By Jeffrey Brown a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.
The slightest slip of the pen can lead to disastrous consequences when you are dealing with creditors statutory demands, as a recent Supreme Court case demonstrates.
VO Group Australia Pty Limited (“VO”) was making an application to set aside a statutory demand that had been issued on it by Watpac Construction Pty Limited (“Watpac”). Watpac in turn alleged that the application was made outside the 21 day time limit for making such an application and was invalid.
VO’s arguments were twofold. Firstly, they alleged that Watpac could not prove that the demand was effectively served. It was common ground between the parties that the demand was sent by post and was properly addressed, except for one detail. Watpac had, in their evidence about service, deposed that the address written on the envelope in which the demand was placed included reference to “North Sydney NSW 2000”. The correct postcode for North Sydney is 2060.
The Court considered whether Watpac could rely on the assumption, set out in the Corporations Act that articles sent by post can be deemed to have been served. This was important because, if Watpac could rely on that presumption, VO would have made their application to set aside the creditor statutory demand out of time.
The leading cases on this issue had made it clear that it is an essential requirement for anyone seeking to prove deemed service that the postal article is “properly addressed”. The inclusion of an incorrect postcode was enough for the Court to conclude that the creditors statutory demand was not properly addressed, and Watpac could not rely on deemed service.
Watpac then tried to rely upon an electronic transmission of the demand, sent to an employee of VO. The employee was the designated representative for VO in its works contract with Watpac, but he was not a director of VO.
The Court accepted that the employee could, for the purposes of the works contract, represent VO and accept service of documents and information on behalf of VO. But the Court could not accept that this alone meant he would be authorised to accept creditors statutory demands on behalf of VO. Given the very serious consequences of non-compliance with a creditors statutory demand within the 21 day period specified in the Corporations Act, the court considered that it could not imply that the employee held an authority to accept service.
The Court held that VO’s application to set aside the creditors statutory demand had been made in time, and that Watpac should pay their costs. As His Honour commented in his judgment, “These proceedings are an unfortunate example of the technicalities which sometimes arise in proceedings to set aside a creditor’s statutory demand”.
See a copy of the judgment here: https://www.caselaw.nsw.gov.au/decision/189702d9776d5212b40aa77e
If you would like more information or advice in relation to Insolvency, Restructuring or Debt Recovery law, please contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au.
