Austruct Group Pty Ltd v Bluenergy Engineering (Australia) Pty Ltd
[2017] WASC 10
•23 JANUARY 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: AUSTRUCT GROUP PTY LTD -v- BLUENERGY ENGINEERING (AUSTRALIA) PTY LTD [2017] WASC 10
CORAM: ACTING MASTER STRK
HEARD: 28 SEPTEMBER 2016
DELIVERED : 23 JANUARY 2017
FILE NO/S: COR 101 of 2016
BETWEEN: AUSTRUCT GROUP PTY LTD
Plaintiff
AND
BLUENERGY ENGINEERING (AUSTRALIA) PTY LTD
Defendant
Catchwords:
Corporations law - Statutory demand - Application for leave under s 459S of the Corporations Act 2001 (Cth)
Legislation:
Corporations Act 2001 (Cth), s 459S
Result:
Leave refused
Category: B
Representation:
Counsel:
Plaintiff: Mr C C K Ko
Defendant: Mr P Laffery
Solicitors:
Plaintiff: Trinix Lawyers
Defendant: Kings Park Corporate Lawyers
Case(s) referred to in judgment(s):
Australian Solar Electrics Pty Ltd v IPD Group Ltd [2012] FCA 786
Chief Commissioner of Stamp Duties v Paliflex Pty Ltd [1999] NSWSC 15; (1999) 149 FLR 179
DAG International Pty Ltd v DAG International Group Pty Ltd [2005] NSWSC 1036
Ewen Stewart & Associates Pty Ltd v Blue Mountains Virtual Air Helitours Pty Ltd (No 2) [2011] NSWSC 113
Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259
Gelor Pty Ltd v Magic Star (WA) Pty Ltd [2002] WASC 148
Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2003] QSC 098
Perpetual Nominee Ltd v NA Investment Holdings Pty Ltd [2011] NSWSC 282
Re Pegasus Capital Management Pty Ltd [2011] NSWSC 570
Re Vangory Holdings Pty Ltd [2015] NSWSC 546
Robowash Pty Ltd v Robowash Finance Pty Ltd [2001] WASC 112
Soundwave Festival Pty Ltd v Altered State (WA) Pty Ltd (No 1) [2014] FCA 466
Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWCA 37; (2000) 48 NSWLR 661
Woodgate v Garard Pty Ltd (2010) 78 ACSR 468
ACTING MASTER STRK: On 16 May 2016, the plaintiff (Austruct) applied for orders to wind up the defendant (Bluenergy). The winding up application relies on a creditor's statutory demand for payment of a debt dated 23 March 2016 (the Demand), which describes the debt as follows:
Description of the debt:
The total amount outstanding under the invoices outlined in the attached schedule relating to services supplied by the creditor for or on behalf of the company.
The amount of debt is $47,025 and the schedule attached to the Demand records as follows:
Invoice Date
Invoice Number
Amount Outstanding
21/12/2015
00003391
$13,750.00
21/12/2015
00003392
$13,887.50
28/01/2016
00003417
$19,387.50
TOTAL
$47,025.00
No application was made by Bluenergy to set aside the Demand within 21 days of its service on Bluenergy under s 459G of the Corporations Act 2001 (Cth). Bluenergy also did not comply with the Demand by paying or securing or compounding the debt the subject of the Demand (the Debt) to Austruct's reasonable satisfaction within that period or at all.
On 22 June 2016, Bluenergy filed an application for leave pursuant to s 459S of the Corporations Act to rely on the existence of a genuine dispute between Bluenergy and Austruct which it could have relied upon if it had applied to set aside the Demand (the Application).
Bluenergy sought that the Application be determined separately and prior to the hearing of Austruct's application to wind up Bluenergy. Programming orders were made and the matter was listed for a special appointment on 28 September 2016.
At the commencement of the hearing, counsel explained that there was some confusion as to whether the matter had been programmed so that both the Application and the application to wind up Bluenergy were to be heard on 28 September 2016. After hearing argument from Counsel, I determined that it was appropriate to hear and determine the Application first.
Grounds sought to be relied upon by Bluenergy
Bluenergy seeks to oppose the winding up application on the following five grounds:
1.The Demand relied on by Austruct is invalid as it was issued to the wrong entity.
2.Alternatively, Bluenergy is not indebted to Austruct for the sum claimed by Austruct of $47,025.00 or any part thereof.
