Re: Art Pacific Pty Ltd; Wilde v Morgan
[2013] VSC 330
•27 June 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2013 02978
IN THE MATTER OF ART PACIFIC PTY LTD (ACN 089 489 270)
BETWEEN:
| MILTON WILDE | First Plaintiff |
| - and - | |
| ART PACIFIC PTY LTD (ACN 089 489 270) | Second Plaintiff |
AND BETWEEN:
| BRENT LEIGH MORGAN and GEOFFREY NIELS HANDBERG | First and Second Defendants |
| - and - | |
| BENDIGO & ADELAIDE BANK LIMITED (ACN 068 049 178) | Third Defendant |
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JUDGE: | Derham AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12, 20 and 24 June 2013 | |
DATE OF JUDGMENT: | 27 June 2013 | |
CASE MAY BE CITED AS: | Re: Art Pacific Pty Ltd; Wilde v Morgan & Ors | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 330 | |
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CORPORATIONS – mortgage of land – service of notices – whether valid service of demand and notice to pay under mortgage and s 76 of the Transfer of Land Act1958 – memorandum of common provisions – deemed service if left at or sent by post to address shown in the mortgage or where a new address has been notified to that new address - whether notification of new address for service precludes service at address in the mortgage – service also deemed effective where the notice is left or sent by post in any manner provided by statute, where applicable –s 418A of the Corporations Act2001 – application to make supplementary submissions – plaintiffs re-opening case – application of the doctrine of ‘fair notice’.
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APPEARANCES: | Counsel | Solicitors |
| For the First and Second Plaintiffs | Mr R. Kendall QC with Mr D. Kim | ICA Lawyers |
| For the First, Second and Third Defendants | Mr C. Möller | Piper Alderman |
HIS HONOUR:
Introduction
By originating process filed 12 June 2013 the plaintiffs seek declarations under s 418A(2) of the Corporations Act 2001 (“the Corporations Act”) as follows:
(a)that the appointment of the first and second defendants as agents for the third defendant, by Deed of Appointment of Agents for Mortgagees in Possession dated 23 October 2012 (“the Deed of Appointment”), under mortgage of land between the second plaintiff and the third defendant dated 18 April 2002 (“the Mortgage”) was invalid;
(b)further, or alternatively, that the first and second defendants’ entry into possession, or assumption of control of the land of the second plaintiff pursuant to the Deed of Appointment under the Mortgage was invalid.
The land in question is at 253-257 Maroondah Highway, Ringwood, Victoria and is the land described in certificates of title volume 5481 folio 080 and volume 4143 folio 465 (“the Property”).
The matter came on urgently on 12 June 2013, when the plaintiffs sought, and obtained, an interim injunction restraining the defendants from selling the Property at an auction set to take place on 13 June 2013 at 11.00am.[1] The serious question to be tried that was raised in the application for an interim injunction was whether a demand and notice to pay (“Default Notice”) by the third defendant (“BAB”) to the second plaintiff (“ART”) dated 15 October 2012 was validly served. It was non-compliance with that Default Notice that provided the foundation for the appointment of the first and second defendants (“the Agents”).
[1]By order of Ferguson J made 12 June 2013, the Originating Process filed 12 June 2013 was referred to an Associate Judge for hearing and determination pursuant to rule 77.05 of the Supreme Court (General Civil Procedure Rules 2005 and, if required, also pursuant to rule 16.1(3) of the Supreme Court(Corporations) Rules2003
The plaintiffs contended that the Default Notice was not properly served. Accordingly, BAB is not entitled to sell the Property as its rights both to appoint the Agents and to exercise its power of sale have not arisen.
The Issues
There were two issues raised at the trial:
(a)Was the Default Notice properly served in accordance with clause 13.01 of the Memorandum of Common Provisions AA662 (“MOCP”) (incorporated in the Mortgage) [2] by being left at the address of the Mortgagor shown in the Mortgage?
(b)If not, was there proper service of the Default Notice under s 113 of the Transfer of Land Act 1958 (“TLA”), as applied by the MOCP or independently, by it being left at the address of the Mortgagor shown in the Mortgage?
Both questions turn on the interpretation of the MOCP and the second on the interpretation of the TLA.
[2]Under ss 91A and 91B of the TLA the MOCP is deemed to be part of the Register and the Mortgage may incorporate them into the Mortgage.
After the conclusion of the trial and after I had reserved my decision, indeed after I had notified the parties that I would hand down my decision this morning, the plaintiffs applied to the Court to make supplementary submissions concerning the application to the facts of this case of the so called doctrine of ‘fair notice’, a doctrine primarily, but not only, finding its expression in relation to the service of statutory demands under the Corporations Act. I heard the parties on the matter so that I could understand how it might have affected the outcome of the application and so I could determine whether it was a matter that should be permitted to be raised after the close of the plaintiffs’ case. I reserved my decision as to whether I would permit the plaintiffs to rely on it and deal with it later in these reasons.[3]
[3]Counsel for the plaintiffs had referred to the doctrine in his submissions on Monday 24 June 2013, but only in passing, and did not press any substantive argument in respect of it, saying that he did not think any assistance could be gleaned from the cases dealing with the service of statutory demands (at Tr115.. Counsel for the defendants therefore did not deal with it.
Summary of Conclusions
I have reached the conclusion that-
(a)service was properly effected under the MOCP by the Default Notice being left at the address of the Mortgagor shown in the Mortgage;
(b)if I am wrong in this conclusion, it is my preliminary view that s 113 of the TLA enables service of the Default Notice by it being left at the address of the Mortgagor shown in the Mortgage, but that it is unnecessary to decide that question in light of the limited time available for, and the limited submissions made, and authorities referred to, on the construction of s 113.
(c)The doctrine of fair notice cannot be relied on where the defendants had no notice that it would be relied upon and where, had they had such notice, they might have taken a different course in relation to both cross-examination of Mr Wilde, the person whose affidavit provided all the substantive evidence in support of the application (there was no cross-examination), and may have introduced evidence that would be relevant to the matter. Accordingly, I have refused the plaintiffs leave to make the supplementary submissions based on the doctrine. However, I deal with it as best I can in the limited time available in the event that I am wrong in that decision.
