Dean Liebich Nominees Pty Ltd v Hillside Vineyards Pty Ltd (in Liq) No. SCGRG 92/1226 Judgment No. 4034 Number of Pages 4 Corporations Companies Winding up

[1993] SASC 4034

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA DEBELLE J

CWDS
Corporations - companies - winding up - Application to stay winding up - Application based on notice pursuant to s.460 which in turn was based on judgment debt - No ground to justify stay - Application refused Re Lypne Investments Ltd (1972) 1 WLR 523; L and D Audio Acoustics Pty Ltd v Pioneer Electronic Aust Pty Ltd (1982) 7 ACLR 180; IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR 417; Vacuum Oil Company Pty Ltd v Wiltshire (1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 and Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773, applied.

HRNG ADELAIDE, 22-24, 30 June and 5 July 1993 #DATE 5:7:1993
Counsel for applicant:     Mr N L Strawbridge
Solicitors for applicant:    Baker O'Loughlin
Counsel for respondent:     Mr R C White
Solicitors for respondent: Sykes Bidstrup

ORDER
Application refused.

JUDGE1 DEBELLE J This is an application to dismiss a petition to wind up a company as being an abuse of process of the court. 2. By summons dated 29 May 1992, Hillside Vineyards Pty Ltd (in liq) ('Hillside') sought an order winding up Dean Liebich Nominees Pty Ltd ('Liebich Nominees'). The ground on which the application was made was a failure to comply with a notice issued pursuant to s.460 of the Corporations Law. That notice had sought payment of a judgment debt in the sum of $72,328. 3. The circumstances in which Hillside had secured its judgment debt are as follows. On 26 March 1992, Hillside issued a summons with a statement of claim attached. The defendants were Liebich Nominees and Messrs H.K. and D.K. Liebich, both of whom are directors of Liebich Nominees. The statement of claim effectively made two claims. The first was against Liebich Nominees for a debt of $72,328. The second alleged breaches by Messrs H.K. and D.K. Liebich of their duties as directors of Liebich Nominees. The second claim founded a separate claim for damages by Hillside against Liebich Nominees. It is unnecessary to refer further to the second claim against Liebich Nominees. 4. On 30 March 1992, the summons was served at the registered office of Liebich Nominees, which is also the office of the secretary of the company. The secretary failed to inform either the directors of Liebich Nominees, or its solicitors, of the fact of service. On 14 April 1992, Hillside entered judgment against Liebich Nominees in default of appearance. At that time, the 2 summons had not been served on either Mr H.K. Liebich or Mr D.K. Liebich. On 21 July 1992, after it had been served with this application to wind it up, Liebich Nominees applied to set aside the judgment in default. The application to wind up the company was adjourned from time to time. 5. The application to set aside the judgment was listed for hearing on 29 September 1992. However, when the application was called on, Liebich Nominees applied for an adjournment. The application was opposed by Hillside. After hearing argument, a Master of this Court adjourned the application to 10 November 1992. Liebich Nominees was ordered to pay the costs of 29 September in any event. On 10 November 1992, a Master heard the application to set aside judgment. On 17 December 1992, the Master published his reasons and dismissed the application. Liebich Nominees appealed by notice dated 23 December 1992. On 1 April 93, I heard that appeal and reserved judgment. 6. Judgment was delivered on 24 June 1993. Mr Strawbridge, who appears for Liebich Nominees on this application and who appeared for it on the appeal from the Master, informs me that the company does not intend to appeal from my judgment dismissing its appeal. 7. As I have said, in the meantime, the application to wind up Liebich Nominees had been adjourned from time to time. It is now listed for hearing on 9 July 1993. By application dated 22 May 1993, Liebich Nominees applied for an order that the application by Hillside to wind up Liebich Nominees be dismissed as an abuse of the process of the court. The application came on for hearing before me on 22 June, 24 June and on 30 June 1993. On two of 3 those three occasions, the application was adjourned at the request of Liebich Nominees. 