Hatch v Tyres4U Pty Ltd - [2010] WASC 100

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: HATCH -v- TYRES4U PTY LTD [2010] WASC 100

CORAM: MASTER SANDERSON

HEARD: 23 MARCH 2010

DELIVERED : 13 MAY 2010

FILE NO/S: COR 194 of 2009

BETWEEN: MARSHALL JOHN HATCH
GREER DANELLE SCHLUETER
Plaintiffs
AND
TYRES4U PTY LTD t/as TYRES4U
First Defendant
HATCH ENTERPRISES (WA) PTY LTD (in liq)
Second Defendant

Catchwords:

Corporations law - Practice and procedure - Application to terminate liquidation - Parties agree liquidation to be terminated - Payment of liquidator's costs and legal costs

Legislation:

Nil

Result:

Costs to be paid by the plaintiffs

Category: B

Representation:

Counsel:

Plaintiffs:     Mr L A Tsaknis
First Defendant              :     Mr R D Banda
Second Defendant         :     Mr D P Bristol

Solicitors:

Plaintiffs:     Redding & Associates
First Defendant              :     Havilah Legal
Second Defendant         :     Rowe Bristol Lawyers

Case(s) referred to in judgment(s):

Nil

MASTER SANDERSON: The second defendant is a company registered in Western Australia. On 2 June 2009 the company was placed into liquidation pursuant to an order made by the Supreme Court of New South Wales. Mr David Ian Mansfield was appointed official liquidator. The plaintiffs are contributories in the second defendant. They are also its directors. By this originating process they sought an order seeking to terminate the winding‑up. Their application was based on a claim the second defendant was solvent, had no creditors and was able to meet its debts when they fell due. The liquidator filed an affidavit confirming that position. He also confirmed that his costs could be deducted from the assets of the company.
Initially the first defendant, the party who brought the winding‑up application against the second defendant, resisted the application. However, at the return of the originating process it became clear that the first defendant had no objection to the winding‑up being terminated. The only issue between the parties related to costs. As this issue had not been directly addressed in the submissions I adjourned the matter to allow all parties to make further submissions on this issue. This has been done and these reasons deal with the question of costs.
In determining the costs issue it is necessary first to say something about how the debt owing by the second defendant to the first defendant arose, the service of the statutory demand and the eventual winding‑up order.
At all material times the registered office of the second defendant was care of Darren Bonker & Associates Pty Ltd, 887 South Western Highway, Byford, WA 6122. That is the address shown in the relevant ASIC information. In opposition to the application the first defendant relied upon an affidavit of Leslie Robert Swanson sworn 22 December 2009. Mr Swanson is a process server. He annexes to his affidavit a copy of the company search of the second defendant showing the correct registered office (annexure A).
In late 2008 a dispute arose between the first defendant and the second defendant as to whether or not the second defendant was indebted to the first defendant. The amount in question was modest - just over $9,000. The dispute was not resolved and the first defendant issued proceedings in the Penrith Registry of the New South Wales Local Court. Mr Swanson says he served those proceedings by sending them to the second defendant's registered office by prepaid ordinary post. He says he did this on 19 November 2008 (annexure B). However it would appear he used the wrong post code. His affidavit of service (annexure B) says 6201 instead of 6122.
The plaintiffs and the second defendant maintain they never received the court process. Mr Darren John Bonker, Principal of Darren Bonker & Associates Pty Ltd, and two of his staff have each sworn an affidavit to that effect. Both plaintiffs have filed affidavits saying the same thing. For present purposes it is unnecessary to take this matter any further. All that can be said is that Mr Swanson says he posted the court process and the plaintiffs and second defendant say they never received it.
The plaintiffs were however aware the first defendant had instructed solicitors. By letter dated 7 November 2008 the first defendant's solicitors wrote to the second defendant claiming the sum of just over $9,000. In an affidavit sworn 2 October 2009 the second‑named plaintiff says she received the letter from the first defendant's solicitors on 18 November 2008. She says the letter was addressed to 'Unit 3, 277 South West Highway, Serpentine'. That is not the registered office of the company, it is not the principal place of business of the company as shown in the ASIC search, and according to her is not an address either she or the first‑named plaintiff have ever used. She does not actually say how it was the letter was received by her - perhaps it can be attributed to the resourcefulness of Australia Post.
In any event, after receiving the letter she rang the first defendant's solicitors. She does not say when she rang or to whom she spoke. She does say she advised the first defendant's solicitors she wanted to come to an arrangement in order to pay the debt. She says on or about 12 December 2008 she spoke to Mr Swanson. She did not realise he was a process server and an employee of the Macquarie Collections Group. The second‑named plaintiff put forward a staggered payment programme. She was told by Mr Swanson in further dealings she should refer to 'Case Number 18364/08'. That was the number of the local court action. She said she did not know that - she was not advised proceedings had been issued. She thought it was simply some internal reference number used either by the first defendant's solicitors or Macquarie Collections Group.