Background[4]
[4]This is principally derived from the affidavit of the first plaintiff, Milton Wilde, sworn 12 June 2013 (“the Wilde Affidavit”). There was no cross-examination of Mr Wilde on his affidavit.
ART became the sole registered proprietor of the Property on 15 November 2002. On that date, BAB was also registered as mortgagee under a mortgage with dealing number AB697342Y (“the Mortgage”). The Mortgage incorporates the MOCP.[5] The address of ART in the Mortgage is 255 Maroondah Highway, Ringwood, Vic 3134. That is also an address of the Property. The second page of the Mortgage includes several covenants by ART, including a covenant by the mortgagor that (at 3) “address for notices and other communications, if different to that shown on the first page of this cover sheet:” and then space is allowed for the completion of addresses and fax numbers to be specified for both mortgagor and mortgagee. They have been left blank, so that there is no different address from the address on the first page of the mortgage as the address of the mortgagor for notices and other communications.
[5]Under ss 91A and 91B of the TLA the MOCP is deemed to be part of the Register and the Mortgage may incorporate them into the Mortgage.
The Property is commercially zoned and has a refurbished 1920s former fire station house and residence on it, together with five bay metal clad constructed storage/car bay facilities. ART occupied the property from the date on which it became registered as proprietor until about 7 May 2007.
By retail lease executed on 4 May 2007, ART leased part of the property to tenants for an initial term of five years and four months, with two options to renew the lease for terms of five years each (“the lease”). As is usual with the exercise of options to renew, the lease contained terms providing that if the tenants exercised the option the rent to be paid for the first term of the renewal was to be determined by a review to market and, if ART and the tenants could not agree on that rent, the provisions of the Retail Leases Act 2003 was to apply. That Act provides a mechanism whereby the Small Business Commissioner appoints an independent rental valuer to determine the market rate.
BAB was given a copy of the lease and formally consented to it in writing.
The Mortgage secures repayment of two loan facilities:
(a)a commercial term interest only loan, which was used to complete the purchase of the property;
(b)a commercial business overdraft used to meet the interest payments on the commercial interest only loan.
Mr Wilde gave evidence about the mode of communication with BAB. His evidence was that:
(a)he has been solely responsible for the day to day management of ART’s affairs and all of its dealings with BAB;
(b)all his communications with BAB have been either in person or if required by telephone or email. Any formal communications from BAB to ART, save for emails, have been by post directed to ART’s post office box. From time to time ART changed its post office box and when this occurred Mr Wilde notified BAB of the change and did so by email. In particular, Mr Wilde produced an email chain in 2008 disclosing notification to BAB of ART’s new, and current, address, being a Post Office Box;[6]
(c)he has located a series of letters sent by BAB to ART in the period from 13 December 2002 to 10 August 2012 regarding the facilities. Each is addressed to ART at its post office box as communicated to BAB from time to time.[7]
[6]Exhibit “MW-5” to the Wilde Affidavit.
[7]Exhibit “MW-4” to the Wilde Affidavit.
From about 2007 until March 2012 Mr Wilde was in regular contact with senior BAB representatives regarding a restructure of the loan facilities. In anticipation of the restructure BAB arranged for the property to be valued on 25 November 2011. The value was $1,710,000. After that valuation was obtained the attitude of BAB to a restructure of the facilities apparently changed and Mr Wilde was notified that BAB was unwilling to extend the loan facilities beyond 24 April 2012 and required all the loans to be refinanced or repaid by that date. Meanwhile on about 22 March 2012 the tenants notified ART that they exercised the option to renew the lease for a further term of five years. It was due to commence on 1 August 2012 and in accordance with the provisions of the lease the rent was to be reviewed to market. By July 2012 the rent was in dispute and the dispute was referred to the Small Business Commissioner for the appointment of an independent valuer to determine the market rental. Mr Wilde meantime sought assistance in refinancing the facilities from a loan and mortgage adviser and was advised that the application to refinance could not be finalised until the rent determination had been completed. BAB was advised accordingly.
BAB were not persuaded that the refinancing could not be undertaken until the rental determination was complete and required evidence of either an unconditional offer from another financial institution or an unconditional contract of sale by Friday, 17 August 2012, failing which the matter would be placed in the hands of the legal advisers of BAB for full recovery action.
Then followed a letter from BAB to ART at its post office box demanding that ART make a repayment for the commercial loan of $4,110.89 by 24 August 2012. The letter made no reference to any default in the facilities nor did it demand that ART take some step to avoid action being taken against it. It made no reference to the necessity to refinance or sell the property.
The efforts of ART to arrange refinancing of the facilities proceeded, but was met with an inability on the part of the proposed refinancing institution to proceed until the rent review dispute had been resolved and completed. BAB was advised accordingly.
On 29 October 2012, ART received a letter by email from the solicitors acting for ART in relation to the lease. The letter was dated 23 October 2012 and was addressed to those solicitors from the Agents. It purported to enclose a copy of a further letter from the Agents dated the same day addressed to ART at its registered office at the rear of 253 Maroondah Highway, Ringwood 3134. The letter from the Agents to ART dated 23 October 2012 asserted that BAB had appointed the Agents as agents of BAB in possession of the Property and enclosed an incomplete copy of the Deed. At this time neither ART nor Mr Wilde had received, nor were they aware, of any formal letter, notice or demand having been sent by or on behalf of BAB regarding any default under the Mortgage, nor any warning that BAB intended to enforce its rights as Mortgagee or that it intended to appoint the Agents. A complete copy of the Deed was received from the Agents on 2 November 2012.
When Mr Wilde read the Deed he noted that the recitals referred to a default under the Mortgage, but he had not received any notice of such a default. His solicitors followed up in February of 2013[8] seeking from the solicitors for BAB a copy of the Notice of Default which was provided later that month together with the MOCP. Before receiving a copy of the Notice of Default from the solicitors for BAB, Mr Wilde swears that he had not seen it previously.
[8]The delay was not explained.
There were without prejudice communications between the solicitors between 5 March and 7 June 2013. These communications related to the detail of the service of the Default Notice and whether or not that notice had been properly served in accordance with the provisions of the MOCP. A number of issues were raised by ART’s solicitors in relation to service of the Default Notice and there were lengthy delays between March and June 2013 during which BAB notified ART that it would need time to respond to those issues and, in particular, to allegations made by ART that the Agents were not validly appointed.
