Post by Sapphire Capital on Dec 18, 2019 21:20:02 GMT 4
In brief
His Honour Justice Sifris has given a clear and detailed explanation of what will be considered proper service on a company in his recent decision in Re Kornucopia Pty Ltd (No 1) [2019] VSC 756 ('Kornucopia').
The matter was heard in conjunction with the winding up application of two related entities, Efektiv Pty Ltd (Efektiv) and Avant-Garde Ventures Pty Ltd (AGV). The companies argued that they had not been served with either the Statutory Demands and, in some cases, a copy of the Originating Process and therefore the petitioning creditors could not proceed with their applications.
What you need to know
Whilst it is extremely difficult to rebut the presumption of valid service, implementing accurate mail collection systems is helpful in demonstrating that a statutory demand has not been received by a company.
How do you serve a document?
If a company does not receive the demand, it cannot fail to comply with it. If a company is successful in proving non-delivery, then there is no presumption of insolvency and the company cannot be wound up.
The usual way of serving a document on a company is by regular ordinary post to the registered office of the company. The Acts Interpretation Act, the Evidence Act and the Corporations Act all allow for a party who sends a document via ordinary pre-paid post to the registered address of a company to assume that the document will be received by the company's registered address within four business days of posting.
If a party can show that this has been done, then it is up to the receiving company to show on the balance of probabilities that it was not delivered. It is not sufficient for the company to only show lack of receipt. If the document was left in your external mailbox and you didn't collect it until it was too late, then that is a lack of receipt. The document was delivered, you just didn't collect it.
The Decision
In this case, it was undisputed that the documents in respect of each of the companies were sent via ordinary pre-paid post to their registered office (which was the same address for all three companies). What was in dispute was that despite being sent to the registered address, whether the documents were delivered and therefore whether the petitioning creditors could proceed with their applications. Mr Youl, an employee of the companies, gave evidence that he was tasked with collecting and reviewing the mail and it was his usual practice to scan and bring to the attention of the directors any legal or other important documents received in the mail.
In his evidence, Mr Youl stated that he had never seen the Statutory Demands and, if he had seen them, he would have scanned them into the computer system and emailed copies to the directors. However, Mr Youl was not the only person at the company in charge of collecting the mail. If it was delivered at a time when he was not at his desk or in the office, other members of staff could collect the mail and place it on his desk.
Moreover, he admitted that there was a space under the door sufficiently large that smaller items of mail, such as electricity bills and the like could be pushed under the door and that on some occasions mail was delivered and received by the company by those means indicating another alternative method of delivery outside of Mr Youl's control. Mr Youl's evidence suggested that there was an unreliable mail collection system in place.
The defendant companies argued that they were entitled to rely on the decision in Panimo Nominees Pty Ltd v Vasiliki Lobsters Melbourne Pty Ltd [2011] VSC 321 (Vasiliki), a case where it was determined that the receiving company had not received the statutory demand, nor had it been delivered and therefore, the company could not be wound up.
His Honour found that there were a number of differences between the circumstances of those of the defendant companies and that of Vasiliki. Notably, in Vasiliki, the company gave evidence that neither the Statutory Demand nor the Originating Process had been received by its registered office, Guests Accountants. Evidence was given by the Accountants regarding non-receipt and the mail handling system implemented by the accountancy firm and there was absolutely no basis to doubt the veracity of that evidence. The firm manager, a Mr Trebish, gave evidence that the firm had been at the same address for over 20 years and, to the best of his knowledge, despite the firm being the registered office for a number of its clients, such a situation involving undelivered mail had never arisen previously.
As opposed to Vasiliki, in Kornucopia His Honour noted that there was no log of incoming or outgoing mail, that on his evidence Mr Youl admitted that there were previous instances where company employees/officers other than him had received the mail, and the Originating Process had been received whereas the company claimed that the Statutory Demands had not.
Lessons
One of the many takeaways from this case is that it is very difficult, but not impossible, to rebut the presumption of valid service. Make sure the address of your registered office is kept up to date. If the registered office is that of the company, make sure you have proper procedures in place for the receipt of mail so, that if necessary, you can prove that the document was not delivered. Perhaps even make arrangements for the Post Office to redirect mail if they're unable to deliver it for whatever reason.
