Star Erections Pty Ltd v Southern Cross Medical and Surgical Pty Ltd

[2001] NSWSC 961

CITATION:	Star Erections Pty Ltd v Southern Cross Medical & Surgical Pty Ltd [2001] NSWSC 961
CURRENT JURISDICTION:	Equity Division Corporations List
FILE NUMBER(S):	SC 3797/01
HEARING DATE(S):	17/10/01
JUDGMENT DATE:	17 October 2001
PARTIES :	John Sheahan (Applicant Liquidator) Southern Cross Medical & Surgical Pty Ltd (Defendant Company) G E Syndication Pty Ltd (Supporting Creditor)
JUDGMENT OF:	Young CJ in Eq

COUNSEL :	G A Seib (Applicant Liquidator) P Fordyce (S) (Defendant Company) Jarrod White (S) (Supporting Creditor)
SOLICITORS:	Piper Alderman (Applicant Liquidator) Morgan Lewis Alter (Defendant Company) Kemp Strang (Supporting Creditor)
CATCHWORDS:	CORPORATIONS [228]- Winding up order-Partially vacated on appeal by misunderstanding- How dealt with.
LEGISLATION CITED:	Corporations Act 2001, ss 459J and 471A Supreme Court Rules Pt 40 r 9
DECISION:	Orders made.

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

3797 of 2001
YOUNG CJ in EQ
Wednesday 17 October 2001

STAR ERECTIONS PTY LTD v SOUTHERN CROSS MEDICAL & SURGICAL PTY LTD

Judgment

: This is a mess. That is the best way of describing what is before the Court in a neutral, accurate way.

2 There was a perfectly ordinary application to wind up the defendant, now the first appellant, which was granted by the Registrar on 25 September 2001, and Mr Sheahan was appointed liquidator.

3 On 4 October 2001, a Mr T appeared before the Duty Judge in this matter. The transcript says that Mr T appeared for the defendant, which is a little inconsistent with the way in which the heading appears in the transcript, which puts the parties the wrong way around and appears as follows:

"T: By consent I hand up a notice of motion on appeal, affidavit and short minutes. It is an appeal from a winding-up order of the registrar.
HIS HONOUR: I do not understand order 2. The order does not work. Would you go away and have another look at it?
Stood over to 10 o'clock on Thursday 5 October 2001."

4 The Associate's page further records that Mr T appeared for the plaintiff and also mentions the matter for the defendant. There does not appear to have been any process before the learned Judge that day.

5 On the next day, the learned Judge initialled a document called "notice of motion of appeal" which was later filed in the Registry on the same day, whereby the company and a contributory appealed from the order winding it up on the main grounds that the purported statutory demand was not accompanied by an affidavit that qualified under s 459E of the Corporations Act 2001, and that the discretion of the Registrar miscarried in refusing an adjournment.

6 The Associate's page for that day again records Mr T as appearing for the appellants and mentioning it for the respondent.

7 The piece of paper which accompanied the Associate's page purports to have the signature of Mr A, solicitor, for the appellants and the facsimile signature of one Andrew Frank. Looking at the document one would think Andrew Frank represents an opposing party. The document, which has handwritten alterations which may well be his Honour's, ordered that the Registrar's orders be vacated and noted that the parties intended to enter into a deed of settlement with a view to the proceedings being dismissed, and the matter was stood over to 6 November 2001 before the Registrar. The notice of appeal was also stood over to that day.

8 On 15 October the applicant, John Sheahan, who had been appointed liquidator, applied for an order by way of interlocutory relief setting aside the orders made by the Duty Judge.

9 The orders made by the Duty Judge were duly passed and entered on 5 October. The only way in which the Court can set aside an order which has been passed and entered, apart from odd situations that occur under the slip rule, is by a separate suit in which either fraud, mistake, or other vitiating factor is alleged, or, alternatively, under Pt 40 r9 of the Supreme Court Rules, or under the inherent power of the Court. The power under Pt 40 r9 applies where an order is made in the absence of a party.

10 The editors of the Supreme Court Practice have put in a note 40.9.3A that there is no decision made as to what is covered by "absence of a party", that the question is really academic because if a party has deliberately refrained from participating in a hearing, then even though the order can be sought to be made in the party's absence, that wilful refusal to become involved would be a reason why the order would not, in fact, be made.

