Cavetina Pty Ltd v Synthetic Dyeworks Industries Pty Ltd [1994] QCA 302 [1994]14 A.C.S.R. 274; Q.L.R. 1/7/95

IN THE COURT OF APPEAL [1994] QCA 302 SUPREME COURT OF QUEENSLAND C.A. No. 250 of 1993 C.A. No. 251 of 1993 Brisbane [Cavetina v. Synthetic Dyeworks] BETWEEN: CAVETINA PTY LTD (Applicant) Respondent -and- SYNTHETIC DYEWORKS INDUSTRIES PTY LTD (Respondent) Appellant The Chief Justice Mr Justice McPherson Mr Justice Demack Judgment delivered 22/08/1994 Separate reasons for judgment of the Chief Justice, McPherson J.A. and Demack J. The Chief Justice and Demack J agreeing as to the order made, McPherson J.A. dissenting. Appeals against both orders dismissed with costs. CATCHWORDS: COMPANY LAW - statutory demand - whether time within which to apply to set aside demand can be extended - construction of sections 459G, 459S and 1322(4) Corporations Law considered. Counsel: Mr P.R. Dutney Q.C., and Mr R.C. Morton for the Appellant Mr P.E. Hack for the Respondent Solicitors: Bowdens for the Appellant Mylonas & Associates for the Respondent Hearing Date: 01/06/1994 -- 1 of 18 -- IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND C.A. No. 250 of 1993 C.A. No. 251 of 1993 Brisbane Before The Chief Justice Mr Justice McPherson Mr Justice Demack [Cavetina v. Synthetic Dyeworks] BETWEEN: CAVETINA PTY LTD (Applicant) Respondent -and- SYNTHETIC DYEWORKS INDUSTRIES PTY LTD (Respondent) Appellant REASONS FOR JUDGMENT - THE CHIEF JUSTICE Judgment delivered 22/08/1994 This appeal has been brought following the making of orders by two different judges which together had the effect that the appellant's statutory demand was set aside. The appellant contends that these orders should not have been made. On 5 October 1993 the appellant served a statutory demand under s. 459E a provision which is to be found in Division 2 of Part 5.4 of the Corporations Law. The amount demanded was $138,889.44. The debt which was claimed was for the balance of an account for services rendered for the respondent company in carrying out the commercial dyeing of cloth over an extended period. The respondent, by a form of application dated 25 October 1993, sought an order that the appellant's statutory demand which was dated 1 October 1993 and was served on the respondent on 5 October 1993 should be set aside. There is a provision of the Corporations Law which will be referred to in greater detail shortly, which, in effect says that -- 2 of 18 -- 2 applications to set aside statutory demands must be made within twenty-one days after the demand is served. There are further provisions which say that such applications to set aside are to be regarded as made when an affidavit supporting the application has been filed and a copy of the application and affidavit are served on the person who served the statutory demand. It was agreed that the twenty-one day period referred to expired in the present case at midnight on 26 October 1993. It also appeared that the form of application to set aside was filed before that deadline, namely on 25 October 1993, and that both it and the supporting affidavit were posted to the appellant on that day. In the ordinary course of post they would not have been received until two days later, and in fact they were received at the appellant's address only on 28 October 1993. Counsel for the respondent accepted that service of the material on the appellant was out of time but he made an application for any necessary extension of time under s. 1322(4)(d). The following are particular provisions of the Laws to which it is necessary to refer: "Section 459G(1) A company may apply to the Court for an order setting aside a statutory demand served on the company. (2) An application may only be made within twenty-one days after the demand is so served. (3) An application is made in accordance with this section only if, within those twenty-one days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company. Section 1322 IRREGULARITIES 1322(1) In this section, unless the contrary intention appears: (a) a reference to a proceeding under this -- 3 of 18 -- 3 Law is a reference to any proceeding whether a legal proceeding or not; and (b) a reference to a procedural irregularity includes a reference to: (i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation or at a joint meeting of creditors and members of a corporation; and (ii) a defect, irregularity or deficiency of notice or time .... (4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Law, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: ... (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Law or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit." A preliminary point taken on the respondent's -- 4 of 18 -- 4 application to set aside the statutory demand was that it was served out of time. This prompted the application for an extension of time and on 4 November 1993, after a hearing, an order was made that the period prescribed for service of the material in connection with the application to set aside should be extended to 29 October 1993. The judge who made this order