3.Alternatively, there is a genuine dispute as to the existence of the debt the subject matter of the Demand.
4.Alternatively, the Application is an abuse of process.
5.Alternatively and in any event, Bluenergy is solvent.
Bluenergy relies on a number of affidavits in opposition to Austruct's winding up application and in support of its Application: the affidavit of Mr Rodney Charles Carter, a director of Bluenergy, sworn on 22 June 2016; the affidavit of Mr Maurice McKinnon, accountant at Horizon Accounting, Bluenergy's accountant, sworn 28 June 2016; the second affidavit of Mr Maurice McKinnon, sworn 30 August 2016; and the affidavit of Mr Donnie James Patterson, the Business Manager for Bluenergy, sworn 30 August 2016.[1]
[1] Other affidavits have been filed in the proceedings on behalf of Bluenergy which concern procedural matters, particularly the timing of filing of substantive affidavits on behalf of Bluenergy.
The applicable principles
Section 459S of the Corporations Act relevantly provides:
(1)In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:
(a)that the company relied on for the purposes of an application by it for the demand to be set aside; or
(b)that the company could have so relied on, but did not so rely on (whether it made such an application or not).
(2)The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.
The matters relevant to an application for leave under s 459S are whether there is a serious question to be tried on the ground sought to be raised; the sufficiency of any explanation as to why the ground was not raised in an application to set aside the creditor's statutory demand, involving an evaluation of the reasonableness of the debtor's conduct at the time when the application might have been made; and whether the court is satisfied that the relevant ground is material to proving whether the debtor is solvent.[2] The discretion conferred by s 459S is to be exercised cautiously and sparingly and with regard to the purpose of pt 5.4 of the Corporations Act to provide for determination of any objections to a creditor's statutory demand by an application under s459G of the Corporations Act, rather than at the time of the winding up application.[3]
[2] Re Vangory Holdings Pty Ltd [2015] NSWSC 546 [10]; citing with approval Chief Commissioner of Stamp Duties v Paliflex Pty Ltd[1999] NSWSC 15; (1999) 149 FLR 179 [49]; DAG International Pty Ltd v DAG International Group Pty Ltd [2005] NSWSC 1036; Perpetual Nominee Ltd v NA Investment Holdings Pty Ltd [2011] NSWSC 282 [33]; Re Pegasus Capital Management Pty Ltd[2011] NSWSC 570 [6].
[3] Re Vangory Holdings Pty Ltd [10]; citing with approval Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWCA 37; (2000) 48 NSWLR 661; and Perpetual Nominee Ltd v NA Investment Holdings Pty Ltd [34]. The approach was adopted by Master Sanderson in Robowash Pty Ltd v Robowash Finance Pty Ltd [2001] WASC 112 [12]; and Acting Master Chapman in Gelor Pty Ltd v Magic Star (WA) Pty Ltd [2002] WASC 148.
Whether a serious question to be tried is established
The first question to be determined is whether there is a serious question to be tried as to the grounds now sought to be raised by Bluenergy. This consideration is directed to whether Bluenergy has a seriously arguable case that the debt is the subject of a genuine dispute. It does not require a final determination of whether a genuine dispute exists.[4]
[4] Re Vangory Holdings Pty Ltd [11]; citing with approval DAG International Pty Ltd v DAG International Group Pty Ltd [5]; and Soundwave Festival Pty Ltd v Altered State (WA) Pty Ltd (No 1) [2014] FCA 466 [10].
Having had regard to the affidavits filed, I am satisfied that there is a serious question to be tried whether, as a matter of fact, the debt referred to in the Demand was a debt incurred by Bluenergy, alternatively incurred by a separate entity, Phillips Total Solutions Pty Ltd ACN 167 893 996, previously known as Bluenergy Engineering Pty Ltd ACN 167 893 996 (BE). The following factors particularly support that conclusion.
Mr Garry Walker, the sole director of Austruct, in his affidavit of 22 September 2016 states as follows:
(a)the debt the subject of the Demand relates to fabrication drawings prepared by Austruct for wall panels to be installed at Elizabeth Quay and walkways at South Hedland Power Station;
(b)the debt relates to three invoices referred to in the schedule to the Demand;
(c)the drawings were originally commissioned by an entity called Bluenergy Engineering;
(d)the drawings were completed in December 2015 and January 2016; and
(e)the final drawings were delivered to Rohan Eicke of an entity called Bluenergy on 28 January 2016.[5]
[5] Affidavit of Garry Roy Walker sworn 22 September 2016 [4] ‑ [8].
