Crema Pty Ltd v Land Mark Property Developments Pty Ltd

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IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 6250 of 2006

CREMA (VIC) PTY LTD (ACN 005 668 011) Plaintiff
v
LAND MARK PROPERTY DEVELOPMENTS (VIC) PTY LTD
(ACN 097 107 250)
Defendant

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JUDGE:

DODDS-STREETON J

WHERE HELD:

Melbourne

DATE OF HEARING:

31 August 2006

DATE OF JUDGMENT:

15 September 2006

CASE MAY BE CITED AS:

Land Mark Property Development Pty Ltd

MEDIUM NEUTRAL CITATION:

[2006] VSC 338

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Corporations – Insolvency – Application to wind up company in insolvency – Non-compliance with statutory demand – No application made to set aside statutory demand – Whether statutory demand a nullity because specified debt not due and payable – Statutory demand not signed by creditor or its solicitor and failure to attach or explain the invoices referred to – Whether s 459S of the Corporations Act 2001 (Cth) applied – Whether supporting creditor’s debt due and payable – Whether company discharged onus of demonstrating solvency – Whether Court should exercise its discretion to adjourn hearing to permit company to refinance.

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APPEARANCES:

Counsel Solicitors
Plaintiff/ Respondent  Mr A. Kirby Comlaw
Defendant/ Appellants Mr J.I. Fajgenbaum QC
Mr H.A. Aizen
Mr K. Baker
Paul Egan & Associates
The Supporting Creditor Mr P.G. Cawthorn Gadens Lawyers

TABLE OF CONTENTS

THE APPEAL...................................................................................................................................... 2

SUMMARY OF FACTS AND EVIDENCE................................................................................... 3

THE LEGISLATION....................................................................................................................... 14

THE APPELLANTS’ ARGUMENTS............................................................................................ 18

WHETHER STATUTORY DEMAND A NULLITY.................................................................. 19

SOLVENCY....................................................................................................................................... 31

DISCRETION NOT TO MAKE WINDING UP ORDER........................................................ 39

CONCLUSION................................................................................................................................. 40

HER HONOUR:

THE APPEAL

  1. By Notice of Appeal filed 23 August 2006, the appellants, Land Mark Property Developments (Vic) Pty Ltd (“Land Mark”) and its director, Mr John Grezos, appeal pursuant to Rule 77.05(1) of the Supreme Court Rules against the order of Master Efthim made 2 August 2006 that:

1.the company should be wound up in insolvency under the Corporations Act;

2.Paul Vastelas of BK Taylor & Co, an official liquidator, be appointed the liquidator of the company;

3.the plaintiffs and the supporting creditors’ costs including reserved costs, be taxed and reimbursed out of the property of the company in accordance with 446(2) of the Corporations Act.

4.Orders 1, 2 and 3 of the Order be stayed until 4.00pm on Friday, 25 August 2006 or until further order.

  1. The plaintiff below and the respondent to the appeal is Crema (Vic) Pty Ltd (“Crema”), a building company, which applied to wind Land Mark up on the basis of its non‑compliance with a statutory demand.  The application to wind the company up is supported by a supporting creditor, the Public Trustee of Queensland as custodian for City Pacific Limited.

  1. By Rule 77.05(7) of the Supreme Court Rules, an appeal from a Master is by way of a rehearing de novo and by Rule 77.05(7)(a), each party may, subject to objection, rely on the affidavits and evidence used or given before the Master.

  1. The principal affidavits relied on by Land Mark before the Master are:

1.The first affidavit of John Grezos sworn…

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Details
Case
[2006] VSC 338
Decision Date

CaseChat Overview and Summary

Crema Pty Ltd applied to the Federal Court of Australia to wind up Land Mark Property Developments Pty Ltd on the grounds of insolvency. The dispute centred on the validity of a statutory demand issued by Crema to Land Mark, the satisfaction of which was a prerequisite for the winding up application. Key issues included whether the statutory demand was a nullity due to non-compliance with the statutory requirements, and whether the specified debt was due and payable. Further, the court needed to determine whether Crema had discharged the burden of demonstrating Land Mark's insolvency, and whether the Court should exercise its discretion to adjourn the hearing to allow Land Mark to refinance.

The court examined the statutory demand to ascertain whether it complied with the requirements set out in the Corporations Act 2001 (Cth). Notably, the statutory demand was neither signed by the creditor nor their solicitor, and the accompanying invoices were not attached or adequately explained. The court considered whether these deficiencies rendered the statutory demand a nullity. Additionally, the court assessed whether the debt specified in the statutory demand was due and payable, and whether Crema had satisfied its evidentiary burden to establish Land Mark's insolvency. Finally, the court contemplated whether it should exercise its discretion under section 459S of the Corporations Act to adjourn the hearing, thus giving Land Mark an opportunity to secure refinancing.

The Federal Court found that the statutory demand was invalid due to the non-compliance with the statutory requirements, specifically the failure to sign and explain the invoices. Consequently, the Court determined that Crema had not established that the statutory demand was valid and that Land Mark was insolvent. Moreover, the court found that Crema had not discharged its onus of proving Land Mark's insolvency, as the statutory demand was insufficient to support such a claim. The court declined to exercise its discretion to adjourn the hearing, reasoning that Land Mark had not demonstrated a reasonable prospect of securing refinancing.

In summary, the Federal Court dismissed Crema's application to wind up Land Mark Property Developments Pty Ltd. The Court held that the statutory demand was invalid due to procedural deficiencies, and Crema had failed to establish Land Mark's insolvency. The Court also noted that Land Mark had not shown a reasonable prospect of securing refinancing, which further supported its decision not to adjourn the hearing. Consequently, Crema's application was dismissed with no order as to costs.

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

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