Horans Steel Pty Ltd v Leac Engineering Pty Ltd

[1991] FCA 777

Re: HORANS STEEL PTY LIMITED
And: LEAC ENGINEERING PTY LIMITED
No. N G3101 of 1991
FED No. 777
Corporations Law
10 ACLC 74/6 ACSR 357
(1991) 105 ALR 143

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Corporations Law - Winding up - demand under s. 460(2)(a) Corporations Law - validity of notice of demand - payment asked to be made to creditor's solicitors.

Corporations Law: s. 460(2)(a)

HEARING

SYDNEY

#DATE 8:11:1991

Counsel for the Applicant: L.V. Stapleton

Solicitors for the Applicant: Monardo and Company

ORDER

Leac Engineering Pty Limited ("the Company") be wound up by the Court under the provisions of the Corporations Law.

Thomas William Frederick Dixon of 9 Argyle Street, Parramatta, an official liquidator, be appointed the liquidator of the affairs of the Company.

The applicant shall have its costs of the winding up.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In this matter a question has been brought to the Court's attention on behalf of the applicant and by the Registrar of the Court, namely whether or not the demand issued pursuant to s. 460(2)(a) of the Corporations Law is valid. That section relevantly provides that:

"The company shall be deemed to be unable to pay its debts

if ... a creditor ... is indebted in a sum exceeding $1000

then due has served on the company a demand, signed by or on behalf of the creditor, requiring the company to pay the sum so due, and the company has, for three weeks after the

service of the demand, failed to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor."

1. I have been referred to a decision of Young J. in the Supreme Court of New South Wales, in Re P and G Building Co Pty Limited (1988) 6 ACLC 753. It is a brief report, and the form of the notice under s. 364 of the Companies (New South Wales) Code, ("the Code") which was the law then in force in this State, does not appear from the judgment. However, his Honour held that for more than one reason the notice did not comply with s. 364 of the Code. The essence of the reasoning of his Honour was that the notice was given in the name of the solicitor and not in the name of the creditor and that the notice demanded payment to the solicitor's firm. Whether Young J. would have held that the notice in that case was bad merely because it demanded payment to the solicitors firm is not clear. His Honour, however, stated, as a reason for his conclusion, that the company which receives the notice must be able to discharge the debt in whichever way is open to it according to law. With that statement of principle I agree.

2. If a notice is, on its proper construction, one that is given in the name of someone who is not the creditor, then I would agree that the notice must be bad. The notice in the present case is not such a notice. It is plainly issued in the name of the creditor, Horans Steel Pty Limited. It goes on to provide that payment of the amount of the debt is demanded by the creditor, and that the payment shall be made to the creditor's solicitors who are named at the foot of the notice, together with their address for payment and service.

3. The question arises whether the fact that the notice requires payment to be made to the creditor's solicitors invalidates the notice.

4. Although the notice requires that payment be made to the creditor's solicitor, Monardo and Company, it is not, in my view, a demand which falls foul of the principle which I mentioned earlier, that is, the company which receives the notice must be able to discharge the debt in whichever way is open to it according to law. I think, however, for more abundant caution, it would be wise in the future if parties issuing such notices made it clear that any method of payment suggested in the notice was not intended to be exhaustive of the methods of payment.

5. The Court orders that:
   1. Leac Engineering Pty Limited ("the Company") be wound up by the
   

Court under the provisions of the Corporations Law.

2. Thomas William Frederick Dixon of 9 Argyle Street, Parramatta, an

official liquidator, be appointed the liquidator of the affairs of the Company.

3. The applicant shall have its costs of the winding up.