NSW ruling underscores strict requirements for interstate service of applications to set aside statutory demands

In the case between Tellhow International Engineering & Contracting Co. Ltd and Riverina Solar Pty Ltd, both of which have a registered office in New South Wales (NSW), Tellhow served a statutory demand on Riverina.

Under section 459G of the Corporations Act 2001 (Cth), recipients of statutory demands have 21 days from the date of service to either arrange payment or apply to the court to set aside the statutory demand. This 21-day time limit is strict and, if it lapses without the demand being paid or the debtor company making an application to set aside the demand, the debtor company is presumed ‘insolvent’ and the creditor can rely on this presumption to apply for a winding up order of the debtor company.

Where a creditor and debtor are in different Australian jurisdictions - or for any other reason an application to set aside a statutory demand is commenced in a state or territory other than the one in which the creditor is located - debtor companies and their solicitors must ensure compliance with the relevant service requirements set out in SEPA.

Tellhow served the statutory demand on Riverina on 25 May 2023. The 21-day period within which Riverina was entitled to apply to the court to set aside the statutory demand expired at midnight on 15 June 2023.

On that date, Riverina filed an application to set aside the statutory demand in the Supreme Court of Queensland. Between 11:37pm and 11:56pm that day, Riverina’s solicitors sent a series of emails to Tellhow’s solicitors attaching a copy of the application and a supporting affidavit that had been filed in Queensland, together with the notice required by section 16 of SEPA.

Riverina’s application was then transferred to the Supreme Court of NSW and an order was made that the question of whether Riverina’s application had been served within 21 days as required by section 459G of the Corporations Act be heard and determined as a preliminary question.

The question mainly turned on the statutory interpretation of the now repealed section 600G of the Corporations Act and its interaction with the interstate service requirements of SEPA.

In line with section 600G of the Corporations Act, as in force at the time, any document that was required to be given to a person under Chapter 5 of the Corporations Act, which includes s 459G, “… may be given to the recipient by means of an electronic communication.”

An electronic communication could only be used if there was a ‘nominated electronic address’ in relation to the recipient. Riverina argued that the email addresses of Tellhow’s solicitors to whom the application to set aside had been sent on 15 June, were Tellhow’s nominated electronic addresses for service as they had been identified in the covering letter that accompanied the statutory demand served on Riverina.

Section 15(3) of SEPA provides that service on a company or registered body “… must be effected in accordance with section 9” while section 9 provides that service on a company or a registered body “is to be effected” by leaving it at, or by sending it by post to, the company’s or body’s registered office.

The Court’s decision

The Court found that section 600G of the Corporations Act applied to service of an application to set aside a statutory demand. However, as the application was filed in a different Australian state to the state in which it was served, the Court held that SEPA applied. The Court concluded that:

• section 9(9) of SEPA expressly excludes the operation of those provisions of the Corporations Act that cover the same field as, but are inconsistent with, section 9 of SEPA;
• the fact that section 9 of SEPA does not expressly exclude s 600G of the Corporations Act provides no support for interpreting the general, non-mandatory provisions of section 600G as overriding the specific, mandatory provisions of s 15(3) of SEPA where the two provisions intersect; and
• section 600G of the Corporations Act does not apply to the service of an application and supporting affidavit under s 459G of the Act to which s 15(3) of SEPA applies.

As a result, the Court determined that Riverina’s application to set aside the statutory demand was not served within the 21-day statutory period and that there was no application before the Court that had been validly made in line with section 459G of the Corporations Act. Riverina’s proceedings were dismissed.

Practical implications

Section 600G of the Corporations Act was repealed on 15 September 2023 and amendments were made to the Act on the same date which effectively preserved its operation relating to documents issued under Part 5 of the Act, including applications under section 459G to set aside a statutory demand.

Sections 110C and 110D of the Corporations Act now provide that any document required to be sent under Chapter 5 may be sent by electronic communication provided it is reasonable to expect that the document would be readily accessible. Any such electronic communication is regarded as ‘received’ when it is capable of being accessed at the addressee's ‘nominated electronic address’.

Electronic service of a s 459G application may still be allowed if both the court in which the application was brought and the debtor’s address are in the same Australian state or territory, although this method of service is not without some risk, particularly if there is any uncertainty over whether the debtor has nominated an electronic address for service.

In addition, even if a statutory demand provides an email address for service of any application to set aside that demand, if the application to set aside is filed in a different state to where the creditor is located, service by email will not be effective. Service in such a scenario must comply with SEPA - including the addition of the prescribed SEPA cover notice and service in line with the methods set out in section 9 of SEPA - with physical service occurring at the creditor’s registered office being the surest way to avoid subsequent disputes over effective service.

Co-written by Jemimah George of Pinsent Masons.