Re Caason Investments Pty Ltd
[2021] VSC 487
•11 August 2021 (ex tempore, revised)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 01639
IN THE MATTER of CAASON INVESTMENTS PTY LTD (ACN 089 590 858)
| CAASON INVESTMENTS PTY LTD (ACN 089 590 858) | Plaintiff |
| v | |
| INTERNATIONAL LITIGATION PARTNERS NO 3 LTD (NO 1662762) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 August 2021 |
DATE OF JUDGMENT: | 11 August 2021 (ex tempore, revised) |
CASE MAY BE CITED AS: | Re Caason Investments Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2021] VSC 487 |
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CORPORATIONS – Application to set aside a statutory demand – Service of the statutory demand – Whether service on legal counsel for the company by email effective – Legal counsel involved in the legal proceeding giving rise to the debt specified in the statutory demand – “Effective informal service rule” – Statutory demand served on the company by email – Application to set aside statutory demand not made in time – ss 109X and 459G of the Corporations Act 2001 (Cth) – reg 5.4.01AAA(2) of the Corporations Regulations 2001 (Cth) – Chen v Kornucopia Pty Ltd (No 1) (2019) 59 VR 305.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | R Flory (solicitor) | Richard Flory – lawyer |
| For the Defendant | C T Moller | Cornwalls (NSW) |
HIS HONOUR:
By originating process filed 18 May 2021, the plaintiff, Caason Investments Pty Ltd (‘Caason’) seeks to set aside a statutory demand dated 22 April 2021 (‘Demand’) served on it by the defendant, International Litigation Partners No 3 Ltd (‘ILP’) pursuant to s 459G of the Corporations Act 2001 (Cth) (‘the Act’).
The parties to this proceeding have a long history with each other, including service by ILP of a number of statutory demands on Caason, but it is not necessary to detail that history here.
The amount claimed in the Demand is for $21,700 and is described in the schedule as being for:
Orders made by the Federal Court of Australia on 22 May 2019 in proceedings [sic] NSD 1558 of 2012 between Caason Investments Pty Ltd v Simon Xioa Fan Cao & Ors.
This proceeding had its first return before me on 2 June 2021, when orders were made for the filing of evidence and submissions. The application was listed for hearing on 25 August 2021.
On 26 July 2021, ILP requested the proceeding be listed for directions after Caason failed to comply with the orders made on 2 June 2021. The proceeding was subsequently listed for directions on 3 August 2021.
In advance of that hearing, the solicitors for ILP provided the Court with a tender bundle of documents. Within that bundle was a letter of 20 May 2021, sent from solicitors for ILP to Richard Flory, the solicitor for Caason in this proceeding and Group Legal Counsel for Caason. That letter raised, amongst other things, an issue as to whether the application of Caason had been filed within time, being the statutory period prescribed in reg 5.4.01AAA(2) of the Corporations Regulations 2001 (Cth) which applied at that time, being 21 days from the service of the Demand. The letter of 20 May 2021 alleged that service of the Demand on Caason occurred via email on 23 April 2021, as opposed to the date of 27 April 2021 specified by Caason in its originating process and affidavit in support of Craig Astill, the sole director of Caason, sworn 18 May 2021.
The controversy as to the date of service of the Demand was not raised at the first return of the proceeding. On 18 May 2021, the Commercial Court Registry wrote to Caason notifying the first return date of the originating process and, as with all matters involving applications to set aside a statutory demand, requested the parties to raise any issues as to service which affects whether or not the application complies with s 459G of the Act in advance of the first return of the proceeding.
The purpose of this communication is to identify matters in which the jurisdiction of the Court may be the subject of a preliminary argument and susceptible of being dealt with on the first return. The parties did not bring to the Court’s attention the issue which now arises in respect of service at the hearing on 2 June 2021 and the Court only became aware of the issue when reviewing the tender bundle provided by ILP prior to the hearing and the affidavit of Mr Sutherland sworn after the first hearing on 16 June 2021.
As the Court was made aware of a potential issue going to its jurisdiction in this proceeding, the matter of service was raised with the parties by me at the hearing on 3 August 2021. It was determined that the question of service of the Demand should be heard as a preliminary issue on 11 August 2021.
