Winding up application valid despite defects in service

The recent decision of the New South Wales Supreme Court in the matter of Industrial Installation and Access Systems Pty Limited [2011] NSWSC 1032 held that there was a valid winding up application under s 459P of the Corporations Act 2001 (Cth) (Act) despite there being no effective service of the originating process.

Facts

Kennards Hire Pty Ltd (Kennards) commenced proceedings seeking an order winding up a company known as Industrial Installation and Access Systems Pty Ltd (Systems) under s 459P of the Act. 

Systems opposed the winding up application arguing that the originating process had not been validly served, and so it was fundamentally defective.

Section 465A(b) of the Act requires a winding up application to be served on the company within 14 days after the application is made.

Kennard’s solicitors posted the originating process to System’s registered offices in Queensland (pursuant to section 109X(1)(a) of the Act).  However, Kennards had failed to comply with the relevant provisions of the Service and Execution of Process Act 1992 (Cth) (SEPA).  Section 9(9) of SEPA provides that the provisions of SEPA override section 109X of the Act.  Sections 15 and 16 of SEPA effectively provide that where an originating process issued out of one Australian State is to be served in another State, then service is only effective if copies of the prescribed SEPA notices are attached to the process.  They were not attached to the application in this case.  The prescribed notice provides defendants with certain procedural information.

Decision

Barrett J held that Kennard’s failure to comply with SEPA resulted in a failure to effect service of the originating process on Systems.

He noted that in respect of service of applications pursuant to s 459G of the Act (applications to set aside a statutory demand), the courts have generally held that failure to properly serve the application in accordance with SEPA to be an “insurmountable obstacle” to the grant of relief.  However, he then noted that there were important drafting differences between the service sections of section 459G and section 459P.

Section 459G(3)(b) of the Act provides that an application is made in accordance with that section “only if” the service requirements are complied with.  In comparison section 465A, which deals with service of proceedings under section 459P requires service within 14 days after “the application is made” which contemplates that the application already has an established existence prior to it being served.  Accordingly, the application for orders to wind up Systems was in existence even though it was not served in compliance with the SEPA.

Accordingly, Barrett J decided that despite the service being ineffective, he could and would make orders under s 467(3)(b) of the Act, which gives a broad power to the Court to make such orders as it sees fit on a winding up application, to dispense with the requirement for service.  He proceeded to make an order winding up Systems.

Conclusion

This case is an important reminder of the importance in complying with procedural requirements when making court applications.  While in this case the court was prepared to dispense with the service requirements, SEPA notices should always be attached to other originating processes where the defendant company is being served interstate.