Victorian Workcover Authority v Kay's Pty Ltd

[2001] VSC 358

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 6678 of 2001

VICTORIAN WORKCOVER AUTHORITY	Plaintiff
V
KAY'S PTY LTD	Defendant

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MASTER:	Senior Master Mahony
WHERE HELD:	Melbourne
DATE OF HEARING:	22 August 2001
DATE OF JUDGMENT:	25 September 2001
CASE MAY BE CITED AS:	Victorian Workcover Authority v Kay's Pty Ltd
MEDIUM NEUTRAL CITATION:	[2001] VSC 358

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Corporations – winding up – failure to comply with statutory demand – non-judgment debt – demand served with photocopy of affidavit – whether photocopy ‘affidavit’ within s 459E (3) – no application to set aside demand – whether presumption of insolvency – effect of valid service of statutory demand on winding up application – effect of s 459S

Corporations Act 2001, ss 459E (3), 459P, 459S

Finis and Others v Fitzwilliam Square Pty Ltd [1988] VR 183, applied

Fingalbay Pty Ltd v Rengay Nominees Pty Ltd (1997) 142 FLR 340, applied

Hamilhall Pty Ltd v A. T. Phillips Pty Ltd (1994) 54 FCR 173; 15 ACSR 247; 12 ACLC 1065, considered

Dolvelle Pty Ltd and Another v Australian Macfarms Pty Ltd (1998) 28 ACSR 177, 16 ACLC 1371 applied

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M. Sanger	Henty Jepson & Kelly
For a Supporting Creditor   (by leave)	Mr J. Nolan	ATO Legal Practice

JUDGMENT

1. This proceeding is a winding up application based on non-compliance with a statutory demand. Albeit commenced under the Corporations Law of Victoria, it is now deemed to be a new proceeding commenced on Sunday, 15 July 2001 under the Corporations Act 2001: see s 1383 of the Act.

1. It may be surmised with confidence from the identity of the plaintiff, the Victorian Workcover Authority (‘Workcover’), that the debts demanded were intended to comprise unpaid workcover premiums due and payable to Workcover by the defendant. 

1. The schedule to the demand, however, is expressed very unhappily indeed.  It asserts that –

“The creditor [i.e., Workcover] is indebted to the company [i.e., the defendant] for goods and services supplied by the company [i.e., the defendant], namely premiums payable for Workcover insurance provided by the company [i.e., the defendant] pursuant to the Accident Compensation Act 1985 (Vic.) for the policy periods 1999/2000 and 2000/01, which premiums became due and payable on 1 July 1999.” 

The sum demanded was $8,384.68.  The errors in the schedule are as palpable as they are deplorable.  They indicate gross negligence in the preparation of the statutory demand.  Even the reference to the Accident Compensation Act was wrong.  If a reference were required, it should have been to the Accident Compensation (Workcover Insurance) Act 1993. It may also be said to be unlikely that a premium for the year ‘2000/01’ would have become due and payable on 1 July 1999.

1. Attached to the statutory demand which is annexed to the originating process is the affidavit, sworn by an officer of the agent of Workcover, to accompany the statutory demand. The previous sentence is, as the italicised definite article was intended to convey, literally true. Although s 459E requires that a statutory demand (not a copy) be served and, if for a non-judgment debt, be accompanied by the affidavit provided for by subs (3), it was obvious from perusal of the Court file that attached to the originating process were an original statutory demand and an original affidavit.  With what (if anything), then, had the defendant been served?  The answer to this question, no more remarkably than some other features of the case, was that the defendant had been served with an original demand – the explanation being that there were a number of duplicate originals signed by the solicitor for Workcover – and a photocopy of the affidavit. The affidavit attached to the originating process was indeed the affidavit which had been sworn to accompany the statutory demand and, therefore, contrary to s 459E (3), it had not ‘accompanied’ the demand at the time of service.

