In the matter of Aquaqueen International Pty Limited (No 3)

[2014] NSWSC 1137

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Aquaqueen International Pty Limited (No 3) [2014] NSWSC 1137
Hearing dates:	18 August 2014
Date of orders:	18 August 2014
Decision date:	18 August 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	The interlocutory process filed on 11 August 2014 is dismissed with costs assessed in the sum of $1,750.
Catchwords:	INTERLOCUTORY APPLICATIONS – application to amend grounds of opposition to statutory demand – whether winding up proceedings arguably constitute an abuse of process – leave for director to represent company – revocation of leave
Category:	Procedural and other rulings
Parties:	Titan National Pty Ltd and Kathryn Wood-Weber (plaintiffs/respondents) Aquaqueen International Pty Ltd (defendant/applicant)
Representation:	Counsel: Ms C Perry (solicitor) (plaintiffs/respondents) Ms S Penson (director) (defendant/applicant) Solicitors: Pure Legal (plaintiffs)
File Number(s):	2013/297134

Judgment (ex tempore)

1. HIS HONOUR: On 19 May 2014, I dismissed an interlocutory process whereby the defendant Aquaqueen International Pty Limited sought to have set aside orders made on 30 April 2014 to the effect that the present plaintiffs Titan National Pty Limited and Kathryn Wood-Weber be substituted as plaintiffs, and further directed that the defendant not be entitled to rely on any affidavit evidence in defence of the winding-up summons that had not been filed and served by 7 July 2014 without the further leave of the Court. Further directions were made in respect of the plaintiffs' evidence and subpoenas, and the proceedings were adjourned to 4 August 2014 in the Corporations list, it being contemplated at that stage that the matter would be heard then. However, on 4 August, Aquaqueen sought leave to rely on further affidavit evidence, and on that day Black J declined leave to rely on a further affidavit of Ms Penson of 4 August 2014, but ordered that Aquaqueen file and serve any application to amend its grounds of opposition to the winding-up orders by 6 August, any such application to be returnable on 11 August and no such application to be filed or served after 6 August without the leave of the Court. His Honour adjourned the winding up application to 25 August 2014, with a view to its being heard on that date. On application made by e-mail by Aquaqueen to his Honour in chambers on 6 August, his Honour varied those orders by extending time for the filing and service of an application to amend the grounds of opposition to 4.00pm on 11 August, to be returnable on 18 August, no such application to be filed or served after 4.00pm on 11 August.

2. Before the Court today is an interlocutory process filed by Aquaqueen on 11 August 2014 purportedly pursuant to those directions. There appears to be some dispute as to whether it was served by 4.00pm on 11 August, but I do not think that it is necessary to delve further into the detail of that marginal dispute.

3. Although it was very clear from his Honour's orders of 4 August and 6 August that what was to be filed was an application to amend the grounds of opposition, the interlocutory process in fact claims:

1. Leave for Ms Penson to represent the defendant;

2. An extension of time to comply with the original statutory demand to 11 April 2014;

3. Dismissal of the originating process and the amended originating process;

4. Dismissal of the application to extend time within which to determine the originating process.

5. Costs; and

6. Any such other orders as the Court sees fit.

4. It fails to claim any amendment to the grounds of opposition. However, the supporting affidavit sets out matters which it can be inferred constitute a proposed amended grounds of opposition. Before turning to them, it is appropriate to refer to the existing grounds of opposition, which are appended to Aquaqueen's notice of appearance of 11 November 2013.

5. The first is that there is a genuine dispute as to whether a debt the subject of the statutory demand originated from a costs order of Statement of Claim proceedings. However, this ground is not open, given that the application to set aside the original statutory demand is dismissed.

6. The second is that the defendant has not conducted any business per se with the plaintiff and does not have any business relationship or any business records with the plaintiff. However, that is entirely irrelevant to any ground of opposition.

7. The third is that there are proceedings in process to appeal the costs assessment determinations conducted by the plaintiff upon which the judgment was filed and the statutory demand issued. If that was originally relevant, as it may have been, those proceedings have now been finalised and that is no longer a relevant ground of opposition.

8. The fourth is that there are ongoing proceedings to set aside the costs judgment in support of the statutory demand and setting aside the statutory demand with accompanying affidavit that verifies the debt. However, the proceedings to have the statutory demand set aside failed, and that is no longer a relevant ground of opposition.

9. The fifth is expressed in terms: "The defendant is not an insolvent company." I regard that as putting in issue insolvency in all relevant ways, and accordingly there is an issue raised by the current grounds of opposition as to insolvency. It will be for the plaintiff at the hearing to prove insolvency, although it will presumably do so by relying on the presumption of insolvency, on creditor's statutory demand. If the defendant wishes to rebut the presumption of insolvency then, as it has been advised by the Court on numerous occasions, it will have to adduce evidence of solvency proving that it can pay its debts as and when they fall due and including, for example, a verified balance sheet prepared by an accountant showing in detail the current assets and the liability position of the company.

10. The sixth ground of opposition in the current notice refers to the absence of notification of the handing down of the judgment that triggered the situation of presumed insolvency. That is no longer a relevant ground of opposition.

