The rebuttable presumption of service of a statutory demand: lessons learnt in the matter of Utech [2024] FCA 874

Justice Wigney’s judgment in the recent decision of Electrical Data and Fibre Optic Systems Pty Ltd v Utech Pty Ltd, in the matter of Utech [2024] FCA 874 provides a timely reminder to lawyers, accountants and insolvency practitioners alike, of a common but often misunderstood area of law: service (and proving service) of a creditor’s statutory demand.

In the hearing of the winding up of Utech Pty Ltd (Utech), evidence was led by both parties as to whether the statutory demand had been validly served.

This article provides an overview of this evidence, and Justice Wigney’s comprehensive summary of the law concerning service of statutory demands, with important lessons to be learned and pitfalls to be avoided.

Key Takeaway:

This judgment acts as an important reminder that service requirements can often go beyond simply posting documents to a company, and that the deeming effect of section 29(1) of the Interpretation Act engaged by posting documents to acompany in compliance with section 109X of the Corporations Act can be displaced by producing proof to displace the assumption of valid service.

What is good service?

The lawyers representing Electrical Data and Fibre Optic Systems Pty Ltd (Electrical Data) sought to quash any questions of ineffective service by providing evidence to the effect that they served the statutory demand in compliance with section 109X(1)(a) of the Corporations Act 2001 (Cth).

Lawyers and insolvency practitioners alike will be well familiar with section 109X, which relevantly provides that a document can beserved on a company by leaving it at, or posting it to, the company’s registered office.

Section 29 of the Acts Interpretation Act 1901 (Cth) also provides service requirements, which states that service can validly be affected by properly addressing, prepaying and posting the document in a letter.

Section 29 of the Acts Interpretation Act further provides that the deeming effect ofposting the document to the company’s registered address is subject to “proof of the contrary”, which as noted by Justice Wigney also applies to section 109X(1)(a) of the Corporations Act, applying the main authorities.

Who bears the onus of proving a document has been served?

Based on these statutory provisions, in order to dispute whether service has occurred, the following legal principles, as summarised by Justice Wigney are to be addressed:

• Evidence that the documents were not received does not necessarily prove that they were not delivered, and therefore not served;
• Proof of non-delivery of the documents is sufficient to prove that the documents were not validly served;
• There is no distinction between delivery of a document to a specified address or place, and its receipt at that address;
• The party disputing service bears the onus of providing “proof of the contrary” under section 29 of the Interpretation Act; and
• It is a question of fact as to whether or not delivery has occurred – evidence that the letter was returned marked “undelivered” or “returned to sender” may be sufficient to prove that the demand was not served.

Applying the above in the present case, Justice Wigney accepted the evidence of Electrical Data’s lawyer that the statutory demand was posted to Utech’s registered address. As a result, Utech held the burden of establishing “proof of the contrary”. That is, Utech needed to provenon-delivery of the statutory demand.

Evidence of “proof of the contrary”

Utech’s registered office was listed as Mandria Accounting Pty Ltd (Mandria). Mr and Ms Lamprinos, the two accountants working at Mandria, gave evidence of their mail processing procedure, which established that:

• Mail was collected, opened, reviewed and categorised byeither Mr or Ms Lamprinos, who shared all administrative duties;
• One of the categories that the mail was sorted into was labelled as “Statutory Demands”, which were saved to both electronic and physical client files;
• Time sensitive documents, such as statutory demands, were distributed via email and registered post – the relevant client was also telephoned to inform them of receipt of the documents; and
• Mr or Ms Lamprinos did not recall receiving a statutory demand addressed to Utech at Mandria’s address, and there were no corresponding records to suggest that the Demand was received.

The above evidence was sufficient to establish “proof to the contrary”, demonstrating that although Electrical Data had posted the Statutory Demand in accordance with the rules, Utech were not delivered the Demand, meaning that valid service had not been effected.

Applicability to law firms:

This decision highlights a number of potential oversights that could occur when serving documents. Although posting a document to the registered office a company will in many situations result in valid service, whether the document is in fact delivered is the main consideration.

To ensure that valid service occurs in light of the above, the following strategies could be employed by firms:

• Engage a process server to ensure that the documents are validly delivered;
• Use a postal service that provides a tracking number;
• When serving a company, conduct a company search prior to service to ensure the correct address is served;
• Save images of all of the documents that are being served, including the front of the envelope showing the service address; and
• Ensure an accurate mail register system is used, to provide documented evidence of when letters are mailed.

Points to note for businesses accepting service – accountants and insolvency practitioners

This judgment highlights the critical importance of maintaining a strict mail processing procedure, to ensure that any evidence of service, or non-service of documents is recorded. Accordingly, the following steps could be taken:

• Ensure that a specific person is delegated the task of collecting, opening, reviewing and categorising the mail received;
• Ensure that mail categories are established, for example, ‘statutory demands’;
• Incoming mail is electronically and physically saved to client files;
• Documents received on behalf of a company are promptly provided to the company, by email and registered post;
• For time sensitive documents, such as statutory demands, the client is promptly contacted via telephone to inform of receipt of the documents; and
• A written mail record is kept of documents that are received, with all relevant information recorded.

If you have any questions regarding the information provided above, please reach out to Pragma Lawyers at hello@pragma.law or call (08) 6188 3340.