On Friday, 7 June 2013 the solicitors for BAB confirmed that the Agents intended to sell the property at auction on 13 June 2013.
The Default Notice
The Default Notice is dated 15 October 2012 and provides in substance that –
(a) you (ART) are in default of the facilities referred to in Schedule 1 to the Notice;
(b)BAB hereby terminates the facility and demands that you pay to it immediately after service of this demand all of the moneys owing by you under the Mortgages referred to in Schedule 2 of the Notice and under the Facilities. Without limiting the generality of that demand the amount owing as at 12 October 2012 was $1,124,161.37 and interest and costs continue to accrue on that amount;
(c)that if you do not comply with this demand within seven days of service BAB may, amongst other things, exercise its powers pursuant to the Mortgage (including to enter upon and take possession of or sell the land referred to in the Mortgage) and pursuant to s 77 of the TLA and commence legal proceedings against you to recover the money secured by the Mortgage.
The Service Effected
The Affidavit of Sarah Southwell sworn on 14 June 2013 and filed on behalf of BAB shows that no service was made at “Rear” 253 Maroondah Highway, Ringwood, VIC 3134, being the registered office of ART.[9] An attempt was made to leave it there, but the gates were locked. Instead, the Notice was delivered “by placing the Documents under the door to the premises on the property situated at 255 Maroondah Highway, Ringwood, Victoria.” That is the front building, which ART had leased to tenants and which was used as a restaurant. It is a separate and distinct part of the land. BAB asserts that the Default Notice was properly served as it was served at the address shown in the Mortgage, being “255 Maroondah Highway, Ringwood, VIC 3134”.
[9]See company search, Exhibit “MW-1” to the Wilde Affidavit.
Clause 13.01 of MOCP
BAB relies on Clause 13(a) of the MOCP to establish that the Default Notice was properly served.
The MOCP contains the following relevant provisions:
1.01In this mortgage unless inconsistent with the context or subject matter or circumstances or unless the contrary intention appears:
…
“Statute” means any Statute or the Corporations Law[10] and includes any ordinance, regulation, rule or by-law made under or pursuant to such Statute or the Corporations Law and all amendments or consolidations of substitutions therefore from time to time.
[10]Another provision provides that references to specific Statutes include any statutory amendments or re-enactments thereof. Section 1407 of the Corporations Act is to like effect: see Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2002] NSWSC 402; 41 ACSR 491.
Notices And Sundry Provisions
13.01Any notice or certificate to be given to or demand to be made on the Mortgagor and any appointment to be made by or on behalf of the Mortgagee shall be deemed to have been duly given or made if it is in writing, signed by an Authorised Officer of the Mortgagee and left at or sent by prepaid mail:
(a) to the address of the Mortgagor as shown in this Mortgage;
(b)where a new address has been notified in writing by the Mortgagor to the Mortgagee, to that new address;
(c)in the case of a corporate Mortgagor, to its registered office or to the address the corporation has notified the Mortgagee in writing; or
(d) in any manner provided by Statute, where applicable.
A communication sent by mail shall be deemed to have been received by the Mortgagor on the second day after posting (excluding days on which no mail deliveries are made).
The Transfer of Land Act provisions
Section 113 of the Transfer of Land Act 1958 (“TLA”) provides so far as relevant:
(1)Any notice under this Act may be served or given by being sent by letter posted to the person concerned at his address for service or, if he has no address for service within the meaning of this section, at his last known place of abode.
(2)Any address of a person that is retained by the Registrar may be used as that person’s address for service.
(3) [Not relevant]
(4) [Not relevant]
(5)The Registrar may amend or alter an address for service of notices if the person whose address is retained provides –
(a) a request for amendment in an appropriate approved form; and
(b)the relevant certificate of title or other documentation which demonstrates to the Registrar’s satisfaction that the person who is applying for the amendment is the person whose address is retained.
(6) [Not relevant]
(7)When a notice is sent by letter posted to any person at his address for service and the letter is returned by the post office the Registrar may if in the circumstances and having regard to the provisions of this Act he thinks fit –
(a) direct any further notice to be given; or
(b) direct substituted service; or
(c) proceed without notice.
Corporations Act provisions
Section 418A[11] of the Corporations Act provides:
[11]Pursuant to rule 16.1(1) of the Supreme Court(Corporations) Rules2003, an Associate Judge may exercise any power conferred on the Court or a judge of the Court by any provision listed in column 1 of schedule 2, subject to any qualification set out in that column. Section 418A is so listed and is not subject to any qualification.
418A Court may declare whether controller is validly acting
(1) Where there is doubt, on a specific ground, about:
(a)whether a purported appointment of a person, after 23 June 1993, as receiver of property of a corporation is valid; or
(b)whether a person who has entered into possession, or assumed control, of property of a corporation after 23 June 1993 did so validly under the terms of a security interest in that property;
the person, the corporation or any of the corporation’s creditors may apply to the Court for an order under subsection (2).
(2)On an application, the Court may make an order declaring whether or not:
(a) the purported appointment was valid; or
(b)the person entered into possession, or assumed control, validly under the terms of the security interest;
as the case may be, on the ground specified in the application or on some other ground.
There was no dispute that the Agents, the first and second defendants, were persons who had entered into possession, or assumed control, of property of a corporation for the purposes of this section.
Submissions
Plaintiffs’ Submissions
The plaintiffs submitted that:
(a)Proper service was not effected as required under the MOCP or under any law available to BAB. No service was made at the registered office of ART.[12]Instead, the Notice was left “by placing the Documents under the door to the premises on the property situated at 255 Maroondah Highway, Ringwood, Victoria,” being the tenanted front part of the Property and the address of ART as shown in the Mortgage;
[12]The ‘Rear’ 253 Maroondah Highway, Ringwood, VIC 3134, see company search, Exhibit “MW-1” to the Wilde Affidavit.
(b)The fact that paragraph 13.01(b) of the MOCP refers to a “new address” means that a new address (if notified to BAB) replaces the old address stated in the Mortgage, and that if the old address is incorrect or obsolete, the new address as informed by the Mortgagor is to be a place for service. Prior to the alleged serving of the Default Notice-
(i) the Plaintiffs had informed BAB, in writing, of a change of address;[13]
[13]Exhibit “MW-5” to the Wilde Affidavit.
