Fair Suck Of The Sauce Bottle! Court Considers Doctrine Of Fair Notice In Relation To Service Of Statutory Demand

In the case of Deputy Commissioner of Taxation v ACN 152 259 839 Pty Ltd [2024] FCA 1489, the Federal Court considered the service of a statutory demand on ACN 152 259 839 Pty Ltd (the Company) pursuant to section 109X(1)(a) of the Corporations Act 2001 (Cth) (the Act), and whether the doctrine of fair notice had been invoked in the circumstances of the case.

In broad terms, the doctrine of fair notice provides that if a creditor knows that a statutory demand has not actually come to the attention of the company, then despite technical compliance with the requirements for service, the Court has a discretion to set aside the demand for want of fair notice.

In this case, the Australian Taxation Office (ATO) served a statutory demand on the Company at its registered office.  The Company argued that that office had been permanently unattended since 2018, and that the ATO knew this fact and that the premises was an unreliable address for service, invoking the doctrine of fair notice.

Background

The company at the heart of this matter is ACN 152 259 839 Pty Ltd, formerly known as Maxcon Developments Pty Ltd (the Company).  The sole director of the Company is Mr Dimitrios Diakou.

The registered office of the Company is Suite 1215, 1 Queens Road, Melbourne (the Premises).

Mr Diakou is also the director of a company called Kerrili Pty Ltd which trades as Diakou Faigen Lawyers.  The official address of Diakou Faigen Lawyers is also the Premises.

On 20 May 2024, Mr Dinh, an officer of the ATO, attended at the Premises to serve a statutory demand and accompanying affidavit (the Statutory Demand) on the Company.  It is important to note the following:

• When Mr Dinh arrived at the front door of the Premises, the door was locked, and the Premises appeared unattended. 
• Mr Dinh observed that the lights were off inside the Premises, but that there was a reception desk and a couch in the Premises. 
• There was a note on the front door which stated, “IF THIS OFFICE IS UNATTENDED PLEASE CALL 9863 9868”.  
• Mr Dinh did not call the telephone number as he did not believe this was required.  
• Mr Dinh believed that the Premises was only temporarily unattended.
• Mr Dinh slid the Statutory Demand, which was enclosed in an envelope addressed to the Company, under the front door of the Premises.

The Company did not comply with the Statutory Demand and the ATO subsequently applied for and obtained orders placing the Company into liquidation.  The Company then applied (amongst other things) for review of the decision, and for orders setting aside the winding up orders.

The Company argued as follows:

• Mr Diakou and Diakou Faigen Lawyers had acted for a client in proceedings against the ATO in or around December 2023 (the Other Proceedings). 
• Mr Dinh had been directly involved in the Other Proceedings on behalf of the ATO.
• Mr Diakou had sent emails to Mr Dinh in relation to the Other Proceedings, and his email signature showed that the address for Diakou Faigen Lawyers was the Premises.
• Discovery revealed that the ATO’s records contained entries recording the postal and business address of Daikou Faigen Lawyers as the Premises and stating that the status of this address was “unreliable”.
• Further, the ATO’s records also showed that Mr Diakou had called the ATO in July 2022 requesting a change in the postal address for the Company.
• Having regard to all of the above matters, the ATO knew that the Premises was unattended (or at the very least that it was an unreliable address for service), and that it was unlikely that the Statutory Demand would come to the attention of the Company.
• In the circumstances, the doctrine of fair notice was invoked, the commencement of the winding up proceedings was an abuse of process, and the winding up order should be set aside. 

Doctrine of fair notice

The key principles in relation to the doctrine are set out in FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136 (FP Leonard) and Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559 (Re Future Life). 

In FP Leonard, Santow J held that where there is knowledge that an address is ‘false’ or ‘non-existent’ then service at such an address will not be effective, and it would be an abuse of process to allow judgment where the plaintiff knew that the document had not come to the attention of the defendant.

In Re Future Life, McLelland CJ, citing Santow J in FP Leonard, clarified that the doctrine does not constitute an exception to the provisions regarding deemed and effective service, but rather that where the plaintiff knew that a document had not come to the attention of the defendant, the resulting abuse of process constitutes an overriding ground for refusing relief notwithstanding that there has been technically effective service.

In Woodgate v Garard Pty Ltd [2010] NSWSC 508, Palmer J cited both FP Leonard and Re Future Life with approval, and summarised the position as it relates to statutory demands as follows:

“Where a creditor serves a Statutory Demand in a prescribed mode and:

• knows, at the time of service or before the s 459G(3) period expires, that the Demand has not actually come to the attention of the company;
• knows that the company would dispute the Demand if made aware of it;
• refrains from bringing the Demand to the actual notice of a responsible officer of the company within the s 459G(3) period; and
• relies on good service of the Demand and the presumption of insolvency arising under s 459C(2)(a),

the Court may, in its discretion and in the interests of justice, set aside the Statutory Demand under s 459J(1)(b), not for want of good service but for want of fair notice.”

Decision

After carefully considering the facts of the case, Moshinsky J held that there was no want of fair notice in the circumstances of the case for the following reasons:

1. the sign on the front door did not convey that the Premises was permanently unattended, and the use of the word “if” suggested that the Premises may simply be unattended from time to time;
2. the relevant knowledge and state of mind of the ATO for the purposes of this matter was the knowledge and state of mind of Mr Dinh, and not the aggregate of all of the information held by the ATO;
3. the information recorded in the ATO’s systems regarding the Premises related to Kerrili Pty Ltd/Daikou Faigen Lawyers, not the Company.  Mr Dinh was not aware of this information at any relevant time, and it was not incumbent on Mr Dinh to check the address details for Kerrili Pty Ltd/Daikou Faigen Lawyers for the purposes of service on the Company; and
4. there was no evidence to suggest that the ATO in fact knew that the Statutory Demand had not been received by the Company.

The Company’s application was dismissed and the winding up order was affirmed.

Lavan comment

This decision is an important reminder that service of documents at a company’s registered office may require more than just leaving the document at the relevant address or premises. 

Creditors and serving parties should exercise caution where the registered office appears unattended, or where post addressed to the registered office is returned, or where the creditor or serving party has information which suggests that the document being served may not in fact come to the attention of the target company.

If you have any questions about this decision, or about the doctrine of fair notice, the experienced Lavan team is here to help.

Thank you to Elaine Ye, Solicitor, for her valuable research and assistance with this article.