended to be used as a debt-collection mechanism. The most important reason for this is that the winding-up process should not be used to compel a solvent company to pay a disputed debt. The proper procedure for determining entitlement to an amount claimed but genuinely disputed is take proceedings for recovery of the alleged debt where the matter can be litigated in the normal course: see Assaf, Statutory Demands: Law and Practice, LexisNexis Butterworths Australia 2008, paragraph 1.7 and following.
The statutory demand will be set aside with costs.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.
Associate:
Date: 24 September 2010
Counsel for the plaintiff: Mr P B Christensen
Solicitors for the plaintiff: Hansteins Lawyers
Defendant: Mr P L Smith (by leave)
Date of hearing: 10 September 2010
Date of judgment: 24 September 2010
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