In the matter of Kazakhstan Potash Corporation Limited

[2021] NSWSC 531

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Kazakhstan Potash Corporation Limited [2021] NSWSC 531

Hearing dates:

30 April 2021

Date of orders:

30 April 2021

Decision date:

30 April 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Order that the defendant company be wound up.

Catchwords:

CORPORATIONS — Winding up — Application based on failure to comply with creditor’s statutory demand — Where debt the subject of the statutory demand was a judgment debt

Cases Cited:

-Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) (2011) 244 CLR 1; [2011] HCA 18

- Re Australasian South Pacific Educational and Commercial Training Incorporated Inc [2018] NSWSC 2048

- Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551

Category:

Principal judgment

Parties:

One Pro Chatswood Pty Ltd (Plaintiff)
Kazakhstan Potash Corporation Ltd (Defendant)

Representation:

Counsel:
Mr D. Krochmalik (Plaintiff)
Mr W. Shen (Solicitor) (Defendant)

Solicitors:
Holding Redlich (Plaintiff)
Shens Lawyers (Defendant)

File Number(s):

2020/313085

Judgment – ex tempore (Revised 30 April 2021)

1. By Originating Process filed on 2 November 2020, the Plaintiff, One Pro Chatswood Pty Limited ("OPC") applies for the winding up of Kazakhstan Potash Corporation Limited ("KPCL"). Mr Krochmalik appears for OPC. Mr Shen, solicitor, also appeared and informed the Court that his retainer by KPCL has been terminated, although he has not filed a notice of ceasing to act. KPCL did not seek to read evidence and did not make substantive submissions in opposition to the application, and Mr Shen had no instructions in that respect.

Affidavit evidence

2. OPC reads an affidavit dated 30 October 2020 of Ms Zhao, its general manager, which records the existence of a debt owed by KPCL arising from a judgment in the District Court of New South Wales and annexes a copy of a company search in respect of KPCL. OPC also reads the affidavit dated 11 May 2020 of Mr Holland, which records service of a creditor’s statutory demand (“Demand”) for that debt on KPCL at its registered office on 28 April 2020. An affidavit of service dated 16 November 2020 proves service of the Originating Process on KPCL, and KPCL has in any event appeared on prior stages of the proceedings, and has previously indicated that it would oppose the winding up by establishing its solvency and by reference to a contention of abuse of process, neither of which is pursued today. OPC also reads the affidavit of Mr Myers dated 18 November 2020 which deals with lodgement of a Form 519 with the Australian Securities and Investments Commission (“ASIC”) and publication of a notice of the winding up application on the insolvency notices web site maintained by ASIC.

3. A further affidavit of Ms Zhao dated 29 April 2021 confirms that KPCL was on 24 April 2020 indebted to OPC in the amount claimed, which was the subject of the judgment debt in the District Court, and that that amount remains due and payable by KPCL to OPC. An affidavit of Ms Cotton dated 29 April 2020 annexes a further company search of KPCL, which does not record that any winding up order has previously been made in respect of KPCL.

4. OPC also tenders a consent to liquidator of Mr Krejci and, for completeness, a copy of a notice of motion filed by KPCL in the District Court of New South Wales on 23 December 2020 seeking to set aside the default judgment against it, and a judgment of the District Court issued on 8 March 2021 recording the dismissal of that notice of motion.

The parties’ submissions and determination

5. The chronology of events which arises from these matters is straightforward and was summarised by Mr Krochmalik in submissions. On 2 April 2020, the District Court issued the default judgment against KPCL in the amount claimed. The Demand was issued on 24 April 2020 and served on 28 April 2020. As Mr Krochmalik points out, the Demand complied with the requirements of the Coronavirus Economic Response Package Omnibus Act 2020, so far as the amount claimed exceeded the increased statutory minimum of $20,000, and a period of 6 months was allowed for compliance with the Demand. The Demand was neither set aside, nor complied with within that 6-month period to 28 October 2020, from the date of service on 28 April 2020. On 2 November 2020, the winding up application was filed, relying on the presumption of insolvency which had arisen from noncompliance with the Demand. As Mr Krochmalik points out, the winding up application was brought within the three-month period specified in s 459C of the Act. The application was subsequently adjourned by the Registrar, while the motion to set aside the default judgment was heard and dismissed by the District Court. On 8 March 2021, I allowed a significant period for KPCL to lead its foreshadowed evidence of solvency, which was ultimately not led.

6. Mr Krochmalik, in submissions, refers to this chronology, and notes that there is no evidence now led by KPCL to rebut a presumption of insolvency. He draws attention to the fact that, quite apart from the presumption of insolvency arising from the unsatisfied Demand, the unsatisfied judgment of the District Court would also support an inference of insolvency: Re Australasian South Pacific Educational and Commercial Training Incorporated Inc [2018] NSWSC 2048 at [24]. He notes that there is no basis for a contention of abuse of process, previously foreshadowed but not pressed by KPCL in submissions, where OPC relies on the Demand to establish a presumption of insolvency, and seeks a winding up order on the basis of that presumption of insolvency, so as to bring about a realisation of KPCL's assets and their distribution to creditors in accordance with the winding up process. That is, of course, what the statutory demand mechanism and winding up procedure is intended to permit. Mr Krochmalik in turn points to compliance with the formal requirements for a winding up, including evidence of publication of the winding up application, and the consent of Mr Krejci to appointment as liquidator to which I have referred above.

7. The service of, and failure to meet, a creditor's statutory demand within the specified time period, extended as I have noted above, gives rise to a presumption of insolvency. In Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) (2011) 244 CLR 1; [2012] HCA 18 at [28] the High Court pointed to the effect of that presumption and observed that:

“Where a demand has not been complied with, the statutory presumption of insolvency applies unless the demand is set aside in proceedings brought for that purpose prior to the hearing of the application for an order to wind up. Unless the demand is rendered ineffective, by an order setting it aside, the company is required to prove to the contrary of the presumption"

8. Here, that presumption of insolvency arises and KPCL has not led evidence to displace it, and I pointed above to the satisfaction of the formal requirements in respect of the winding up application. There is no suggestion here that the winding up could or should be withheld on discretionary grounds, and I bear in mind that the general law recognises that the presumption of insolvency arising from a creditor’s statutory demand supports an entitlement to a winding up order ex debito justitiae: Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551.

9. For these reasons, I am satisfied that the winding up order that is sought by OPC should be made. I therefore make orders in accordance with the short minutes of order provided by OPC, initialled by me and placed in the file.

**********

Decision last updated: 20 May 2021