By Jen Singh, Solicitor – [SOURCE]
Key Takeaways
- There are no excuses. If you are served with a Creditor’s Statutory Demand and wish to have it set-aside, you must file and serve an application within 21 days.
- If you are served with a Creditor’s Statutory Demand, seek a lawyer as soon as possible. Time is of the essence. You need a lawyer with the agility and skill to act quickly and smartly in commencing proceedings to have Creditor’s Statutory Demand set aside.
- Do not attempt to rely on advice from Google, or even the Registry staff as in this case, as such advice may be incorrect. Receiving incorrect advice is not grounds for an extension of time.
Overview
In a recent matter before the Federal Court, Derrington J dismissed an application to set aside a creditor’s statutory demand (Demand) for payment of debt.
There were three issues to be considered by the Court in this matter. They were as follows:
- Whether the Applicant failed to make and serve the application to set aside the Demand within 21 days after it was brought to the attention of its director, Mr Alex Brown (who was granted leave to represent the Applicant in these proceedings);
- Whether there was a genuine dispute about the debt identified in the Demand, pursuant to section 459G of the Corporations Act 2001 (Cth) (Act); and
- Whether there was a genuine offsetting claim pursuant to section 459H(1)(b) of the Act.
Was the Application Served Within 21 Days?
On 26 July 2022, the Respondent, by way of his solicitors, served a Demand on the applicant seeking payment of unpaid costs, pursuant to an order made by Barlow QC DCJ. The quantum of the Demand was $13,700.05 (GST inclusive).
On 17 August 2022, the Respondent filed and served an application to wind up the Applicant company.
On 19 August 2022, the Applicant filed the application subject of these proceedings, seeking that the Demand be set aside pursuant to section 459G of the Act on the grounds that there is a genuine dispute regarding the debt identified in the demand, and a genuine offsetting claim between the parties.
The Respondent however asserted that the Applicant was required to make the Application no later than 16 August 2022, pursuant to the prescribed 21-day time limitation (s459G(2) of the Act).
The Respondent further asserted that as the Applicant failed to make the Application by 16 August 2922, the Court did not have jurisdiction to determine the application.
The Applicant raised two main points to support its case:
1. The Respondent must be held to what the Applicant described as “[the Respondent’s] chosen method of service” which the Applicant claims was service “Pursuant to section 109X of the Corporations Act 2001 (Cth)”.
It was the Applicant’s case that as the covering letter from the Respondent’s solicitor enclosing the Demand did not state that there is “service by email”, the Applicant was not given “fair notice” that service could occur by any method other than as outlined in s109X(1)(a) of the Act.
However, the covering letter from the Respondent’s solicitors stated the following:
“By email and express post: sandys.swim.school@gmail.com… pursuant to section 109X of the Corporations Act …. we enclose by way of service …”
As such, the Court found that the wording of the letter prepared by the Respondent’s solicitor was acceptable, and not ‘misleading’, as claimed by the Applicant.
Further, the Court considered the acceptability of service by email for a Creditor’s Statutory Demand. When doing so, the Court paid particular regard to the matter of Bioaction Pty Ltd v Ogborne [2022] FCA 436 (Bioaction), in which Cheeseman J found:
“38 Provisions which provide for a mode of service of documents on natural persons (s28A of the Acts Interpretation Act1901 (Cth)) and companies (s28A of the Acts Interpretation Act and s109X of the Corporations Act) are facultative not mandatory …
39 Other means of service may be adopted, and if those other means result in the documents arriving at the nominated address within the statutory period then valid service will have been effected. What is critical is the result which is achieved by the plaintiff’s efforts, not the manner by which that result has been achieved (citations omitted) …”
The Court also considered the effect of the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth) (Reforms) with respect to service of documents by way of electronic communications. Section 600G of the Reforms relevantly provides that any document that is required or permitted to be given to a person may be given by way of electronic communication. Cheeseman J, in Bioaction, confirmed that section 600G applies to any document that is required or permitted to be given to a person under Chapter 5 of the Act, which therefore includes a Creditor’s Statutory Demand.
Section 105A of the Reforms provides clarity regarding when an electronic communication is sent and received.
Notably, the Reforms also removed the requirement for the consent of the recipient to be served documents by way of electronic communication. As such, the Court was satisfied that the Company had been served by way of email on 26 July 2022. As such, any application to set aside the Demand was required to be filed by 16 August 2022.
Communications Between Applicant and the Registry
The Applicant had been in communication with the Registry, and had received emails from the Registry on 17 and 18 August 2022 which said “the last date for filing your application is 22 August 2022”. The Applicant sought to rely on these emails and submitted that it should not be penalised in circumstances where it followed the advice of the Registry staff.
The Court made the following comment with respect to the emails sent by Registry staff:
“The difficulty with this submission is that, by the time the Applicant lodged the application and supporting affidavit at 9:58:48pm on 18 August 2022, the time for compliance with s 459G had already passed. Any advice given by Registry staff, even assuming it to have had the character for which the Applicant contended (which has not been established) was by this time irrelevant.”
The Applicant also sought to rely on Arcade Bade Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3, in which, when considering section 459J(1)(b) of the Act, the Court of Appealheld that s459J(1)(b) contemplates “conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice”.
This differs from the present case in that:
- In the present case, the Applicant did not rely on s459J(1)(b) but rather solely on s459G; and
- There was no conduct from the Registry staff which could be described as unconscionable, an abuse of process or which gives rise to substantial injustice.
Decision
The Court held as follows:
- The Applicant failed to establish that the application to set aside the Demand was filed and served within the statutory period of 21 days required by section 459G of the Act;
- Consequently, the Court has no jurisdiction to entertain the application and it must be dismissed; and
- Accordingly, the Court need not consider the grounds relied on in seeking to set aside the demand, being whether there exists a genuine dispute or genuine offsetting claim.
