Keygrowth Ltd v Gemalla Pty Ltd

[1991] FCA 919

IN THE FEDERAL COURT OF AUSTRALIA )

I No. VG 3091 of 1991

VICTORIA DISTRICT REGISTRY

1

GENERAL DIVISION 1

BETWEEN:	KEYGROWTH LTD Applicant
AND :	GEMALLA PTY LTD
Respondent

C O N :	WILCOX J
PLACE :	BELBOURNE
DATE :	10 DECEMBER 1991

EXTEMPORE REASONS FOR JUDGMENT

WILCOX J:  There is before the Court a Notice of Motion

seeklng various orders in the alternative. The first of those

alternatives, being the order which has been argued to date,

is that the Court should dismiss the application for winding

up the respondent. The Application is based on both s.460 and

as distinct from order 71, rule 36 - there remain various
s.461 of the Cor~orations	Law but I have been informed by

counsel for the applicant that his client is prepared to elect

- indeed, he says that it previously elected - to limit itself

to s.460.

Assuming for the purposes of this motion that it is

therefore appropriate to limit consideration of the
applicant's compliance with the rules to order 71, rule 37 -

L .

problems about the way in which the application has been
handled on behalf of the applicant. Order 71, rule 37(2)
requires that:

"On filing and serving an application under this rule, the applicant must also file and serve:

(a)	an affidavit made not earlier than 7 days before the application is filed setting out a statement by a person who has, not earlier than 3 days before the date on which the affidavit is made, undertaken a search of the company records maintained by the Commission, as to whether any winding up application is pending or any winding up order has been made against the company; and
(b)	an affidavit made not earlier than 7 days before the application is filed setting out the prescribed infonation,which may be in or substantially in Form 128; and
(d)	an affidavit in or substantially in Form 94 proving service of a notice under subsection 460(2), if applicable, together with copies of any documents exhibited to that affidavit."
It is common ground that no such affidavits were

served upon the company, or upon any representative of the
company, until they were handed to the solicitors acting on

behalf of the respondent company before the commencement of

this hearing today. It is curious that this deficiency
occurred, because it appears that affidavits which complied
with the rules were in fact sworn and filed. And it is clear
that other documents were served, not only upon the company,
but also upon its solicitors. However, these documents were
not provided.

Moreover order 71 rule 37 (2)(c) requires the filing

and service of an affidavit setting out certain matters. By sub-rule ( 3), unless the court orders to the contrary, and I interpolate that there has been no such order, the affidavit setting out the matters referred to in para. (c) of sub-rule

(2) must be made by a person who can depose to the

indebtedness of the company to his or her own knowledge and be

served on the company wlth the application.

An affidavit which purported to comply with this

paragraph was in fact served on the company with the
application. It was sworn by James Noel Marks who claimed to
be a director of the applicant company, and there is no
dispute about that claim. But the deponent said that he made
the affidavit on the basis of his knowledge, information and

belle£. In the body of the affidavit he did not identify what

Consequently it is not possible for a reader of the affidavit	parts of the affidavit were made on the basis of his own person knowledge, as distinct from the information and belief.
to conclude that the particular matters referred to in para.(c) were based upon the deponent's personal knowledge.

It is clear from the above that there have been

significant fallures to comply with the terms of rule 37. The
submission is put on behalf of the respondent that the Court
should therefore dismiss the application without going to any
other matters which might be relevant at the hearing. On the
other side, the argument is put that the application should
not be dismissed because the respondent company has not
suffered any prejudice. It is said that the defects are
technical only.

In one sense it can be said that the defects are

technical. They go to the detail of what must be provided by
an applicant to the Court and to the company against whom
winding up proceedings are taken. But it must be remembered
that the proceedings are proceedings of considerable
importance to a company. If a winding up order is made, for
practical purposes the company ceases to be able to carry on
its activities. The courts have always insisted on a high
standard of compliance with rules which relate to the winding

up of a company or, indeed, the bankruptcy of an individual.

During the course of argument I discussed with

counsel what power there might be in the court to dispense

with compliance with the requirements of rule 37. Reference

was made to s.1322 of the Cor~orations Law. Under this

section the Court may grant relief in respect of procedural
irregularities. But this power' can only be exercised if the
Court is satisfied of the matters set out in subs. 6 of that
section. These requirements are, firstly, that the act,
matter or thing is essentially of a procedural nature, and,
secondly, that the persons concerned in the contravention
acted honestly; or alternatively, that it is in the public
interest that the order be made.

