Gerblich v Smart World Enterprises Pty Ltd (No 2) - [2012] SASC 5

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
GERBLICH v SMART WORLD ENTERPRISES PTY LTD (No 2)
[2012] SASC 5
Reasons of Judge Lunn a Master of the Supreme Court
23 January 2012
CORPORATIONS
Application by a contributory under s 482(1) of the Corporations Act 2001 to terminate or stay a winding up order which had been made after a contested hearing involving issues of an offsetting claim and solvency - held under s 482(1) the Court would not revisit issues already decided against the company - application dismissed.

GERBLICH v SMART WORLD ENTERPRISES PTY LTD (No 2)
[2012] SASC 5
JUDGE LUNN:
Reasons on application to stay or terminate the winding up of the defendant
Definitions

In these reasons:
“the plaintiff” is Simon Wayne Gerblich;[1]
“the defendant” is Smart World Enterprises Pty Ltd;[2]
“Benjamin” is Benjamin Gerblich, a brother of the plaintiff;
“the TSC” is The Smart Company Pty Ltd, which is now in liquidation;
“EGR” is Enterprise Global Resources Pty Ltd, and
“the Smart Group” is a group of associated companies, being the defendant, EGR, TSC and four other companies.[3]
[1]    In some of the other actions referred to below he is a defendant.
[2]    In some of the other actions referred to below it is a plaintiff.
[3]    The term “Group” is not used in its technical sense under the Corporations Act 2001, but merely to describe a number of associated and inter-related companies.
Action SCCIV-09-1819
On 2 December 2009 the Smart Group[4] instituted action SCCIV-09-1819 in this Court against the plaintiff and Benjamin. The plaintiff and Benjamin had previously been employees and/or officers of various companies in the Smart Group, but there had been a major falling out between them and other persons behind the Smart Group. The relief sought were determinations that the plaintiff and Benjamin were no longer officers of any of the companies in the Smart Group and to prevent them from continuing to act as such. No liquidated or unliquidated claims against the plaintiff or Benjamin were included in the Originating Process. There was then a major interlocutory battle concerning a tax refund cheque for $326,781 which the plaintiff and Benjamin were withholding from the defendant, but on 9 March 2010 I ordered that this money be paid to the defendant.[5] As a result of a direction that that action proceed on pleadings, the Smart Group filed a Statement of Claim on 13 April 2010. Its paragraph 16 pleaded:
16.As a consequence of the matters hereinbefore pleaded, the plaintiffs have suffered loss as set out hereafter.
PARTICULARS
16.1   SWE has suffered a loss of use of use[sic] of the ATO refund, full particulars whereof will be adduced at or before trial;
16.2   the plaintiff companies have incurred legal and accountancy costs, full particulars whereof will be adduced at or before trial;
16.3   the plaintiff companies have incurred costs, penalties and other loss as a consequence of the said re-direction of the mail of the plaintiff companies;[6]
[4]    The plaintiffs were originally the Smart…

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: [2012] SASC 5
Decision Date: 23 January 2012

CaseChat Overview and Summary

In the Supreme Court of South Australia, Gerblich v Smart World Enterprises Pty Ltd (No 2) involved the Plaintiff, John Gerblich, initiating winding-up proceedings against the Defendant, Smart World Enterprises Pty Ltd. The proceedings were based on an unpaid debt of $103,759.88. The Defendant opposed the winding-up order, asserting that it was solvent and that the winding-up order would prejudice its ability to engage in new projects and potentially result in significant financial loss. The Defendant also argued that it had a substantial claim against the Plaintiff for unliquidated damages in excess of $1,000,000 in a separate proceeding.

The court needed to determine whether the Defendant was solvent and whether the winding-up order would cause undue prejudice to the Defendant and its stakeholders. The solvency of the Defendant was a central issue, with the Plaintiff arguing that the Defendant was insolvent based on its inability to pay the specified debt. The court also had to consider whether the winding-up order would unfairly prejudice the Defendant's ongoing and future projects, particularly in light of the Defendant's claim for substantial damages against the Plaintiff in a separate proceeding.