The consequences of not doing so could be catastrophic.
His Honour Justice Sifris has given a clear and detailed explanation of what will be considered proper service on a company in his recent decision in Re Kornucopia Pty Ltd (No 1) [2019] VSC 756 ('Kornucopia').
The matter was heard in conjunction with the winding up application of two related entities, Efektiv Pty Ltd (Efektiv) and Avant-Garde Ventures Pty Ltd (AGV). The companies argued that they had not been served with either the Statutory Demands and, in some cases, a copy of the Originating Process and therefore the petitioning creditors could not proceed with their applications.
What you need to know
Whilst it is extremely difficult to rebut the presumption of valid service, implementing accurate mail collection systems is helpful in demonstrating that a statutory demand has not been received by a company.
How do you serve a document?
If a company does not receive the demand, it cannot fail to comply with it. If a company is successful in proving non-delivery, then there is no presumption of insolvency and the company cannot be wound up.
The usual way of serving a document on a company is by regular ordinary post to the registered office of the company. The Acts Interpretation Act, the Evidence Act and the Corporations Act all allow for a party who sends a document via ordinary pre-paid post to the registered address of a company to assume that the document will be received by the company's registered address within four business days of posting.
If a party can show that this has been done, then it is up to the receiving company to show on the balance of probabilities that it was not delivered. It is not sufficient for the company to only show lack of receipt. If the document was left in your external mailbox and you didn't collect it until it was too late, then that is a lack of receipt. The document was delivered, you just didn't collect it.
The Decision
In this case, it was undisputed that the documents in respect of each of the companies were sent via ordinary pre-paid post to their registered office (which was the same address for all three companies). What was in dispute was that despite being sent to the registered address, whether the documents were delivered and therefore whether the petitioning creditors could proceed with their applications. Mr Youl, an employee of the companies, gave evidence that he was tasked with collecting and reviewing the mail and it was his usual practice to scan and bring to the attention of the directors any legal or other important documents received in the mail.
In his evidence, Mr Youl stated that he had never seen the Statutory Demands and, if he had seen them, he would have scanned them into the computer system and emailed copies to the directors. However, Mr Youl was not the only person at the company in charge of collecting the mail. If it was delivered at a time when he was not at his desk or in the office, other members of staff could collect the mail and place it on his desk.
Moreover, he admitted that there was a space under the door sufficiently large that smaller items of mail, such as electricity bills and the like could be pushed under the door and that on some occasions mail was delivered and received by the company by those means indicating another alternative method of delivery outside of Mr Youl's control. Mr Youl's evidence suggested that there was an unreliable mail collection system in place.
The defendant companies argued that they were entitled to rely on the decision in Panimo Nominees Pty Ltd v Vasiliki Lobsters Melbourne Pty Ltd [2011] VSC 321 (Vasiliki), a case where it was determined that the receiving company had not received the statutory demand, nor had it been delivered and therefore, the company could not be wound up.
His Honour found that there were a number of differences between the circumstances of those of the defendant companies and that of Vasiliki. Notably, in Vasiliki, the company gave evidence that neither the Statutory Demand nor the Originating Process had been received by its registered office, Guests Accountants. Evidence was given by the Accountants regarding non-receipt and the mail handling system implemented by the accountancy firm and there was absolutely no basis to doubt the veracity of that evidence. The firm manager, a Mr Trebish, gave evidence that the firm had been at the same address for over 20 years and, to the best of his knowledge, despite the firm being the registered office for a number of its clients, such a situation involving undelivered mail had never arisen previously.
As opposed to Vasiliki, in Kornucopia His Honour noted that there was no log of incoming or outgoing mail, that on his evidence Mr Youl admitted that there were previous instances where company employees/officers other than him had received the mail, and the Originating Process had been received whereas the company claimed that the Statutory Demands had not.
Lessons
One of the many takeaways from this case is that it is very difficult, but not impossible, to rebut the presumption of valid service. Make sure the address of your registered office is kept up to date. If the registered office is that of the company, make sure you have proper procedures in place for the receipt of mail so, that if necessary, you can prove that the document was not delivered. Perhaps even make arrangements for the Post Office to redirect mail if they're unable to deliver it for whatever reason.
The consequences of not doing so could be catastrophic.