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Queensland Judgments
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  • Unreported Judgment

Sunstate Land Pty Ltd v Hiview Design & Construction Pty Ltd

 

[2020] QSC 181

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Sunstate Land Pty Ltd v Hiview Design & Construction Pty Ltd [2020] QSC 181

PARTIES:

SUNSTATE LAND PTY LTD (ACN 149 257 518)

(applicant)

v

HIVIEW DESIGN & CONSTRUCTION PY LTD

(ACN 142 198 650)

(respondent)

FILE NO/S:

BS No 4275 of 2020

DIVISION:

Trial Division

PROCEEDING:

Application filed 21 April 2020

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

Friday 15 May 2020 (ex tempore)

DELIVERED AT:

Brisbane

HEARING DATE:

5 May and 15 May 2020

JUDGE:

Callaghan J

ORDER:

  1. Pursuant to s 459J(1)(a) and s 459J(1)(b) of the Corporations Act 2001 (Cth), the statutory demand dated 20 March 2020, issued by the respondent to the applicant, be set aside.
  2. The respondent pay the applicant’s costs.

CATCHWORDS:

CORPORATIONS – WINDING UP – WINDING UP IN INSOLVENCY – STATUTORY DEMAND – PERIOD FOR SERVICE OF DEMAND - APPLICATION TO SET ASIDE DEMAND – FOR DEFECT OR SOME OTHER REASON – where statutory demand for debt executed before passing of Coronavirus Economic Response Package Omnibus Act 2020 (Cth) – where service of statutory demand effected after passing of Coronavirus Economic Response Package Omnibus Act 2020 (Cth) – where statutory demand in a form prescribing time periods for compliance by reference to superseded provisions of the Corporations Act 2001 (Cth) and the Corporations Regulations 2001 (Cth) – whether statutory demand defective – whether some other reason why demand should be set aside

Acts Interpretation Act 1901 (Cth), s 7, s 28A, s 29

Coronavirus Economic Response Package Omnibus Act 2020 (Cth), s 2, Schedule 8, Schedule 12, Part 2

Corporations Act 2001 (Cth) s 9, s 109X, s 459E, s 459F, s  459G, s 459J, s 459Q, s 1669

Corporations Regulations 2001 (Cth), Form 509H

COUNSEL:

G Radcliff for the applicant

R Clutterbuck for the respondent

SOLICITORS:

Legacy Legal for the applicant

Turnbull Mylne for the respondent

HIS HONOUR:   On the 20th of March 2020, the respondent, Hiview Design & Construction Pty Ltd, executed a “creditor’s statutory demand for payment of debt” pursuant to paragraph 459E(2)(e) of the Corporations Act 2001.  It demanded that the applicant pay $275,840.78, being the total of two amounts of debts described in a schedule attached to the demand.  Payment was required within the then statutorily prescribed period of:

“Twenty-one days after service … of (the) demand.”

It also informed the respondent that, in accordance with section 459G of the Corporations Act 2001, as it then read, it could apply for an order setting the demand aside, and that:

“Such application must be made within 21 days after the demand is served”

The demand was issued in a form 509H, as it was then prescribed, and contained a summary as to the effect that these legislative provisions may have, that is:

“A failure to respond to a statutory demand can have very serious consequences for a company.  In particular, it may result in the company being placed in liquidation and control of the company passing to the liquidator of the company.” 

The respondent has today invoked, for the purposes of addressing the issue of service of this demand, sections 7 and 29 of the Commonwealth Acts Interpretation Act.  Accepting the application of those provisions and, in particular section 29, there are still competing contentions as to when service was effected.  The respondent previously placed before the Court evidence that, when read in conjunction with these provisions, may allow for the conclusion to be drawn that the demand was served by way of post on either:

“Twenty-five to twenty-six March.”

The respondent originally submitted and, in the recently received submissions, reasserted that:

“The Court should take judicial notice that the “point of post” is located in very close proximity to the registered address of the applicant, and, therefore, the statutory demand and accompanying affidavit is more likely to have been delivered on 23 or 24 March 2020.” 

If I was going to act on that submission, upon which the respondent’s argument does seem to depend, then I would be compelled, also, to take judicial notice of other things.  These might have involved an assessment of the legitimacy of the claim that a letter committed to Australia Post’s regular domestic services has an estimated delivery time of three to four business days. 

It will, however, be sufficient for current purposes to take judicial notice of the fact that at and around 20 March 2020, there were very few working organisations in Australia that were not affected in some way by the COVID virus.  Formerly reasonable assumptions about the ordinary course of any business simply cannot be made as to events which were occurring at that time. 

