Some say what you don’t know can’t hurt you, but in the case of court proceedings, ignorance is not bliss. You may not know that a creditor can wind up, or a person can obtain judgment against, a company without the company knowing or responding.

Unfortunately this can occur when a company doesn’t ensure that it receives and reviews post from its registered office. The consequences can be catastrophic as courts will not extend time limits for companies that have been served the relevant papers but fail to notice or address a claim.

Courts require parties to give each other notice of legal proceedings by serving court documents. This allows a party to decide whether to defend itself or agree to the demand. A company can usually be served by posting the document to its registered office.

Once a statement of claim is served, the recipient has 28 days to file a defence. If a company fails to do so, the plaintiff can obtain default judgment regardless of the merits of its claim. Similarly, after filing and serving a statutory demand to compel payment of a debt, a company has 21 days to apply to have the demand set aside. If it fails to do so, the company is presumed insolvent and risks being wound up.

In a recent Federal Court decision, a company, Bet HQ, did not apply to set aside a statutory demand for $25,613.20 in time and was wound up. The Plaintiff served the demand on Bet HQ’s registered office, a ‘largely virtual’ serviced office. Bet HQ’s business operations were actually carried out in Melbourne, but it had not updated its registered office address to its main business location or updated the relevant records maintained by ASIC. Bet HQ claimed its registered office did not forward the statutory demand and that it only received the demand months later after it requested and received the document from the plaintiff.

Despite this, the Court did not allow Bet HQ to oppose the application to wind it up. The Court was not satisfied that Bet HQ, or its sole director, acted reasonably in managing the collection of its post. Bet HQ’s sole director had previously complained about haphazard and delayed forwarding of post from its registered office and did not provide evidence that he collected forwarded post over the relevant period.

In another case the defendant company also sought to oppose being wound up on the basis that it had not received the statutory demand in time to respond. The demand was served just before the Christmas break at the company’s registered office, which was its accountants’ office. The accountants failed to notice and forward the statutory demand until they returned from break two days before the time limit expired.

Despite the circumstances, the Court found that just because the company had not received the statutory demand did not mean it was not served. As a result, the Court found that the time limit had expired.

Although this may seem harsh on the companies involved, the courts maintain that a plaintiff should not be penalised for following the correct procedure to achieve the relief they seek.  It is clear that a person should and can rely on ASIC’s register as being accurate unless they know that it is not.

The takeaway is that companies should ensure:

• the company details on ASIC’s register are accurate; and
• they have a dependable and timely internal postal system in place, especially if their registered office is separately located from their principal place of business.