Solicitors:
Polczynski Lawyers (Plaintiff)
ASM Saddim Hossain (Director) (for part of hearing)
File Number(s): 2016/262346
[2]
Adjournment application
By Originating Process filed on 31 August 2016, the Plaintiff, Fuji Xerox Australia Pty Limited applies for an order winding up Auscabs Payment Solution Pty Limited ("Company"). The Company was represented in the application by its director, Mr Hossain, pursuant to leave granted under r 7.1 of the Uniform Civil Procedure Rules 2005 (NSW). I granted that leave notwithstanding that the authorisation for Mr Hossain to represent the Company in the application appears to have been informal in character, rather than by directors' resolution, and in the circumstances that Mr Hossain has indicated that he understands that, by appearing for the Company he may expose himself to an order for costs made against him personally in the application. I dispensed with the strict application of the rules to the extent necessary to grant that leave under s 14 of the Civil Procedure Act 2005 (NSW).
In the matter of Auscabs Payment Solution Proprietary Limited [2016] NSWSC 1906 | Case summary | Zoe
Mr Hossain, on the Company's behalf, seeks an adjournment of the application today. I am required to determine an application in respect of the management of the proceedings, including an application for an adjournment of the proceedings, by reference to the overriding objective identified in s 56 of the Civil Procedure Act as the just, quick and cheap resolution of the real issues in dispute in the proceedings. In doing so, I am also required to have regard to the objects of case management under s 57 of the Civil Procedure Act including the just determination of the proceedings, the efficient disposal of the business of the court, and the other matters there specified including the timely disposal of proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. I am also required to have regard to the matters specified in s 58 of the Civil Procedure Act in determining whether, inter alia, to make an order granting an adjournment of the proceedings.
I also consider that I should have regard to the fact that, where a winding up application is brought, the legislature has indicated its intent that such an application should be determined promptly by placing a time limit on determinations of such applications under s 459R of the Corporations Act 2001 (Cth). I also bear in mind that, where a presumption has arisen, by noncompliance with a creditor's statutory demand, that a company is insolvent, then a delay in determination of the application may expose other creditors of the company to risk.
Mr Hossain, on the Company's behalf, indicates that the Company seeks an adjournment to allow it to seek legal advice, to negotiate with the Plaintiff, and to seek to reach agreement with another creditor. It appears that another creditor has this morning obtained a default judgment against the Company, I have been advised from the bar table, in the amount of approximately $625,000 although Mr Hossain has indicated that the Company wishes to bring an appeal against that judgment.
So far as the Company's retainer of a solicitor is concerned, the creditor's statutory demand was served in early July 2016 and the application to wind up the Company has been on foot since 31 August 2016, for nearly two months, and it seems to me that there has been an opportunity for the Company to retain a solicitor in that period. I bear in mind, also, that there are limits to what a solicitor is likely to be able to achieve, in the circumstances in which the Company now find itself, where a presumption of insolvency arises from a failure to comply with a creditor's statutory demand; the matters which may be raised in opposition to a winding up application, without leave of the Court which may only be granted in limited circumstances, are limited; and, third, and perhaps most importantly, as Ms Willis points out, Mr Hossain's affidavit in respect of the application appears to indicate that the Company cannot in fact meet the debt which is the subject of the creditor's statutory demand served by the Plaintiff. That debt arises from a settlement agreement of previous proceedings, and Mr Hossain states in paragraph 13 of his affidavit that the Company has been unable to meet that agreement, for reasons to which he refers.
It seems to me that an adjournment of this application would not bring about the just, quick and cheap resolution of the real issues in dispute, because those issues are crystallised by the presumption of insolvency and Mr Hossain's affidavit evidence and there is little or nothing that a solicitor retained by the Company could now do to address the facts as they emerge from that evidence. It seems to me that an adjournment would be contrary to the just, quick and cheap resolution of the issues in dispute and to the fair conduct of the proceedings so far as it would expose the Plaintiff to additional costs, which it may well be unable to recover against a company that is potentially insolvent, and would expose other persons dealing with the Company to the risk that it incurs debts in dealing with them which it is also unable to pay in its present financial position.
