Malik Investments Pty Ltd v ICA Group Pty Ltd

[2007] NSWSC 1104

CITATION:	Malik Investments Pty Ltd v ICA Group Pty Ltd [2007] NSWSC 1104
HEARING DATE(S):	02/10/07
JUDGMENT DATE :	2 October 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	2 October 2007
DECISION:	Orders for winding up and appointment of liquidator
CATCHWORDS:	CORPORATIONS - winding up in insolvency - non-compliance with statutory demand - pending s.459S application for leave to defend on ground of solvency - leave not needed - oral s.459S application to rely on dispute concerning debt subject of statutory demand - application too late - only evidence of solvency is uncorroborated word of director - defendant's onus not discharged - orders made
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.459C, 459G, 459H, 459J, 459S,
CASES CITED:	Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562 Deputy Commissioner of Taxation v Sydney Concrete Steel Fixing Pty Ltd (1999) 17 ACLC 972 Expile Pty Ltd v Jabb’s Excavations Pty Ltd (2003) 45 ACSR 711 Switz Pty Ltd v Glowbind Pty Ltd (2000) 33 ACSR 723
PARTIES:	Malik Investments Pty Ltd - Plaintiff ICA Group Pty Ltd - Defendant
FILE NUMBER(S):	SC 2706/07
COUNSEL:	Mr M.J. Cohen - Plaintiff Mr M.D. Foley, Solicitor - Defendant
SOLICITORS:	Rocco Mimmo Lawyer - Plaintiff Foleys - Defendant

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

BARRETT J

TUESDAY 2 OCTOBER 2007

2706/07 MALIK INVESTMENTS PTY LTD v ICA GROUP PTY LTD

JUDGMENT

1 I have before me the plaintiff's originating process filed 14 May 2007 by which it seeks an order that the defendant be wound up in insolvency. All the formal matters to be proved upon such an application are established by affidavits that have been filed and read.

2 The defendant, in its notice of appearance, has indicated an intention of defending the winding up application on the ground that it is solvent.

3 The winding up application is advanced on the basis of non-compliance with a statutory demand, which non-compliance, of course, caused a presumption of insolvency to arise pursuant to s.459C of the Corporations Act 2001 (Cth). The defendant is thus in a position where its task is to prove solvency. That is the task that the defendant has given notice it intends to pursue.

4 On 27 August 2007 the defendant filed a notice of motion by which it sought, by reference to s.459S, the leave of the court to defend the winding up proceedings "on the basis that the defendant is solvent". That application is not a meaningful application in the sense that opposition to the making of a winding up order, on the basis that the defendant company is solvent, is not a ground of opposition precluded by s.459S(1) in the absence of the leave of the court under that section.

5 In a case such as the present, where there was in fact no application under s.459G for an order setting aside the relevant statutory demand, s.459S precludes, in the absence of the leave of the court, reliance on a ground that could have been relied on for the purposes of an application for an order setting aside the statutory demand.

6 The fact that the company is solvent does not represent a ground on which a statutory demand may be set aside: see, for example, Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562. The grounds on which such an order could be made are those set out in ss.459H and 459J. These do not include the ground that the company is solvent. It is for this reason that I say that the s.459S application, or purported s.459S application, in the notice of motion filed on 27 August 2007 is not a meaningful application.

7 Reliance by the present defendant on the ground that it is solvent is a course that it may take in opposition to the making of a winding up order without leave under s.459S.

8 Mr Foley has indicated in court this afternoon that he wishes to amend the s.459S application so that it becomes an application for leave to rely on the ground that there is a genuine dispute about the existence of the debt the subject of the statutory demand, that being a ground clearly relevant for s.459S purposes. It is the ground indicated by s.459H(1)(a). But, of course, we are now at the stage of the hearing of the winding up application and, as the Court of Appeal has made clear in Switz Pty Ltd v Glowbind Pty Ltd (2000) 33 ACSR 723, an application under s.459S should be dealt with beforehand and is not to be combined with the hearing of the winding up application. In other words, it is too late for the defendant now to seek to pursue some other s.459S application.