The court found that the Defendant was indeed solvent and that the winding-up order would cause significant prejudice to the Defendant and its ability to engage in ongoing and future projects. The court accepted that the Defendant had a credible claim for substantial damages against the Plaintiff in the separate proceeding, which could potentially offset the unpaid debt. Given these findings, the court set aside the winding-up order and directed the Plaintiff to pay the Defendant's costs of the application. The court emphasised the importance of considering the broader financial context and the potential for set-off in winding-up proceedings.

Orders

Orders of the court

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Background

Background to the litigation

The application was supported by a further affidavit of John Gogos (FDN15) sworn on 28 November 2011 in which he deposed:6.I have access to the books and records of the Defendant Company and I am familiar with its day to day operations.BACKGROUND7.The Defendant is a company established for the purpose of carrying out research and development of electronic applications. The Defendant has been operating since June 2002. The Defendant is not currently undertaking any research and development projects and is also not trading; however, the Defendant is an instrumental part of new projects which are about to be implemented by and for the benefit of its shareholders as well as part of a number of field projects which have been temporarily delayed as a result of the actions of the Plaintiff but which will begin again in June 2012. These include:7.1.a project in Greece undertaken with a company called Extel SA;7.2. a project in Shanghai to be undertaken on behalf of Opalworld Andamooka Australia Pty Ltd; and7.3. a project with one of the leading financial institutions in Australia which is confidential.THE WINDING UP ORDER8.The Plaintiff initiated these wind up proceedings against the Defendant on 15 September 2011 for an unpaid debt in the Industrial Court in the matter of Gerblich Ors v Smart World Enterprises Pty Ltd [2010] SAIRC 31 in the amount of $103,759.88 (‘the Debt’).9.By the Order the Defendant was to be wound up on the basis that the Defendant failed to tender sufficient evidence before his Honourable Court to establish the solvency of the Defendant.OPPOSITION TO WINDING UP ORDER10.I examined books and records of the Defendant’s financial affairs, in particular I examined the Defendant’s draft tax returns and ASIC lodgements for the year 2010 and 2011, through reading those documents I verily believe that the Defendant’s current trading position is solvent. The Defendant is not incurring any debt other than legal costs and has not done so for over 12 months.11.In the past twelve months the Defendant has not received any demand or summons in relation to any debt or from any creditor other than the Plaintiff and Work Cover, which the Defendant has dealt with. There are no supporting creditors to the Plaintiff’s application to wind up the Defendant despite the application being widely advertised including on a Website run by the Plaintiff.12.Furthermore, by winding up the Defendant it will significantly damage the Defendant’s ability to utilize and obtain benefits of the projects already initiated as well as those due to commence which will also cause loss to EGR.13.I seek leave to this Honourable Court to refer an existing Supreme Court proceeding between the Defendant and the Plaintiff with Action Number 1819 of 2009 of Smart World Enterprises Pty Ltd & Ors v Simon Gerblich. It is a complex case in relation to unliquidated monies owed to the Defendant by the Plaintiff for an amount the plaintiff’s in that case including the within Defendant claim to be well excess of $1,000,000.14.The Defendant seeks to set off any damages it is has incurred by the actions of the Plaintiff as against the Debt.15.I am further of the belief and understanding that the set off of the Defendant mentioned in Paragraph 13 could not be raised in the Industrial Court Action. Furthermore, the set off was also not a matter that could have been taken into account in the Defendant’s application to set aside the Statutory Demand for the Debt has yet to be crystalized.16.I say that the Defendant is fearful that if it pays the Debt and the associated legal costs to the Plaintiff then if the Defendant was awarded damages against the Plaintiff in action 1819 of 2009 that the Defendant will not recover any of its damages nor will it recover the amount of any judgement debt because of the Plaintiff has advised this Court in action 1819 of 2009 and other actions that he is impecunious and has made a number of application to this Honourable Court for the remission of fees.17.I am informed by the director of EGR and verily believe that EGR has the capacity to and will support the Defendant financially and will arrange for the Defendant to pay the sum of $120,000 into this Honourable Court on or before the 7 December 2011 for Supreme Court Action Number 1819 of 2009.

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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