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With Australia being subject to an unprecedented lockdown, many aspects of everyday life have been required to change or adapt to our new normal.

The Court is no exception as new processes are put in place in relation to physical appearances, and legislation.

This article will examine the recent case of CPR Solutions Mackay Pty Ltd v Zammit Earthmoving Pty Ltd [2020] QSC 165 (Zammit) and its implications in a current and post COVID-19 world.

In Zammit, the Supreme Court of Queensland considered whether the 21 day limitation period under s459G of the Corporations Act 2001 (Cth) (CorporationsAct) to set aside a statutory demand could be extended due to delays in applications being processed by the court due to COVID-19 restrictions.

Background

In Zammit, the respondent sought to recover the sum of $244,824.04 from the applicant for goods sold and services rendered, by serving a creditor’s statutory demand under s559E of the Corporations Act on 26 February 2020.

On 16 March 2020, the applicant’s solicitors disputed the validity of the demand on three grounds, that:

1.               parts of the work claimed in the debt balance were not requested by the applicant;

2.               the respondent was indebted to the applicant for a greater sum of money than that claimed in the demand; and

3.               a portion of the invoices relied upon were over 6 years old and potentially statute barred.

Despite the disputes raised by the applicant, the respondent refused to withdraw the demand.  

Section 459G of the Corporations Act requires a debtor to bring an application for an order to set aside the statutory demand within 21 days after service is affected.

In Zammit, the applicant’s solicitors filed an application to set aside the creditor’s statutory demand twenty days after the demand was served.  Unfortunately, the Mackay registry did not immediately seal the application or provide a return date due to restrictions imposed due to the ongoing COVID-19 pandemic.

Notwithstanding, the applicant’s solicitors served an unsealed version of the application on the respondent’s solicitors and indicated that a sealed copy would be provided upon receipt from the registry. The respondent’s solicitors did not accept that formal service had been affected under the Uniform Civil Procedure Rules 1999 (Qld) as the documents did not contain any of the following: 

          an action number given by the court;

4.               the court seal or filing date; or

5.               a return date for hearing the application.

The sealed documents were not available for collection until 6 April 2020, being a total of 20 days since they had been filed.

Application of section 459G of the Corporations Act

The Courts are often tasked with determining the validity of an application under s459G of the Corporations Act.

In LJAW Enterprises Pty Ltd v RJK Enterprises Pty Ltd [2004] QSC 134, Holmes J (as her Honour then was) indicated that the requirements of section 459G of the Corporations Act are inflexible and deprive the court of any discretion to overlook any defects in service.[1] In LJAW, Holmes J followed matters such as Benonyx[2], Chelring[3], Universal Trade Exchange[4] and Robowash[5], to determine that as the documents served did not contain any return date for an application, the respondent is unable to determine when they are required to attend before the court.

Chesterman J in Cooloola Dairys Pty Ltd v National Foods Milk Ltd agreed with the statements of Holmes J and stated that “any application will not perform its required function if it is not sealed and does not show the action number allocated by the Court”. [6]

In Zammit, the court examined the impacts of the recently enacted COVID-19 Emergency Response Act 2020 (Qld) (Emergency Response Act). It determined that section 15(1) of the Emergency Response Act conferred powers on a registrar to make a decision within a modified timeframe, as it was state legislation, it could not modify or amend the timeframes under s459G of the Corporations Act.

Despite the above limits on the state legislation, the Australian Government had also enacted the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (Omnibus Act) in response to the COVID-19 pandemic and the impacts on everyday life. Despite the Omnibus Act altering provisions of certain legislation (such as the 21-day timeframe for compliance of a statutory demand under section 459G of the Corporations Act), it was not applicable in Zammit given the statutory demand had been served prior to the Omnibus Act coming into force on 25 March 2020.

Prior to COVID-19, case law was firm that any application to set aside a creditor’s statutory demand under section 459G of the Act must be filed and served within the stipulated timeframe, namely 21 days).

The purpose of section 459G of the Corporations Act is to put a creditor on notice as to an application to set aside its statutory demand. Given that the registrar had not affixed any of the usual notations associated with a filed document, there was no indication to the respondent (apart from the applicant’s solicitors assertion) that proceedings had actually been commenced.

The question to be considered is whether an applicant can be punished for actions that are outside its scope of control (for example, a registry officer being unable to seal and set a date down immediately). Secondly, if they can be punished, should they?

Unfortunately for the applicant in Zammit, the timeframe imposed by section 459G of the Corporations Act cannot be altered, amended or extended under any circumstances which also extends to situations outside a party’s control.

It is in the public interest for creditors and debtors to have clear parameters that they must each operate in when making creditor’s statutory demands and commencing proceedings to wind up a company.

Where to now?

With the amended timeframes for compliance of a creditor’s statutory demand scheduled to revert to normal from 25 September 2020, creditors and their representatives must be vigilant in respect of the Corporations Act and the timeframes imposed within it.

Despite the upcoming anticipated end to the temporary provisions, parts of the country are now facing re-imposed lockdown measures. It will be paramount that creditors and debtors take into account any  potential delays to ensure that any documents that need to be filed and served to either instigate or oppose a creditor’s statutory demand are done so promptly, and with reference to any potential delays on filing procedures.

 

Ellen Nowland

Associate

Results Legal

E: enowland@resultslegal.com.au

T: +61 7 3234 3218

 

 



[1] Zammit, paragraph 21

[2] Benonyx Pty Ltd v Fetrona Pty Ltd [1999] NSWSC 181.

[3] Chelring Pty Ltd v Coombs [2000] WASC 60.

[4] Universal Trade Exchange Pty Ltd v Westpac Banking Corporation (2002) 20 ACLC 1302.

[5] Robowash Pty Ltd v Robowash Finance Pty Ltd (2000) 158 FLR 338.

[6] Cooloola Dairys Pty Ltd v National Foods Milk Ltd (2004) 211 ALR 293 at 34