rejected the appellant's argument that the Act was drafted in a way which excluded the possibility of orders being made for time extension when applications to set aside were not fully perfected within the prescribed statutory time limit. After a further hearing before a different judge it was, on 11 November 1993, ordered that the statutory demand should itself be set aside, this order being made on the basis that there was sufficiently raised a dispute in respect of the amount of the debt claimed, and a sufficient indication given of the existence of an offsetting demand within the meaning of s. 459H(1), so that, within the meaning of s. 459H(3), the appellant was left with a deficiency in what was the necessary statutory minimum to sustain its demand. On the hearing of this appeal no attempt was made to argue against the determinations made by the second judge resulting in the statutory demand being set aside except insofar as the contention remained that the order should not have been made because the application to set aside was out of time and time could not be extended. For the determination of this appeal, it is therefore unnecessary to consider any questions concerning the sufficiency of the appellant's debt or the respondent's claims for offsetting amounts. No attempt was made to suggest either below or before this court that there would be any particular prejudice or injustice suffered by the appellant if time were extended in this case. The period involved was a mere two days. There was the further fact that the proceedings were filed and actually posted within the statutorily defined period even if the material to be served was not received until shortly -- 5 of 18 -- 5 after the period expired. The appellant, accordingly, did not seek to argue any matter of discretion but appeared content to accept that if a discretion to extend time existed then the judge's decision could not effectively be challenged. The argument relied squarely upon the proposition that there was no jurisdiction in the court to extend the time prescribed by s. 459G. The argument relied first upon what the appellant's counsel described as clear and emphatic language excluding the possibility of extension. The argument looked to the words, "only be made" in s. 459G(2) and the further statement that "an application is made in accordance with this section only if, within those twenty-one days ... (b) a copy of the application, and a copy of the supporting affidavit, are served ..." (emphasis added). If any time limit at all is to apply, including a time limit which may only provisionally be applicable and be subject to a power in the court to order an extension, then the time limit will have to be prescribed in mandatory language. It would serve no purpose at all if a provision were enacted indicating merely that, an applicant might, if he chose, make his application within twenty one days. There would in fact be no time limit, not even a provisional one, unless the statute uses some form of mandatory language. More traditional language used in imposing time limits, if employed here, may have resulted in something along the lines that the application "shall" be brought within a specified number of days. However, this kind of provision would not ordinarily be thought to exclude the jurisdiction of a court to rely upon general powers found elsewhere in the statute to extend time for bringing applications or doing acts. Further, it would at earlier times have been regarded as standard drafting procedure to locate any clause empowering the granting of time extensions amongst miscellaneous provisions collected elsewhere in the statute. If the word "shall" is used to limit the period within which applications may be brought it is no weaker in -- 6 of 18 -- 6 its effect than the phrase, "may only be made within". It is the relative novelty of the latter phrase which may, as a matter of first impression, appear to carry a more emphatic effect but this impression may not survive close analysis. It has to be said that if the draftsman wished clearly and emphatically to provide that the statutory time should not be extended, then such express language could readily have been used and if used in s.459G it could have been regarded as a particular provision which would prevail against a more general provision dealing with time extensions which would then remain in s. 1322. The draftsman has not done that and accordingly, it seems, should not be regarded as having made the "clear and emphatic" statement on the matter such as was submitted to us, a submission which has the support of the reasoning of Hayne J. in Texel Pty Ltd v. Commonwealth Bank of Australia (1993) 11, A.C.S.R. 535 (see especially at 536- 537). It was then said that Part 5.4 of the Corporations Law which contains s. 459G constituted a code and that no provision permitting the extension of time in the case of an application to set aside a statutory demand is to be found within that portion of the Act. The objections could be offered that to describe Part 5.4 as a Code in the sense which was