Austruct Group Pty Ltd v Bluenergy Engineering (Australia) Pty Ltd - [2017] WASC 10

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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] WASC 10
Decision Date: 23 JANUARY 2017

CaseChat Overview and Summary

Austruct Group Pty Ltd applied for leave to set aside a statutory demand under s 459S of the Corporations Act 2001 (Cth). The demand was addressed to Bluenergy Engineering (Australia) Pty Ltd, a company with Rodney Carter as its sole director. The primary dispute between the parties centred on whether Bluenergy was solvent and whether the demand should be set aside due to the lack of a satisfactory explanation for the delay in responding to it. Austruct argued that Bluenergy was insolvent, while Bluenergy contended that it was solvent and that the demand should be set aside due to the failure to provide an adequate explanation for the delay.

The court had to determine if Mr Carter, the sole director of Bluenergy, had the authority to deal with the statutory demand on behalf of Bluenergy. The court also had to assess whether the dispute over the debt was material to Bluenergy's solvency. Bluenergy presented two approaches to determining materiality: a narrow approach focusing on solvency if the debt did not exist, and a broad approach considering the overall financial position of the company. Bluenergy argued for the application of the broad approach.

The court found that Mr Carter had the authority to deal with the demand, as there was no satisfactory explanation for the delay in responding to it. The court noted that Mr Carter did not provide any explanation regarding when and how he became aware of the demand, which was sent on 5 May 2016 and received by Bluenergy's Ms Symons on or before 10 May 2016. The court also found that Bluenergy had not provided a satisfactory explanation for the delay in setting aside the demand. Regarding the solvency issue, the court found that the dispute was material to Bluenergy's solvency based on the broad approach, which considers the overall financial position of the company.

The court granted Austruct Group's application for leave to set aside the statutory demand. It was held that Mr Carter had the authority to deal with the demand, and the delay in responding to it was not adequately explained. The court also concluded that the dispute over the debt was material to Bluenergy's solvency under the broad approach.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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. 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.

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