Kelly v J Stockland & Co Pty Ltd

[2007] NSWSC 214

CITATION:	Kelly v J Stockwell & Co Pty Ltd [2007] NSWSC 214
HEARING DATE(S):	12/03/07
JUDGMENT DATE :	12 March 2007
JURISDICTION:	Equity Division Corporations Listt
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	12 March 2007
DECISION:	Order for winding up. Order appointing liquidator.
CATCHWORDS:	CORPORATIONS - winding up - application for winding up order by creditor relying on unsatisfied statutory demand - subsequently filed application by company seeking order for its own winding up - whether plaintiff's prior application an abuse of process - where plaintiff's application attended by certain procedural irregularities with respect to time - whether such defects productive of "substantial injustice" within s.467A
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.461(1)(a), 465A, 467A, 470(1)(a)
CASES CITED:	Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2006) 230 ALR 184 Australian Securities and Investments Commission v Eastlands Pty Ltd (No 3) [2006] FCA 1702 IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR 417 Re a Company [1894] 2 Ch 349
PARTIES:	Aaron Lee Kelly - Plaintiff J Stockwell & Co Pty Ltd - Defendant
FILE NUMBER(S):	SC 6483/06
COUNSEL:	Mr B. Loukas, Solicitor - Plaintiff Ms S.K. Hill - Defendant
SOLICITORS:	Rick Jones & Associates - Plaintiff Youth and Enterprise Legal Centre - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

MONDAY 12 MARCH 2007

6483/06 AARON LEE KELLY v J STOCKWELL & CO PTY LTD

JUDGMENT

1 The plaintiff seeks an order for the winding up of the defendant in insolvency and the appointment of a liquidator. He does so on the basis of non-compliance with a statutory demand served in October last year. All matters relevant to the making of a winding up order on the plaintiff’s application have been duly proved, although with some deficiencies as to timing to which I shall return.

2 The defendant, however, resists the making of a winding up order on several grounds. First, the defendant says that the winding up application is an abuse of process as “the defendant was already in the course of winding up when the plaintiff filed its originating process”.

3 It is not correct that a winding up of the defendant had commenced before the plaintiff filed his originating process. Rather, it appears that the two shareholders of the defendant had met together and resolved to seek winding up of the company by the court. The case might therefore be within s.461(1)(a) of the Corporations Act 2001 (Cth), in that it may be possible to regard a unanimous resolution of two persons who are shareholders as a special resolution, even if it is not described as a special resolution.

4 At all events, following that determination of the two shareholders, which occurred before the plaintiff's originating process seeking winding up was filed, there was some delay before the defendant actually filed an originating process of its own. The plaintiff's originating process was filed on 28 December 2006. The defendant's originating process seeking its own winding up was filed on 28 February 2007.

5 The abuse of process suggestion cannot be sustained. It can only in rare circumstances be an abuse of process for a creditor who has a presumption of insolvency operating in his favour to proceed with a winding up application. Such a creditor is entitled to a winding up order ex debito justitiae unless the presumption of insolvency is displaced by evidence of solvency: IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR 417. For an abuse of process allegation to defeat that entitlement, it would have to be shown that collateral purpose or untoward motive was at work in what the plaintiff was doing - that is to say, something over and above the creditor's desire to resort to its entitlement to a winding up order in consequence of the presumption of insolvency: see, for example, Re a Company [1894] 2 Ch 349. No such collateral or untoward matter is shown here.

6 In saying this, I take the view that it is in no way questionable for a creditor in the position of the present plaintiff to proceed with a winding up application, even though the company has taken steps of its own towards seeking a winding up order, which steps it may or may not see fit to follow through to the end.

7 The other matters relied on by the defendant can be taken together. The second matter is the plaintiff's failure to lodge a notice of application for winding up with ASIC in accordance with s.470(1)(a) within the required time. It was some weeks late. The third matter is failure of the plaintiff to serve the originating process until a relatively short time after that specified in s.465A. The fourth matter is that the ASIC search annexed by the plaintiff was carried out somewhat earlier than seven days before the originating process was filed.

8 I regard these second, third and fourth matters as defects or irregularities in connection with the application of the type referred to in s.467A. It was suggested by White J in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2006) 230 ALR 184 at [59] that use of “merely” in s.467A indicates that the section is concerned with breaches of the rules “not at the higher end on the scale of seriousness”. The alternative construction (which seems to me preferable) is that “merely”, in the phrase “merely because of”, does not refer to the seriousness of the breach but is just part of the modern drafter’s equivalent of “by reason only that”. On that basis, substantial injustice is the only issue raised by s.467A: Australian Securities and Investments Commission v Eastlands Pty Ltd (No 3) [2006] FCA 1702. At all events, it is clear in the case before me that the three matters of timing non-compliance are by no means at the higher end of any scale of seriousness that may be relevant. Section 467A precludes dismissal of the plaintiff’s winding up because of those defects, unless the court is satisfied that substantial injustice has been caused by the defects or any of them.

9 In the present circumstances, where the defendant wishes the court to make a winding up order in respect of it and has taken steps of its own to seek such an order, I cannot see that any substantial injustice would be caused if the court made a winding up order on the earlier application of the plaintiff, bearing in mind that the plaintiff has proved all matters going to the presumption of insolvency. It is said that, if it is the plaintiff’s winding up application that is progressed to finality rather than the defendant’s own application, the defendant will somehow lose control of matters, in particular, that its candidate for appointment as liquidator will not be before the court.

10 That is not a matter that could possibly be productive of substantial injustice. The court may only appoint someone who is an official liquidator. All official liquidators must satisfy the same requirements and are subject to the same standards of conduct. The generally accepted approach is that the court will, in the absence of demonstrated reason to the contrary, appoint as liquidator the duly qualified person whose consent is filed by the plaintiff.

11 Section 467A, as it applies in this case, precludes dismissal of the plaintiff’s originating process on the basis of the three timing deficiencies, none of which was major and none of which has been shown to be the source of any particular prejudice, let alone “substantial injustice”. Furthermore, the court must proceed on the premise that the defendant is insolvent. The general expectation is that insolvent companies should be wound up, as a matter of public interest. There is no reason why that should not be the result here.

12 The plaintiff has made out its entitlement to a winding up order. I will make that order and also appoint as liquidator the qualified person whose consent has been filed by the plaintiff. If anyone associated with the defendant and affected by its winding up can make some case that the particular liquidator is an inappropriate person to act, an application for removal of that liquidator and his replacement by another may be made.

13 I make the following orders:

1. Order that J Stockwell & Co Pty Ltd ACN 001 213 421 be wound up in insolvency.
2. Order that Quentin James Olde of Level 14, 56 Pitt Street, Sydney, an official liquidator, be appointed liquidator of J Stockwell & Co Pty Ltd.
3. Order that the defendant pay the plaintiff's costs of the proceedings.
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