(ii) BAB had sent its postal correspondence to that address.[14]
[14]Exhibit “MW-4” to the Wilde Affidavit.
(c)The proper construction of Clause 13 is that Clause 13(a) does not apply once BAB has notice of a new address for the Mortgagor. That is, Clause 13(a) cannot apply in a situation where (as here) the Mortgagee has notified BAB that the address in the Mortgage is no longer the correct address. In this regard, Mr Kendall QC, who appeared with Mr Kim for the plaintiffs, submitted:
There would be no point in having (b) if it was to have no effect. In other words, if (b) provides for the giving of a new address, but on the argument of our learned friend, it means that even though the Bank has [been] given a new address and even though the Bank might act on that new address for a long period of time, it can nevertheless ignore it when it comes to serving the document. A person may well think, a person having taken the trouble that Mr Wilde took to inform the Bank of the correct postal address and to make sure that was done, may well think that the Bank would not go back, as it were, on its conduct and adopt a different address when it came to the service of such a critical notice. Indeed, one might be lured into a false sense of security about it.
(d)In construing the clause it needs to be borne in mind that there are serious consequences following service of a Notice of Default, or of other notices or appointments of the kind referred to in the clause;
(e)BAB was well aware that the manner in which to serve ART was by way of its PO Box address, PO Box 191, Mitcham, VIC 3132. Prior to the purported service of the Default Notice, BAB sent letters and notice to that address.
(f)Clause 13(d) of the MOCP states that the Mortgagee can serve a notice, “In any manner provided by Statute, where applicable”. “Statute” is defined in the MOCP so as to include both the Corporations Act and the TLA;
(g)Section 113 of the TLA does not assist the Defendants. On construction, the Plaintiffs submit that the section relates to postal delivery and not to hand delivery, as in this case. This is evident from the language of s 113(1) and (7);
(h)Even if the section relates to hand delivery, the section cannot be construed so as to allow a mortgagee to send a notice to a mortgagor recorded in the Land Register where the mortgagee knows that that address is not correct. This is in contrast to s.109X of the Corporations Act 2001, which allows service by delivery to the registered office. Companies are required under the Law to update their registered office when there is a change, which ART did. There is no such requirement under the TLA. There is an option for a party to change the address in the Mortgage, but no mandatory requirement that it be done. To construe s 113 of the TLA in the way that the Defendants contend, will mean that there would be valid service even where the mortgagee was aware that it was no longer the address for service to the mortgagor. That could not be the intention of the section. The section provides a means by which the mortgagee may (but not “must”) serve by way of postal delivery, in the manner stated. In this present case BAB did not serve by post;
(i)Section 113 of the TLA is not a mandatory requirement. It is a right that BAB had if it wished to exercise that right. BAB did not exercise that right.
(j)In relation to the argument that s 113(2) of the TLA is free standing and enables service either by post or by being left at the address “retained by the Registrar”, the section, when read as a whole, is concerned with service by post. In other words, all s 113 is doing, when one reads it in its entirety, is providing for the service of documents by post.
Fair Notice
In its application to re-open and make supplementary submissions concerning the doctrine of fair notice, the plaintiffs submitted that BAB’s construction of clause 13.01 of the MOCP is advanced in circumstances where:
(a)BAB served the Default Notice by placing it under the front door of premises occupied by a third party tenant;
(b) BAB knew that ART had left that address[15];
(c)BAB knew that the front of the premises had been leased to a third party for use as a restaurant;
(d)BAB knew of the new postal address for ART and had used that address extensively in correspondence;
(e)BAB has not adduced any evidence that suggests that it did not know these things.
[15]BAB’s knowledge arose by virtue of its endorsement of its consent to the lease of this premises.
The plaintiffs submitted that:
(a)Clause 13.01 constitutes the agreement between BAB and ART as to the manner in which BAB may serve notices or make demands on ART;
(b)The proper function of the default notice was to bring the default to the attention of ART[16]. The purpose of serving the default notice was to ensure that its contents came to the notice of the person for whom it was intended;[17].
(c)Clause 13, when read in the context of the entirety of the MOCP, clearly intends that BAB would give some notice to ART on which he might reasonably expect to be able to act;[18].
(d)If the mortgagee simply “goes through the motions” of serving a default notice (such as giving it to a third party who now occupies the mortgagor’s former address), the mortgagee could exercise its power of sale without the mortgagor ever knowing that this was to occur;
(e)The defendants’ construction of clause 13.01 contravenes the doctrine of “fair notice”, which doctrine is that in cases where there is knowledge that the address where the notice was served is “false” or “non-existent”, then service will not be effective.[19]
[16] Thompson v Newman (unreported) COR 299 of 1997 – Supreme Court of WA, Master Sanderson, 13 June 1997 BC9702708 at page 8.
[17] Hastie & Jenkerson v McMahon [1991] 1 All ER 255 at 259 cited with approval in Dwyer v Canon Australia Pty Ltd – Supreme Court of SA, 23 March 2007 per Debelle J at para 25- BC200702108.
[18] Bunbury Foods Pty Ltd & Another v National Bank of Australasia Ltd & Anor (1984) 153 CLR 491 at pages 502 and 503. The High Court appeared to accept the proposition that a party must not intend for a merely illusory notice.
[19] Mangraviti Pty Ltd v Lumley Finance Ltd [2010] NSWSC 61.
The doctrine of fair notice turns on the knowledge of the server that the notice has not reached the person to be served, and that that person has not had notice of the document served, whether it be a statutory demand, or a writ or other court process. Where that occurs, the Court retains a discretion to refuse the relief that otherwise would follow from service of the document,[20] which is generally deemed to be good service.
[20]Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559 at 565 per McLelland CJ in Eq.
The name of the doctrine derives either from the steps taken by the server when it learns that service has not brought the matter to the notice of the person to be served, or the fact that those steps have not been taken to bring the matter to the notice of the person to be served. The server learning by the return of the document, or by other means, that the person to be served has moved from the address at which the server is entitled, as a matter of law, to serve the document, may then take steps to bring it to the notice of the person to be served. Having done that, the service at the address to which the server is entitled to serve the document, and by virtue of which it is usually deemed to be good service regardless of whether it comes to the notice of the person to be served, is good service.