For these reasons I decline to adjourn the proceedings.
[3]
Winding up application
As I noted above, by Originating Process filed on 31 August 2016 the Plaintiff, Fuji Xerox Australia Pty Limited applies for an order winding up the Company on the grounds of insolvency, in reliance on an unsatisfied creditor's statutory demand.
The Company, by its director, Mr Hossain, originally sought an adjournment of the application which I declined in the circumstances that I have set out above. Mr Hossain has not sought to be heard in respect of the balance of the application. That course was likely a prudent one, so as to minimise his exposure to costs, given the state of the evidence and the likely outcome of the application.
The application to wind up the Company is based on a creditor's statutory demand served on 5 July 2016 in an amount of $60,000, described as:
"Default sum payable pursuant to deed of settlement between the Creditor and the Debtor in connection with the settlement of Sydney District Court proceedings 2015/79205."
The creditor's statutory demand was accompanied by an affidavit verifying that demand dated 5 July 2016 which indicated that the amount claimed was based on a deed of settlement in respect of the relevant District Court proceedings.
The Plaintiff read several affidavits in respect of the application, including the affidavit of its Team Leader, National Recoveries, Ms Ramraj, dated 26 August 2016 which confirms that the Company was indebted to the Plaintiff in the amount of $60,000 on 5 July 2016, being the default sum payable under the deed of settlement in respect of the District Court proceedings; confirms the authority given by the Plaintiff to its solicitor to make a demand upon the Company for the payment of that debt; and confirms that the Company had failed to comply with the creditor's statutory demand and remained indebted to the Plaintiff in the amount of $60,000.
There is evidence of service of the creditor's statutory demand, by post, by an affidavit dated 10 August 2016 of Ms Ackerman. In any event, the Company has appeared, in respect of aspects of the application today and no point has been taken that it was not on notice of any aspect of the application. The Plaintiff also relies on an affidavit of search of its solicitor, Ms Willis, dated 30 August 2016 and an affidavit of service of Mr Hobbs dated 19 September 2016 which confirms delivery of the Originating Process, supporting affidavits and a consent of liquidator to the Company at its registered office.
An affidavit of publication dated 30 September 2016 is also read confirming the publication of notice of the application on ASIC's insolvency notice website. An affidavit of debt dated 19 October 2016 confirms, that, as at the date of that affidavit, the Company remains indebted to the Plaintiff in the relevant amount. A current search of the records maintained by the Australian Securities and Investments Commission in respect of the Company is also in evidence in accordance with the requirements of the Supreme Court (Corporations) Rules 1999 (NSW).
I should also refer briefly to two other matters, before turning to the applicable principles. First, by notice of appearance filed 20 October 2016, the Company by its director Mr Hossain indicated that the grounds on which the Company would oppose the winding up application were that, first, it did not receive the creditor's statutory demand due to miscommunication with its registered office. There is evidence of service of the creditor's statutory demand upon the Company's registered office and in those circumstances, the creditor's statutory demand was effectively served and the fact that there was a miscommunication between the Company's registered office and itself would not prevent a presumption of insolvency arising. That notice of appearance also indicates a second ground of opposition to the winding up that, if the Company is not wound up, then, "[W]e will be able to find a way to pay the claiming party", and indicates that the Company's time frame to finish the payment is by September 2017, nearly twelve months in the future. That falls well short of a claim of solvency, being the ability to pay the Company's debts as and when they fall due.
