Update on Statutory Demands – why accuracy is critical

Update on Statutory Demands – why accuracy is critical

A recent decision from Victoria is a timely reminder of the importance of accuracy and, noting the seriousness of noncompliance with a Creditor’s Statutory Demand For Payment of Debt (statutory demand), why the courts are strict when it comes to correct service of statutory demands.

Judicial Registrar Matthew found in  Mills Oakley (a partnership) v Asset HQ Australia Pty Ltd [2019] VSC 98 that the statutory presumption of insolvency did not arise as there had not been effective service due to a typographical error in the postal address of the recipient company.

Statutory provisions and presumptions

A winding up application was brought against Asset HQ Australia Pty Ltd (Company) due to alleged noncompliance with a statutory demand said to have been served to the Company’s registered office by post.

Section 459C(2)(a) of the Corporations Act 2001 (Cth) (Corporations Act) provides that a company is presumed insolvent if it has failed to comply with a statutory demand. Taking that one step back, the company must have been served with the statutory demand before there is something to comply with/not comply with.

Section 109X of the Act and s28A of the Acts Interpretation Act 1901 (Cth) (Acts Interpretation Act) states that a document may be served on a company by posting it to the company’s registered office.  Pursuant to section 160(1) of the Evidence Act 2008 (Vic) and section 29 of the Acts Interpretation Act, service of a document sent by prepaid post is deemed effective on the fourth working day after it is posted, unless there is evidence raised to the contrary.

The dispute

In this matter, the Company’s registered office address included ‘1 Pacific Highway’. In a very unfortunate set of circumstances, the individual that typed out the Company’s registered address on the envelope that included the statutory demand to be served typed “Pacific Way” instead of “Pacific Highway”.

The Company disputed service, alleging that the mailroom at the registered office never received the statutory demand.

The creditor’s solicitors submitted that the statutory demand would have been delivered despite this “immaterial” [30] typographical error on the envelope and that it had not been returned to sender. It sought to rely on evidence that Pacific Highway was the only street in the postcode 2060 which contained the word ‘Pacific’ and that Australia Post had informed the solicitors:

“if a pre-paid postal item could not be delivered that the postal worker would endorse the item “return to sender” if there was a return address provided and that a postal return item would be delivered in the ordinary course of post.” [13]

The Company argued that service had not been complied with and therefore the creditor could not rely on the presumption of service in section 29 of the Acts of Interpretation Act because the envelope was not “properly addressed” [48].

Decision

Judicial Registrar Matthews cited a number of authorities as well as the well-known text of Farid Assaf when coming to the decision that the statutory presumption of insolvency did not arise as there had not been effective service due to a typographical error in the postal address.  It was put quite simply when Judicial Registrar stated:

“The plaintiff’s repeated submission that there was no ‘material difference’ or ‘practical difference’ between “Way” and “Highway” in this case was not to the point: “Way” was not the Registered Office and that is the end of it. [55]

Such a simple error had such serious consequences for this creditor.

JHK Legal have an experienced litigation and insolvency team that pride themselves on accuracy and being up to date with the latest decisions. If you need assistance with statutory demands or the recovery of funds generally, please contact our office.

 

Written by Alicia Auden, Legal Practitioner Director

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