Abraham v Joadja;Abraham v Jasmman

CATCHWORDS : CORPORATIONS - Application under s 459P read with s 459A of the Corporations Act 2001 (Cth) ("the Act") for the winding up of two companies following non-compliance with statutory demands - Opposed on grounds that statutory demands relied upon were served before validity of earlier demands had been tested, on basis that companies were not insolvent and that proceedings were abuse of process - Alleged forgery of jurats on affidavits - No leave sought under s 459S of the Act to rely on any grounds other than solvency - No basis for such leave in any event - Presumption of insolvency not rebutted - Actually insolvent - Abuse of process not made out - Process of the Court not being used for foreign purpose - Companies wound up

Joadja Whiskey v Abraham [2007] NSWSC 860 Ace Contractors & Staff Pty Limited v Westgarth Development Pty Limited [1999] FCA 728 Expile Pty Limited v Jabb's Excavations Pty Limited (2003) 45 ACSR 711 CASES CITED : Octavo Investments Pty Limited v Knight (1979) 144 CLR 360 Williams v Spautz [1992] 174 CLR 509 Hanrahan v Ainsworth (1990) 22 NSWLR 73 Briginshaw v Briginshaw (1938) 60 CLR 336 at 362-363

Yael Abraham PARTIES : The Joadja Whiskey Company Pty Ltd Yael Abraham Jasmman Pty Ltd

COUNSEL : Y. Abraham (Self Represented) (Plaintiff) T. Bartush-Peek (Solicitor) (Defendants)

SOLICITORS : Y. Abraham (Self Represented) (Plaintiff) Our Lawyers Our Conveyancers (Defendants)

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

2790/2007 YAEL ABRAHAM -V- THE JOADJA WHISKEY COMPANY PTY LIMITED 2792/2007 YAEL ABRAHAM -V- JASMMAN PTY LIMITED EX TEMPORE JUDGMENT 1 HIS HONOUR: Before the Court are applications by the plaintiff, Ms Yael Abraham, for the winding up in insolvency under s 459P of the Corporations Act, 2001 (Cth) ("the Act") (read with s 459A of the Act) of two companies, Jasmman Pty Limited ("Jasmman") and The Joadja Whiskey Company Pty Limited ("Joadja"). Both companies have appeared to oppose the orders sought. 2 The applications were originally brought in the Federal Court of Australia and were cross-vested to this Court by order of that Court. 3 There is a formal defect in the Originating Process with respect to the Joadja proceedings in that whilst it states it is in that matter, and is an application for that company, the application seeks the winding up of Jasmman. No point was taken about that formal defect and ostensibly no prejudice flowed from it, because Joadja appeared and opposed the application on its merits. 4 The plaintiff is a non-practising solicitor. She held practising certificates during various periods from 8 April 1982 to 30 June 1999. 5 Both sets of proceedings have their origins in an employment dispute. The plaintiff has in her favour a judgment of the Industrial Relations Commission New South Wales against both companies, jointly and severally, for $22,500, as a consequence of their unfair dismissal of her from her employment with them. They have not satisfied the judgment or any part of it. 6 Because of the substantial overlap of fact and the general discretionary grounds sought to be relied on by the companies in opposing the relief sought (as more fully appears below), the two applications were heard together, and by consent evidence in one was ordered to be evidence in the other. 7 In each application, only evidence relevant to it has been taken into account. 8 In each application the plaintiff relies on non-compliance with a statutory demand dated 5 February 2007. 9 The plaintiff had previously served a combined statutory demand dated 15 November 2006 on both Jasmman and Joadja. By originating process in the Court dated 27 November 2006 each company moved to set the demand aside. 10 Joadja's application succeeded, and the demand was set aside by me on 26 July 2007: see Joadja Whiskey v Abraham [2007] NSWSC 860. 11 One of the grounds relied upon was that a combined demand was impermissible, a ground which, amongst others, I upheld. 12 On 26 July 2007 the Court was informed on behalf of Jasmman that its application was not being proceeded with, and it was dismissed. That outcome is academic because the demand was in any event set aside. 13 Each statutory demand relied upon in these applications is relevantly in the following terms: "1. The company owes Yael Abraham the amount of $22,5000 plus interest at the rate of 9 percent per annum, totalling $1485 from the 4th May 2006 to date, beint [sic] the total of the amount of debts described in the schedule. 2. Since the amount owed is a judgment debt there is no need to prepare an affidavit according to the rules. The Industrial Relations Commission ordered the above amount be paid to the applicant on the 4th May 2006."