At the hearing on 3 August 2021, Mr Flory also raised an issue as to a potential defect in the statutory demand. Caason alleges that the debt claimed in the Demand is a joint debt but only one creditor, ILP, is named in the Demand. Due to the nature of that issue, it was also decided that it should be determined as a preliminary question alongside the issue as to service of the demand. I note, however, that the Court would only have jurisdiction to decide that issue if an application has been commenced and is in compliance with s 459G of the Act.
The orders I made in the proceeding on 3 August 2021 contemplated that I would determine both the question of the date of service of the statutory demand and the issue agitated by Mr Flory. On reflection, I consider it is appropriate to consider first the issue of service as, if that is decided adversely to Caason, the Court is without jurisdiction to consider the second issue as to whether the statutory demand is defective by reason of only having being issued by ILP and not by joint creditors.
Evidence
For the purposes of this preliminary issue, ILP relies on the affidavit of Andrew Sutherland, solicitor for ILP, sworn 16 June 2021.
Caason relies on the affidavit of Craig Astill, director of Caason, sworn 18 May 2021. Caason has filed additional affidavits of Mr Astill which do not go to the issue of service.
Service
Evidence of service
ILP submits that the Demand was served on Caason on 23 April 2021 via email and any application to set aside the Demand was required to have been made by 14 May 2021. It contends that this proceeding was therefore filed out of time and the Court has no jurisdiction to hear the application.
Caason submits that the Demand was served on it by post on 27 April 2021 and it therefore had until 18 May 2021 to make application to set aside the Demand. It submits that the proceeding has therefore been filed within time.
Mr Sutherland has exhibited email correspondence passing between himself and Mr Flory, solicitor for Caason. On 23 April 2021, Mr Sutherland sent an email to Mr Flory as follows:
Dear Richard
We note that Murphy J on 22 May 2019 ordered, amongst other things, that Caason “pay the ILP entities costs of this application on a party/party basis”. Those costs were assessed by the Court (without objection from Caason) at $21,700. The certificate of taxation is annexure B to Mr Lindholm’s affidavit (attached).
We enclose by way of service Creditors Statutory Demand for Payment of Debt and affidavit accompanying it.
The original was posted to Caason’s registered office today.
Kindly acknowledge receipt.[1]
[1]Exhibit APS-16 to the affidavit of Andrew Sutherland sworn 16 June 2021.
The email from Mr Sutherland was sent to [email protected]. Mr Flory replied to that email, using the [email protected] email address, on 4 May 2021. That email relevantly stated:
I will seek instructions in this matter as to whether I act for the Company or not but I suggest in the meantime you should rely for the date for service on the date after you posted it to the Company’s registered address.
I also note that Caason has an offsetting claim against your clients which was previously tendered in the Arasor matter and amounts to $690,608.26. I enclose a sentence from the Affidavit of Craig Astill field [sic] in the Federal Court proceedings and marked in yellow.
It’s [sic] claim against ILP under the Variation Letter variation agreement in the sum of $690,608.26 is still to be determined and it continues to incur costs to enforce that agreement.[2]
…
[2]Ibid.
Although Mr Flory responded using his Caason email address, he signs off the email as Richard Flory, RJR Partners, Level 14, 390 St Kilda Road, Melbourne 3000, the physical location of the registered office of Caason.
Mr Sutherland responded to Mr Flory on 6 May 2021, stating:
Once you let me know whether you are acting or not, I will respond to your comments.[3]
[3]Ibid.
Later that same day Mr Flory responded to Mr Sutherland, again using the email address of [email protected]:
Andrew I have instructions to act now, please respond to my queries and please confirm when you sent the letter to the Company so that the time starts from the day after it was posted.[4]
[4]Ibid.
Mr Flory’s email signature in his email of 6 May 2021 identifies Mr Flory as “Group Legal Counsel”, provides his direct telephone number, the main phone and fax numbers for Caason, and includes a logo for Caason.