1. The affidavit annexed to the originating process complies with Form 7 of the Rules as in force on the date it was made, 2 May 2001.  It makes clear that the defendant is indebted to Workcover – not the other way around – and that the sum demanded is due and payable and that the deponent believes there is no genuine dispute about the existence or amount of the debt.  Had both the duplicate statutory demand and the affidavit been served on the defendant, the defendant would have been supposed to read them together and it is possible that the affidavit, together with the identity of Workcover, would have sufficed to negative the inference of substantial prejudice to which the multiple errors in the schedule to the demand would give rise.  Accordingly, given that premise, had there been an application for an order setting aside the demand on the ground of the defects in the schedule, it might not have been successful: cf Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 24 ACSR 353, 15 ACLC 1001. As to that point, I am of the view that the documents actually served would necessarily have sufficed to the same extent: that the ‘affidavit’ served was a photocopy is irrelevant, of course, to its provision of information in effect clarifying the content of the schedule to the demand.

1. The failure to serve the affidavit itself at that time, however, would seem to have rendered the demand susceptible to an application for an order setting it aside, quite apart from any reliance which the defendant also might have placed in that behalf on the defects in the schedule to the statutory demand. This is because the requirement for service of an affidavit provided for by s 459E (3) cannot be satisfied by serving a copy of such an affidavit.

1. In Finis and Others v Fitzwilliam Square Pty Ltd [1988] VR 183, Brooking, J of this Court held that a statutory requirement for a valid application for an order nisi to review an order of a Magistrates’ Court – that it be commenced by application to the Court on an affidavit showing a prima facie case of error or mistake – was not satisfied by applying on a facsimile copy of such an affidavit which the applicant ‘has succeeded in filing’ (at 184). His Honour went on (ibid):

“The original affidavit itself must be filed.  An applicant cannot be said to show a prima facie case by affidavit to the Court if he informs the Court that an affidavit has been sworn and is in some other place and produces what purports to be a copy of it.”

Finis was followed by Mandie, J of this Court in Fingalbay Pty Ltd v Rengay Nominees Pty Ltd (1997) 142 FLR 340 (a case to which Mr Sanger of Counsel for Workcover referred me) where the plaintiff had filed with an application under s 459G of the Corporations Law a facsimile copy of an affidavit supporting the application. His Honour said (at 340-1):

“This was not a case where anything was sent by facsimile transmission to the prothonotary but a case where the original signed affidavit had been sworn in South Australia and a facsimile transmission of that affidavit had been received presumably by the solicitor for the applicant but it matters not.

The facsimile transmission or the hard copy which resulted from that facsimile transmission was the document that was filed with the Court…  

It was not suggested that a faxed copy of the affidavit stood any differently to a photocopy.  Both a facsimile and a photocopy are images of the original affidavit.

It was submitted that a faxed copy of the affidavit fell within the meaning of the word ‘affidavit’ in s 459G (3) of the Corporations Law. I am unable to accept that submission. In my view it is plain beyond argument that an affidavit within the meaning of that section and within the meaning in ordinary usage is a document bearing the signature of the deponent and the signature of the person before whom the oath is taken. There are obviously good reasons why that ought to be so but it is sufficient to say that in the natural and ordinary meaning of the word, and I have no reason to think that the section has departed from that, an affidavit is the original and not a copy. I think it is all the more important that a clear and certain interpretation be given to s 459G (3) having regard to the fact that an application can be made ‘only if’ its provisions are complied with.”

His Honour then referred to the decision of Brooking, J in Finis.

1. Mr Sanger made a valiant attempt to distinguish Finis and Fingalbay on the basis that they concerned filing affidavits, not serving them. I have been unable to accept the distinction. In this case, s 459E (3) required the service, not the filing, of an affidavit.  Finis and Fingalbay compel the conclusion that a failure to do what was required in this case, by doing instead the same as was done in those cases instead of compliance with the requirement which applied in them, could not achieve a different and better result. More particularly, if, as is plainly so, ‘affidavit’ in s 459G (3) means affidavit and not a facsimile copy or a photocopy (Fingalbay), consistency of construction means that there could be no basis for reaching any other conclusion with respect to ‘affidavit’ in s 459E (3). Accordingly, as I have mentioned, had the defendant made an application under s 459G for an order setting aside the statutory demand on the ground that, when served, it was not accompanied by the affidavit required by s 459E (3), it seems that the application must have succeeded, just as did that in Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (in liq) (1994) 14 ACSR 565, 12 ACLC 963 where a statutory demand for a non-judgment debt was served unaccompanied by any form of affidavit.

