There’s More Than One Way to Serve a Statutory Demand by Pieter Oomens & Marianne Elias | March 2007 Area of Expertise | Commercial Disputes The law in relation to service of Creditors’ Statutory Demands has been well settled. Recently, however, the Supreme Court has had to re-visit the subject. Given the consequences of failing to challenge a notice in time, any new statement on this subject should be examined closely.
Background The case of Polstar Pty Ltd v Agnew [2007] NSWSC 114 which was decided in late Febuary 2007 posed some interesting questions concerning service of Creditors’ Statutory Demands under the Corporations Act 2001. Agnew was a salesperson in a real estate agency carried on by Polstar. Agnew alleged that she was entitled to commissions under her employment contract. There was a dispute as to the amount owed to Agnew in commissions, Polstar believing that Agnew was entitled to substantially less than was demanded. Agnew’s solicitor sent a statutory demand under s459E of the Corporations Act 2001 to the a post office box address, which, while not the post office box address of the Polstar, was one to which Polstar’s sole director had access. The envelope was posted on 4 October 2006. It was collected from the post office box by the director on 19 October 2006.
The Material Issues Polstar argued that the statutory demand had not been properly served. There was an alternative ground that in the circumstances of this case, if the notice were found to have been served, it should be set aside under s459J(1)(b). Agnew claimed that the demand was served, and that Polstar’s application was invalid, as it was outside the 21 day time limit imposed by s459G. The presiding judge, Barrett J, set out three issues stemming from the arguments raised by the parties: (a)
whether the statutory demand was served on Polstar;
(b)
if the demand had been served, whether Polstar’s application for an order setting it aside was made within 21 days after the demand was deemed to be served; and
(c)
if the application had been made within 21 days, whether there was “some other reason why the demand should be set aside” within s459J(1)(b).
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The Judgment WAS THE STATUTORY DEMAND SERVED? Berrett J examined requirements for service of a company, and the definitions of “office” in relation to s109X of the Corporations Act 2001 and s28A of the Acts Interpretation Act 1901. According to Barrett J, the definition of “office” in both Acts is centered around a physical premises which can be identified by prominent display as the company’s registered office, at a location capable of being “open to the public” under s145(1) of the Corporations Act 2001. In this sense, a post office box can not be a company’s office. Nevertheless, circumstances may arise where sending documents to a post office box can amount to service, namely where there is a significant reason to believe that the box was, or was held out to be, a means of access to the company’s registered, head or principal office. One such case was Macrae v St Margarets Hospital1. In that case the hospital’s letterhead specifically requested for all correspondence to be forwarded to a post office box. While there was held to be no service in accordance with s109X or 28A, Barrett J drew on Italiano v Carbone2 to demonstrate that in this situation receiving and acting upon the document is the crucial factor. Because the demand actually reached the sole director of Polstar and she dealt with it as a statutory demand duly served, it was held that “informal service” had occurred. This was sufficient to activate the obligation of Polstar to act in conformity with Section 459G to challenge the demand.
WHEN WAS THE STATUTORY DEMAND SERVED? The crucial factor in this case was the receipt, acceptance and dealing with the document, rather than the posting of it. Service of the demand was held to have taken place on 19 October 2006, the date it actually came into Polstar’s possession. The obligatory 21 day period for challenge was to be calculated from that date.
SOME OTHER REASON WHY THE DEMAND SHOULD BE SET ASIDE Barrett J pointed to the fact that it was known to Agnew that a genuine dispute as to the amount of money owed to her existed at the time that the demand was made. Poslstar made it clear at all times that disagreement existed with regard to the way the commissions were paid. He highlighted that the statutory intention of s459E(3)(a) of the Corporations Act 2001, reflected in the rules of the court, is that a statutory demand not be served where there is such dispute. Citing Santow J in First State Computing Pty Ltd v Kyling3, he said that disputes as to the amount of a debt should be resolved through normal channels such as litigation, rather than through winding up proceedings. Where the statutory demand almost exclusively comprises matters that were in genuine dispute from the outset, an order under s 459J(1)(b) setting aside the demand may be required to prevent abuse of process under Pt 5.4 of the act. On this basis, Barrett J ordered that the statutory demand be set aside.
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Implications Current authority already suggests that a post office box will generally not be considered to fall within the definition of a company’s “office” under the Corporations Act 2001 and thus sending a document via post to a post office box address will, as a rule, not be considered service under s109X of the Act. However Barrett J suggests that there is a possibility that service can be effected by sending a document to a post office box where a “connection is shown between the post office box and the plaintiff such as might warrant a finding that the box was (or was held out to be) a means of access to that company’s registered office, head office or principal office4. The decision, in addition to reiterating the importance of obtaining the correct and most appropriate address for the service of documents, opens up an avenue for service to a post office box where sufficient information exists to link that box with the company’s principal place of business.
Endnotes 1 (1999) 19 NSWCCR 1 2 [2005] NSWCA 177 3 (1995) 13 ACLC 939 at 951 4 AT 22
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