Australia: Court considers electronic service of application to set aside a statutory demand

Victorian Supreme Court confirms that an application to set aside a statutory demand can be served electronically, and the Court's evaluation of a genuine dispute concerns the establishment of a genuine level of claim, and not the likely result of the claim.

BACKGROUND

A Creditor served Greenmint Pty Ltd (Greenmint) with a statutory demand for the payment of $105,128.00 owing under a Deed of Loan (Deed) between the parties. The statutory demand was dated 23 March 2015 and served on 24 March 2015. Greenmint subsequently brought an application under section 459G of the Corporations Act 2001 (Act) to set aside the statutory demand. Pursuant to the Act, a debtor has 21 days from the receipt of a statutory demand to file and serve an application to have the demand set aside. Failure to do so creates a statutory presumption of insolvency under the Act.

THRESHOLD ISSUE OF EFFECTIVE SERVICE

The Creditor claimed that Greenmint had not made its application within the 21 day time period prescribed by the Act. Greenmint was required to file and serve its application at the address nominated by the Creditor by no later than 14 April 2015. The Creditor had nominated his solicitors as the address for service in the statutory demand, and had provided a street address, but not a facsimile number or email address.

The Creditor claimed that the application and supporting affidavit was received by him on 15 April 2015, under a cover letter dated 14 April 2015, and was therefore served a day late. However, an email sent to the Creditor's solicitors, and a facsimile confirmation, showed receipt of the documents by email and facsimile on 14 April 2015.

Relying on the approach of Austin J in Austar Finance Group Pty Ltd v Campbell, Gardiner AJ resolved that whilst the general authorities provide that service should be effected by performing service at the address specified in the statutory demand, where it is shown that those documents have actually been received in a readable format by the nominated person, that service will be effective. Gardiner AJ determined that the documents transmitted by facsimile and e-mail were received in a readable format by the Creditor's solicitors, and as such, service had been validly effected within the 21 day period.

WAS THERE A GENUINE DISPUTE IN RELATION TO THE DEBT?

Under section 459H of the Act, in determining an application to set aside a statutory demand, the Court must be satisfied that there is a genuine dispute about the existence or amount of the debt to which the demand relates, and/or that the debtor has an offsetting claim.

The Court paid regard to the principles espoused in Troutfarms Australia Pty Ltd v Perpetual Nominees Ltd, where the court held:

  • there must be a genuine dispute about the existence or amount of the debt, without in-depth examination or determination of the merits; and
  • the applicant is required only to establish a genuine dispute, not to advance a fully evidenced claim.

Gardner AJ also agreed with the comments of Thomas J in Re Morris Catering (Aust) Pty Ltd, who stated that it is not helpful to perceive that one party is more likely than another to succeed, but that the essential task is relatively simple – to identify the genuine level of a claim, and not the likely result of it.

Applying this reasoning, the Court gave short shrift to the arguments raised on behalf the debtor which included that there was a misrepresentation at the time of entering into the Deed, or that the high level of interest payable under the Deed amounted to a penalty.

COMMENT

Whilst it is always advisable to serve an application to set aside a statutory demand at the address stipulated by the creditor in the demand, the Court has taken a common sense approach to the issue of service in this case, finding that electronic service of the application and supporting affidavit is effective, where it is shown that the intended recipient did receive the documents.

The Court also provided a timely reminder that whilst it will not delve into the prospects of a genuine dispute in connection with a debt, it will also safeguard the integrity of the statutory demand process by scrutinising the validity of an alleged dispute.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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