Like many areas of insolvency law, statutory demands have strict procedural requirements as to the timing by which documents must be served. But how is the passage of time calculated? If something is required to be done "21 days after" a document is served, is this intended to be inclusive or exclusive of the day the document was served? The Supreme Court of NSW recently grappled with this issue in Verimark Pty Ltd v Passiontree Velvet Pty Ltd [2019] NSWSC 455 and has provided clarity for lawyers and insolvency practitioners alike.

Background

Verimark commenced proceedings against Passiontree in the local court at Burwood for breach of contract, claiming approximately $40,000 in damages. During the proceedings, Passiontree was successful on two interlocutory applications and Verimark was ordered to pay Passiontree's costs on these motions.

Passiontree had their costs assessed, and obtained certificates of determination in the sum of approximately $25,000. These certificates were lodged with the Local Court, and judgment was entered for that sum. Passiontree then served a statutory demand on Verimark for the judgment debt.

The statutory demand was served on Verimark on 1:30pm on 21 February 2019. At 4:00pm on 14 March 2019, Verimark filed an application with the Supreme Court of NSW to set the statutory demand aside.

Passiontree argued that the Court did not have jurisdiction to hear the application, as it was not served in time.

The issue in dispute

Pursuant to section 459G of the Corporations Act 2001 (Cth), an application to set aside a statutory demand "may only be made within 21 days after the demand is so served". Section 105 of the Act also reads:

Without limiting subsection 36(1) of the Acts Interpretation Act 1901, in calculating how many days a particular day, act or event is before or after another day, act or event, the first-mentioned day, or the day of the first-mentioned act or event, is to be counted but not the other day, or the day of the other act or event.

Passiontree submitted that the reference to the first-mentioned day in section 105 is a reference to the date of service of the statutory demand (being 21 February 2019) and accordingly it is to be counted in the 21 day period set out in section 459G.

If Passiontree was right about this construction, the deadline to file an application to set aside the statutory demand expired on 13 March 2019 and accordingly the Court did not have jurisdiction to hear Verimark's application to set aside the statutory demand.

Verimark submitted that the correct interpretation of section 459G is that the 21 days started counting from the first day after service, being 22 February 2019. On this construction, their time to file the application expired on 14 March 2019 and accordingly they filed within time.

The Court's lap around the Interpretation Acts

The matter was heard by Ward CJ in Equity. Her Honour considered section 36 of the Acts Interpretation Act 1901 (Cth), which provides that if a period of time is expressed to begin after a specified day, then the period of time does not include that day. Her Honour also noted section 36(1) of the Interpretation Act 1987 (NSW), which states that "if in any Act or instrument a period of time, dating from a given day, act or event is prescribed for any purpose, the time shall be reckoned exclusive of that day or of the day of that act or event".

This supports Verimark's construction of section 459G. Her Honour also applied the case of Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463. In that case, Barrett J similarly found that where a section is phrased in terms of 21 days "after" a specific day, then one is to leave out of account the specified day itself.

Accordingly, her Honour held that Verimark's submission that the days were to be calculated from the day after the service of the statutory demand was correct.

But what of section 105? Her Honour found that the Commonwealth and NSW Interpretation Acts can be read consistently with section 105 of the Corporations Act. This is because the particular event referred to in section 105 is the making of the application to set aside the statutory demand. Therefore, the "first mentioned event" (being the service of the application) is to be counted, but not the other event (being the service of the statutory demand).

In finding that the Court had jurisdiction to hear the application, her Honour went on to find that the statutory demand ought to be set aside as there was a genuine dispute as to whether it is payable, and that there is a genuine off-setting claim based on the damages claimed in the Burwood Local Court Proceedings.

Take home lessons

Statutory demands are an area of law where the courts take a strict approach with respect to procedural requirements, such as the deadlines for filing applications to set them aside. Procedural defects can lead to the parties incurring significant costs in trying to rectify the error, or may simply lead to their rights being prejudiced. Therefore, it is essential that the statutory time periods are followed strictly.

In this case, the passage of a single day was all that was required to trigger a dispute to the Supreme Court of New South Wales as to the jurisdiction for the application to set aside the statutory demand. The law is now absolutely clear that, in calculating the passage of time, it is the day after service of the statutory demand from which the 21 days are to be calculated.

Lawyers and insolvency practitioners alike should commit this rule to the forefront of their minds when they are diarising dates after the service of a statutory demand. These strict rules also emphasise the importance of ensuring that a statutory demand (and an application to set it aside) are served on the other party in such a manner that the exact time of service are precisely ascertainable so that there can be no dispute as to when the documents are served.