In the matter of Boss Constructions (NSW) Pty Ltd

1. [1]

   HER HONOUR: This is an application to set aside a statutory demand by reason of an offsetting claim said to render the substantiated amount of the debt to nil. The application is brought by the first plaintiff (Boss Constructions) and its sole director, Nicholas Bobos, against the Council of the City of Broken Hill (the Council). The undisputed debt is a default judgment obtained by the Council against Boss Constructions in 2016 for unpaid rates, being $11,885.02 inclusive of costs. The offsetting claim is said to be a claim “for unjust enrichments” in respect of advertising revenue said to have been received by the Council from local businesses for advertising on a tourist information sign located on land purchased by Boss Constructions from the Council in 2012.

2. [2]

   The affidavits served by the Council included one by the Council’s solicitor putting in issue whether the originating process had been filed within the 21 days required by section 459G of the Corporations Act 2001 (Cth). At the hearing, however, Council’s counsel did not take this point or propose to read those portions of the solicitor’s affidavit. The reason for this became apparent: if the originating process was dismissed by reason of the absence of jurisdiction of the Court, then the Court may also lack power to make an order under section 459F extending time for compliance with this statutory demand, that power being an incident to a valid application under section 459G: Leveridge Capital Limited v Modena Imports Pty Limited [2009] NSWSC 509 at [8] per Brereton J; TQN Design and Construct Pty Limited v KCL Developments Pty Limited [2011] NSWCA 7 at [21]. More than three months has now passed since the presumption of insolvency arose by reason of Boss Construction’s failure to comply with the statutory demand. The Council has not filed an application to wind up Boss Constructions on the presumption of insolvency, and the presumption no longer operates.

3. [3]

   Regrettably for the Council, having apprised the Court of its potential lack of jurisdiction, I consider that it is incumbent on the Court to determine whether it has jurisdiction. There is no point making orders which, on closer examination, would be made without power.

Facts

1. [4]

   As the substantive hearing of Boss Construction’s application did not proceed, neither party read their affidavits, but it may be helpful to set out some factual background which emerges from the court book. I do so not as findings of fact based upon affidavits read following rulings on objections to the contents of those affidavits, but rather to give a context to this judgment.

2. [5]

   In 2007, Mr Bobos submitted an expression of interest to the Council to purchase land for the purpose of establishing a 24 hour roadhouse on Adelaide Road, Broken Hill. Council advised by letter that was agreeable to selling the property on certain terms, noting:

3. [6]

   In 2011, contracts were exchanged for Boss Constructions to buy 524-638 Barrier Highway (which I take to be another name for Adelaide Road), Broken Hill for $231,000 (the property). Boss Constructions paid a 10% deposit. The balance of the purchase price was provided by way of vendor finance secured by a mortgage registered over the property.

4. [7]

   A tourist information bay with a tourist information sign, apparently comprising some 525 square metres of land, was located on the property. It appears that the Council agreed to either excise the tourist information bay from the property sold to Boss Constructions, or remove and relocate the tourist information sign to other land but, due to an oversight, neither occurred. Nor, according to the Council, did Boss Constructions request the Council to relocate the sign or excise the land after completion of the sale.

5. [8]

   In March 2012, the purchase of the property was completed.

6. [9]

   In November 2016, the Council obtained default judgment against Boss Constructions for unpaid rates. The default judgment formed the basis of the statutory demand sought to be set aside in these proceedings.

7. [10]

   In September 2017, the Council commenced proceedings against Boss Constructions in the Local Court of New South Wales at Parramatta seeking unpaid interest in respect of the vendor finance in the amount of $17,215.

8. [11]

   On 1 October 2017, Mr Bobos became aware of the Local Court proceedings when he discovered the statement of claim on the reception desk in his company’s office.

9. [12]

   On 23 October 2017, Boss Constructions issued an invoice to the Council for rent for the tourist sign. The rent was charged from 2012 until 20 November 2017 at $200 per week plus GST. The total rent invoiced was $59,000 plus GST, being $64,900.

10. [13]

    On 27 October 2017, Boss Constructions filed a defence the Local Court proceedings and also a cross-claim including a claim for unpaid rent for the visitor sign. In its defence to the cross-claim, the Council admitted that there was a sign on the property but denied that Boss Constructions was entitled to rent.

11. [14]

    On 5 November 2018, the Local Court at Parramatta heard the Council’s claim and Boss Constructions’ cross-claim. The Council succeeded after a hearing on the merits and the cross-claim was dismissed. Boss Constructions was ordered to pay the Council’s costs of the claim and cross-claim on an ordinary basis up to 4 July 2018 and on an indemnity basis thereafter.