1. But that this would have been the result of an application under s 459G does not conclude the question I must determine. There having been no such application, this proceeding – under s 459P – is based on the defendant’s failure to comply with the statutory demand (however imperfectly expressed) which was served. The defendant has been duly served with copies of the originating process and the supporting affidavit but has failed to appear. In these circumstances, the question is whether Workcover is entitled to a winding up order, notwithstanding the blemishes in the statutory demand and attending its service.

1. My concern about the effect on this proceeding of the failure of Workcover to serve the affidavit required by s 459E (3) when the statutory demand was served was, I consider, given expression in the following passage from the judgment of Branson, J in another case to which Mr Sanger referred me, Hamilhall Pty Ltd v A. T. Phillips Pty Ltd (1994) 54 FCR 173, at [13]; 15 ACSR 247, at 249; 12 ACLC 1065, at 1067:

“Although it is not necessary for me to decide the point I point out that it is not clear that a statutory demand will fail to be a statutory demand within the meaning of the Corporations Law if it is not accompanied by an affidavit that complies with the requirements of s 459E (3). Section 459E (2) deals explicitly, and one might think comprehensively, with the requirements of a statutory demand. In my view the more likely position is that a statutory demand which is not accompanied by an affidavit which complies with s 459E (3) has not been served as required by s 459E. On this approach a statutory demand which when served has not been accompanied by such an affidavit will not support a presumption of insolvency. As its proper service could never be established failure to comply with it could consequently never be established as required by s 459F of the Corporations Law.”

Section 459F (1) provides:

“If, as at the end of the period for compliance with a statutory demand, the statutory demand is still in effect and the company has not complied with it, the company is taken to fail to comply with it at the end of that period.”

The section only applies where a statutory demand is ‘still in effect’.  The proposition advanced by Branson, J in the passage I have set out (which her opening words make clear was obiter) is, in effect, that where there is a failure to accompany the service of a statutory demand for a non-judgment debt with an affidavit satisfying the requirements of s 459E (3), the statutory demand would never be ‘in effect’ for the purposes of s 459F.

1. That was the view to which the facts of this case attracted me and, in the end, to which Mr Sanger, and Mr Nolan of Counsel for a supporting creditor, had to direct their contrary submissions.  (Although Mr Sanger had referred me, in a written submission, to the effect of the passage I have set out from the judgment of Branson, J, it was not specifically referred to during argument by either counsel or by me.)  As the argument unfolded it was Mr Nolan who went first in the attempt to change the view to which, as I have mentioned, I was attracted. 

1. Mr Nolan submitted that whether time begins to run for the purposes of s 459F – or, in other words, whether a statutory demand comes into ‘effect’ for the purposes of that section – depends on the service of the statutory demand (assuming it fulfils the requirements of s 459E (2)), not on the service of the affidavit required to accompany it, nor on the service of both. Deficiencies in the service of the affidavit are to be dealt with by resort to s 459G, as, for example, in Victor Tunevitsch. Where (as in this case) no application has been made under s 459G and the question about the service of the affidavit arises from the plaintiff’s evidence on the hearing of a winding up application under s 459P, the Court is expressly limited by the provisions of s 459S while nevertheless retaining the ultimate discretion it has always had not to make a winding up order even though the grounds for it are made out (the preservation of which is found in the permissive language of s 459A). An example of the proper exercise of that ultimate discretion, Mr Nolan submitted, may be the refusal of a winding up order in a case where, as in Victor Tunevitsch, no form of affidavit at all had accompanied the statutory demand at the time of service, but he urged that the exercise of the discretion might be thought inappropriate where (as in this case) the defendant had received an image of the accompanying affidavit, albeit not that document itself.  As for s 459S, it could not be utilised in this case, first, because, the defendant not appearing, there was no one to seek leave; and, secondly, and more fundamentally, because leave could not be granted in any event to raise an argument about failure to serve the affidavit required to accompany the statutory demand, because the argument could not be ‘material to proving that the company is solvent’: see s 459S (2).

