In the matter of My Peace Incorporated

[2014] NSWSC 1906

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of My Peace Incorporated [2014] NSWSC 1906
Hearing dates:	Tuesday, 7 October 2014
Date of orders:	07 October 2014
Decision date:	07 October 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Ordered association be wound up in insolvency and liquidator appointed
Catchwords:	ASSOCIATIONS – winding up – winding up in insolvency – “insolvency” – relevance of Corporations Act – relevance of purported statutory demand
Legislation Cited:	(Cth) Corporations Act 2001, s 95A (NSW) Associations Incorporation Act 2009, 63, 64
Cases Cited:	QBE Workers Compensation v Wandiyali ATSI Inc (in liq) (2004) 62 NSWLR 117; [2004] NSWSC 1022 Sandell v Porter (1966) 115 CLR 666
Category:	Principal judgment
Parties:	Harbour Radio Pty Ltd ACN 010 853 317 (plaintiff) My Peace Incorporated ABN 47 406 057 345, Incorporation No: INC9895510 (defendant)
Representation:	Counsel: D D Knoll AM (plaintiff) Solicitors: Peter M. Wayne & Associates (plaintiff)
File Number(s):	2014/170262

Judgment (ex tempore)

1. HIS HONOUR: The defendant My Peace Incorporated is an association incorporated under the (NSW) Associations Incorporation Act 2009. By originating process filed on 6 June 2014, the plaintiff Harbour Radio Pty Ltd claiming be to be a creditor of the defendant, seeks an order pursuant to (NSW) Associations Incorporation Act, s 63, that the defendant be wound up.

2. Section 63(1)(c) provides that the Supreme Court may order the winding up of an association if, inter alia, the association is insolvent. The Act contains no definition of insolvency and while, by s 64, Parts 5.5 and 5.6 of the (Cth) Corporations Act 2001 are made applicable to the winding up process consequent upon an order for winding-up being made, it does not make applicable to the winding up of an association the earlier provisions of the Corporations Act relevant to winding up. In particular, it does not make applicable Part 5.4 relating to winding up in insolvency, or Part 5.4A, winding up on other grounds.

3. In those circumstances, I do not see how it can be said that the definition of insolvency in Corporations Act, s 95A, is imported or made applicable. Nonetheless, it seems to me that in enacting the Associations Incorporation Act, in which Parliament determined to use the ground that "the association is insolvent" in place of the ground that "the association is unable to pay its debts" which appeared in the earlier Associations Incorporation Act of 1984, Parliament should be taken to have intended the concept of "insolvency" to be that which was in common use in the field of winding up of corporations and bankruptcy of individuals at the time. The notion that insolvency involves an inability to pay one's debts from one's own resources as and when they fall due has been current in that field for many years, as illustrated, for example, by the judgment of Sandell v Porter (1966) 115 CLR 666.

4. The evidence establishes that when served with the plaintiff's Statement of Claim, the defendant did not respond. A purported statutory demand also elicited no response. I say "purported", because there is no provision for service of a statutory demand under the Associations Incorporation Act, for reasons explained by Barrett J in QBE Workers Compensation v Wandiyali ATSI Inc (in liq) (2004) 62 NSWLR 117; [2004] NSWSC 1022.

5. Although it has crossed my mind that failure to respond to a purported demand might be some evidence of insolvency, albeit that no presumption arises, it seems to me the safer course is to take the view that, as the demand had no legal foundation whatsoever, the defendant was entitled to ignore it, and so I do not rely on that matter.

6. However, the public officer of the defendant has, on a number of occasions, sought to enter into an instalment arrangement with the plaintiff; that of itself bespeaks an inability to pay the debt as it falls due. In the course of one such conversation, the defendant's officer admitted that the defendant did not have any money to make payments. On some occasions, there has been an assertion that a payment was made, but none has been received. Where an instalment arrangement was negotiated, it was not complied with.

7. There is no suggestion of any dispute about the existence, or amount of the debt and, in those circumstances, the only inference available from the failure to pay it and the requests for instalment plans is that the association is unable to pay it and is, therefore, insolvent. I am satisfied that the defendant is insolvent.

8. The Court orders that:

1. Pursuant to the Associations Incorporation Act, s 63(1)(c), that the defendant be wound up and David Levi be appointed liquidator of the defendant;

2. That the plaintiff's costs, assessed in the sum of $8000, be paid out of the assets of the defendant.

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Decision last updated: 05 February 2015