The time of service on companies - s109X and 'deemed' service

When a company owes a debt which is over $2,000, the creditor has the option of serving on the company a statutory demand for payment of that debt (demand) or suing the company for the debt. If the company fails apply to the Court to set aside the demand (because it disputes the debt) or pay the demand within 21 days of service of the demand, then the creditor may apply to wind up that company under the Corporations Act 2001 (Cth).

Similarly, when a company is sued in Court by a creditor for a debt, the company usually has a fixed time period from service of the process in which to file an appearance or a defence in response to the originating process (process) served upon it (e.g. 10 days to file an appearance, 21 days to file a defence). If the company does not take action within the specified time, then the creditor can obtain judgment by applying to the Court.

So what is the position when a creditor believes that a demand or process was delivered a day or more earlier than the company says it was actually received? What if a director comes back from leave three weeks after the demand or process was actually delivered to the registered office? What happens when a company has moved its registered office and receives the demand or process much later than when it was posted because of a diversion to another address or a PO Box? In this situation, the company may think it has a certain time from receipt of the demand or process to respond, but the actual time to respond may be much less than that.

You may think that these issues are trivial, but most companies wait until around the 19th day after receipt of a demand to send the demand to its lawyers. Similar issues occur with process. This is an ongoing frustration for lawyers that practice in this area. The position appears to be that the date of receipt by a person in the company is irrelevant: the critical date is the date that the demand or process was delivered or deemed to have been delivered to the registered office.

S109X of the Corporations Act 2001 (Cth) defines how to serve a document on a company. S109X provides that a document may be served by leaving it at, or posting it to, the company's registered office. There are two separate deeming provisions which appear to apply in the circumstances:

1. S29 of the Acts Interpretation Act 1901 (Cth) (s29(1)) is a deeming provision for service in case the date of actual delivery is unknown. S29 provides that service shall be deemed to be effected by properly addressing prepaying and posting the document as a letter, and unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post.
   
2. s160 Evidence Act 2008 (Vic) (s160) creates a presumption (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid ordinary post addressed to a person at a specified address in Australia was received at that address on the fourth working day after having been posted.

In Scope Data Systems Pty Ltd v David Goman as Representative of the Partnership BDO Nelson Parkhill [2007] NSWSC 27 White J held that these two provisions operate harmoniously, despite their apparent conflict. In Scope Data, a creditor sent a demand by ordinary prepaid post on Monday 25 September 2006. Monday 2 October 2006 was a public holiday. The demand was received by the company’s accountant on Tuesday 3 October 2006 (5 working days after posting) at a PO Box because of a diversion. The PO Box was checked on Friday 29 September 2006 (4 working days after posting) by the company’s accountant between 9am and 10am. The company applied to set aside the demand on 23 October 2006 (20 days after 3 October 2006; 24 days after 29 September 2006).

The defendant claimed that the demand was delivered or deemed to have been delivered on 29 September 2006 (after it was checked) and the application was therefore out of time. The defendant relied upon the NSW equivalent of s160 and on evidence in a delivery timetable that such a letter would be received the next business day (purportedly as evidence of what is 'the ordinary course of post'). The plaintiff asserted that the demand was served on 3 October 2006 and the application was therefore made in time.

In considering the interaction of s29(1) and s160, White J held (at [34] and [38]) that s160 is applicable as a means of proving when a document is taken to have been delivered in the ordinary course of post, or, if it is established that the document was not delivered in the ordinary course of post, when it is to be taken to have been delivered. On the facts (at [70] and [71]), White J held that had the letter not been diverted to a PO Box, then the presumption in s160 would have applied to deem service on 29 September 2006.

When faced an question about when a demand or process was served, it appears that the Court must make the following inquiries about the evidence before it:

1. Is there evidence of the actual delivery time of the demand or process to the address?
2. If there is no evidence of the actual delivery time to the address, is there evidence of what occurs in ‘the ordinary course of post’?
3. Is there evidence contradicting that delivery was in ‘the ordinary course of post’?
4. Is there evidence sufficient to raise a doubt about the presumption that the demand or process was received at the address on the fourth working day after posting?

The evidence of what is 'the ordinary course of post' should not be hearsay evidence, such as evidence of discussions between the solicitor and a postal employee, as there is unsettled authority on whether an application to set aside a demand is final or interlocutory and therefore whether the evidence can be admitted. If it is a final proceeding, hearsay evidence cannot be admitted. If it is an interlocutory proceeding, hearsay evidence may be admitted (see s75 Evidence Act 2008 (Vic)) but there is ample authority for its rejection (see: Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527, Citystart Pty Ltd v Deputy Commissioner of Taxation for The Commonwealth of Australia [2006] WASC 35 (8 March 2006).

Using the examples of service issues above and the position of the authorities on the issues, I have provided some basic answers:

1. What is the position when a creditor thinks that a demand or process is delivered to a registered office a day or more earlier than the creditor says that it received it? Evidence needs to be produced to the Court which demonstrates what occurs in 'the ordinary course of post'. If there is no evidence of this, it is deemed to have been delivered on the fourth working day after having been posted unless there is evidence which displaces this presumption.
   
2. What if a director comes back from leave three weeks after the demand was actually delivered? The demand is deemed to be served when it is delivered to the registered office. The receipt by a person at the registered office is irrelevant.
3. What happens when a company has moved its registered office and receives the demand or process much later than when it was posted because of a diversion to another address or a PO Box? Evidence needs to be produced to the Court which demonstrates what is 'the ordinary course of post'. If there is no or no adequate evidence of this, it is deemed to have been delivered on the fourth working day after having been posted unless there is evidence which displaces this presumption.The fact that there is a diversion in place and that the letter was never received at the registered office ought to displace this presumption.

I am happy to discuss any of the above and I hope this post is informative.