1. Mr Sanger adopted Mr Nolan’s submissions on this point. 

1. I have come to the conclusion that I should accept Mr Nolan’s submissions.  Not only do they appear cogent in themselves, but they enjoy the support of what was said in a similar situation by Santow, J of the Supreme Court of New South Wales in Dolvelle Pty Ltd and Another v Australian Macfarms Pty Ltd (1998) 28 ACSR 177, at 185, 16 ACLC 1371, at 1379-1380. In that case, in which a winding up order was sought, it was urged upon Santow, J by the defendant that the proceeding should be dismissed inter alia because the statutory demand served by the plaintiff had not been accompanied by an affidavit as required by s 459E (3), in that the affidavit had been made two days before the statutory demand was signed. (I note that I had occasion to consider the alleged requirement of contemporaneity of demand and affidavit in Dornay Nominees Pty Ltd v Blackbutt Nominees Pty Ltd (2001) 36 ACSR 749. That was an application under s 459G; and the conclusion I reached in that proceeding does not affect, for my present purposes, the persuasive effect in this case of the approach adopted by Santow, J in Dolvelle.) Santow, J was concerned – as I have been too – with the mandatory language (‘must be accompanied’) in s 459E (3), but did not regard strict compliance with the requirement expressed by that section (as interpreted in that case) ‘as an essential integer of the relief sought’ (ACSR, at 185, ACLC, at 1379). His Honour accepted the plaintiff’s submission that, the proceeding being an application for winding up, s 459S applied so that the defendant could not rely on the alleged failure of the plaintiff to ‘accompany’ the statutory demand with an affidavit as required by s 459E (3) because that could not be ‘material to proving that the company [was] solvent’.

1. Santow, J also based his conclusion on this point in Dolvelle on s 467A, accepting a further submission by the plaintiff that the problem about the affidavit was ‘a defect in a statutory demand’ within s 467A (b) which had not caused the defendant substantial prejudice. Mr Sanger also sought similarly to rely on s 467A in this case. I have to say that, with respect, I have been unable to appreciate how a deficiency in compliance with the requirements of s 459E (3) as to an accompanying affidavit can constitute ‘a defect in [the] statutory demand’. That would seem to involve transferring the deficiency from one document to the other; or treating the affidavit as part of, or synonymous with, the statutory demand. Having regard to the conclusion I have expressed, it is unnecessary further to consider this point.

1. Since it is possible that the verbiage in the schedule to the statutory demand was rendered intelligible – if barely so – to the defendant by the combination of the identity of Workcover and the content of the photocopy of the affidavit (supra, [5]), I consider that I should take the same attitude to it.  No application for the setting aside of the statutory demand having been made, it is now too late for the defects in its schedule to affect the outcome of this proceeding, unless I were to exercise my ultimate discretion adversely to Workcover which, the defendant not having appeared and the copy affidavit clarifying the schedule somewhat having been served, presently I am not prepared to do.

1. Therefore, I shall permit Workcover to proceed with its application.

1. There are ten other winding up proceedings before me commenced by Workcover, each with  precisely the same unhappy history as to the content of the schedule of the statutory demand and non-service of the accompanying affidavit, as this.   Their outcome has also awaited my decision in this proceeding, which was, of them all, the first commenced.  Mr Nolan did not attend to appear in this proceeding but in one of the other ten (Victorian Workcover Authority v Dowlmac Transport Pty Ltd).  In that proceeding he appeared as of right, his client, the Deputy Commissioner of Taxation, duly having filed and served the notice required by Rule 2.9.  Rather than deal with that proceeding as the ‘test’ case, I elected to hear argument in this and gave Mr Nolan leave to appear in that behalf.  In each of the other cases, Mr Sanger also appeared for Workcover and there has been no appearance filed, or attendance, for the defendant.  There has been no attendance by or for any other supporting or opposing creditor  in any of the proceedings.  Workcover may also proceed with them.