Statutory demands in the digital age: can email be effective service?

A statutory demand is a formal notice under the Corporations Act 2001 (Cth) (Act) requiring a company to pay a debt or provide security within a prescribed timeframe. Ignoring it can have serious consequences, including insolvency proceedings. In an era of digital communication, can a statutory demand be validly served by email?

What does the law say?

The usual method of service for a statutory demand is ordinary pre-paid post, addressed to the target company’s registered office. This is a prescribed method set out in s 109X(1)(a) of the Act, which states that a document may be served on a company by leaving it at, or posting it to, that company’s registered office.

Under the law, a statutory demand sent by post is generally treated as served on the seventh working day after posting it. However, creditors who want to get the debtor’s attention more quickly may seek to find ways to bring the demand to their notice sooner.

Where a creditor can establish that the statutory demand came to the attention of the responsible officer of the debtor company, this is sufficient to establish effective service, even though the mode by which it came to their attention is not expressly provided for in s 109X of the Act.

As Justice Young said in Howship Holdings Pty Ltd v Leslie (No 2) (1996) 41 NSWLR 542, [544]:

The ordinary meaning of ‘service’ is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries.

Indeed, the authorities to which Young J refers date back to at least 1854.

How long does a debtor have to reply to a statutory demand?

Debtor companies have 21 days in which to respond to a statutory demand. This period commences from the date that the relevant officer received actual notice of the statutory demand, regardless of whether the statutory demand was also delivered to the company on a later date by other means.

Under the Act, the “other means” of service include:

• by personal service on the sole director of the company;[1]
• by facsimile received prior to the demand having also been received by post;[2]
• by a director collecting it from the post office after the demand was initially sent to the wrong address;[3]
• by post actually received prior to the delivery date presumed by statute in the ordinary course of post;[4]
• by email received prior to receipt by post;[5]
• by email received after the demand was also sent by post which had been returned to the creditor by Australia Post;[6] and
• by a director who admitted receipt of the demand by undisclosed means after unsuccessful service on the debtor’s registered office.[7]

Service by email (as opposed to service by one of the more “traditional” means) has been the subject of Court conjecture in recent times, as shown in the following cases.

Caason Investments

In Re Caason Investments Pty Ltd [2021] VSC 487 Associate Justice Gardiner considered whether service by email to the company’s General Counsel was effective service in the company’s application to set aside a statutory demand.

The question of date of service was a vexed one: if the statutory demand was served by email, the date of service would be 23 April 2021, and any set aside application would need to be made by 14 May 2021.  If the statutory demand was served by post, the date of service would be 27 April 2021 and the company would have an extra four days in which to apply to have the statutory demand set aside.  The set aside application was filed on 18 May 2021 which, if the statutory demand was served by email, would be out of time.

The parties had been in dispute with each other for some time, and correspondence had been previously exchanged between the General Counsel for the company and the solicitors for the creditor.  The statutory demand was sent by the creditor’s solicitors by email to the company’s General Counsel, at his company email address.

Associate Justice Gardiner considered the two distinct lines of authority on what is necessary when it comes to service by email:

• the “Woodgate v Garard” line of authority, which holds that there will be good service when the document came to the actual attention of a responsible officer of the company; and
• the “Newsnet v Patching” line of authority, where which considers service is effective when the email is received, that is, not when the document is brought to the attention of a responsible officer.

Associate Justice Gardiner found that the “Newsnet v Patching” view is preferred by the Courts.[8]

Accordingly, his Honour found that the company was served with the statutory demand on 23 April 2021 – the date the documents were emailed to the company’s General Counsel.

Kornucopia Pty Ltd

In this case (In the Matter of Kornucopia Pty Ltd (No 1) [2019] VSC 756) Justice Sifris considered three winding up applications (in respect of three different companies) concurrently.  His Honour considered that the first issue to be dealt with was service of the statutory demands, as, if there is no valid service of the statutory demands, that may well be the end of all the proceedings.

While His Honour had to consider the specific circumstances of service of each of the statutory demands, one was sent by email from the solicitors for the creditor after having been sent by post only to be returned marked “rts”.

One of the directors of the company gave evidence that she ‘perused’ the email on the day it was sent.

Justice Sifris found that service of the statutory demand had been effected by post, but in the event that he was wrong, the statutory demand had been served by email on the date it had been sent (referring to the Newsnet v Patching line of authority).

Melking Holdings

In Deputy Commissioner of Taxation v Melking Holdings Pty Ltd [2019] FCA 988, Justice Colvin heard an application for Judicial Review of orders made by a Registrar winding up the debtor company following its failure to comply with a statutory demand.  One of the grounds for the review was that the statutory demand had not been properly served.  Whilst the application does not deal with service by email, it is nonetheless noteworthy.

The statutory demand was initially sent by ordinary post to the company’s registered office.  The envelope was returned to the Australian Taxation Office (ATO, the creditor in this instance) marked “Return to Sender”. An ATO employee then sent the statutory demand to other postal addresses associated with company.

Justice Colvin found that on 22 March 2019, the director of the company received a copy of the statutory demand on the basis of the director’s own evidence.  However, under cross-examination, the director said that he could not remember how it turned up at the company’s office.

Here, the court considered that the date the director admitted that he received the statutory demand was the date of service of the statutory demand.  The review application was not successful.

The upshot? Email can be an effective form of service

Whilst service of a statutory demand has long been effected by post, recent cases have shown (and the Courts have permitted) service by email as an effective means of service.

For creditors, this presents an opportunity to more expeditiously deal with a debtor via the statutory demand process.

For debtors, these decisions serve as a reminder that statutory demands must be quickly acted upon, as delay can prove costly. Where a statutory demand is received by email (or email and post), a debtor should be cognisant that service can be proven from the date the company became aware of the demand, which may be earlier than the date of receipt by post.

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[1] Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322, [28] – [29].

[2] Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2003] QSC 98, [2] – [3].

[3] Woodgate v Garard Pty Ltd [2010] NSWSC 508, [4].

[4] Re New Wilkie Energy Group Ltd [2024] NSWSC 942, [3] – [4], [17].

[5] Re Caason Investments Pty Ltd [2021] VSC 487, [14], [39].

[6] In the Matter of Kornucopia Pty Ltd (No 1) [2019] VSC 756, [26] – [27], [85].

[7] Deputy Commissioner of Taxation v Melking Holdings Pty Ltd [2019] FCA 988, [60] – [62].

[8] Re Caason Investments Pty Ltd [2021] VSC 487, [29].