9 It is nevertheless appropriate to note, by way of aside, that the debt in question, that is the debt which forms the basis of the statutory demand, was a judgment debt. It was a debt arising from a default judgment in the District Court. It is further relevant to note that an application by the judgment debtor was made to the District Court for an order setting aside the default judgment and that on 21 September 2007 that application was dismissed. I have been told that the judgment debtor, that is the present defendant, intends to make another or second application to have the judgment debt set aside, but the position, as it stands at the moment, is that the judgment debt subsists, has been reviewed by the District Court and has not been seen to be of such a quality that it should be overturned. That would indicate very strongly against the grant of any leave under s.459S, in respect of reliance on the existence of a dispute concerning the debt if any application for s.459S leave in order to advance that ground were before the court. But, of course, as I have said, there is no such application and it is now too late for an application to be pursued.

10 I should refer to some of the procedural history. The winding up application was before the court on 27 August 2007. On that occasion Hammerschlag J stood the originating process over to 24 September 2007, at the same time noting an undertaking given to the court by the defendant, through its solicitor, Mr Foley, to pay into court, within 21 days of that date, that is 21 days of the 27 August 2007, the sum of $447,743.51. The court accepted that undertaking.

11 On 27 August 2007 there was filed an affidavit of Mr Meredith exhibiting certain correspondence but not, as I see it, addressing the issue of solvency, which is the ground on which the defendant seeks to resist the making of a winding up order. There is also an affidavit Mr Huxley, a director of the defendant, sworn 27 August 2007, in which he deposes to a belief that the defendant is solvent and able to meet its obligations as and when they fall due. He exhibits to that certain unaudited and unverified financial statements.

12 There is no other evidence of solvency. In particular there has been no attempt to grapple with the reality exposed to in cases such as Deputy Commissioner of Taxation v Sydney Concrete Steel Fixing Pty Ltd (1999) 17 ACLC 972 that the court will not make findings of solvency where it has only the uncorroborated evidence of persons associated with the company and interested in the outcome the proceedings. The need for “fullest and best” evidence of solvency (Expile Pty Ltd v Jabb’s Excavations Pty Ltd (2003) 45 ACSR 711) is not met by the evidence now before me.

13 Returning to the procedural history, I should refer to the fact that on 17 September 2007 the defendant made an unsuccessful attempt to have the court vary the undertaking given by it to the court on 27 August 2007. The day on which that application came before the court was the last day for compliance with the undertaking of 27 August 2007. The defendant sought variation of the undertaking to allow a longer time for payment. That application was refused.

14 The matter therefore seems to me to lie in short compass. The plaintiff has operating, in its favour, a presumption of insolvency and has proved all other matters necessary to obtain a winding up order. The defendant has not obtained leave to seek to resist the winding up application on the ground that there exists a genuine dispute as to the existence of the judgment debt the subject of the statutory demand. The judgment debt has been the subject of an unsuccessful application to the District Court to have it set aside. A further such application is foreshadowed. The defendant, so far as attempts to show that it is solvent is concerned, has produced nothing more than an uncorroborated, unsubstantiated subjective opinion of its own director. The defendant has also failed to honour the undertaking given to the court at the time when the winding up application was originally adjourned.

15 In these circumstances the grounds for the making of a winding up order, namely, that the defendant company is insolvent, have been proved and it has not been shown that there exists any circumstance warranting the exercise of the court's discretion in such a way as to refuse a winding up order or to adjourn the hearing further.

16 Noting that the defendant’s name has changed, I make the following orders:

1. Order that ACN 090 Pty Ltd (ACN 090 978 797) be wound up in insolvency.
2. Order that Steven Nichols of Level 2, 350 Kent Street, Sydney, an official liquidator, be appointed liquidator of ACN 090 Pty Ltd.
3. Order that the plaintiff's costs of the proceedings be paid by the defendant.

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