argued is really to assume the truth of the proposition which is asserted and also would involve imposing a restriction upon the ambit of s. 1322(4) which cannot be found within that subsection using, as it does, language of quite general application. The further fact that the Explanatory Memorandum accompanying the enactment at its Bill stage also describes the provisions dealing with the setting aside of the statutory demands as being intended to be a complete code and as implementing a policy of "requiring debtor companies to raise genuine disputes (about, for example, whether a debt is owed) at an early stage, rather than after winding up proceedings have commenced", similarly somewhat tends to beg the question presently raised. The issue is whether there has been -- 7 of 18 -- 7 brought into existence a completely self-contained code excluding language contained within the same legislation apparently on the face of it applicable to the matter and not specifically excluded by words within the so-called code. A further argument for the appellant was that it was possible in the new legislation not only to discern an intention that non-productive arguments about the exact amount of the creditor's debt were excluded so long as a sufficient debt remained, but that there could also be detected an intention to allow only a strictly limited opportunity for contesting the validity of demand notices supporting winding-up applications, at least in the case of companies that were not able to show they were solvent. This conclusion was said to follow from the terms of s. 459S which are as follows: "459S(1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground: (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). (2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent." There is some weight in this argument but whether it provides a sufficiently secure foundation for all of the policy which the appellant wished to read into Part 5.4 is another question. It can also be asserted that s.459S contemplates that there may be opposition, at least with -- 8 of 18 -- 8 leave of the court, to applications to wind-up which rely on a failure to comply with statutory demands when the point could have been taken earlier on an application to set aside the demand. It cannot be said that there is detectable beyond argument any fully perfected policy of channelling exclusively into early applications to set aside statutory demands everything that it is open to a resisting company to raise on that issue. Further, this contention does not touch the essential question viz. whether it remains open under the legislation for the court, in a proper case, in its discretion, to extend the time for an application to set aside a statutory demand. It is not possible confidently to assert that there is an inflexible policy discernible in the legislation which would be defeated if the courts, in proper cases, had power in their discretion to extend time. A section which was much relied upon by the respondent on the appeal was s. 467A dealing with the effect of defects or irregularities in applications under Part 5.4 or 5.4A. This section reads as follows: "467A An application under Part 5.4 or 5.4A must not be dismissed merely because of one or more of the following: (a) in any case - a defect or irregularity in connection with the application; (b) in the case of an application for a company to be wound up in insolvency - a defect in a statutory demand; unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied (for example, by an adjournment or an order for costs)." The respondent's argument was that when the material specified in s. 459G(3)(b) was not served within the specified time, there occurred "a defect or irregularity in connection with the application" within the meaning of s. 467A(a) with the result that the application to set aside should not be dismissed unless there had occurred some -- 9 of 18 -- 9 substantial injustice which could not be remedied and that was not the case here. In other words, the respondent argued that here was to be found some additional support for its position apart from the assistance which it was entitled to derive from the courts power to extend time granted by s. 1322. One difficulty for the respondent was that the more it argued that the failure to comply with the time limit fell within the ambit of s. 467A, the greater was the tendency to exclude the potential application of s. 1322 in the case of applications under Part 5.4. This is because, if s.467A was available to cover any out-of-time aspects of applications to set aside, then it would appear as a particular provision within what the appellant's counsel described as a Code with a resulting tendency to exclude the operation of a general power to extend time found elsewhere. Counsel for the appellant countered the respondent's reference to and reliance upon s. 467A by saying that there did not exist here any "application" under Part 5.4 because there were no copies of the initiating document and supporting affidavit served within the specified twenty-one