However, Mr Carter (a director of Bluenergy) states that Bluenergy never received, requested, agreed or contracted services from Austruct the subject matter of the alleged debt. It is Bluenergy's position that the debt instead was incurred by BE, and that Mr Carter did not on behalf of Bluenergy agree that Bluenergy would meet BE's liabilities including the debt.[6]
[6] Affidavit of Rodney Charles Carter sworn 22 June 2016 [17].
Annexed to Mr Carter's affidavit is a copy of purchase orders which are said to be related to the debt. The purchase orders refer to BE, the ACN of BE, and premises in Henderson, Western Australia (the principal place of business of BE).[7] The purchase orders are dated 12 October 2015 and 30 November 2015 respectively.
[7] Affidavit of Rodney Charles Carter sworn 22 June 2016, 'RCC‑3'; affidavit of Donnie Charles Paterson sworn 30 August 2016, 'DJP‑3'.
Annexed to the affidavit of Mr Patterson, the Business Manager for Bluenergy, is a copy of an ASIC Company extract for Bluenergy which records its registration date as being 7 December 2016.[8]
[8] Affidavit of Donnie James Patterson sworn 30 August 2016, 'DJP‑4'.
Mr Patterson deposes to Bluenergy and BE having entered into an agreement on 12 January 2016, by which Bluenergy purchased BE's 'Sale Assets'; undertook to complete the remaining works of BE on its behalf 'without the obligations of BE'; and did not contract to accept BE's liabilities, claims or debts.[9]
[9] Affidavit of Donnie James Patterson sworn 30 August 2016 [13] ‑ [15], 'DJP‑5'.
Annexed to the affidavit of Mr Patterson is a copy of an ASIC Company extract for BE, which indicates that its registration date was 5 February 2014, and that a liquidator was appointed by the court to BE in May 2016.[10]
[10] Affidavit of Donnie James Patterson sworn 30 August 2016, 'DJP‑3', page 38.
I find that there is a serious question to be tried. However, I have deliberately refrained from any detailed examination of the evidence led by Bluenergy. Once satisfied that there is a serious question, I need go no further.
Is there a satisfactory explanation for why there was no application to set aside the statutory demand? Was Bluenergy's conduct reasonable?
The next issue which arises is the sufficiency of any explanation as to why the ground was not raised in an application to set aside the creditor's statutory demand, which involves an evaluation of the reasonableness of the debtor's conduct at the time when the application might have been made.
Austruct's position
Austruct relies on the affidavit of service of Ms Kerry Gina Fontana sworn on 22 September 2016. Ms Fontana deposes to having served Bluenergy with the Demand and the accompanying affidavit of Mr Garry Walker sworn on 23 March 2016 by posting the documents by priority prepaid post to the registered office of Bluenergy. The evidence filed on behalf of Austruct establishes that the Demand was properly addressed, prepaid and posted. I therefore accept that the Demand was posted on 23 March 2016.
The Demand was addressed to Bluenergy's registered office. It is not disputed that it was posted to Bluenergy's proper registered address.
Austruct also relies on the affidavit of Ms Andrea Marie Symons sworn on 22 September 2016. Ms Symons deposes to having emailed a copy of the Demand and accompanying affidavit to Mr Rodney Carter on 23 March 2016.[11]
[11] Affidavit of Andrea Marie Symons sworn 22 September 2016 [5], 'AMS1'.
Ms Symons also deposes to having:
(a)received a message on 10 May 2016 that Mr Claude Armeli of Kings Park Lawyers had left a message for her to telephone him regarding Austruct;
(b)discussed the Demand with a Mr Armeli on 11 May 2016, at which time he said (among other things) words to the effect that 'his client had dropped off a copy of a statutory demand';[12] and
(c)received a letter by email from Mr Damien Maloney of Kings Park Lawyers, raising issues in relation to the Demand.[13]
Bluenergy's position
[12] Affidavit of Andrea Marie Symons sworn 22 September 2016 [6] ‑ [7].
[13] Affidavit of Andrea Marie Symons sworn 22 September 2016 [10], 'AMS2'.