The Plaintiff also tendered the affidavit of Mr Hossain in opposition to the adjournment application and that affidavit contains admissions which seem to me further to indicate that the Company cannot rebut the presumption of insolvency. That affidavit refers to the loss of a "massive" amount of money "misplaced" by staff in the Company's Brisbane operation; to the financial consequences of that loss; to difficulties with the Company keeping up with its business commitments; and to its inability to meet the settlement agreement. That evidence seems to me to be admissible as evidence, contrary to the Company's interests, of its inability to pay the debt arising from the settlement agreement. Mr Hossain also referred to the Company's hope to restructure and reorganise its business, and to its organising funds to create cash flow and business operation. However, the test of cash flow solvency requires that the Company be able to pay debts as and when they fall due, and is not satisfied by the fact that, given substantial time, the Company may be in a position ultimately to meet a debt.
Turning now to the applicable principles, this application to wind up the Company is founded on a failure to comply with a creditor's statutory demand. A presumption of insolvency arises from a failure to comply with, or set aside, such a demand within the 21 day period specified in the Corporations Act. The effect of that presumption was summarised by a unanimous High Court in Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) [2011] HCA 18; (2011) 244 CLR 1 at [28] to the effect that:
"… where a demand has not been complied with, the statutory presumption of insolvency applies unless the demand is set aside in proceedings brought … prior to the hearing of the application for an order to wind up. Unless the demand is rendered ineffective, by an order setting it aside, the company is required to prove to the contrary of the presumption."
The Company has here led no affirmative evidence of solvency, in the sense of evidence that would allow it to indicate that it could, at the time the debt arising from the settlement agreement was due, have paid that debt, or even that it could do so now, without a substantial period of time in which to pursue the reconstruction which it wishes to undertake. The Court is plainly not in a position to conclude, on the evidence as it stands, that the presumption of insolvency that arises from a failure to comply with a creditor's statutory demand has been rebutted by any affirmative evidence of solvency, applying the cash flow test of solvency under s 95A of the Corporations Act. So far as Mr Hossain's affidavit has been tendered by the Plaintiff, it tends to establish insolvency, rather than solvency, by indicating that the Company cannot presently meet the debt that is due under the settlement agreement.
It is important to recognise that the winding up of the Company, in these circumstances, serves a public purpose, so far as it is a means to avoid the risk that third parties will deal with the Company, on an ongoing basis, in circumstances that it is unable to meet debts incurred to them as and when they fall due. I am satisfied this is a proper case, where the presumption of insolvency has not been rebutted, to order that the Company be wound up. The formal requirements for such an order have been satisfied by the evidence to which I have referred.
[4]
Costs
The Plaintiff seeks an order for costs in a short form, amounting to professional costs of $4,500 and the disbursements incurred in respect of the winding up application, including the court filing fee. Ms Willis, who appears for the Plaintiff, has pointed out that there have been several attendances in the winding up application, including two attendances today. The Court can make short form costs orders, where costs are in a relatively small amount, and the costs of an assessment would be disproportionate to the amount that is sought to be recovered. I am satisfied the amount claimed is proper for a winding up involving several attendances and an oral hearing this afternoon.
The Plaintiff has, it seems to me sensibly in the circumstances, not pressed for an order for costs against Mr Hossain personally. Although, in some circumstances, a director who appears for a company may be ordered to pay costs personally, it does not seem to me that this was such a case. Mr Hossain pursued an application for an adjournment, which was reasonably made although not successful and, importantly, did not then press opposition to a winding up application which was likely to succeed, when the adjournment was not granted. In those circumstances, it did not seem to me that Mr Hossain acted unreasonably, and the Plaintiff was well advised in not pressing for costs against him personally.
Accordingly, I make the following orders:
Auscabs Payment Solution Ltd ACN 161 774 296 be wound up in insolvency.
Mr Robert Boyce Moodie and Mr Will Griffiths be appointed as liquidators of Auscabs Payment Solution Ltd.
The plaintiff's costs of the winding-up, in the amount of $7,677.86, be costs in the winding-up.
These orders to be entered forthwith.
[5]
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Decision last updated: 30 December 2016