This is, I think, the effect of the statement of the doctrine by Gillard J in CGU Workers' Compensation (Vic) Ltd v Carousel Bar Pty Ltd,[21] where at [83]-[84] his honour said:
These cases state that there is a qualification to the effect of s109X and s109Y. Those sections establish service by post by delivery in the ordinary course of post. If the documents are returned within the statutory period having been delivered to the registered office address what is the effect of the return on the service which has been effected properly?
The qualification is that unless it is established that the creditor has taken all reasonable steps to bring the demand to the attention of the company after the demand has been returned, it would be an abuse of process to bring a winding up application knowing that the demand never came to the notice of the company. But if all steps were diligently pursued by the creditor to bring the statutory demand to the notice of the company then service would be effective and the proceeding would not be an abuse of process.
[21][1999] VSC 227.
There have been many expressions of the doctrine, and of its basis, but it appears to me to be primarily based on the server committing an abuse of process by relying on service it knows has not resulted in the person to be served having notice of the matter.
The best statement of the principles is, in my estimation, in RE Future Life Enterprises Pty Ltd,[22] where McLelland CJ in Eq dealt with service of a statutory demand under s 459E of the Corporations Act, saying:
[22](1994) 33 NSWLR 559 at 564-5.
Mr Vernier has further contended that the statutory demand was not effectively served on Future Life by being left at its registered office on 28 October 1993, having regard to its immediate return and the absence of communication between the firm of accountants occupying that office and anyone directly connected with the company. In support of that contention he relied on the following passage from the judgment of von Doussa J in Re Rustic Homes Pty Ltd (1988) 49 SASR 41 at 45:
"... Good and effective service will be assumed where documents are left at the registered office unless and until there is information before the court which suggests that the documents probably did not come to the notice of the company. There is a duty on the plaintiff and the plaintiffs' solicitors to disclose the real situation concerning the company to the court; and in a case where there is reason to suspect that the company probably has not received notice of documents the plaintiff may then either utilise the mode of service provided in s 528(4) or obtain directions from the court."
That was a case concerning the effect of s 528(1) of the Companies (South Australia) Code which was in identical terms to s 220(1) of the Corporations Law, which provides: "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." His Honour said (at 42) that s 528(1) "should not be construed so as to deem one of the modes of service permitted by it to be good service where the facts before the tribunal show that the document has probably not come to the attention of the company".
With great respect it is difficult to reconcile what was said in Re Rustic Homes Pty Ltd with the clear and unequivocal words of s 220(1), or with the approach adopted by the High Court to the construction of a provision as to the service of documents by post in the Acts Interpretation Act1954 (Qld) in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, particularly at 95-97. The question of the construction and effect of s 220(1) together with s 109Y of the Corporations Law (which deals with service by post) was examined in considerable detail by Santow J (with whose judgment I respectfully agree subject to a minor qualification noted below) in F P Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136; 11 ACLC 1,203. His Honour expressed his conclusion, so far as presently relevant (at 139; 1205) as follows:
"But what is the effect ... of coming to know after postal delivery that the company, no longer resides at the registered office address? ... One line of authority, based on a doctrine of 'fair notice', would suggest that in cases where there is knowledge that the address is 'false' or 'non- existent' then service will not be effective: Re Gasbourne Pty Ltd (1984) 8 ACLR 618; 2 ACLC 103. This has been formulated in different ways including not being 'misled' by the register: Re Otway Coal [1953] VLR 557 at 563. And that it would be an abuse of process to allow judgment in cases, where the [plaintiff] knew that the statement of claim had not come to the attention of the defendant: Deputy Federal Commissioner of Taxation v Abberwood Pty Ltd (1990) 2 ACSR 91; 8 ACLC 528. But Abberwood can be distinguished. There the [plaintiff] had independent contact with the directors of the company. Yet the [plaintiff] told them nothing of the process sent to the registered office and later returned by a subsequent occupant with the notification that the company was no longer at that address. This was held to be an abuse of process. That, in my judgment, should be the proper basis for such an exception to the statutory requirement. Abuse of process underlies the notion of lack of 'fair notice'. Here, contrary to the facts in Abberwood, such opportunity for indirect contact was diligently pursued by the plaintiff. There was 'fair notice' -- if that be required – and clearly no abuse of process. There is therefore no basis for failing to give full force to the clear words of the two sections of the Corporations Law in deeming service to have occurred."
The qualification is that an abuse of process in the circumstances postulated by his Honour is not strictly speaking an "exception" to the provisions of s 220(1) (which would suggest that there has been no effective service) but rather constitutes an over-riding ground for refusing relief notwithstanding that there has been effective service. This is really implicit in what his Honour says. In the present case, there is no possible basis for suggesting an abuse of process on the part of Friends' Provident, whose solicitors did all they reasonably could to ensure that fair notice of the statutory demand was given to those in control of the affairs of Future Life. [Emphasis added]
In the context of the service of statutory demands, and subsequent applications to wind up the corporation on the strength of the deemed insolvency arising from a failure to satisfy or set aside the demand, the basis of operation of the doctrine of fair notice may turn on more than it being an abuse of process to rely upon a known ineffective service. That is because of the existence in s 459J(1)(b) of the Corporations Act of “some other reason why the demand should be set aside".[23]
[23]Mangraviti Pty Ltd v Lumley Finance Ltd [2010] NSWSC 61, per Palmer J at [14].
Counsel for the plaintiffs emphasised that the proper basis, in his submission, was not abuse of process but, as McLelland CJ put it, where the doctrine is attracted it is an over-riding ground for refusing relief notwithstanding that there has been effective service. The point of Counsel for the plaintiffs relying on this basis was to enable him to ‘migrate’ the doctrine from Court related process to notices in general.
It may be that the doctrine is even more restricted than I have stated above. In Lane Cove Council v Geebung Polo Club Pty Limited,[24] Justice Barrett of the Supreme Court of New South Wales referred to a number of the cases, including an extensive judgment of Austin J in Chief Commissioner of Stamp Duties v Palifex Pty Ltd[25], and stated at [53]:
As Austin J emphasised in [Palifex], there is room for some overriding notion of ‘fair notice’ only where, despite literal compliance with the rules as to service, a document does not come to the notice of the party to be served because of deliberate suppression or some other improperly motivated conduct of the serving party. It is conduct of that kind which brings into play abuse of process considerations. Nothing of that kind occurred here. Any ‘fair notice’ doctrine therefore has no application in this case. [Emphasis added]
[24](2002) 41 ACSR 15.
