The Federal Court has set aside an order for winding up of a company (due to unpaid tax debts) on the basis that the evidence presented created a reasonable doubt (for the purposes of s160 of the Evidence Act 1995) that the posted Statutory Demand arrived in the post.
The facts were these:
- On 4 October 2017, that a Deputy Commissioner of Taxation (DCT) posted the Statutory Demand to the Company (demanding that it pay certain tax amounts). Section 459E of the Corporations Act 2001 (Corps Act) provides the service of Statutory Demands. Failure to comply with such a Demand (per s459F), gives rise to a presumption of insolvency (under s459C(2)), allowing the company to be wound up (under s459A).
- The DCT relied on posting the Demand, to the Company’s registered office, as service, under s109X(1)(a) of the Corps Act.
- The company’s registered office was that of it’s former accountant. The Company ceased being the client of the accountancy firm on 28 September 2017, but the firm continued to provide its registered office, until 7 November 2017 (about a month after the Demand was posted).
- The Company did not comply with the Demand for payment, so the DCT applied for, and obtained, an order of the Court to wind up the Company. This was in early March 2018. The Company was not in attendance at these proceedings – apparently because it was not aware of the proceedings (though it was not explained, how it could be, that notice of these proceedings, did not make it through to the Company, as well as the Statutory Demand).
- A director of the liquidated Company, then brought an urgent application, to set aside the Registrar’s winding up order (which required the Court, to give the director leave to do so, under s198G(3)(b) of the Corps Act, given that the Liquidator was, by then, in control of the Company).
- In support of this action, the Company’s former accountant (who provided its registered office, at the time of alleged service) made an affidavit saying that the Statutory Demand was never received. The Affidavit was not bland or perfunctory. Rather it was detailed and persuasive. It explained the accounting firm’s process, for opening mail and despatching it to clients (or returning it to the sender, when appropriate). The deponent described, in detail, the system he said that he devised; said that he supervised this system; demonstrated that it worked (by stating the last piece of correspondence he sent to the taxpayer Company; and, finally, he said that he had no reason to ‘doubt’ his belief that the Statutory Demand never arrived in the mail. [para 5 of the judgement]
The law relating to service in the post, was not limited to s109X of the Corps Act (even though it permitted service by post). The Court said that it had to be read with two other provisions, both of which admitted of the possibility that a posted item might not arrive. These provisions were both framed, in terms of a ‘presumption’, that posted item had arrived (and was thus served), but that this presumption could be rebutted.
- The first of these was s29(1) of the Acts Interpretation Act 1901, which provides that: Where an Act authorises or requires any document to be served by post, … , then the 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.
- The second of these was s160(1) of the Evidence Act 1995, which provides that: It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.
In the DCT’s submissions [para 7], he:
- stressed that the onus was always on the company to raise the doubt as to non-delivery at the address.
- The Commissioner particularly emphasised that proof of non-receipt, by the Company director, was not proof of non-delivery to the registered office – a proposition accepted by both parties.
- The Commissioner argued that the evidence was inadequate and insufficiently robust to prove the existence of a relevant doubt. In particular, the Commissioner pointed to the absence of direct evidence from those employees who would normally process such a notice on its receipt.
The Court, however, concluded that the evidence was sufficient to relevantly ‘raise doubt‘ as to non-delivery, within the meaning, and for the purposes of, s160(1) of the Evidence Act (even though the DCT did nothing wrong in relying on service by post, to the registered office).
- The Court noted that the deponent not only created the mail system, but also ‘supervised’ it.
- The Court noted that, under this system, an item of mail would either be forwarded to the client or returned to sender, and the deponent said he checked and neither of these things happened.
- The Court also noted that the affidavit confirms, that the deponent had turned his mind, to all other possibilities, as to how such a document may have gone astray, within the system, and that he can only conclude that the posted items were not delivered at his address.
- The Court thought these statements were plausible.
- In the absence of any cross-examination, the statements dispose of any suggested possibility that the system broke down.
There is a good statement of the relevant principles, and authorities, in relation to delivery, of a winding up documents, by ordinary post [in para 2 of the judgement].
(DCT v Josway Hospitality Pty Ltd  FCA 466, McKerracher J, 6 April 2018.)
[FJM; LTN 70, 13/4/18; Tax Month April 2018]
Study questions (answers available)
- Did the Company’s director succeed in having its winding up order set aside?
- Did the director need the leave of the Court, to interfere in the affairs of the company, once it was in liquidation?
- In applying for the Company’s liquidation, did the DCT rely on having served a Statutory Demand, by post, as permitted under s109X(1)(a) of the Corps Act?
- Does s109X allow an alleged recipient to show that a posted item never arrived.
- Do other Federal Laws, about service by post, admit the possibility, that posted items might never arrive?
- Was it, under s29 of the Acts Interpretation Act, that the Court found there was relevant ‘doubt’ about the documents arriving in the post?
- Was the Court lead, to find relevant doubt (about the posted items arriving), primarily by a detailed affidavit of the accountant, describing the mail system he designed and supervised, together with the inquiries he made?