11. The seventh is that the defendant has attempted offers to settle with the plaintiff and received no response. That provides no valid ground of opposition.

12. Accordingly, as it seems to me, the only viable ground of opposition is that of solvency; but the existing notice of grounds of opposition clearly raises solvency as an issue.

13. In the affidavit to which I have referred, Ms Penson refers to a number of additional grounds of opposition which she seeks to raise. The first is that the defendant is not insolvent. As I have said, that is already covered by the existing notice of grounds of opposition.

14. The second is that there is no evidence of insolvency. Insofar as that is any different from the first, it is sufficiently covered by the existing notice of grounds of opposition.

15. The third is that the plaintiffs’ debt, and at least the amount claimed by them, are disputed. I am not prepared to grant leave to add that as a ground of opposition. The substantial reason is that, in the judgment on the application for substitution delivered on 30 April 2014, I explained why the substituted plaintiffs are plainly creditors of the defendant and why that is not seriously disputable. The precise amount of their debt is irrelevant, as they are not relying on a statutory demand served by them but on the original statutory demand of the original plaintiff.

16. The fourth ground sought to be added is that the statutory demand was not served with an affidavit in support. This ground is entirely misconceived. The substituted plaintiffs rely on the original statutory demand which was in respect of a judgment debt. The substituted plaintiffs do not have to serve their own statutory demand, and do not have to be judgment creditors. They must be creditors to have standing, and I held in the judgment of 30 April that they were. Once they have standing as creditors, they rely not on any demand made by them but on the demand of the original plaintiff and the non-compliance with it to give rise to the presumption of insolvency.

17. The fifth proposed additional ground is that the amended originating process is said not to have been served. I refuse to permit this to be relied on at this stage, given that Aquaqueen is plainly on notice of the amended originating process and a defence based on that ground would be entirely meritless.

18. Finally, Aquaqueen seeks to assert in various ways that the proceedings against it are an abuse of process and to add a ground of defence to assert that they are an abuse of process. I have listened to the arguments and read much of the evidence relied on in support of that allegation. Although from one perspective I can understand why Aquaqueen, who did not receive notice of the delivery of Garling J's judgment and who might have expected that on paying out the original plaintiff these proceedings would be at an end, feels that it is being the subject of injustice and persecution in these proceedings, that is very much a subjective perception. Viewed objectively, there is nothing more in this than persons who are undisputedly creditors of Aquaqueen seeking to take proceedings that a creditor is entitled to bring either to get paid or, if not to be paid, to have the company wound up. It is not an abuse of process for a creditor to bring winding-up proceedings in the hope that it might be paid but on the basis that the relief claimed is a winding-up order because it suspects that the company is insolvent. While it may be an abuse of process to bring proceedings to shame a company into payment of a debt when it is plainly solvent and there would be no arguable ground for a winding-up, in this case, the plaintiff has in its favour a presumption of solvency, and there is nothing in the material put so far before the Court that would persuade it that that presumption has been rebutted.

19. In those circumstances, there is no abuse of process and no arguable abuse of process in the course of action that the plaintiffs have adopted. For that reason I will not permit abuse of process to be added as a ground of opposition. As the only viable grounds of opposition are that of solvency, and as that is already covered in the existing grounds of opposition, there is no need to give leave to amend the grounds of opposition. Accordingly, the interlocutory process filed on 11 August 2014 will be dismissed with costs.

20. That leaves the winding-up proceedings returnable before the Court for hearing next Monday 25 August 2014. As it seems to me at this stage, there is no sufficient evidence of solvency that would enable Aquaqueen to rebut the presumption of insolvency. The Court has repeatedly indicated to Aquaqueen what it needs to do to rebut the presumption of insolvency. If it comes forward with evidence that would be capable of doing that by Monday 25 August, it will be for the Judge hearing the application at that stage to determine whether Aquaqueen should be permitted to rely on such belated evidence. If no such evidence is forthcoming, however, it is very likely that Aquaqueen will be wound up on 25 August.

21. Finally, the Court has until now granted leave to Ms Penson, Aquaqueen's director, to appear on its behalf in these proceedings. Ms Penson has done her best, with unfailing courtesy and great attention to detail in the preparation of material and submissions, to endeavour to assist the Court, but it is increasingly obvious that, despite the Court's repeated endeavours to confine the issues to those seriously or legitimately in dispute, Ms Penson does not appear to be capable of acting on that guidance and confining the matters in a way that makes for the economical use of the Court's time. For that reason, from this point I will revoke Ms Penson's leave to appear on behalf of Aquaqueen. I am all the more comfortable doing so because Ms Penson has on several occasions today referred to "her counsel", and if she has counsel there is no reason why counsel cannot appear and conduct these proceedings on the next occasion.

22. The Court orders that the interlocutory process filed on 11 August 2014 be dismissed, with costs assessed in the sum of $1,750.

COUNSEL ADDRESSED

23. Black J reserved the costs of the application before him. The reserved costs order made by Black J did not express to whom or to what event those costs would be reserved. So far as I am concerned I am dealing only with the application filed on 11 August 2014 and heard today. The costs reserved by Black J should be dealt with either on application made to his Honour, or on the hearing of the winding up application. The costs order that I have indicated will stand.

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Decision last updated: 21 January 2015