Service of statutory demand

1. [15]

   On 20 November 2018, the Council served the statutory demand on Boss Constructions. Mr Bobos accepts that Boss Constructions was served on that date. The statutory demand set out the obligation of Boss Constructions to either pay the debt or serve an application to set aside the demand within 21 days, and further:

2. [16]

   Section 459G provides:

3. [17]

   The method of calculating when the 21 days expires is helpfully described by Barrett J in Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463 at [5], [6] and [11]. Applying his Honour’s analysis to this case, one excludes the date on which the statutory demand was served, being 20 November 2018, and the result is that the time in which to file an application to set aside the creditor’s statutory demand expired at midnight on 11 December 2018.

4. [18]

   The originating process was filed at 9.50 pm on 11 December 2018 and an email was sent by Mr Bobos to the Council’s solicitor at 9.59 pm attaching the originating process. According to the email, and the file name of the PDF attachment, only the originating process was served but not the affidavit supporting the application. An application under section 459G will not be validly made if either the application or affidavit in support are not served within the 21 day period: Complete Windscreen Service Nominees Pty Limited v Nielsen & Moller Windscreens Pty Ltd (1995) 121 FLR 178; (1995) 18 ACSR 320; Centurian Constructions Pty Limited v Beca Developments Pty Limited (in liq) (1996) 129 FLR 364; (1996) 14 ACLC 312.

5. [19]

   Even if the attachment did include the affidavit in support, this is not the end of the matter. Section 459G does not define what is meant by “serving” the application and affidavit. This is determined by other applicable laws and rules of court: Austar Finance Pty Ltd v Campbell (2007) 215 FLR 464; [2007] NSWSC 1493 at [32]-[33] per Austin J.

6. [20]

   Rule 3.7 of the Uniform Civil Procedure Rules 2005 (NSW) provides:

7. [21]

   That aside, the originating process may still have been served by email if it had actually come to the attention of the Council by that means: Howship Holdings Pty Ltd v Leslie (No 2) (1996) 41 NSWLR 542 at 544-5; (1996) 21 ACSR 440 at 443-4 per Young J. But the Council’s solicitor deposed, unsurprisingly, that he usually left his offices at 5.30pm and thus did not read the email until he arrived at work at about 9am the next day, 12 December 2018.

8. [22]

   Emails are transmitted to and electronically stored on a server and positive action is needed on the part of the receiver to access the email through their computer and read it. As such, service by email does not constitute service under section 459G(3) unless the email has actually been accessed on the receiver’s computer: Austar Finance Pty Ltd v Campbell at [48]-[50]; Opensoft Australia Pty Ltd v Miller Street Pty Ltd [2011] FCA 653 at [54]-[55] per Jagot J. As Banks-Smith J put it in Sheraz Pty Ltd v Rumsley [2019] FCA 493 at [33]:

9. [23]

   It seems to me that Boss Constructions did not comply with section 459G(2) because a copy of the application and the supporting affidavit were not served on the person who served the demand on the company within 21 days of the demand being served.

Jurisdiction

1. [24]

   The timing requirement imposed by section 459G has not been met by the plaintiff. In those circumstances, as the authors of Ford’s Principles of Corporations Law (LexisNexis, looseleaf) explain at [27.062.6], “[t]here is no application under Pt 5.4 Div 3 before the court and the court’s jurisdiction is not enlivened”. As the High Court made clear in David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265 per Gummow J for the Court at 276-7 (footnotes omitted):

2. [25]

   Similarly, in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581, Sundberg J noted at 587:

3. [26]

   The Court does not have power to make an order setting aside the statutory demand and, as such, the proceedings must be dismissed with costs.

4. [27]

   For these reasons, I make the following orders:

   1. (1)

      The Originating Process dated 11 December 2018 is dismissed.

   2. (2)

      Vacate the directions made earlier today in respect of an application for leave to extend time under section 459F(2)(a)(i) of the Corporations Act 2001 (Cth).

   3. (3)

      Direct the defendant to serve, by 5:00PM Friday 3 May 2019, any submissions and affidavits in respect of a special costs order.

   4. (4)

      Direct the plaintiffs to serve, by 5:00PM Wednesday 8 May 2019, any submissions and affidavits in reply in respect of a special costs order.

   5. (5)

      Note that the parties consent to the Court determining the special costs application on the papers.