14 The demand provides a description of the debt in the following terms: "Judgment entered into [sic] by the Industrial Relations Commission on the 4th May 2006 for unfair dismissal." 15 It is not in issue that each demand was served, that no application by the defendant was made to set it aside, or that it has not been complied with. 16 It is also not in issue that such notifications and publications as are required by the Act in winding up applications have taken place. There has been filed in each application a consent by Robert William Whitton to act as liquidator. 17 Each application for winding up is defended on three bases. The first basis seeks to attack the relevant statutory demand on the grounds that at the time it was made there was extant the earlier demand, which has subsequently been set aside by the Court. The submission was put that no further demand could be issued in relation to the same debt before determination of the proceedings to set it aside, and it could therefore not be relied upon to found a presumption of insolvency. 18 Ms Bartush-Peek, solicitor, who appeared for the defendants, did not refer to any authority in support of the proposition. The proposition does not cope with the fact that no application was made to set aside the statutory demands which found these applications. There was nothing to prevent the defendant companies from moving to set them aside. 19 Section 459S of the Act provides as follows: 459S Company may not oppose application on certain grounds (1) [Where company may not oppose application] In so far as an application for a company to be would up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground: (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). (2) [Court must be satisfied of solvency for leave] The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.

20 Accordingly, leave would be required by the respective defendants to rely on that contention. No such leave was sought. If it had been I would have refused it. 21 The second basis is that the companies are not insolvent. 22 Under s 459C(2) and (3) of the Act, each of the companies having failed to comply with a statutory demand, it is presumed to be insolvent, except so far as the contrary is proved. Each company bears the onus of proving its solvency. 23 In order to discharge that onus, the Court should ordinarily be presented with the "fullest and best" evidence of the financial position of the respondent. Bald assertions of solvency arising from a general review of the accounts, even if made by qualified accountants who have detailed knowledge of how those accounts were prepared, is not ordinarily probative of solvency: Ace Contractors & Staff Pty Limited v Westgarth Development Pty Limited [1999] FCA 728 at [4]; Expile Pty Limited v Jabb's Excavations Pty Limited (2003) 45 ACSR 711. 24 The only evidence of solvency which has been placed before the Court is that contained in the affidavit of Mr Peters, a director of both companies, dated 1 May 2007. Mr Peters is an accountant and a registered tax agent presently operating "in the private equity space". 25 Dealing first with Joadja, according to Mr Peters, in October 2002 he and a fellow director, Mark Longobardi, acquired a property at Joadja Creek Road, Joadja, through a company trust known as The Joadja Whiskey Company Trust. Joadja is the trustee. 26 The place Joadja is an historic mining town, and he and Mr Longobardi conduct limited historical tours on the property, which generate only a small portion of the property's holding costs. 27 In evidence is a title search establishing that Joadja is the owner of the property in fee simple. The property is mortgaged to support borrowings by Mr Peters and Mr Longobardi, and shortfalls in servicing these loans have been, and continue to be, met by them. 28 There is a mortgage on title in favour of Bank of West Australia Limited, which according to Mr Peters "is in the names of Mark Longobardi and myself". He says that at no stage has Joadja undertaken any role other than trustee for the trust, and has no assets or liabilities. Accordingly, no financial records have ever been kept and the only returns ever made have been to the Australian Securities and Investment Commission. 29 Mr Peters says that in its capacity as trustee Joadja has given a number of fixed and floating charges "in line with the Trust having provided its assets as security for loans raised by unit holders of the trust. This has not altered the fact that the Trustee has no assets or liabilities in its own name." 30 As is apparent from the foregoing, the evidence goes no distance in establishing the solvency of Joadja. 31 A trustee has a right to resort to and apply the trust fund for the discharge of liabilities in the authorised conduct of the trust: Octavo Investments Pty Limited v Knight (1979) 144 CLR 360 at 371. 32 Notwithstanding that the information is peculiarly within its own knowledge, Joadja has placed no evidence before the Court, let alone the fullest and best evidence, of any ability to recoup from any trust assets the liability which it has to the plaintiff. 33 If anything, the evidence of Mr Peters seems to establish the contrary. 34 Joadja has not rebutted the statutory presumption of insolvency which lies against it. Indeed, in my view, the evidence establishes actual insolvency. 35 Turning now to Jasmman. Key financial documentation was stolen from Mr Longobardi's home in June 2004. Although Jasmman continued to trade after this theft, this, according to Mr Peters, became untenable, due to the plaintiff commencing multiple proceedings against Mr Longobardi, Joadja and Jasmman in a number of jurisdictions. 36 Mr Peters then "considered it prudent to operate the historical tours through a further entity unrelated to the present disputes." He says that while the shareholders of Jasmman continue to provide funding, "as is currently the case", it will remain solvent. 37 This evidence falls far short of rebutting the statutory presumption of insolvency which lies against Jasmman. 38 If Mr Peters' evidence is to be accepted, then funding would forthwith be provided to enable the company to meet its judgment debt to the plaintiff. He gives no evidence of any commitment upon which the company can rely to discharge this undisputed obligation. 39 The company is at the mercy of its shareholders, without any legal or practical resort to funding for the discharge of the obligation which is the subject of these proceedings. 40 To my mind, the evidence displays a strategy in the face of the judgment debt of ensuring that Jasmman cannot meet it. 41 The company has no books and records and there is no evidence of any assets from which it could discharge its debt. Jasmman has equally failed to displace the presumption of insolvency against it. In my view the evidence against it establishes its actual insolvency.

