In the matter of BiFox Limited

[2021] NSWSC 647

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of BiFox Limited [2021] NSWSC 647

Hearing dates:

7 June 2021

Date of orders:

7 June 2021

Decision date:

07 June 2021

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

See orders at [22].

Catchwords:

CORPORATIONS – applications in three proceedings for orders setting aside statutory demands – where entities that issued the statutory demands have been deregistered between the issuing of the demands and the filing of the originating processes to have the demands set aside – where applications to have the statutory demands set aside cannot be made in accordance with s 459G because person on whom each application and supporting affidavit must be served has ceased to exist – plaintiff sought declarations that the statutory demands ceased to have effect upon deregistration of issuing entities.

Legislation Cited:

Corporations Act 2001 (Cth), ss 459E, 459F, 459G, 459J, 601AB, 601AD

Supreme Court Act 1970 (NSW), s 75

Cases Cited:

N/A

Category:

Principal judgment

Parties:

BiFox Limited ACN 004 287 790 (Plaintiff)
Spar Capital Partners Pty Limited (Defendant)

Representation:

Counsel:
Mr M Mathas (Solicitor) (Plaintiff)
N/A (Defendant)

Solicitors:
MathasLaw (Plaintiff)
N/A (Defendant)

File Number(s):

2021/139589, 2021/139590 and 2021/ 139591

Publication restriction:

N/A

EX TEMPORE Judgment

1. HER HONOUR: On 19 November 2020 BiFox Limited (BiFox) was served with three statutory demands issued under s 459E of the Corporations Act2001 (Cth):

1. a demand in respect of an alleged debt of $439,597.18 issued by Spar Capital Partners Pty Ltd (Spar Partners) in its capacity as security trustee under the Kiwanda Security Trust;

2. a demand in respect of an alleged debt of $346,697.18 issued by Spar Capital Nominees Pty Ltd (Spar Nominees); and

3. a demand in respect of an alleged debt of $498,330 issued by Spar Partners.

2. Each of these statutory demands required payment to the issuer of the demand within six months after service of the demand.

3. The affidavit accompanying each of the statutory demands was affirmed by Mr Chris West on 19 November 2020. At that time, Mr West was the sole director of Spar Partners and the sole director of Spar Nominees.

4. On 17 January 2021, Spar Partners and Spar Nominees were deregistered by the Australian Securities and Investments Commissions (ASIC) pursuant to s 601AB of the Corporations Act. At the time of deregistration, each company's registered office was Level 7, 92 Pitt Street, Sydney, Mr West was the sole director of each company.

5. Spar Partners and Spar Nominees ceased to exist upon deregistration: Corporations Act, s 601AD(1). ASIC extracts for both companies tendered this morning show that the companies remained deregistered as at 17 May 2021 and the solicitor appearing for the plaintiff in each proceeding today has informed the Court that a further search carried out this morning and again during the hearing continued to show each of those two companies as deregistered.

6. On 18 May 2021, BiFox filed three originating processes in this Court, each accompanied by a supporting affidavit, seeking orders setting aside each of the demands under s 459H or, alternatively, s 459J of the Corporations Act.

7. In proceeding 139589 of 2021, orders were sought setting aside the statutory demand issued by Spar Partners in respect of the alleged debt of $439,597.18.

8. In proceeding 139590 of 2021, orders were sought setting aside the statutory demand issued by Spar Nominees in respect of the alleged debt of $346,697.18.

9. In proceeding 139591 of 2021, orders were sought setting aside the statutory demand issued by Spar Partners in respect of the alleged debt of $498,330.

10. Affidavits of service filed in each proceeding establish that the originating process in each proceeding, together with the supporting affidavit and exhibit to that affidavit, were sent to Mr West by leaving it at the address recorded for Mr West in ASIC's register and were also left at the last recorded registered office of Spar Partners and Spar Nominees (being the address for service nominated in each statutory demand).

11. The exhibits sent to Mr West in each proceeding include the ASIC extracts to which I have referred showing that Spar Nominees and Spar Partners were deregistered on 17 January 2021.

12. Mr West has not taken any steps to be heard in these proceedings. The matter was called outside the Court before today’s hearing out of an abundance of caution and there was no appearance by any other interested person in these proceedings.

