Before commencing winding up proceedings against a debtor company, it is very common for a creditor to serve a creditor's statutory demand for payment of a debt ("statutory demand"). After spending time and effort preparing a statutory demand, it is crucial that the statutory demand is served properly on the debtor company. If it is not served properly, the statutory demand may be set aside and cost you money.
A statutory demand can be served on a debtor company in a number of ways. The Corporations Act provides a guide to (but does not limit) these ways. Essentially, service can be effected by:
- posting it to the debtor company's registered office;
- leaving it at the debtor company's registered office; or
- personal service of a copy on a director of the debtor company (who resides in Australia or in an external Territory).
It is critical to have an up-to-date ASIC search of the debtor company to both prepare and effect service of a statutory demand on the debtor company. An ASIC search will show the current registered address of the debtor company and the name and address of the director(s). On the flip side, it is also important for directors to make sure that the registered address of the company is kept up-to-date to avoid important documents being overlooked if sent to an old address.
The most common, and often the most problematic, way to serve a statutory demand is by post to the registered office of the debtor company. Service by post can be problematic as it relies on a rebuttable presumption that "a postal article, sent by pre-paid post to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted" (section 160 of the Evidence Act). A debtor company may therefore challenge service by post. Examples of successful challenges to service by post on a debtor company have been made where a postcode on the envelope enclosing the documents was obscured, and where there was proof the documents had been returned by Australia Post.
To avoid some of the more common pitfalls when serving documents by post, we recommend that there be a policy that the same person:
- address a pre-paid envelope to the registered office of the debtor company;
- physically place the documents in the envelope and seal the envelope;
- put the envelope in an Australia Post post office box (noting the time and address of the post office box); and
- complete an affidavit of service as soon as possible after completing the above steps.
Service by post alone may not be enough if you know that the debtor company no longer occupies the address noted on an ASIC search as the registered office. In that case you need to make sure that the statutory demand comes to the attention of the debtor company at its new address, and utilise one of the other methods of service.
To overcome problems with postal service, it is preferable to serve the statutory demand physically at the registered office of the debtor company. Service by hand at the registered office of the debtor company will provide certainty about service of the statutory demand including the date of service. It is likely to be easier to serve documents at an office address as opposed to serving a copy personally on a director (it is harder for an office to avoid service!). However there are still dangers if the documents are not served properly at the registered office. For example the documents may not be effectively served if they are left in a building mail box located outside the registered office instead of at the registered office, or if you have actual knowledge that the documents were not received by the debtor company.
If the registered office is an office or residential block with security and access is denied it may not be possible to physically serve the debtor company at its registered office. In those circumstances, the documents might have to be served by post or a copy personally served on a director (if possible).
In summary, effective service of a statutory demand is essential. Personal service of a statutory demand at the registered office of a debtor company provides the most certainty to a creditor. The cost of personal service is very small compared to the cost of having a dispute about effective service. A creditor should take care if serving a statutory demand by post to make sure that all the details are correct. Finally, it is fair to say that the same care needs to go into serving a statutory demand as goes into its preparation.