In the matter of Koya Trading Pty Limited

[2015] NSWSC 1212

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Koya Trading Pty Limited [2015] NSWSC 1212
Hearing dates:	8 July 2015
Decision date:	08 July 2015
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Order that the Defendant Koya Trading Pty Limited (ACN 162 754 029) be wound up. Robert Kite and Mark Hutchins be appointed as joint and several liquidators of the Defendant. Costs of this application be costs in the winding up.
Catchwords:	CORPORATIONS – winding up – presumption of insolvency – where company failed to comply with creditor’s statutory demand – whether the company be wound up under s 459P of the Corporations Act 2001 (Cth).
Legislation Cited:	- Corporations Act 2001 (Cth) ss 459J, 459J(1), 459P, 459R, 459S, 465A, 467A
Cases Cited:	- Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd (Recs & Mgrs Apptd) [2011] 8 HCA 18; (2011) 244 CLR 1
Category:	Principal judgment
Parties:	Accessories Kingdom (Australia) Pty Limited (Plaintiff) Koya Trading Pty Limited (Defendant)
Representation:	Counsel: L Byrne (Plaintiff)   Solicitors: Solon Lawyers (Plaintiff) Pryor Tzannes & Wallis (Defendant)
File Number(s):	2015/53898

Judgment – ex tempore

1. By application filed on 20 February 2015, the Plaintiff, Accessories Kingdom (Australia) Pty Limited (“Accessories Kingdom”), applies under s 459P of the Corporations Act 2001 (Cth), for the winding up of the Defendant, Koya Trading Pty Limited (“Koya Trading”) on the grounds of insolvency.

2. Koya Trading did not take an active part in the proceedings. Mr Wilks, solicitor, appeared and indicated that his firm had given notice of ceasing to act, following a notice of intention to cease to act, in circumstances that he had been unable to obtain instructions from the principal of Koya Trading. There was a difficulty with that notice of ceasing to act, namely, that it gave only seven days’ notice of the intention to cease to act, where 28 days’ notice would be required where the matter had been set down for hearing. The Court could have permitted the solicitors to cease to act, on less notice, by leave, in an appropriate case. Mr Wilks, appropriately in my view, did not make an application for such leave, which could not fairly have been determined unless his client had been on notice of the fact that it would be made. Mr Wilks, also fairly in my view, remained so far as his firm was solicitor on the record, but did not take an active role in the proceedings so far as he did not have any instructions from his client.

3. The application is brought, as I have noted, under s 459P of the Corporations Act, which provides, relevantly, that a creditor of a company may apply for the company to be wound up in insolvency. Accessories Kingdom’s application relies on an unsatisfied creditor's statutory demand, to which I will refer below. That creditor's statutory demand was dated 16 January 2015 and referred to a debt of $79,109.59 made up of the principal sum pursuant to a loan agreement between Accessories Kingdom and Koya Trading dated 1 July 2014 and interest under that loan agreement from 1 July 2014 to 16 January 2015.

4. The creditor's statutory demand was verified by an affidavit sworn by a director of Accessories Kingdom, Mr Abdou Meate, dated 16 January 2015 which referred to the agreement for loan dated 1 July 2014 and annexed a copy of that agreement and set out the calculation of the amount due to Accessories Kingdom from Koya Trading under that agreement, and contained a statement that Koya Trading was as at “16 January 1999” indebted to Accessories Kingdom in the sum claimed. The reference to "16 January 1999" was an obvious misprint, where the affidavit was dated 16 January 2015, and it seems to me that any recipient of the demand would have understood the verification as directed to the position on the date the demand and the affidavit were dated.

5. There is a further possible difficulty with the supporting affidavit, which commences with a statement that the amount of $3,288.14 is due and payable by Koya Trading. It is unclear whether that statement refers to another amount claimed against Koya Trading, not included in the creditor's statutory demand, or is a misprint, and is intended to refer to the amounts otherwise referred to in the demand and the affidavit of $79,109.59. That misprint or error would only become relevant, under s 459J(1)(b) of the Corporations Act (since it was not a defect in the demand itself, but in the supporting affidavit), if it gave rise to some other reason to set aside the demand. It does not seem to me that such other reason can be raised at this point, for two reasons. The first is that this is an application to wind up the company, in circumstances that no application was previously made to set aside the demand, and no application has now been made for leave under s 459S of the Corporations Act to raise any deficiency in the demand, or raise matters which could previously have been raised in an application under s 459J of the Act. Second, there is no evidence read before me to suggest that there has been any detriment caused to Koya Trading by reason of the incorrect reference to that amount in the demand.

