Barclays Australia (Finance) Pty Ltd v Mike Gaffikin Marine Pty Ltd

Judgment - EX TEMPORE 1By application filed on 17 May 2012, Mr Tomas Etridge seeks an order under s 459Q (or more precisely ss 459A and 459Q) of the Corporations Act 2001 (Cth) that the Defendant, Stoligor Investments Pty Ltd ("Company"), be wound up in insolvency. Background 2The application is based on the service of a statutory demand ("Demand") on the Company on 15 February 2012, and the Company's failure within 21 days of service of the Demand to pay or secure or compound for it to the Plaintiff's satisfaction. 3The matter was previously listed before me on 30 July 2012. On that occasion I granted leave to Mr Stolyar, a director of the Company, to appear on its behalf, notwithstanding that r 7.2 of the Uniform Civil Procedure Rules 2005 (NSW) had not been strictly complied with. I also drew Mr Stolyar's attention to his potential liability to pay the costs of the proceedings, and to the fact that the Company might benefit by seeking independent legal advice. As I pointed out on that occasion, an order for winding up has potentially serious consequences for a company and the Court's jurisdiction, particularly at the point at which it deals with a winding up application, is significantly confined by s 459S of the Corporations Act. 4I pause here to note that this matter has some regrettable features. Mr Stolyar contends that there are issues as to whether the entity which owed the relevant debt was the Company, and his primary case appears to be that the debt was owed by Mr Stolyar personally; however, the debt has not yet been paid either by the Company or by Mr Stolyar personally. Mr Stolyar also contends that there were issues as to service of proceedings in the Consumer Trader and Tenancy Tribunal ("CTTT") upon the Company and that the Company has had difficulty with obtaining either a review of the judgment of the CTTT or a setting aside of that judgment by application to a lower court. Those difficulties appear to have arisen, at least in part, from non-compliance by the Company with time limits which are imposed for good public policy reasons. 5It is unfortunate that opportunities which might have been available to the Company to agitate the issues which it seeks to now agitate had not been taken up at a previous time, and it is perhaps regrettable that the Company did not seek legal advice so as to seek to protect its position at an earlier time. It may be that matters now sought to be raised before me could have been raised in an application to set aside the Demand under, for example, s 459J of the Corporations Act. However, the fact that matters could have been raised at an earlier time does not permit the Court to deal with them now. Indeed, s 459S of the Corporations Act adopts the opposite approach in treating the fact that matters could have been raised in an application to set aside a statutory demand at an earlier point as a barrier to them being raised in opposition to a winding up order without leave of the Court, which can only be granted on limited grounds. The Company's contentions 6Returning now to the facts of the matter, the Demand was based on a judgment debt in the amount of $16,938 in the Local Court of New South Wales. The judgment of the Local Court was in turn founded on an award in the amount of $16,938 made in favour of Mr Etridge by the CTTT on 9 June 2011, which was registered as a judgment of the Local Court. The Demand was served on the Company by prepaid post sent on 15 February 2012. The winding up application was advertised on 15 June 2012. Mr Etridge's evidence, by affidavit dated 10 August 2012, is that the amount due under the Local Court judgment is presently due and unsatisfied. A consent of a liquidator to appointment has been filed. 7By notice of motion filed on 27 June 2012, Mr Stolyar sought an order dismissing the winding up application. I treated that motion as in issue in the proceedings although, as Mr Stolyar agreed in the course of submissions, the motion and Mr Stolyar's supporting affidavit in substance set out the basis for the Company's defence of the winding up application. 