[25][1999] NSW SC 15 (Paliflex).
Defendants Submissions
The defendants submitted that:
(a)The plaintiffs’ construction of clause 13 should be rejected for the following reasons:
(i) the natural meaning of the clause is clear. It provides for deemed service of notices, certificates and demands by any of the avenues specified. Those avenues are specified disjunctively. They are listed separately and separated by “or”. Satisfaction of any of the avenues will constitute good service. The narrowing or “carve-out” entailed by the plaintiff’s construction is not consistent with the natural meaning of the clause, and should not be accepted;
(ii) The contention that the new address “replaces the old address stated in the mortgage”[26] finds no support in the text. Clause 13(b) is facultative. If a new address is notified, service at that address will be good. But that is not to say that notification under clause 13(b) renders clause 13(a) – or any of the other sub-clauses to clause 13 – nugatory. Such a construction finds no support in the text. There is nothing, for example, that says “If (b), (a) does not apply;
[26]Plaintiffs’ submission, 8.3.
(iii) the textual considerations are to the contrary. Clause 13(c) provides that service can be effected at the mortgagor’s “registered office or to the address the corporation has notified the Mortgagee in writing”. If the plaintiffs’ construction of clause 13(b) is correct, there is no reason why it should not apply to clause 13(c), that is, where there has been notification under clause 13(b), there cannot be service at the mortgagor’s registered office;
(iv) For reasons of logic and consistency, the plaintiffs’ construction would apply also to clause 13(d), that is notification under clause 13(b) would preclude “service under statute”, as clause 13(d) provides. That consequence would be absurd. However, the inability to contract out of the statutory provisions aside, it would be the logical consequence of the plaintiffs’ construction of clause 13(b);
(v) The construction for which the plaintiffs contend suffers from the further vice that it would potentially preclude BAB from having the ability to deliver the notice to a physical location. It would force BAB into a means of service of the mortgagees’ choosing;[27]
[27]See Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2002] NSWSC 402; 41 ACSR 491.
(vi) the avenue of service of notices at the mortgaged premises is of long standing. It is provided for in the law of Property Act 1925 (UK) and equivalent statutes in Australia. In Victoria, for instance, it is to be found in s 198(3) of the Property Law Act 1958.[28]Even though not applicable in this case, that section illustrates the significance of service at the mortgaged property;
[28]It is common ground that s 198(4) is not applicable in this case.
(vii) Section 113(2) provides “Any address of a person that is retained by the Registrar may be used as its address for service”. The address in the mortgage is retained by the Registrar and is available for use for service of a notice or demand under s 76 of the Act;
(viii) An analogous case is Alexander v Stocks & Holdings (Sales) Pty Ltd,[29] which concerned service of a notice of default on a purchaser under a contract of sale. The contract adopted the conditions of Table A of the seventh schedule to the Transfer of Land Act, including Condition 13 concerning service. The notice was sent by post to the purchaser at the address shown in the contract, but was returned to the vendor’s solicitors by the postal authorities. Even though there was no means of notifying a “new address” in that case, it is relevant because the Full Court held that, notwithstanding that the notice was not received by the purchaser, there had been good service. As Crockett J said:[30]
[29][1975] VR 843.
[30]At 855-6.
The plain fact is that the parties to a contract have chosen to agree by a term of that contract upon four different ways in which a notice may be served. By such agreement the party to be served submits to the risk that selection of a particular mode of service may involve that the notice may not come to the actual knowledge of the party being served with it.
(ix) The submissions of the plaintiffs as to the proper construction of s 113 of the Act are inconsistent with the wording of the section, with long standing authority, and with the fundamental feature of Torrens system – namely, the significance of the Register and the information it contains;
(x) The consequence of the plaintiffs’ interpretation of s 113 can be illustrated by considering its application if the notice in this case had been sent by post to the address shown in the mortgage. As the plaintiffs would have it, such service would not be effective, thereby emasculating the operation of ss 113(1) and (2) of the Transfer of Land Act;
(xi) There is longstanding authority that, in the case of Torrens system mortgages, service may be on the mortgagor at the address appearing in the Register.[31] The same principle applies, for instance, regarding the notice specified in caveats.[32]
[31] Gunns v Land Mortgage Bank of Victoria Ltd (1890) 12 ALT 49; Irving v Commissioner of Titles [1963] WAR 67.
[32] National Australia Bank v Dyer, unreported, SCV, Batt J, 14 August 1996.
In relation to the application by the plaintiffs to re-open or make submissions concerning the application of the doctrine of fair notice, the defendants submitted:
(a)They are prejudiced by the application for leave. They had no notice that the plaintiffs might rely on the doctrine and had they had such notice they might have taken a different course and cross-examined Mr Wilde and introduced evidence relevant to whether they knew that the service in fact effected had not resulted in the Default Notice coming to the notice of ART;
(b)The basis of the doctrine is abuse of process, and it finds its most common application in relation to the service of statutory demands where the service requirements give rise to drastic and terminal results, the winding-up of the corporation concerned. The translation of the doctrine to the service of a Default Notice under a Mortgage is not an equivalent circumstance. It is not the service of a document that leads to or is a process of the Court;
(c)The reasoning of Santow J in FP Leonard Advertising Pty Ltd v K D Travel Service Pty Ltd[33] showed that on the facts of this case there was no room for the operation of the doctrine. In that case, his Honour’s reasoning was:[34]
[33](1993) 12 ACSR 136; 11 ACLC 1,203 (FP Leonard).
[34]CGU Workers' Compensation (Vic) Ltd v Carousel Bar Pty Ltd [1999] VSC 227 (Gillard J) at [110].
(xii) Service of the statutory demand effected by post by delivery to the registered office of the company is effective service by reason of s109X and s109Y if delivery is not disproved;
(xiii) If prior to the issue of the application to wind up, the document is returned to the creditor in circumstances which show that the document never came to the knowledge of the company, it would be an abuse of process to proceed with the application unless steps are taken to give fair notice to the company;
(xiv) What is fair notice appears to be taking all steps diligently to give notice of the demand to the company.