6. Koya Trading had filed a Notice of Appearance on 27 March 2015, which indicated grounds of opposition to the winding up application, namely, that it was solvent; that there was a genuine dispute as to the nature and amount of the debt claimed by Accessories Kingdom; and that Accessories Kingdom's application was defective at law. The first proposition could not be established, where Koya Trading did not lead any affirmative evidence to establish its solvency. The second could not be pursued, unless leave was obtained under s 459S of the Corporations Act, and such leave was neither sought nor obtained. The third may be a reference to the issue, which I noted above, as to the defect in the affidavit supporting the demand, but also could not be pursued, unless leave was obtained under s 459S of the Corporations Act.

7. I turn now to the evidence in support of the winding up application. That evidence should be approached with the background that, where there is a creditor's statutory demand which has not been set aside, and has not been paid, secured or compromised, then a presumption of insolvency arises from non-compliance with the demand. The effect of that presumption was summarised by a unanimous High Court in Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd (Recs & Mgrs Apptd) [2011] 8 HCA 18; (2011) 244 CLR 1 at [28] observing that:

“[W]here 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. With that background, Accessories Kingdom relies on the affidavit of its director, Mr Meate, dated 18 February 2015, which refers to service of the creditor's statutory demand and, as I noted above, annexes the demand, the affidavit verifying it, and the loan agreement on which the demand relies. That affidavit also annexes a company search of Koya Trading, which indicates its registered office, which will be relevant to proof of service to which I will refer below. By a further affidavit dated 18 February 2015, Mr Meate again confirms that Accessories Kingdom is a creditor of Koya Trading and confirms the indebtedness of Koya Trading to Accessories Kingdom in the amount claimed in the demand, with a minor discrepancy, so far as the demand refers to $79,109.59 and Mr Meate's affidavit dated 18 February refers to the amount of $79,109.50. That minor discrepancy is not a matter that causes any issue for this application, having regard to s 467A of the Corporations Act, which deals with any defect or irregularity in connection with an application which does not give rise to substantial injustice.

9. An affidavit of Accessories Kingdom's solicitor dated 20 February 2015 proves service of the creditor's statutory demand and supporting affidavit on Koya Trading by registered post sent to its registered office, being the office of its accountant, as recorded in the ASIC company search to which I referred above.

10. An affidavit of Mr Soulos dated 17 March 2015 records lodgement of the notice of the winding up application with the Australian Securities and Investments Commission. Mr Byrne, who appeared for Accessories Kingdom, fairly drew attention to the fact that lodgement of notice of the winding up application with ASIC under s 465A(a) of the Corporations Act had been made a little out of the prescribed time in that section, but again that seems to me to cause no difficulty for the application by reason of s 467A of the Corporations Act. Mr Soulos' further affidavit dated 17 March 2015 proves service of the winding up application itself, together with accompanying material. That is, of course, not likely to be controversial in circumstances that Koya Trading had appeared, for a considerable time, in the proceedings, and had indicated grounds of opposition to the application, although they have not been pursued today.

11. Two final affidavits of Mr Meate and Mr Soulos dated 7 July 2015, the day prior to the hearing of this application, confirm that Koya Trading remained indebted to Accessories Kingdom in the amount referred to in the creditor's statutory demand and had failed to pay, secure or compound for that amount or any part of it to the reasonable satisfaction of Accessories Kingdom and remained indebted to it in that amount, and confirmed, from a current company search of Koya Trading, that no other application for the appointment of a provisional liquidator or a winding up order had been made against the company. Mr Soulos' affidavit dated 7 July also proved publication of notice of the winding up application on ASIC's website maintained for the publication of such notices.

12. I am satisfied that a presumption of insolvency arises from the service of a creditor's statutory demand, which has not been satisfied. I am satisfied that the formal requirements for the application are satisfied, in that notice of application has been published; the winding up application was brought within the three month period after the creditor's statutory demand, so that a presumption of insolvency arose; the order sought today will be made within six months of the winding up application as required by s 459R of the Act; there is proof of service of the winding up application on the company and evidence that ASIC was notified of the winding up application by lodgement of a Form 519 and, as I have noted, no previous winding up order has been made in respect of the company. I also note that a consent of liquidator has been filed.

13. Accordingly, I make the following orders:

1.   The Defendant, Koya Trading Pty Limited (ACN 162 754 029) be wound up.

2.   Robert Kite and Mark Hutchins be appointed as joint and several liquidators of the Defendant.

3.    Costs of this application be costs in the winding up.

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Decision last updated: 03 September 2015