Further, the application of section 29 of the Acts Interpretation Act is expressly qualified by the words:

“Unless the contrary is proved.”

The applicant has placed before the Court an affidavit sworn by one Michael Gibbons. A director of the accountancy firm which serves as the registered address of the applicant.  Mr Gibbons has sworn to facts which compel an inference that the demand was not received until the morning of 1 April 2020.  His evidence was supported by other documentation, and he was not required for cross-examination. 

The Court should, in those circumstances, proceed on the basis that the demand was received by the applicant’s agent on that date and that, therefore, service pursuant to section 109X of the Corporations Act 2001 was effected on 1 April 2020. 

The applicant now seeks, pursuant to section 459G of the Corporations Act 2001, to have the demand set aside.  This section is part of a legislative scheme which has been authoritatively considered.  Strict application of the relevant provisions has been required – see David Grant & Co Pty Ltd v Westpac Banking Corp [1995] 184 CLR 265. 

However, recent events and new legislation have made a drastic change to long-held expectations.  Given the conclusion that I have reached about the effect of this legislation, it is unnecessary to consider all of the arguments that were made in support of the application.  The issues in this case must be resolved by reference to the Coronavirus Economic Response Package Omnibus Act 2020 and section 1669 of the Corporations Act, as it now reads.  There is, as allowed in the comparison on page 110 of the explanatory memorandum that accompanied this legislation, no equivalence between the law as it was and as it now is. 

I have provided to the parties copies of the legislative materials to which I have had regard for the purposes of my decision and will now have marked “A” for identification. A copy of these provisions was provided to the parties.

MFI #A MARKED FOR IDENTIFICATION

HIS HONOUR:   They include:

  1. Sections 9, 109X, 459E, 459F, 459G, 459J, 459Q and 1669 of the Corporations Act, Commonwealth, compilation date 25 March 2020;
  2. Sections 7, 28A and 29 of the Acts Interpretation Act 1901, Commonwealth;
  3. Section 2 and Schedules 8 and 12, part 2 of the Coronavirus Economic Response Package Omnibus Act 2020; 
  4. Form 509H of the Corporations Regulations, compilation date 19 November 2019;
  5. Form 509H of those same Regulations, compilation date 1 April 2020; and
  6. Chapter 8 of the explanatory memorandum of the Coronavirus Economic Response Package Omnibus Bill 2020

One effect of these provisions is that the period allowed for compliance with a statutory demand issued pursuant to the Corporations Act is no longer 21 days and is now six months.  This alteration applies to

statutory demands that are served on or after the commencement of the relevant schedule.” 

The relevant schedule - 12 - commenced to have operation on 25 March 2020. I note that in the absence of the assumption that I was asked to make based upon the propinquity of the post office and Mr Gibbons’ office, and even on the basis of the actual evidence adduced, this date would be problematic for the respondent.

In any case, given the finding that I have made as regards the date [1 April 2020] upon which the respondent’s demand was served, the amendments to the legislation apply to that demand.  The applicant is, therefore, now in a position to point to the fact that:

  1. paragraph 3 of the demand requires the applicant to pay the respondent within 21 days after service; 
  2. paragraph 5 of the demand informs the applicant that an application for an order setting the demand aside must be made within 21 days after service;  and
  3. the demand was not in the prescribed form 509H as set out in the current iteration of the Corporations Regulations.

It follows, so the applicant submits, that the notice is defective, in the sense that it lacks something which is necessary or essential for completeness.  This is because:

  1. where paragraph 3 of the demand states a period of demand, it should, by force of law, state a period of six months;
  2. where paragraph 5 of the demand states the period of 21 days, it should, by force of law, state six months; and
  3. the demand was not in the prescribed form 509H as set out in the current iteration of the Corporations Regulations.

It is further contended that because of these defects, substantial injustice will be caused unless the demand is set aside.  That substantial injustice arises because the legislation provided, and the applicant would have understood it to provide, that the period identified in the notice was no longer applicable.  Failure to comply with the notice as it was expressed could not, in fact, have resulted in the company being placed in liquidation.  Even a non-defective notice, if served on 1 April 2020, could do that only if the applicant was still non-compliant as at 1 October 2020. 

Understandably - because it is not now, in law obliged to do so - the applicant has not complied with the notice. And yet on its face, if it was not set aside the applicant would be presumed to have committed an act of insolvency.  The notice could be used for the purposes of an application made pursuant to section 459Q as a springboard from which to launch an application to have the applicant company wound up.  In other words, it would be denied the “short-term regulatory relief” offered by the new legislation. I have extracted that term from chapter 8.1 of the explanatory memorandum.