8. The first ground argued in support of the application is the failure of the secretary of Liebich Nominees to inform the directors of the fact of service of summons and statement of claim annexed. It is also said that the secretary failed to inform the directors of the service of the notice issued under s.460 of the Corporations Law. There is no dispute that service was properly effected in both instances upon the registered office of the company. Rather, the complaint is made that the secretary failed, as I have said, to inform the directors of the company of the fact of service in each case. I do not understand how the company can assert that these facts constitute an abuse of process. On proper analysis, this contention is no more than an acknowledgment of deficiencies in the internal administration of Liebich Nominees. In my view, Liebich Nominees cannot seek to set aside the petition to wind it up because of deficiencies in its internal administration. It certainly cannot seek to advance them in support of an application for abuse of process. That ground must obviously fail. Liebich Nominees then asserts that it is solvent and that the application for winding up prevents it from carrying on its business. It also asserts that there are other procedures short of an application to wind up the company which Hillside can and ought to have pursued to enforce the judgment debt. It is true, as Mr Strawbridge submitted, that an application to wind up a company is not to be used so that the court becomes a debt collection agency nor is it to be used as a means of bringing 4 improper pressure upon a company: Re Lympne Investments Ltd (1972) 1 WLR 523 and L and D Audio Acoustics Pty Ltd v Pioneer Electronic Aust Pty Ltd (1982) 7 ACLR 180. But this contention in my view, fails to address the essential problem which faces Liebich Nominees. 9. The argument overlooks the fact that Hillside has a judgment debt in its favour, that the s.460 notice was grounded on that judgment debt, and that an appeal from a decision refusing to set aside that judgment has failed. There is no ground on which this court can lawfully deny Hillside its entitlement to seek to enforce payment of the debt. Further, there is no ground upon which the court can direct Hillside as to the method of enforcing of its debt. As Gibbs J said in IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR
417 at 427: "The authorities show that as a general rule a creditor who cannot obtain payment is, as between himself and the company that owes the debt, entitled to a winding up order as a matter of right." 10. Further, in this case, Hillside has issued a notice under s.460 of the Corporations Law. That notice was served on 16 April 1992 and the debt has remained unpaid for 12 months. Mr Strawbridge pointed to a balance sheet of Liebich Nominees dated 30 June 1990. There is no later financial statement of the company which shows its true financial position. The only indicator of the capacity of the company to pay its debts is to be found in the failure to pay after service of the s.460 notice. Hillside is entitled to rely on the fact of service of that notice and the non-payment of the debt for the purpose of prosecuting its petition. If, as the directors of Liebich Nominees assert, the company is solvent and can pay the judgment debt, then the course Liebich Nominees should adopt is obvious. 11. Finally, Liebich Nominees asserts that the debt is not a trading debt of the company but a debt of the Liebich Family Trust, of which it is trustee. It further asserts that Hillside was aware of that fact when dealing with Liebich Nominees as trustee. It is said, therefore, that it is improper for Hillside to seek to enforce payment of the debt by seeking an order to wind up Liebich Nominees. 12. The contention must fail for two reasons. It must fail first, because it seeks to go behind the judgment which has been entered against it. The statement of claim which led to the judgment debt of $72,328 asserted a debt due by Liebich Nominees to Hillside. It did not refer to the trust. It is relevant to note also that, on the hearing of the appeal against the refusal of the Master to set aside the judgment, this ground was not argued. Secondly, even if the debt was incurred by Liebich Nominees as trustee of the Liebich Family Trust, a fact which is denied by the liquidator of Hillside, Hillside is nevertheless entitled to look to Liebich Nominees for payment: Vacuum Oil Company Pty Ltd v Wiltshire (1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360. There is no evidence of any arrangement between the parties to the effect that Hillside would look to any person other than Liebich Nominees for payment of the debt due to it: cf. Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773. 13. Nothing has been advanced on the part of the Liebich Nominees to demonstrate that in any respect the application is 6 an abuse of the process of the court. The application is therefore refused.