8The basis of that defence is, first, the Company did not receive the funds claimed by Mr Etridge and, implicitly, Mr Stolyar personally did so; and, second, there is a genuine dispute about the existence of the debt. Mr Stolyar's affidavit dated 27 June 2012 makes statements to that effect in conclusory form. That affidavit also contains certain allegations in respect of the conduct of proceedings by Mr Etridge in the CTTT. 9A further affidavit of Mr Stolyar in reply dated 10 July 2012 contains further material directed to impugning the CTTT's decision. Mr Stolyar contends, in summary, that the conditions for release of the rental bond to Mr Etridge were not satisfied; Mr Etridge was in arrears of rental; another person had paid the rental bond rather than Mr Etridge; and Mr Etridge had caused damage to the relevant unit as a result of a fire and other damage. Mr Stolyar also contends that he, not the Company, was the lessor of the property, as Mr Etridge made the relevant payments to Mr Stolyar. The lease which is in evidence shows the Company as the lessor, but Mr Stolyar contends that that resulted from an error on the part of the real estate agent handling the lease. Analysis 10There are at least two difficulties with the approach adopted by the Company. The first is that, in substance, that approach was directed to establishing that the CTTT was wrong in its findings. However, those findings have taken effect as a judgment of the Local Court. It is well established that an appeal against a judgment does not in itself establish a genuine dispute as to the relevant debt, even if raised in an application to set aside a statutory demand: for example, Barclays Australia (Finance) Pty Ltd v Mike Gaffakin Marine Pty Ltd (1996) 21 ACSR 235. In Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466 at [11] Barrett J summarised the position as being that it was "well established" that the fact that a judgment reached after a hearing on the merits may be liable to be set aside as a result of an appeal does not mean that there is a "genuine dispute" as to the existence of the debt. 11There may, in some circumstances, be room to set aside a statutory demand, in an application brought within 21 days, under section 459J of the Corporations Act, if an appeal has been brought or is to be brought, although this typically would only occur on condition that the relevant moneys be paid into Court. In the present case, that course is not open to the Court, because an application to set aside the Demand was not brought within 21 days of the service of the Demand, and the High Court has made clear in David Grant & Co Pty Ltd v Westpac Banking Group [1995] HCA 43; (1995) 184 CLR 265 that there is no jurisdiction under the Corporations Act to extend the time for such an application. 12As I emphasised to Mr Stolyar when the matter was last before me, the Court's jurisdiction in dealing with Mr Etridge's application to wind up the Company based on the failure to comply with the Demand is a statutory jurisdiction conferred by, and limited by, s 459S of the Corporations Act. The non-compliance with the Demand in this case gave rise to a failure to comply with the demand, within the meaning of sections 459F and 459Q of the Corporations Act. Section 459S(1) of the Corporations Act in turn provides that, where an application to wind up the Company on insolvency relies on its failure to comply with the Demand, the Company may not, without the court's leave, oppose the application on a ground that it relied on, or could have but did not rely on, in an application to set aside the Demand. All the matters now raised by the Company (through Mr Stolyar) could have been relied upon in an application to set aside the Demand. 13In any event, section 459S(2) provides that the Court may not grant leave under s 459S(1) unless it is satisfied that the ground sought to be raised is material to proving that the Company is solvent. I will treat the Company, through Mr Stolyar, as having made an application for such leave. However, the statute does not permit me to grant that leave, absent evidence that the relevant ground is material to proving the Company is solvent. There is no evidence before me as to the Company's financial position, although Mr Stolyar asserted from the bar table that the Company is not trading. Assuming that to be the case, it is possible that the debt claimed would be material to proving the Company's solvency, in the sense that it would be the only debt to which the Company was exposed: Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWCA 37; (2000) 48 NSWLR 661; Ewen Stewart & Associates Pty Ltd v Blue Mountains Virtual Air Helitours Pty Ltd [2011] NSWSC 113. However, even if I were able to make that assumption in the absence of evidence, I do not consider that I could grant such leave where I cannot be satisfied that there is a serious question to be tried as to a challenge to the debt on which the Demand is based, where it is founded on a judgment debt which has not been set aside. Orders 14In these circumstances, I cannot grant leave to the Company to oppose the application on the grounds relied upon by Mr Stolyar; the Company's solvency has not been established by affirmative evidence before me; and a presumption of insolvency arises from the failure to comply with the Demand and has not been rebutted. 15I will accordingly make orders that: