HER HONOUR: This is an application under section 459A of the Corporations Act 2001 (Cth) to wind up the defendant, Empire Scaffolding Pty Limited, in insolvency. The plaintiff, ScafworX Investments Pty Limited, is the judgment creditor of the defendant, having obtained judgment in the District Court of New South Wales on 28 August 2019 for some $250,000.
Carter v Newtel [2020] NSWSC 309 | Case summary | Zoe
The plaintiff has complied with all of the requirements to have a liquidator appointed save that it has been unable to serve this application on the company and publish a notice as required by section 465A(1)(b) and (c) of the Corporations Act 2001 (Cth), which provides:
Notice of application
(1) A person who applies under section 459P, 462 or 464 for a company to be wound up must:
(a) lodge notice in the prescribed form that the application has been made; and
(b) within 14 days after the application is made, serve a copy of it on the company; and
(c) cause a notice setting out the prescribed information about the application to be published in the prescribed manner.
This is because a Notification of Withdrawal of Consent for Registered Office Form was lodged with the Australian Securities and Investments Commission (ASIC) after service of the statutory demand but before commencement of these proceedings and the director of the defendant, Christopher Harris, whose former address became the registered office of the company by default, has been very difficult to serve instead. Mr Harris became a director of Empire Scaffolding on 13 October 2015 and gave his address to ASIC as being in Bella Vista.
At the time that judgment was entered in favour of the plaintiff, the registered office of the defendant was "Blaxland House" in Parramatta. On 23 September 2019, a statutory demand issued by the plaintiff in respect of the judgment sum was served by registered post on the registered office of the company. On 24 September 2019, Tim Seirlis, an employee of the plaintiff, spoke to Mr Harris on his mobile phone.
On 14 November 2019, a Notification of Withdrawal of Consent for Registered Office Form was lodged with ASIC. By default, the registered office of the defendant was changed by ASIC to the director's last known residential address in accordance with section 143(3) of the Corporations Act. However, the plaintiff had come to learn through the efforts of its private investigator that Mr Harris no longer lived at the Bella Vista address.
On 22 November 2019, these proceedings were commenced and the plaintiff's solicitor lodged a Notification of Court Action Relating to Winding-Up Form 519 with ASIC, thereby complying with section 465A(1)(a) of the Corporations Act. As the plaintiff was aware that the Bella Vista address was no longer the residence of Mr Harris, it was concerned that any attempt to serve the Originating Process on that address would not have constituted effective service. Quite properly, the plaintiff had in mind Ford, Austin and Ramsay's Principles of Corporations Law at [4.056.27], where the learned authors explain: (emphasis added)
Section 109X [of the Corporation Act] … literally means that if a document is left at the registered office it is effectively served not only regardless of whether it comes to the notice of the company but also regardless of the state of knowledge of the person relying on literal compliance. However, courts have taken account of what that person knows. Where the person relying on literal compliance knows positively that there has been no receipt by the company of a document, there cannot be effective service.
The authors cite Cox v Rappslash Pty Ltd (1991) 9 ACLC 129 and Deputy Commissioner of Taxation v Abberwood Pty Ltd (1990) 2 ACSR 91; 8 ACLC 528 as examples of the application of this principle.
According to a company search of the records held by ASIC, the new registered office of the company (being the address of Mr Harris) was only recorded as such on 20 December 2019. Thus it was not possible for the plaintiff to serve the defendant within fourteen days of filing the Originating Process as the former registered office had been withdrawn but the new registered office had not come into effect, although in any event Mr Harris was not there.
The matter has been listed for directions a number of times and there has been no appearance by the defendant. Another creditor of the defendant has, however, become aware of these proceedings, presumably by reason of the notification lodged with ASIC, and has contacted the plaintiff's solicitor.
In November 2019, the plaintiff retained a private investigator who, after three months' work, located Mr Harris in another state. On 13 March 2020, the Originating Process and supporting documents were handed by the private investigator to Mr Harris, who was informed that the matter was listed before the Registrar on 18 March 2020. On 18 March 2020, the Registrar adjourned the matter to the Corporations List today. On 19 March 2020, Mr Seirlis sent a text message to Mr Harris advising him that the winding-up proceedings had been adjourned to today. Mr Seirlis deposed that he was not aware of any other address or contact details for the defendant apart from Mr Harris' mobile phone number. Mr Seirlis said he knew that this was the mobile phone number for Mr Harris as Mr Harris had used it to advertise for staff in online advertisements and Mr Seirlis had himself spoken to Mr Harris on 24 September 2019 using that number as earlier mentioned.