11 The problem in the instant case is that it would appear that the learned Judge was of the view that Mr T appeared for both parties. That is not supported by the transcript of the first day, although as I have said, that transcript is not particularly accurate in other respects. However, the transcript of the second day mentions Mr T mentioning the appearance of the respondent.

12 A whole series of situations may have occurred. Mr T may have genuinely believed he had the consent of the liquidator to do what he did. Mr T may have behaved in a fraudulent way, though one does not ordinarily impute that sort of conduct to a solicitor of this Court without some evidence. Or there may have been some other misunderstanding. It would appear nothing was actually served on the liquidator, and it would also seem the liquidator's head office is in South Australia though the address given in the order appointing him was Macquarie Place, Sydney, an office that may not be particularly well staffed.

13 The learned Judge obviously thought he was making an order in the absence of a party. I do not think that I have the facts to determine otherwise, and that must mean that there is no standing in the liquidator to make the present application because he is no longer the liquidator.

14 However, it is very peculiar that before an appeal is heard the winding up order is set aside, which defeats the whole purpose of the appeal, yet that has happened.

15 I should, at this juncture note a matter relating to the appeal itself. Mr Seib for the liquidator submitted that the first of these grounds of appeal was precluded by s 459J of the Corporations Act as it raised a matter which should have been taken into account in setting aside the statutory demand.

16 It seems to me that the only way out of this mess is to act as follows:

1. To remit the matter for hearing by the Registrar and, in the first instance, I will return it to his list on 25 October 2001 at 11 am.

2. The Court is entitled to put in a provisional liquidator pending the hearing of an appeal and also, of course, pending the hearing of the originating process, though that is usually only done if there is proper evidence of jeopardy to assets. In the instant mess it seems to me that I should try and preserve the status quote by appointing Mr Sheahan as provisional liquidator, and he consents to that.

3. It would seem the petitioning creditor's debt has been paid either absolutely or conditionally, but the supporting creditor, for whom Mr Jarrod White appears, wishes to be substituted. If the Registrar is satisfied on 25 October that Mr White's client has status to be substituted, then the Registrar should deal with that matter so that the final hearing of the application for winding up may be dealt with as soon as possible.

17 The problem with doing that is it may give Mr Sheahan an advantage that he is not entitled to have. As I understand it - and I may not understand it fully - the costs of the liquidator acting as liquidator of the company up until 5 October are $4000. At least, that is what is claimed by Mr Sheahan. Mr Fordyce, solicitor, who appears today for the company, says that he has no problem about paying the liquidator's reasonable fees for that period.

18 However, the fees for time spent and the disbursements for lawyers in mounting the interlocutory application to vacate the Duty Judge's order has meant that a further $11,000 or thereabouts has been billed against this company. That may be a proper charge against the company if, when all the facts come out, there has been some behaviour that is, to use a neutral term, less than cricket on behalf of those in charge of the company. On the other hand, it may be that those costs should not be chargeable against the company and in appointing Mr Sheahan as provisional liquidator I should not give him an advantage.

19 A question has arisen as to the impact of s 471A of the Act on these proceedings. It may very well be that the Court should not have vacated the Registrar's order. Without looking carefully at that section, I say the learned Judge obviously considered he was doing it by consent of everybody. However, if he was wrong, it seems to me his order as an order of the Supreme Court was still effective.

20 The other impact of the section is, as I have now put in a provisional liquidator, the directors may be unable to defend the winding up summons in the name of the company. I think Mr Fordyce's application that leave should be given under section 471A(2)(d) that they have that power, is the proper one and I will grant it subject to the condition that without further order of the Court the defence should be at the cost of Mr Paul Jones who has made that application.

21 I think the thing to do is to make it a condition of the appointment of the provisional liquidator that the provisional liquidator will not seek to enforce against the company any costs between 5 and 17 October 2001 without the further order of the Court.

22 Accordingly, the formal orders I should make are:

1. I vacate the hearing of 6 November 2001 before the Registrar and adjourn the present matter to the Registrar's list on 25 October 2001 at 11 am.

2. I appoint John Sheahan of Macquarie Place, Sydney as the provisional liquidator of the company.

3. Order 2 is made on the condition that Mr Sheahan will not seek to enforce any claim for costs between 5 and 17 October 2001 against the company without further order of the Court.

4. The costs of today are reserved.

5. The Court approves Mr Paul Jones acting as an officer of the company only for the purpose of defending the winding up proceedings in the name of the company at his own risk as to costs, unless the Court makes a further order as to costs.

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Last Modified: 10/29/2001