42 The third basis for opposition put is that these proceedings are an abuse of process because Ms Abraham has filed and served documents "that purport to be affidavits that carry forged jurats in purported compliance with the Court's procedural requirements". It is put further that in the circumstances the Court's inherent jurisdiction to prevent abuse of its process and practice and procedure has been enlivened, and that the applications should be dismissed. 43 The Court will always have the power to prevent an abuse of its processes even if the moving party has a prima facie case: Williams v Spautz [1992] 174 CLR 509 at 518. 44 Whether the proceedings involve an abuse of the process of the Court depends on whether they have been brought and continued for an improper or ulterior purpose, that is, a purpose not within the scope of the process: see Hanrahan v Ainsworth (1990) 22 NSWLR 73. 45 The allegation here is that the plaintiff has, on a number of affidavits, forged the signature of a person purporting to be the Justice of the Peace. The affidavits concerned include an affidavit of publication affirmed by Ms Abraham on 27 April 2007, and an affidavit by one Anna Davies, affirmed on 23 April 2007 as to service of the statutory demand on Joadja. The affidavit of publication attaches insertions in the Sydney Morning Herald for 21 April 2007. It was reaffirmed by Ms Abraham on 26 July 2007. (Although that reaffirmation is not under challenge, it is formally defective because one cannot identify before whom it was affirmed). 46 The evidence established that a number reflected on those instruments is the designated number of a Justice of the Peace, namely, Mr James Stuart Geggie. That number is 920-5712. It appears on the jurat of each of the affidavits. Mr Geggie swore an affidavit upon which he was not cross-examined. He says he did not affix his signature to those affidavits. 47 The circumstances under which Mr Geggie's number came to be affixed to the documents, and the signature which apparently purports to be his, are clearly questionable. Ms Abraham had in 2004 sworn an affidavit before Mr Geggie, and had access to his signature. 48 The plaintiff was cross-examined and the forgery allegation was put to her. She denied it. She gave an explanation that the documents were sworn before a person named Nellie, who she says used Mr Geggie's name and number. She says she has reported the matter to the police. 49 Notwithstanding the serious allegation of forgery, the defendants called no expert handwriting evidence, or any other evidence tending to show that it was the plaintiff who affixed the signature and number in this instance. 50 The cross-examination of the plaintiff was far from sufficient to make out the serious allegation. One of the forgeries asserted concerns the affidavit of Ms Davies. In circumstances such as the present, one would have expected the defendants to either have called her as a witness, even if it required a subpoena, or to have explained why she was not called, particularly in the circumstances where a matter as serious as forgery is being asserted. 51 The onus of establishing these serious allegations is on the defendants. While the civil standard of balance of probabilities applies, the nature of the issue necessarily affects the process by which the requisite degree of satisfaction is obtained: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362-363. 52 I am not satisfied, let alone comfortably satisfied on the evidence, that the defendants have established on any basis that the claim they make as to the plaintiff's misconduct has been made out. That, of course, does not mean that the complaint is not susceptible of being tested elsewhere. 53 It was, however, not established before me to a level satisfactory to enable it to be taken into account and for me comfortably to act on it. 54 Moreover, even if it were made out, it does not seem to me that the plaintiff is seeking to use the procedures of the Court for anything other than a proper purpose. She is a judgment creditor and the defendants are insolvent. The circumstances of the substance of what is deposed to in the affidavits is also not in issue. 55 I do not consider that the claim that the plaintiff is abusing the processes of the Court has been made out. On the other hand, I consider that the rights of the plaintiff to a winding up order of each of the companies has been made out. 56 In the circumstances the orders of the Court will be as follows:

1. The Joadja Whiskey Company Pty Limited, ACN 100 572 558 is placed under a winding up order, and Robert William Whitton is appointed to be liquidator.
2. Jasmman Pty Limited, ACN 092 769 214, is placed under a winding up order, and Robert William Whitton is appointed to be liquidator. 57

In each application an order is sought that costs of the application be paid out of the assets of the respective company in the winding up. I do not propose to make that order. It seems to me that s 466(2) of the Corporations Act, 2001 (Cth) has that effect in any event. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.