In that way, it is said that the requirements of section 459J, subsection (1)(a) have been satisfied, and the Court should, therefore, set aside the demand.

It is further submitted that even if this situation is not perfectly captured by the language of section 459J(1)(a), the tension between the requirements of the notice and the language of the statute amount to an:

“other reason why the demand should be set aside.”

As contemplated in section 459J(1)(b), the defect is said, when considered against the background of COVID-19’s effect and the powerful legislative response to it, to be of such magnitude as to attract the application of this subsection. 

In considering that submission, these provisions and the effect of the legislation, regard must always be had to section 459J(2), which constrains the Court from setting aside a statutory demand merely because of a defect.  The effect of the legislation does, however, seem to go beyond merely rendering the notice of demand defective.  It has changed in a fundamental way the status of the relevant obligations as they were thought to exist when the notice was issued.  In fact, had the application been brought in a different form, as, say, for a declaration as to the status of the purported notice, it may have been arguable that it was not, in fact, a statutory demand as defined by section 9 of the Corporations Act.  I do not need to decide that.  The applicant was entitled to bring this application in the form presented to the Court.

It follows that the only way in which this application could be resisted would be if it was open to interpret these provisions in a way that denied their apparently plain meaning and effect.  To that end, Mr Clutterbuck has done everything that he possibly could have.  He points to the fact that if the applicant is right then it might be thought that the legislation has conferred an unintended benefit on an entity like the applicant. 

The materials demonstrate a contentious exchange of correspondence between the parties that had begun by at least 16 January 2020.  In that exchange, the status of money said to have been owed by the applicant was canvassed at some length.  In respect of at least part of the debt claimed, that is, a “substantiated amount”, the respondent laid its case before the applicant with some particularity. I thought it questionable, on the materials that were before me when the application was heard, whether the applicant had, in truth, raised a genuine dispute about at least part of that debt. 

It must also be allowed that as at the time the demand was executed and posted, it was compliant with the legislative regime.  It was not suggested by the applicant that, as at 20 March 2020, the respondent ought to have been on notice that any relevant provision was about to be changed by Parliament.  Indeed, it might be thought that had any such thing been contemplated a different method of service would have been adopted. 

However, it is noted that elsewhere in the legislative “omnibus”, specific provision was made for relief in respect of debt incurred during the six-month period starting on the day the new laws commenced – see the explanatory memorandum at 12.17 and the Corporations Act at 588GAAA.  It might, therefore, be inferred that it was, in fact, intended that there not be any discrimination in the operation of the amendments to section 459F as between debts according to whether they were incurred before or after 25 March 2020.  In either case, Parliament intended to provide:

“Flexibility to temporarily adjust legal obligations”

such as those which are created by that section.  The objectives of the new legislation also included the facilitation of the “continuation of business”, which is no doubt, what the applicant seeks in its own way to do.  In summary, the new legislation has had an irresistible impact on the present circumstances and, pursuant to both section 459J(1)(a) and (b) of the Corporations Act, it is ordered that the statutory demand dated 20 March 2020, issued by the respondent to the applicant, be set aside.  I will hear the parties as to costs.

HIS HONOUR:   The question of costs is, as has been noted, one which is within my discretion.  The applicant is in a powerful position by reason of the fact that it did identify, for the respondent’s benefit, in effect, the issues which lie at the heart of my reasons for a decision.  I am not, however, going to award costs on an indemnity basis.  The situation does not fall into that category, in my view. 

The respondent had what appeared to be a genuine concern, which was expressed legally in a fashion which was perfectly regular as at the time it was expressed.  We were concerned with a novel provision and they were entitled to litigate it on the basis that they took the risk of losing and paying the applicant’s costs. But, also, it seems to me that they have been put to some further – perhaps not excessive, but some further expense by things which happened since the last hearing. I will take that into account in the exercise of my discretion not to award indemnity costs, but simply to order that the respondent pay the applicant’s costs. 

Close

Editorial Notes

  • Published Case Name:

    Sunstate Land Pty Ltd v Hiview Design & Construction Pty Ltd

  • Shortened Case Name:

    Sunstate Land Pty Ltd v Hiview Design & Construction Pty Ltd

  • MNC:

    [2020] QSC 181

  • Court:

    QSC

  • Judge(s):

    Callaghan J

  • Date:

    15 May 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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