Earlier, on 11 March 2020, Mr Sutherland emailed Mr Flory at his Caason email address attaching by way of service the certificate of costs owed pursuant to the order of Murphy J of 22 May 2019.[5] This certificate forms the basis of the Demand the subject of this proceeding. There appears to have been no response to that email and on 22 June 2020, Kylie May, apparently an office manager at Mr Sutherland’s office, emailed both Mr Flory and Mr Sutherland following up the non-payment of the certificate of costs. Mr Moller, counsel for ILP, drew my attention to the report of the decision of Murphy J in Caason Investments Pty Ltd v Cao (No 3)[6], which gave rise to the debt claimed in the Demand, more particularly, to the appearance of Mr Flory who is described in the appearances section of the judgment as being “of Caason Investments Pty Ltd”. In another decision of Murphy J, Caason Investments Pty Ltd v Cao (No 4)[7], which also concerned costs issues, Mr Flory is described in the appearances section as “Mr R Flory of Caason Investments Pty Ltd” and appeared on behalf of Caason without counsel.
[5]Exhibit APS-15 to the affidavit of Andrew Sutherland sworn 16 June 2021.
[6][2020] FCA 91.
[7][2020] FCA 1246.
As previously noted, paragraph 1 of the originating process and paragraph 3 of Mr Astill’s affidavit sworn 18 May 2021, contends that the date of service of the Demand was 27 April 2021. This is the only evidence filed by Caason on the issue of service however, in his written submissions filed 9 August 2021, Mr Flory states at paragraph 10:
On 23 April 2021 I received by email a copy of the Statutory Demand dated on or about the same date.
Mr Flory confirmed his statement in his submissions at the hearing on 11 August 2021.
Submissions on service
Mr Moller submits that Caason was served with the Demand on 23 April 2021 and as such this proceeding was commenced outside the 21 day statutory period prescribed at the time.
Mr Moller submits that the Demand was sent to Mr Flory by email to an address, [email protected], which Mr Sutherland had previously used to correspond with Mr Flory, including regarding the costs orders made by the Federal Court of Australia which forms the basis of the debt claimed in the Demand. Further, Mr Flory responded to that email of 23 April 2021 sent by Mr Sutherland using the same Caason email address.
Mr Moller submitted that Mr Flory had authority to act on behalf of Caason regarding the costs orders made by Murphy J of the Federal Court of Australia as he had appeared in those proceedings. Further, Mr Sutherland emailed Mr Flory the certificate of costs to Mr Flory’s Caason email address, the same address that the Demand was sent to on 23 April 2021. Mr Moller submits that the terms of Mr Flory’s instructions have no bearing on the issue of service as Mr Flory had actual authority to act for Caason and was also held out as having that authority by Caason by reference to his email signature.
Mr Moller further submitted that the lack of affidavit evidence filed by Caason, by Mr Flory or Mr Astill, as to the receipt of the Demand or emails means that the Court may draw the necessary inferences against Caason.
Mr Moller made reference to the decision of Chen v Kornucopia Pty Ltd (No 1)[8] where Sifris J, as his Honour then was, held that the “effective informal service rule” applies in relation to the service of statutory demands and other documents on a corporate entity. In that case, the “informal service” was by email. His Honour identified two distinct lines of authority on what is necessary when it comes to service by email:
(a) the Woodgate v Garard Pty Ltd[9] line of authority, which holds that there will be good service when the document came to the actual attention of a responsible officer of the company; and
(b) the Newsnet Pty Ltd v Patching[10] line of authority, where White J considered that service would be effective when the email is received, that is, not when the document is brought to the attention of a responsible officer.[11]
[8](2019) 59 VR 305 (‘Kornucopia’).
[9](2010) 239 FLR 339 (‘Woodgate’).
[10](2011) 81 NSWLR 104 (‘Newsnet’).
[11]Kornucopia (n 8) 319-320.
Justice Sifris further observed that, in SGR Pastoral Pty Ltd v GJ, LE & JN Christensen[12], Bowskill J had reviewed the varying lines of authority, and preferred the latter, being the view of White J. Justice Bowskill stated:
In the case of service by email, in my view, what must be shown is that the electronic copy of the application and supporting affidavit was received, in a complete and legible form, at the address for service, within the prescribed time. That is, that the email was sent to an email address that [belongs] to the nominated agent for service ... that the email attaching the documents to be served actually arrived at the email address; and that the email and attached documents were capable of being opened and read (even if they were not opened and read until later).[13]
[12][2019] QSC 229 (‘SGR Pastoral’).
[13]Ibid [37].
Mr Flory has not filed an affidavit in the proceeding but he states in paragraph 10 of his written submissions that:
On 23 April 2021 [he] received by email a copy of the Statutory Demand dated on or about the same date. The 23 April is a Friday. [He has] not been in the premises of Caason for all of 2020 and most of 2021 and although [he has] an email address as Caasons [sic] General Counsel, [he is] not an officer of the company.
