The recent decision of the Supreme Court of New South Wales: In the matter Black Tie Holdings Pty Ltd  NSWSC 781 (Black Tie Holdings) has set the record straight on how new amendments to the Corporations Act 2001 (Cth) (Corporations Act) are to apply to electronic service of an application to set aside a statutory demand, whilst at the same time driving home the importance of strict compliance with the Service and Execution of Process Act 1991 (Cth) (SEPA).
The following matters were not in dispute between the parties:
There were a number of issues in dispute in the matter of Black Tie Holdings, however the following issues were of particular importance:
Having not previously obtained consent to serve the Application via email, Black Tie pointed to recent amendments to the Corporations Act in reliance upon the contention that service of the Application via email was good service.
In 2020, the Corporations Act was amended (with effect from 16 December 2020) to expand the scope for service of electronic communication of documents required or permitted to be given under Chapter 5 of the Corporations Act, which deals with the External Administration of corporate entities (Reforms).
The Reforms introduced sections 105A and 105B to the Corporations Act, which were introduced to assist in identifying when and where an electronic communication is sent or received. The Reforms also amended section 600G, which relates to the electronic communication of documents given under Chapter 5 of the Corporations Act.
Black Tie’s submissions
Black Tie submitted that it was entitled to serve the Application on Z4Life via email, because the cover letter received from Z4Life’s solicitors that enclosed the Statutory Demand included a “nominated electronic address” insofar as that term is defined within section 9 of the Corporations Act. It was argued that by nominating the email address, section 600G allowed Black Tie to serve the Application by sending it to that address electronically.
The nominated electronic address referred to by Black Tie was the email address of the Z4Life’s solicitor, which was included in the signature panel of the cover letter enclosing the Statutory Demand for service on Black Tie.
Black Tie relied upon sub-paragraph (b) of the definition of a nominated electronic address, which provides that a nominated address can be one that the “originator” (being the person sending the email) believes on reasonable grounds to be a current electronic address for the “addressee” (being the person receiving the email).
Z4life submitted that the email address referred to in the cover letter was not a nominated electronic address in reliance upon sub-paragraph (a) of the definition, because the email address was not nominated by Z4Life’s solicitors to the “originator” of the email that actually served the Application, being Black Tie’s solicitors.
In other words, Z4Life contended that the nominated email address could be relied upon by Black Tie (being the entity that the original cover letter was actually addressed to), but not Black Tie’s solicitors, because the cover letter was not addressed to the solicitors.
In considering the operation of these new provisions of the Corporations Act, the Court held that whilst it accepted that Z4Life’s submission was technically correct, Black Tie’s solicitors had reasonable grounds to believe that the email address was a current electronic address for the purpose of receiving electronic communications, thereby satisfying sub-paragraph (a) of the definition of a nominated electronic address under the Corporations Act.
The Court therefore held that service of the Application by email was a permissible and effective form of service of the Application. However, the issue as to whether service of the Application was properly effected in this case was still unresolved, due to the operation of SEPA.
It was common ground that Black Tie had failed to attach a SEPA Notice when serving the Application via email. It was also accepted that neither Z4Life nor Z4Life’s solicitors were based in New South Wales, being the jurisdiction in which the proceedings were commenced.
In addressing interstate service of originating processes, section 16 of SEPA provides that:
“Service is effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served.”
Black Tie’s submissions
Black Tie argued that the Court should in its equitable jurisdiction consider that Z4Life was estopped from relying upon SEPA, because the address in the Statutory Demand nominated the physical office of Z4life’s solicitors (in Queensland) as the correct address for service of the Application. Black Tie argued that this was misleading, because that was not an address for service in the same jurisdiction that the Statutory Demand was served in (being in New South Wales).
Z4Life submitted that by failing to attach a SEPA Notice, service of the Application cannot be effective in accordance with section 16 of SEPA. It further contended that that the requirements of SEPA cannot be waived or outflanked and that by failing to attach the SEPA Notice, service of the Application was not effected within the statutory period nominated by the Corporations Act and that the Application must therefore be dismissed.
After consideration of a number of authorities on the issue, the Court held that Z4Life was not estopped from relying upon SEPA and that Black Tie’s failure to attach a SEPA Notice when serving the Application via email was fatal.
The Application was therefore dismissed, with costs in favour of Z4life.
The decision in Black Tie Holdings signals the beginning of a shift towards accepting electronic means of service, which is becoming increasingly common in the modern legal profession. Practitioners should therefore familiarise themselves with the recent Reforms, to ensure that potential issues with service are not overlooked. Equally, the Reforms also provide companies with the opportunity to serve documents under Chapter 5 of the Corporations Act on short notice via email, provided that there is a nominated electronic address meeting the definition in section 9.
Whilst the Reforms provide some welcome flexibility for both companies and practitioners, the decision in Black Tie Holdings sends a clear warning to those who do not act in strict compliance with requirements of SEPA. It is therefore essential that practitioners remain cognisant of the legislation which is applicable to the originating process being served.
Stone Group Lawyers acted for the successful defendant, Z4Life.
Brendan is a Senior Associate in our Commercial Litigation team and has been practicing since 2017.
Brendan has gained valuable experience in litigation, dispute resolution and insolvency, acting for publicly listed companies, multi-billion dollar private companies, government agencies, high-net-worth individuals and local business owners in varying jurisdictions.
Brendan prefers to apply a practical and personable approach to resolving complex legal issues in order to achieve the best possible outcomes for his clients.