Statutory demands can be an effective way for companies to recover debt, but they can also have serious consequences for debtors who fail to deal with them in accordance with the strict requirements of the Corporations Act.
A company served with a statutory demand is entitled to apply to the Court for an order setting it aside under section 459G of the Corporations Act. Importantly, such an application must be filed and served within 21 days.
In 2020, the Corporations Act was amended by the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth) with effect from 16 December 2020. Among other things, the reforms expanded the scope for electronic communication of documents under section 459G.
In Bioaction Pty Ltd v Ogborne, in the matter of Bioaction Pty Ltd [2022] FCA 436, Justice Cheeseman considered the effect of those amendments, specifically whether documents were filed and served within the 21-day statutory period.
The timeline in Bioaction v Ogborne
13 January
The creditor’s statutory demand was served on the applicant, Bioaction.
1 February
The applicant’s solicitor sought information from the defendant’s solicitor as to the date of service of the statutory demand
3 February, 2:47pm
The defendant’s solicitor replied by confirming that the demand had been served on 13 January 2022. She then turned her computer off and left her office.
3 February, 3:11pm
The applicant’s solicitor filed the application to set aside the demand through the Federal Court’s online portal.
3 February, 4:48pm
The applicant’s solicitor sent the defendant’s solicitor an email with sealed PDF copies of the originating documents. Justice Cheeseman inferred this was retrievable within approximately 11 seconds of being sent, based on unchallenged expert evidence.
3 February
Both parties agreed in the dispute that 3 February was the last day of the 21-day statutory period for service of the application to set aside the demand.
4 February
The defendant’s solicitor sent an email to confirm receipt of the 4:48pm email, but added she did not have instructions to accept service of the documents by email.
The effect of the 2020 reforms on service by electronic means
Justice Cheeseman noted that, prior to the 2020 reforms, there was a divergence in the authorities as to whether service by electronic means was effective for the purpose of section 459G where no address for electronic service of the creditor had been nominated in the statutory demand, or otherwise had been consented to. However, she noted that the 2020 reforms had amended section 600G of the Corporations Act to resolve any doubt about the true state of the law.
The amendments authorise a document to be given to the recipient by means of an electronic communication if, at the time, it is reasonable to expect the document would be readily accessible so as to be usable for subsequent reference and there is a “nominated electronic address” in relation to the recipient.
Critically, Justice Cheeseman observed that the definition of “nominated electronic address” in the Corporations Act extends to cover the situation where the addressee has not in fact nominated such an address. In that case, the nominated electronic address will be an electronic address which the originator believes on reasonable grounds is a current electronic address of the addressee for receiving electronic communications.
Further, Justice Cheeseman noted that the 2020 reforms introduced sections 105A and 105B of the Corporations Act, which establish statutory presumptions in respect of the time when, and the place where, electronic communications are sent and received. By section 105A, proof of effective service does not require that there be proof that the documents were actually accessed or reviewed or even came to the attention of the addressee or anyone else. What matters is that they could have been had the addressee sought to do so.
Were the originating documents within time?
Justice Cheeseman held that the relevant nominated electronic addresses were those of the defendant’s solicitor (being her personal firm email address and a general email address for the firm). Despite not being nominated by her, it was reasonable to believe they were current electronic addresses for receiving electronic communications based on the fact that:
- The defendant had been represented from the beginning of the dispute by this solicitor.
- The legal representatives of the parties had communicated with each other by email, including in relation to the statutory demand, in the period before the filing and service of the application to set it aside:
- The defendant’s solicitor had sent emails to the applicant’s solicitor from her personal firm email address. In those email communications, she also sent letters as attachments, using the firm’s stationery which included the general firm email address.
- The applicant’s solicitor had sent emails to these email addresses.
Justice Cheeseman ultimately held that the originating documents were received at the creditor’s address for service nominated in the statutory demand shortly before 5 pm on 3 February 2022.