days. It was contended that when the wording of s. 459G was observed, this was an essential characteristic without which it could not be said that an application had been made. This might be thought to be a rather technical objection, but on a close reading of the sections it has a certain weight. Section 9, providing the Corporation Law's "dictionary" gives an inclusive definition of "defect" but it relates only to statutory demands and not to applications to set aside such demands. There is a great deal to be said for the view that "a defect or irregularity in connection with the application", the phrase appearing in s. 467A(a), should not be taken to include failures to bring an application within the specified time, but only to other kinds of defects and irregularities with the result that what would then be thought of as a particular provision dealing with extensions of time in necessary cases would be found exclusively contained in s. 1322. On this basis the -- 10 of 18 -- 10 section just mentioned and section 467A could be read comfortably together without any awkward conflict between them. This, conclusion, however, would still leave the question whether the power to extend time granted by s. 1322 is available in the case of applications under s.459G to set aside statutory demands. In a number of cases coming before single judges, apart from the case of Texel decided by Hayne J, some opinions have been expressed which bear upon this question, but they do not add significantly to the reasoning in that case: see e.g. CFC Corporation Pty Ltd v. Lanier (Australia) Pty Ltd (1993) 11 A.C.S.R. 772; Pacific Communication Rentals Pty Ltd v Walker (1993) 12 ACSR 287; De Pellegrini Pty Ltd v Reinforced Earth Pty Ltd (1994)13 A.C.S.R. 54. With respect, the consideration which appealed to the judge in Texel and the further arguments adduced by the appellant in the present case, are not sufficiently persuasive that the court lacks jurisdiction to order extensions of time for the making of applications to set aside statutory demands and may not make such order when justice would seem to require it and there is no countervailing injustice suffered by the creditor. Section 459G should not be regarded as excluding the Court's jurisdiction to extend time for bringing applications to set aside statutory demands. The slight tardiness in effecting service of the copy application and the supporting affidavit in the present case are sufficiently explained in the material and the orders made below should accordingly stand. The appeals against both of the orders made below should be dismissed with costs. -- 11 of 18 -- 11 IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 250 of 1993 Appeal No. 251 of 1993 Brisbane Before Macrossan C.J. McPherson J.A. Demack J. [Cavetina v. Synthetic Dyeworks Industries P/L.] BETWEEN CAVETINA PTY LTD (Applicant) Respondent - and - SYNTHETIC DYEWORKS INDUSTRIES PTY LTD (Respondent) Appellant REASONS FOR JUDGMENT - McPHERSON J.A. Judgment delivered the Twenty-Second day of August 1994 Section 459G(1) of the Corporations Law enables a company to apply to the Court for an order setting aside a statutory demand served on the company. Section 459G(2) provides that such an application may only be made within 21 days after the demand was served. Section 459G(3) further provides that an application "is made in accordance with that section only if, within those 21 days", an affidavit supporting the application is filed with the Court, and copies of the application and the supporting affidavit are served on the person who served the demand on the company. Here the statutory demand was served on the company on 5 October 1993. The application was filed with the Court on 25 October 1993, which was the twentieth day of the 21 day -- 12 of 18 -- 12 period prescribed by s.459G(2). However, although copies of the application and affidavit were mailed on the same day, they were not received in the ordinary course of the post until 28 October, which was two days after the 21 day period had expired, and 23 days after the demand had been served on the company. The application was therefore not made in accordance with s.459G. In an attempt to meet this problem the company obtained an order under s.1322(4)(d) of the Corporations Law extending the period within which copies of the application and affidavit be served on the demandant. On 4 November 1993 Derrington J., before whom the application for extension came, extended that period to October 29, 1993. It appears to have been assumed that the order had the consequence of making the application to set aside the statutory demand effective for the purpose of s.459G. I am not persuaded that that is so. Extending the period specified in s.459G(3) for serving the copies did not mean that the application was made in accordance with s.459G. It remained an application that was not "made in accordance with" the section because, even after the order was made, it was still the case that the copies were served not "within those 21 days", but only within 23 days after the demand was served