(d)This is the correct statement of the doctrine and in this case there was no room for the application of the doctrine on the facts because there was no evidence that BAB knew that the service of the Default Notice was not effective. There was no evidence that the Notice had been returned, nor any evidence of contact with the tenants at the Property that might have indicated that the Default Notice had not reached ART.
Interpretation of clause 13.01 of MCOP
There are a number of points to be noticed about this clause that are relevant to its construction.
First, as I pointed out in argument, that there is a drafting convention that, where there are a series of paragraphs within a clause or section that are all ‘alternatives’, or options, the conjunction ‘or’ may be included only at the end of the penultimate paragraph. The result is that ‘or’ is to be read as if it appeared at the end of each paragraph.[35] Counsel for the parties each agreed that this convention is applicable to clause 13.01 of the MCOP and has the result that each paragraph should be read as if ‘or’ appeared at its end (except for the last paragraph of course).
[35]See DC Pearce and RS Geddes, Statutory Interpretation in Australia, 6th Ed, at [12.2].
There are a number of consequences flowing from this convention when applied to clause 13.01 of the MOCP:
(a)Each paragraph is, subject to textual indications to the contrary, an available ‘alternative’ means of giving a notice or making a demand under the clause, that is, serving it;
(b)There are 5 ‘alternatives’, when paragraph (c) is given full effect (it includes a true alternative to the registered office of a corporate mortgagor, being an address the corporation has notified to the Mortgagee in writing);
(c)There is no reason to suppose that the provision of a new address under paragraph (b) means that either paragraph (c) or (d) is not available as a means of service. Indeed Counsel for the plaintiffs readily conceded, rightly in my view, that he was not contending that the provision of a new address excludes the service of the notice at the registered office in accordance with paragraph (c), or, for that matter, the service of the notice as provided by statute, which would encompass both 109X of the Corporations Act and s 113 of the TLA, if service were effected pursuant to those provisions.
The second point to notice is that clause 13.01 contains ‘deeming’ provisions designed to produce a result of service (the giving of a notice or the making of a demand, for example) whether actual notice is received by the Mortgagor. That is the effect of:
(a)the provision in the opening words, described by Counsel for the defendants, Mr Carl Möller, as the ‘chapeaux’, “shall be deemed to have been duly given or made”;
(b)the provision in the closing words, that relates to sending notices by mail, that “a communication sent by mail shall be deemed to have been received by the Mortgagor on the second day after posting…”.
The third point is that its evident object or purpose is to facilitate the service of notices and demands by the Mortgagee on the Mortgagor. It does not relate at all to the service of any notice or other communication on the Mortgagee by the Mortgagor. It may be argued, however, that the clause is for the benefit of both parties to the Mortgage, in that it provides for the service of notices and demands that give rise to serious consequences for the Mortgagor and by requiring service in particular ways gives the Mortgagor some protection. But on balance it bears the usual one sided character of a provision designed to give the Mortgagee several means of giving notices and making demands which cover all available means.
The argument put to support the proposition that in this case service at the address shown in the mortgage was not proper service (under the MOCP) boils down to the proposition that once a new address is notified in writing under paragraph (b), paragraph (a) simply has no application at all. This is what I call a ‘textual’ indication, meaning that the ordinary meaning of the cascade of provisions as options always available to the Mortgagee for effecting service is altered by the words “where a new address has been notified …”. On the plaintiffs’ argument, these words hark back to paragraph (a) so as to make it inapplicable where the new address is notified.
In this regard, the interpretation of clause 13.01(c) becomes problematic. It provides that service can be effected at the Mortgagor’s “registered office or to the address the corporation has notified the Mortgagee in writing”. If the plaintiffs’ construction of clause 13.01(b) is correct, then why should it not apply to clause 13.01(c), that is, where there has been notification under clause 13.01(b), there cannot be service at the mortgagor’s registered office? The two modes of service under paragraph (c) are clearly alternatives. It is also clear that notification of a new address under paragraph (b) can, in the case of a Mortgagor that is a corporation, operate as the notification of an address for the purposes of paragraph (c). Mr Kendall QC did not contend that paragraph (c) should be interpreted in the same way as paragraphs (a) and (b). This is because he acknowledged that it is not possible to exclude service, whether by post or by the article being ‘left’, at the registered office. He is driven, in my view, as I apprehend his argument, to rely on the effect of the phrase “new address” as bringing with it the notion of a replacement address rather than an alternative address. A ‘new address’ is one that is recent, or fresh or unused, and may include one that is ‘further’ or ‘additional’.[36] It is not necessarily a consequence of the use of the word ‘new’ in relation to the address that the old address is rendered moribund. In the end, the construction advanced by the plaintiffs makes “new address” do too much work.
[36]The Macquarie Dictionary, 3rd Ed, definitions 1, 7 & 8.
Another argument against the construction advanced by the plaintiffs to which the defendants made reference was that the construction for which the plaintiffs contend would potentially preclude BAB from having the ability to deliver the notice to a physical location. It must be remembered that the opening word of the clause contemplate that the Mortgagee may leave the article at the address referred to in one of the sub-paragraphs. There is therefore clearly displayed an intention that service by physical delivery to an address should be available, rather than posting, if that method is preferred.[37] Where, as here, the Mortgagor notifies a post office box as the ‘new address’ the Mortgagee would, on the plaintiffs’ construction, be precluded from physical delivery of the article. That, however, could not apply to physical delivery to the registered office pursuant to s 109X of the Corporations Act (by virtue of paragraph 13.01(d) of the MOCP and under the independent operation that section). That interpretation is paradoxical.
[37]See Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2002] NSWSC 402; 41 ACSR 491 at [14].
In my view, the construction advanced by the plaintiffs is against both the natural meaning of the clause construed as a whole, and against its evident object or purpose mentioned above. Clause 13.01 is, as Mr Möller submitted, facultative in that it confers a power on the Mortgagee to effect service in a number of different ways of its choosing. The mode of service in paragraph (b) is an option the Mortgagee has, amongst the other options set out. If a new address is notified, service at that address will be good as well, if the Mortgagee chooses to take that course. That notification of a new address under clause 13.01(b) cannot, consistently with the purpose of the clause and the disjunctive “or” notionally at the end of each paragraph, render clause 13(a) – or any of the other sub-clauses to clause 13.01 – nugatory. That this is the correct construction of the clause is confirmed by the other options that it is conceded are available to the Mortgagee under paragraphs (c) and (d) of the clause.