AS to this subsection, I can only say that there is

no evidence as to the circumstances in which the omission
occurred. So there is nothing before me which would enable me
to feel satisfied that the relevant persons acted honestly. I
am not suggesting that they acted other than honestly; there
is simply no evidence on the matter. Similarly there is
nothing before the Court which deals with the public interest;
except perhaps such general considerations as might be germane
to the manner in which the Court's discretion should be
exercised. However, I think that the specific mention of
public interest indicates that something more than these
general considerations was in the mind of the drafter of the
section. It seems to me that there is not the factual
material before the Court which would enable me to exercise

discretion under s.1322.

The other possible source of power is order 1, rule

8 of the Federal Court Rules. This is a very general power,
enabling the Court to dispense with compliance with any of the
requirements of the rules, either before or after the occasion
for compliance arises. The power is frequently used,
particularly where the non-compliance is technical and has
caused no prejudice to the opposlng party. As I said to
counsel during the course of discussion, if this was a case
where the relevant affidavits had been served upon the
company, or even upon its solicitors, at or about the time
when they were filed, that is to say, at or about the time
when the application was filed and served, I would be disposed
to look favourably upon a submission that I should exercise
discretion under order 1, rule 8. It could be sald that there
could be no conceivable prejudice by the failure to hand the
documents over at the exact time when the application was
served.

But that is not this case. The application was

filed on 25 September. The matter has been before the Court
on a number of occasions and only today, at a time when the
applicant seeks to press on with the application and obtain a
winding up order, have these documents been served. It would
be manifestly unfair to oblige the respondent to deal wlth the
matter on its merits today when these documents have been

received only this morning.

Furthermore, and this is the factor which is

critical to my judgment as to the course to be taken - this is

not slmply a case of complying documents not having been
served at the appropriate time. The submission which has been
put on behalf of the respondent about the deficiency in the
affidavit of the director, that is to say, that it does not
comply with subrule 3, is correct. It would not be right for
the Court to act upon the assumption that Mr: Marks, the
director, is relying on his knowledge, as distinct from his
information of belief, in deposing to the critical matters.
Yet unless one takes that course, one could not reach a
conclusion that he was speaking from knowledge, as distinct
from information and belief. I think that the policy behind
subrule 3 is quite clear. It is to ensure that a person who
actually knows the facts relating to the indebtedness pledges
his or her oath to those facts. A company is not to be wound
up on mere hearsay material. Yet, if I were to act on Mr
Marks' affidavit, that would be the effect.

One possible course would be to refuse this present

application and adjourn the matter to a future date, when a
proper affidavit could be obtained from M r Marks or somebody

else. In the meantime the affidavits now served could be

considered on behalf of the respondent. But, on the whole, I do not think that this is the better course to take. I do so for two reasons. One is that the proceedings would be much

clearer and cleaner if the applicants started again, rather
than encumbering the record with yet more affidavits.

Secondly, it is apparent from the material to which I have

been taken, that the claim, the subject of the proceeding, is	under appeal to the Court of Appeal Division of the Victorian
Supreme Court. I have been told from the bar table, without any dispute, that an application for a speedy hearing of the appear1 is to be dealt with next Friday and that,both parties will seek a speedy hearing, in which case the matter will
probably come on for hearing in March.

If the applicants' paperwork was in order, I would

not be disposed to adjourn the matter simply to allow the

appeal to be heard. In saying that I bear in mind that the

Court of Appeal has already dealt with the question of a stay of proceedings and rejected an application for a general stay. But, if there has to be an adjournment anyway, until February or March, there seems to be some virtue in the appeal being dealt with first.

For all of those reasons, I think that the

appropriate course is for me to accede to the application. If the applicant wishes to file a fresh Application immediately, that is its entitlement. Nothing that I have said is intended to express any view about the course which the Court ought to

take on the return of any such application. That will be a
matter for consideration in the light of the facts as they are
at that time. All that I am saying is that those background
matters have influenced the vlew that I take about the
exercise of power under order 1, rule 8.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment

of the Honourable Justice Wilcox.

Associate: M - &

Dated: 10 ~ecen&er 1991

APPEARANCES

Counsel for the Applicant:	P J Booth
Solicitors for the Applicant:	Arnold Bloch Leibler
Counsel for the Respondent:	G Garde, QC and D Denton

Solicitors for the Respondent: Coltmans

Date(s) of hearing:  10 December 1991