on 5 October. The order made by Derrington J. did not alter that state of affairs. It could not have done so except perhaps by artificially "deeming" the copies to have been served on 26 October instead of 28 October. There may be a question whether under s.1322 an order having that -- 13 of 18 -- 13 effect could have been made. However, whether or not such an order could have been made, the order in fact made on 4 November 1993 was not expressed, and did not purport to have, that operation or effect. The application continued to be one that was not "made in accordance with" s.459G because, however much the time for service was extended, copies of the application and affidavit were in fact not served within the period of 21 days specified in s.459G(3). It may be that the outcome would have been different if an order had been sought and made extending the limit of time within which the application to set aside the demand could be made. That would raise the question whether it was open to the court acting under s.1322 to extend the period of 21 days specified in s.459G(2). To answer that question in the affirmative would, in my respectful opinion, deprive the word "only" in s. 459G(2) of all effect. If the word is not intended to have its literal meaning, then it is difficult to see what purpose was served by including it in sub-s.(2) at all. The opposite conclusion would presumably have the result that s.459G(2) is to be read as if it provided "An application may only be made within 21 days after the demand is served or within such extended time as the court under s.1322 may order". Such a result could have been achieved by omitting the word "only" altogether. Hence, it remains impossible to identify the function or utility of the word "only" in s.459G(2) if it does not mean what it says, which is that the application is to be made within 21 days of service of the demand, and not at some -- 14 of 18 -- 14 time thereafter. There are other considerations which in my opinion serve to confirm this conclusion. They include the history of the statutory demand procedure, the legislative scheme which was adopted by the amendment introducing the relevant provisions in question, and the contents of the explanatory memorandum published at the time of the Corporate Law Reform Bill. Those considerations are identified in the reasons for judgment of Hayne J. in the Supreme Court of Victoria in Texel Pty Ltd. v. Commonwealth Bank of Australia (1993) 11 ACSR 535, with which I respectfully agree. See also De Pellegrini Pty Ltd v. Reinforced Earth Pty Ltd. (1994) 13 A.C.S.R. 54, where Olney J. declined to follow the decision under appeal. On the view I have formed, the order made on 4 November 1993 was futile and the appeal against it was unnecessary. However, for the reasons given, I am satisfied that the order should not have been made. The appeal against that order should be allowed with costs and the order set aside; in lieu the application to extend time should be dismissed with costs. The subsequent order made by Lee J. on 11 November 1993, exercising his discretion to set aside the statutory demand, assumed that the order made on 4 November 1993 meant that the application to set aside the statutory demand was made in accordance within s.459G. In my opinion that was not so. The appeal against the order setting aside the statutory demand must therefore also be allowed with costs, and the application for that order should be -- 15 of 18 -- 15 dismissed with costs. -- 16 of 18 -- 16 IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 250 of 1993. Appeal No. 251 of 1993. Brisbane [Cavetina v. Synthetic Dyeworks Industries P/L] Before Macrossan C.J. McPherson J.A. Demack J. BETWEEN: CAVETINA PTY LTD. (Applicant) Respondent AND: SYNTHETIC DYEWORKS INDUSTRIES PTY LTD (Respondent) Appellant REASONS FOR JUDGMENT - DEMACK J. Judgment delivered 22/08/1994 I have read the reasons for judgment prepared by the Chief Justice and McPherson J.A. I agree with the reasons prepared by the Chief Justice and the orders he proposes. For many years there have been statutory provisions and rules of court which set time limits within which steps in procedures must be taken. For just as long, it has been recognised that the rigid application of such provisions will produce injustices and so courts have been given power to extend time or to waive compliance. I am not convinced that adding the word "only" to -- 17 of 18 -- 17 s. 459G(2) clearly takes away from the court or a judge the power to extend time. "Only" merely identifies the time period within which an application is to be made, just as "if" does. Putting the two words together does not, in my opinion, put the matter beyond the court's power under s. 1322. If it were the intention of Parliament to do this, s. 459G(2) could have been said to be beyond the operation of s. 1322. That would have meant not only that power to extend time was excluded, but that every irregularity would be beyond repair. This would introduce a tyranny of black letter law into complex commercial legislation. -- 18 of 18 --