13. The alleged debts claimed in the statutory demands are disputed by BiFox.

14. Because Spar Partners and Spar Nominees ceased to exist on 17 January 2021, there is no entity on which BiFox can serve its originating process and supporting affidavit in relation to each demand as required by s 459G of the Corporations Act, although it has delivered copies of the documents to the addresses for Mr West and the last recorded registered office for Spar Partners and Spar Nominees as I have already referred to.

15. For the same reason, even if BiFox did not dispute the debt and wished to comply with the statutory demand, there is no entity in existence to which payment could be made in order to comply with the demand.

16. As the written submissions filed on behalf of BiFox point out, if the statutory demand is not set aside and is still in effect at the end of the statutory period, BiFox will be taken to have failed to comply with the demand pursuant to s 459F of the Corporations Act and a presumption of insolvency will apply against BiFox under s 459C if the registration of Spar Partners or Spar Nominees is subsequently reinstated and those companies commence winding up proceedings, or if any other creditor of BiFox subsequently commences winding up proceedings.

17. The demands cannot be set aside because the applications to set them aside have not been made in accordance with s 459G of the Corporations Act by reason of BiFox's inability to serve the originating processes and supporting affidavits on entities that no longer exist.

18. I raised this problem with the solicitor for BiFox at the commencement of the hearing today and granted leave to BiFox to amend its originating process in each of the three proceedings to seek a declaration that each statutory demand ceased to have effect upon the deregistration of the alleged creditor on 17 January 2021. In my opinion, such a declaration should be made in the very unusual circumstances of this case pursuant to the Court's inherent jurisdiction and/or s 75 of the Supreme Court Act1970 (NSW).

19. In circumstances where the applications to set aside the demand cannot be made in accordance with s 459G by reason of the fact that the companies that issued the demands no longer exist, it is plainly unjust to BiFox, and far removed from the objectives of the statutory scheme under Part 5.4 of the Corporations Act, that BiFox should be taken to have failed to comply with the statutory demands and bear the risk of a presumption of insolvency applying against it in any relevant future proceedings. The purpose of the statutory demands, namely the recovery of the alleged debts, ceased to exist when the alleged creditors ceased to exist.

20. The effect of the declarations in each proceeding will be that BiFox will not be taken to have failed to comply with the statutory demands at the end of the statutory period because the demands will not have been in effect at that time. There must be orders dismissing BiFox's claim setting aside the statutory demands because these applications were not made in accordance with s 459G of the Corporations Act for the reasons that I have explained above.

21. BiFox correctly accepts that an order for costs cannot be made in its favour, as the defendant entities do not exist.

22. For those reasons I make the following declarations and orders:

In proceeding 139589 of 2021:

1. Declare that the statutory demand served on BiFox Limited (ACN 004 287 790) on 19 November 2020 by Spar Capital Partners Pty Ltd (ACN 138 872 410) in its capacity as security trustee under the Kiwanda Security Trust in respect of an alleged debt of $439,597.18 ceased to have effect upon the deregistration of Spar Capital Partners Pty Ltd on 17 January 2021.

2. Dismiss the claims for relief in prayers 1 and 2 of the originating process filed in these proceedings on 18 May 2021.

In proceeding 139590 of 2021:

1. Declare that the statutory demand served on BiFox Limited (ACN 004 287 790) on 19 November 2020 by Spar Capital Nominees Pty Ltd (ACN 138 871 299) in respect of an alleged debt of $346,697.18 ceased to have effect on the deregistration of Spar Capital Nominees Pty Ltd on 17 January 2021.

2. Dismiss the claims for relief in prayers 1 and 2 of the originating process filed on 18 May 2021.

In proceeding 139591 of 2021:

1. Declare that the statutory demand served on BiFox Limited (ACN 004 287 790) on 19 November 2021 by Spar Capital Partners Pty Ltd (ACN 138 872 410) in respect of an alleged debt of $498,330 ceased to have effect on the deregistration of Spar Capital Partners Pty Ltd on 17 January 2021.

2. Dismiss the claims for relief in prayers 1 and 2 of the originating process filed in these proceedings on 18 May 2021.

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Amendments

08 June 2021 - typographical error

Decision last updated: 08 June 2021