On 12 December 2008 the second‑named plaintiff sent a facsimile transmission to the first defendant's solicitors offering to pay off the debt by instalments of $500 per week. On 21 January 2009 the first defendant's solicitors sent a facsimile back rejecting the offer. That facsimile made no reference to the local court proceedings. On 30 January 2009 she sent a further letter to the first defendant's solicitors. She proposed the second defendant pay the outstanding amount at the rate of $800 per week. Neither the plaintiffs nor the second defendant received a response to that letter. Neither the plaintiffs nor the second defendant took any steps to satisfy the first defendant's claim despite the fact they were aware the first defendant had appointed solicitors and the matter was being handled by a collection agency.
In fact things had progressed. As no appearance was filed in the local court proceedings judgment was entered by the first defendant against the second defendant. The first defendant then issued a statutory demand. The demand is dated 13 February 2009. It appears as annexure D to the affidavit of Mr Swanson. It was served by prepaid post. This time the post code was correct. The exhibit to which I have referred shows the address to which it was sent as the second defendant's registered office. Once again according to Mr Bonker the document was not received. It is entirely unclear what became of it. It was never returned to Mr Swanson, but the issue need be taken no further. Mr Bonker's evidence is that he did not receive the statutory demand. Certainly it did not come to the attention of the plaintiffs.
There being no compliance with the statutory demand the first defendant issued an originating process seeking to wind‑up the second defendant. The originating process was lodged on 27 April 2009 and was listed for hearing on 2 June 2009. On 12 May 2009 Macquarie Collections Group sent to the registered office of the second defendant a copy of the originating process and the supporting affidavit. This letter and the attachments did arrive at Mr Bonker's office. Natasha Ruth Veldman a receptionist with Mr Bonker's firm has sworn an affidavit dated 25 August 2009 to that effect. She says she received the Macquarie Collections Group letter with the attachments on 18 May 2009. On that same day it was forwarded by Mr Bonker's firm to the plaintiffs. According to the second‑named plaintiff's affidavit dated 2 October 2009 the documents were sent to an incorrect address. Nowhere in the affidavit evidence filed on behalf of the plaintiffs is it explained how this came about. The only reference to this mistake is found in one sentence in par 14 of her affidavit. In any event, the result was the plaintiffs did not receive the letter of 12 May 2009 from Macquarie Collections Group together with the annexures at their residential address until 29 May 2009. As at that date the plaintiffs were away. It was not until 2 June 2009 that they found the letter. The first‑named plaintiff then contacted Mr Swanson, but it was too late. The winding‑up order had been made.
Who in these circumstances is to pay the costs? There are the costs of the liquidator which amount to just under $70,000, the costs incurred by the parties in these proceedings, and the costs of the winding‑up proceedings. The plaintiffs say all of these costs should be borne by the first defendant. The first defendant says all the costs should be borne by the plaintiff. The liquidator is anxious to ensure his fees are met preferably out of the assets of the second defendant with the second defendant having a right of indemnity against some other party.
It is clear there are no winners in this situation. No matter which way the costs fall someone will be substantially out of pocket over a debt of less than $10,000. But the position must be resolved one way or the other.
On balance I am satisfied the plaintiffs ought indemnify the second defendant for the liquidator's costs. The plaintiffs were the moving force behind the second defendant. They were aware of the first defendant's claim to be owed money. After receiving the first defendant's solicitor's letter of 7 November 2008 an offer was made and that was followed up with a further offer in January 2009. It is true that the second defendant's did not respond to that letter either through their solicitors or Mr Swanson, but the plaintiffs must have been aware steps were being taken to recover the alleged debt and they should perhaps have done more to follow the matter through.
So far as the first defendant is concerned they attempted to serve both the statutory demand and the winding‑up application by post as they were perfectly entitled to do. They had no reason to believe the demand and the originating process were not properly served. At no time were they alerted to the prospect that the plaintiffs and the second defendant were unaware of the steps they were taking. The first defendant's were entirely innocent parties in the whole affair.
On balance then I am satisfied the second defendant ought pay the costs of the liquidator. Clearly the plaintiffs will ultimately bear these costs. The plaintiffs should pay the costs of this application including reserved costs.