Roberts t/as Deacons v South East Asia Communications

[2003] NSWSC 800

CITATION:	Roberts t/as Deacons v South East Asia Communications [2003] NSWSC 800
HEARING DATE(S):	28/08/03
JUDGMENT DATE:	28 August 2003
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Hearing of winding up application to proceed
CATCHWORDS:	CORPORATIONS - winding up in insolvency - alleged defect in affidavit accompanying statutory demand - does not vitiate demand - does not forestall presumption of insolvency
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.459C(2), 459E(3), 459J(1)
CASES CITED:	B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433 David Grant Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 132 FLR 300 Switz Pty Ltd v Glowbind Pty Ltd (2000) 33 ACSR 723 Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226 Victor Tunevitch Pty Ltd v Farrow Mortgage Services Pty Ltd (1994) 17 FLR 330
PARTIES :	Mark Roberts & Ors trading as Deacons - Plaintiffs South East Asia Communications Pty Ltd - Defendant
FILE NUMBER(S):	SC 3318/03
COUNSEL:	Mr R.D. Marshall - Plaintiffs Mr D.J. Durston - Defendant
SOLICITORS:	Toomey Pegg & Drevikovsky - Plaintiffs Ma & Company - Defendant

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

BARRETT J

THURSDAY 28 AUGUST 2003

3318/03 - MARK ROBERTS TRADING AS DEACONS & 46 ORS v SOUTH EAST ASIA COMMUNICATIONS PTY LIMITED

JUDGMENT

1 The plaintiffs seek an order for the winding-up of the defendant in insolvency on the basis of the presumption of insolvency arising under s.459C(2) of the Corporations Act 2001 (Cth) by reason of non-compliance with a statutory demand. The defendant contends, as a preliminary matter, that the presumption has not arisen. That contention is based on what is said to be a serious irregularity in the affidavit accompanying the statutory demand.

2 The plaintiffs are a firm of solicitors practising in Hong Kong. The affidavit in question is an affidavit sworn by their Sydney solicitor. He deposed that he was the creditors’ solicitor, that he was authorised by them to make the affidavit, that he was informed by one of the creditors that the defendant owed the creditors certain described debts for fees and that the total of the debts was due and payable. This affidavit is said by the defendant to be defective, first, because it does not comply with the relevant rules and second, because it is, as to the existence of the debts, merely hearsay.

3 Mr Durston of counsel, who appears for the defendant, took me to a number of cases concerning the sufficiency of affidavits called for by s.459E(3). In particular, he referred to observations of Branson J in B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433 at 436 in which there was reference to a view that an accompanying affidavit under s.459E(3) should not consist of hearsay and that the person verifying as required by the section should do so from his or her own knowledge or on the basis of inspection of relevant business records. As to the rules, Mr Durston submitted that the relevant rule with which s.459E(3)(b) requires compliance is the Corporations Act r 2.5, but I am satisfied that the applicable rule is the Corporations Act r 5.2, as submitted by Mr Marshall of counsel, who appears for the plaintiffs. In the end, I think this makes little difference as each refers to an affidavit made by the creditor or a person authorised.

4 Mr Durston’s central proposition is that, because of the irregularities he says affect the accompanying affidavit called for by s.459E(3), the supposed statutory demand is not a statutory demand at all and, for that reason, no presumption of insolvency has arisen.

5 There is ample and compelling authority for the proposition that a deficiency in the accompanying affidavit is not a “defect in the demand” for the purposes of s.459J(1)(a) but may constitute “some other reason” under s.459J(1)(b) for setting aside the statutory demand: see, for example, B & M Quality Constructions (above), Victor Tunevitch Pty Ltd v Farrow Mortgage Services Pty Ltd (1994) 17 FLR 330, Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 132 FLR 300. But the defendant here does not seek to have the statutory demand set aside. Indeed, it is too late for it to do so. The defendant resorts rather to the sweeping proposition that there is in reality no statutory demand at all.

6 That proposition is simply not sustainable. The defendant does not point to any alleged vice in the statutory demand itself. The Act draws a sharp distinction between the statutory demand and the accompanying affidavit. The validity of the statutory demand, by which I mean a document possessing the character referred to in the s 9 definition of statutory demand (that is, “a document that is, or purports to be, a demand served under section 459E”) is in no way affected or called into question by the form, content or inadequacy of the accompanying affidavit. In Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226, Lockhart J adverted to (but did not embrace) the proposition that a statutory demand itself might be so far out of line with the statutory requirements that it could not be said even to “purport” to be a statutory demand. That, even if possible, is simply not the case here.

7 In David Grant Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 and Switz Pty Ltd v Glowbind Pty Ltd (2000) 33 ACSR 723, the High Court and Court of Appeal respectively emphasised a fundamental aspect of the present statutory scheme, namely, that questions as to the sufficiency of steps under Div 2 of Pt 5.4 to give rise to the presumption of insolvency are to be confined, and strictly confined, to the specific avenue of challenge made available by Div 3 of Pt 5.4, unless the court expressly grants leave under s.459S for a controversy of that kind to be aired at the subsequent stage when the application for winding-up is heard.

8 This proceeding is at that subsequent stage. No such leave has been sought. Even if the deficiencies in the s.459E(3) affidavit the defendant alleges do exist (and my strong inclination is to think that they do not), they would amount, at best, to some “other reason” under s.459J(1)(b) for the setting aside of the statutory demand. They would therefore be matters which s.459S expressly directs may not be relied upon in opposition to the winding-up application without leave.

9 I shall proceed to hear that application.

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Last Modified: 09/02/2003