The explanation of the failure of Bluenergy to apply to set aside the Demand within time was not expressly addressed in the submissions filed on behalf of Bluenergy in support of the Application.
Mr Maurice McKinnon, accountant at Horizon Accounting, Bluenergy's accountant, in his affidavit sworn 28 June 2016 deposes to:
(a)Horizon Accounting's office being the registered office of Bluenergy;[14]
(b)him not recalling ever having received a copy of the Demand at his office and the basis for his belief that the Demand was not received at his office (including a description of his practice's internal protocols);[15]
(c)first seeing the Demand when he received a copy of Austruct's winding up application by letter from Austruct's solicitors dated 27 May 2016;[16]
(d)having emailed a copy of the winding up application to Mr Carter immediately upon his receipt of the letter from Austruct's solicitors.[17]
[14] Affidavit of Maurice Edward McKinnon sworn 28 June 2016 [6].
[15] Affidavit of Maurice Edward McKinnon sworn 28 June 2016 [9] ‑ [14].
[16] Affidavit of Maurice Edward McKinnon sworn 28 June 2016 [15].
[17] Affidavit of Maurice Edward McKinnon sworn 28 June 2016 [17] ‑ [18], 'MEM‑3'.
Mr Donnie Patterson, the Business Manager for Bluenergy, in his affidavit sworn 30 August 2016 deposes to first seeing the Demand when he was shown a copy of Austruct's winding up application by letter from Austruct's solicitors dated 27 May 2016 by Mr Maurice McKinnon.[18]
[18] Affidavit of Donnie James Patterson sworn 30 August 2016 [6] ‑ [7].
Mr Rodney Carter in his affidavit sworn 22 June 2016 states that he does not recall receiving a copy of the Demand on or about 26 March 2016 and that he was not aware of it having been emailed to him on that date.[19] Further, he says that once the email was brought to his attention and he had considered the contents of the Demand, he instructed Bluenergy's solicitors to inform Austruct's solicitors that the Debt related to a separate entity, BE.[20]
[19] Affidavit of Rodney Charles Carter sworn 22 June 2016 [10].
[20] Affidavit of Rodney Charles Carter sworn 22 June 2016, [13].
Section 459G does not deal with what is service. As explained by Helman J in Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd:[21]
[21] Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2003] QSC 098 [8] ‑ [9].
It is not necessary to resolve that question, however, since I am persuaded by a second argument advanced on behalf of the respondent, viz that the admitted receipt of the facsimile transmission of the statutory demand and accompanying affidavit proves that there had been effective service of those documents on the principles discussed by Young J in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542. In that case a summons seeking an order pursuant to s459G of the Corporations Law had been served at a document exchange box. His Honour held that service of a summons at a document exchange box was not of itself good service but proof of actual receipt, albeit through a document exchange box, was effective as service. Young J observed:
'S459G(3) of the Corporations Law provides that an application to set aside a statutory demand may only be made if the copy of the application and copy of the supporting affidavit are served on the person making the demand within twenty-one days. The decision of the High Court of Australia in David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265 makes it clear that the legislature intended that if no such application is filed and served within the twenty-one days it is not competent for a court to deal with the application.
S459G itself does not deal with what is service. 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, including Hope v Hope (1852) 4 De GM & G 328 at 341‑345; 43 ER 534 at 539‑540; R v Heron; Ex parte Mulder (1884) 10 VLR 314 at 315; Pino v Prosser [1967] VR 835 at 838. Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them.
If this were not so, one would get the absurd situation referred to by McInerney J in Pino v Prosser (at 837), that the conclusion would be one which is:
'"... remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ ... should be held not to have been served." (p543‑p544)'
Young J held that s109X of the Corporations Law was not a code governing service. S109X, by providing that a summons 'may be served' by certain means, is facultative not mandatory:
'The document could have been served under s109X, but the mere fact that it has not been does not disqualify it from service if the document came into the possession of the addressee. (p544)'
There is, I think, no reason to refrain from applying the principle explained by Young J in Howship Holdings Pty Ltd v Leslie to service of a statutory demand under s459E of the Corporations Act. To ignore the admissions of receipt, and, it should be noted, service, of the documents of the kind before me in this case would be artificial in the extreme. I therefore conclude that service of the statutory demand and the accompanying affidavit occurred when, on behalf of the applicant, it was admitted that it had taken place, ie, on 31 January 2003.