Thus, the giving or making of a notice or demand in accordance with any of the paragraphs of clause 13.01 will be effective and be deemed to have been given or made whether it in fact comes to the notice of the Mortgagor.
Section 113 of the TLA
The issue here was both simpler and of more wide ranging consequence. It is that s 113(2) is itself facultative and enables a notice under the TLA to be served whether by post or physical delivery to any address of the Mortgagor that is retained by the Registrar.
To reiterate, the terms of s 113(1) are that a notice under the TLA may be served or given by being sent by letter posted to the person concerned at his address for service or, if he has no address for service within the meaning of this section, at his last known place of abode. What sub-section (2) does is provide what is that address for service. It is any address of the person retained by the Registrar. It is not in dispute that a notice under s 76 is a notice under the TLA for the purposes of this section.
This aspect of the matter was argued by reference principally to the words of the section and without and historical and fuller textual analysis of the TLA, and the provisions in it that may bear upon its interpretation. Reference was made, as I have said, to authorities old and relatively new,[38] which establish that service on a caveator at the address in the caveat is good service even though it is known that the caveator did not receive actual notice of the matter. In tis regard reference was also made to s 89(4), which introduces a deemed service on a caveator if the notice, and any proceedings “in respect thereof” is served at the address specified in the caveat.
[38]Gunns v Land Mortgage Bank of Victoria Ltd (1890) 12 ALT 49; Irving v Commissioner of Titles [1963] WAR 67; National Australia Bank v Dyer, unreported, SCV, Batt J, 14 August 1996.
It is my preliminary view that s 113 (2) enables service of the Default Notice by it being left at the address of the Mortgagor shown in the mortgage. This is because s 113 read as a whole is facultative, it permits service at the address for service, being the address retained by the Registrar, and that service may be by post as specified in sub-section (1). The fact that it does not specify any other mode of service does not mean that other available modes are precluded.
If service is in accordance with sub-section (1) (at the address for service identified in sub-section (2)) it is effective service.[39] That does not, it seems to me, restrict the available modes of service to service by post. Although the specification in sub-section (2) of the address for service may be seen as no more that an extension of the operation of sub-section (1), in the sense that the address for service in sub-section (1) is to be found identified in sub-section (2), that does not mean that the only mode of service of any notice under the TLA must be by post.
[39]It is also relevant that s 49 of the Interpretation of Legislation Act1984 would have the effect of deeming such service effective unless the contrary were proved.
In this case, however, I consider it unsafe in light of the arguments advanced to come to a concluded view as to whether the section is concerned entirely with service by post, or extends to service by other means at the address for service referred to in s 113(2). The arguments were not sufficiently wide ranging to satisfy me that in deciding this question I would not be deciding the matter per incuriam.
Having regard to my decision on the first question, therefore, I consider it unnecessary to come to a concluded view on the second question.
Fair Notice
After the conclusion of the trial and after I had reserved my decision, indeed after I had notified the parties that I would hand down my decision this morning, the plaintiffs applied to the Court to make supplementary submissions concerning the application to the facts of this case of the so called doctrine of ‘fair notice’, a doctrine primarily, but not only, finding its expression in relation to the service of statutory demands under the Corporations Act.
I heard the parties on the matter so that I could understand how it might have affected the outcome of the application and so I could determine whether it was a matter that should be permitted to be raised after the close of the plaintiffs’ case.
I reserved my decision as to whether I would permit the plaintiffs to rely on it and deal with it in these reasons.[40]
[40]Counsel for the plaintiffs had referred to the doctrine in his submissions on Monday 24 June 2013, but only in passing, and did not press any substantive argument in respect of it, saying that he did not think any assistance could be gleaned from the cases dealing with the service of statutory demands (at Tr115. Counsel for the defendants therefore did not deal with it.
I have set out in the sections of these reasons dealing with the submissions of the parties the content of the doctrine and the authorities, or some of them, that have considered it or applied it.
In my view, leave should be refused for the plaintiffs to re-open their case or make submissions on the application of the doctrine to the facts of this case.
The doctrine of fair notice cannot be relied on where the defendants had no notice that it would be relied upon and where, had they had such notice, they might have taken a different course in relation to both cross-examination of Mr Wilde, the person whose affidavit provided all the substantive evidence in support of the application (there was no cross-examination), and may have introduced evidence that would be relevant to the matter. Accordingly, I refuse the plaintiffs leave to make the supplementary submissions based on the doctrine.
However, I have set out the submissions of the parties and set out my conclusions as to the applicability of the doctrine below in the event that I am wrong in that decision.
The fact that BAB knew[41] that ART had left the premises is not of itself sufficient to ground the ap lication of the doctrine of fair notice to this case. What is necessary, at the minimum, is circumstances where, prior to the appointment of the Agents in reliance on the failure to meet the Default Notice’s requirements, the Default Notice is returned to BAB in circumstances which show that the document never came to the knowledge of ART, or material evidence shows that BAB knew that its service at the address shown in the Mortgage had not brought it to the notice of ART.
[41]For present purposes I assume BAB knew that ART had left the premises at which service was effected, although there was no factual exploration of the issue in the evidence and it may be that at best it ought to have known had it consulted its records.
In those circumstances, had those facts been established, it would have been possible to contend that it was an abuse of process for BAB to proceed as it did to appoint the Agents. I come to that conclusion only on the assumption, for present purposes, that such a course of conduct could amount to an abuse of process unless steps were taken to give fair notice to the company, without expressly finding that it would. That is, I do not need to find, and I do not, that the doctrine extends from statutory demands, court process and the like to default notices, and the like, given under Mortgages and under s 76 of the TLA.
In relation to the submission that the proper basis of the doctrine was not ‘abuse of process’ but, as McLelland CJ put it, an over-riding ground for refusing relief notwithstanding that there has been effective service, it seems to me it has no application to a case of this kind where the plaintiffs seek to undo the appointment of the Agents by declarations under s 418A of the Corporations Act. That is, it is an attempt to use the doctrine as a sword to attack the validity of the appointment of the Agents and not as a shield to resist that course. But, I do not need to decide this issue as the facts lead to a clear result, in my view.
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