The application was not advertised with ASIC Insolvency Notices because rule 5.6(2) of the Supreme Court (Corporations) Rules 1999 provides:
Notice of application for winding up
…
(2) A notice … under paragraph 465A(1)(c) of the Corporations Act, of an application for a company to be wound up must be published:
(a) at least 3 days after the originating process is served on the company, and
(b) at least 7 days before the date fixed for the hearing of the application.
At least three days after service of the Originating Process was effectively the date of the last directions hearing before the Registrar and would not have been more than seven days before the date fixed for hearing.
[3]
Exercise of discretion under section 467(3)(b)
Section 467(3)(b) of the Corporations Act gives the Court a discretion to dispense with notices or steps being taken:
(3) The Court may, on the application coming on for hearing or at any time at the request of the applicant, the company or any person who has given notice of intention to appear on the hearing of the application:
…
(b) dispense with any notices being given or steps being taken that are required by this Act, or by the rules, or by any prior order of the Court; and
In Carter v Newtel (2003) 44 ACSR 661; [2003] NSWSC 128, Austin J made an order under section 467(3)(b) in similar circumstances where he formed the view that no substantive purpose could be achieved by compliance with the requirements and there would be an unnecessary cost associated with them: at [23]. In Kozlowski v JSBG Developments Pty Limited [2010] NSWSC 1022, White J dispensed with the requirement to advertise a winding up application, saying at [15]:
The purpose of advertising would primarily be to bring notice of the application to any other creditors of the defendant, particularly if creditors wish to support the application and be substituted as creditor if for any reason the applicant did not wish to proceed. But it might also be open to a creditor to oppose the application if the winding up, and the costs incidental thereto, might prejudice its ability to recover a debt or the amount that could be recovered.
On the case before White J, there was no evidence that there were any creditors other than the plaintiff. There was nothing to show that the failure to advertise had caused any substantial injustice. His Honour appointed a liquidator notwithstanding the lack of advertising.
In In the matter of Aspirion Group Pty Limited (receiver and manager appointed) [2014] NSWSC 39, Black J extended time to notify ASIC of a resolution to appoint a liquidator. In circumstances where the winding up order was sought pursuant to a resolution passed in a general meeting and an independent liquidator would be appointed, there seemed to be no disadvantage likely to arise from the failure to publish: at [5]. A similar approach was taken by Gleeson JA in In the matters of Seedz Investments Pty Limited, Snap Fitness Double Bay Pty Limited, Yelneh Industries Pty Limited and Fitness Management Pty Limited [2017] NSWSC 650 at [19]; In the matter of The Skippy Film Company Pty Limited [2017] NSWSC 646 at [21]-[23] and In the matter of Glen Elgin Retreat Pty Limited [2019] NSWSC 1395 at [12]-[13].
The plaintiff submits that its failure to comply with the service requirement under section 465A was not occasioned by any default or neglect on its part, and that is clearly correct. The plaintiff further submits that the failure to comply with the advertising requirement of section 465A would cause unnecessary delay and not bring about any particular benefit. It is said that there is no prejudice to the defendant and the application has come to the attention of interested members of the public through lodgement of Form 519 as is evident from an email received from another creditor of the defendant.
The Court is asked to exercise its discretion under section 467(3)(b) to dispense with compliance with section 465A(1)(b) and (c) of the Corporations Act. It seems to me that this is a case where such an order should be made. The amount which was the subject of the statutory demand has now been at large for more than six months. It is apparent that the sole director of the defendant company has gone to some lengths to avoid being served in the usual manner, by withdrawing the registered office and then making himself scarce. The plaintiff has been put to great cost and experienced delay in seeking to have a liquidator appointed to the company and ought not be further delayed by reason of its inability to comply with section 465A of the Corporations Act in circumstances where that inability was directly caused by the actions of Mr Harris, the sole director of the defendant.
For these reasons, I make the orders in the short minutes or order which are initialled by me, dated today and placed with the papers.
1. Pursuant to section 467(3)(b) of the Corporations Act 2001 (Cth), dispense with the requirements of section 465A(b) and (c) of the Corporations Act in respect of serving the Originating Process within 14 days of filing and advertising the application.
2. Pursuant to section 459A of the Corporations Act, order that Empire Scaffolding Pty Ltd be wound up in insolvency.
3. Order Darren John Vardy be appointed as a Liquidator of the defendant.
4. Order the defendant pay the plaintiff's costs in the sum of $7,358.00.
[4]
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.
Decision last updated: 27 March 2020