Mr Rodney Carter, the sole director of Bluenergy, is a person with authority to deal with the Demand on behalf of Bluenergy.[22]
[22] Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 [58]; Australian Solar Electrics Pty Ltd v IPD Group Ltd [2012] FCA 786, citing Woodgate v Garard Pty Ltd (2010) 78 ACSR 468.
Given the timing of the message received by Ms Symons (see [24] above), it would appear that Mr Carter became aware of the email and the Demand on or prior to 10 May 2016. However, Mr Carter proffers no explanation as to when and how he became aware of the email and the Demand.
The evidence of Mr McKinnon is of some assistance, but in light of the lack of explanation proffered by Mr Carter, I am not satisfied that on the evidence before me, there is an adequate or satisfactory explanation for why no step was taken to set aside the Demand.
Is the dispute concerning the debt material to Bluenergy's solvency?
The next issue which arises is whether the dispute concerning the debt is material to Bluenergy's solvency.
As to the applicable legal principles, Bluenergy refers to two approaches to the requirement under s 459S of the Corporations Act that the court be satisfied that the relevant ground is material to proving that the company is solvent - a 'narrow' and a 'broad' approach.[23]
[23] As to the narrow approach, Bluenergy referred to Switz Pty Ltd v Glowbind Pty Ltd; and as to the broad approach, Ewen Stewart & Associates Pty Ltd v Blue Mountains Virtual Air Helitours Pty Ltd (No 2) [2011] NSWSC 113.
In Perpetual Nominee Ltd v NA Investment Holdings Pty Ltd,[24] the tests were described as follows.
On the strict approach to the question of 'materiality', as was applied by Spigelman CJ in Switz v Glowbind at [674] and [56], a challenge to the debt will be material to proving that the company is solvent if the company is able to demonstrate that, if the debt does not exist, then the company will be solvent. (See also the view expressed by Perram J in Grant Thornton Services (NSW) Pty Ltd v St George Wholesale Distributors Pty Ltd [2008] FCA 1777 at [19‑22]).
The broad approach to the question, in contrast, looks to the overall financial position of the company. In Deputy Cmr of Taxation v Neo Rock Pty Ltd [2009] FCA 129, Logan J held at [10] that:
'The evidence led on behalf of Neo Rock on the application is noteworthy for its absence of reference to the overall financial position of that company. There is no evidence which touches upon the assets and liabilities of the company generally, its profit and loss, its balance sheet, or its solvency, either having regard to the debt as it presently stands (which has its origins in that which supported the statutory demand) or otherwise howsoever.'
[24] Perpetual Nominee Ltd v NA Investment Holdings Pty Ltd [70] ‑ [71].
Bluenergy intends (among other grounds) to defend the winding up application on the basis of solvency. For the purpose of the Application, Bluenergy has not sought to establish that the 'narrow' approach is satisfied. Rather, Bluenergy submits that the 'broad' approach ought to be preferred.
The submission made on behalf of Bluenergy as to why the 'broad' approach is satisfied is as follows:[25]
It is submitted (notwithstanding the submissions in section B above) that the debt the subject matter of the Demand is material to the Defendant's interlocutory application because (and assuming for the moment the Court accepts that the Demand was validly issued, which is denied):
(a)there is a presumption of insolvency at the expiration of the 21 day statutory period as the Defendant did not apply to set aside the Demand; and
(b)but for the debt the subject matter of the Demand there would be no presumption of insolvency of the Defendant.
[25] Defendant's submissions filed 19 September 2016 [21].
The position adopted by Bluenergy and its interpretation of the 'broad' approach is misconceived.
Austruct submits that Bluenergy has not provided any evidence that the relevant ground (being whether the debt is owed by Bluenergy or some other entity) is material to proving solvency.
Having regard to the evidence filed on behalf of Bluenergy, in particular the evidence filed on behalf of Bluenergy as to its solvency, even on the broad approach, I find that Bluenergy has not established the materiality of this evidence to proving solvency.
Determination
In all of the circumstances, I am satisfied that this is a case where I should not exercise my discretion so as to grant leave under s 459S. As I am only dealing with the Application, I do not intend to deal with or comment on whether s 459S precludes the advancing by Bluenergy of the contention that the course of conduct engaged in by Austruct is an abuse of process.
I will hear the parties as to the precise form of order and costs.
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