In his written submissions, Mr Flory notes that in his email on 4 May 2021 he stated that he would seek instructions on whether he acts for Caason or not and says that:
The reason for bringing this to the attention of the Defendants was that [he] had not acted for the Plaintiff in other matters, but Ernst & Young Law acted for the Plaintiff. It had also used its long time Solicitors Cornwalls Melbourne office and K&L Gates from time to time. Due to the COVID-19 issues in Victoria with several lockdowns [Mr Flory] provided a warning in effect to the Defendants not to rely on this “informal service” because the Defendant knew that other Solicitors had acted in the most recent cases with the Defendant and [he] did not want to mislead the Defendant that [Mr Flory] was automatically acting. The Defendants had been dealing with E&Y Law for a considerable period of time on behalf of the Plaintiff.
Consideration of the service issue
In my view, Caason was served with the Demand on 23 April 2021 when Mr Sutherland sent a copy of the Demand and the accompanying affidavit by email to Caason’s General Counsel, Mr Flory. Caason has not gone into evidence as to the circumstances surrounding the receipt of that email but it seems clear by reference to Mr Flory’s submissions, both oral and written, that he received the email on that day.
It is not to the point that he may not have reviewed it on that occasion,[14] although the evidence is silent on that point. Nor is it to the point that he sought to reserve his position as to whether he was acting on behalf of Caason in relation to the reaction to the Demand in his email of 4 May 2021 or that he has not accessed the premises of Caason for the period he has described. Mr Flory’s subjective view about whether he has been served or not is also not to the point. Service involves a finding of fact combined with an application of the relevant legal principles.
[14]See Kornucopia (n 8) 332.
As Sifris J observed in Kornucopia, while s 109X of the Act provides for service on a company, it is not an exhaustive code of the ways in which a corporate entity may be served. Justice Sifris observed[15] the ”effective informal service rule” has been applied many times to the service of statutory demands and other documents on a corporate entity in ways that are not provided for in s 109X.[16] As Mr Moller observed, in Kornucopia, Sifris J identified two distinct lines of authorities on what precisely is necessary for the serving entity to establish when it comes to service by email. The first being the Woodgate[17] line referred to above and the other discussed by White J in Newsnet.[18] Justice Sifris preferred the approach of Bowskill J in SGR Pastoral[19] which in turn followed White J in Newsnet.[20] The relevant passage of Bowskill J’s judgment has been detailed earlier.[21]
[15]Ibid 319.
[16]Ibid referring to Woodgate (n 9) 476[42].
[17](n 9).
[18](n 10).
[19](n 12).
[20]Kornucopia (n 8) 333.
[21]See paragraph 30 above.
There is no doubt that Mr Flory was an appropriate person to give notice of the Demand to when regard is had to his position as Group General Counsel at Caason, this being borne out with his involvement in the hearings in the Federal Court of Australia before Murphy J and receipt of the resulting certificate of costs by way of service to his Caason email address. I note that Mr Astill’s affidavit in support of the application was sworn before Mr Flory on 18 May 2021, who identified his physical address in the jurat as Level 14, 390 St Kilda Road Melbourne, in the State of Victoria, the location of the registered office of Caason.
As I have said, neither he nor Mr Astill has described what occurred after the receipt of Mr Sutherland’s email annexing the Demand on 23 April 2021 despite the opportunity to do so but I do think that anything turns on this as I regard service as having been effected on 23 April 2021.
This was not a circumstance where Mr Flory was solicitor at an external law firm who had no previous involvement on Caason’s behalf in the costs issue. He is described in his email signature as an internal senior employee of Caason as its legal counsel and had been closely involved in the matter prior to service of the demand.
As I have found that the Demand was served on Caason on 23 April 2021, in order for there to be a valid application to set that demand aside, it was required to be made by 14 May 2021. The originating process in this proceeding was filed 18 May 2021 and as such does not comply with the requirements of s 459G of the Act and the Court is without jurisdiction to consider the application.
Joint debt
As I have concluded that the Court does not have jurisdiction to hear the application, the question as to the debt being a joint debt and only one creditor named in the Demand cannot be considered.
Orders
I will order that the originating process filed 18 May 2021 be dismissed.
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