Kozlowski v JSBG Developments Pty Ltd [2010] NSWSC 1022 | Case summary

2010/114197 Wlodzimierz Antoni Kozlowski v JSBG Developments Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application to wind up the defendant company for insolvency based on non-compliance with a statutory demand. 2 Yesterday I dealt with an application by the defendant (consented to by the plaintiff) for the hearing of this application to be adjourned until 15 November 2010 and for the time for dealing with the application to be extended under s 459R of the Corporations Act 2001 (Cth) to an indeterminate date. I refused that application for reasons I then gave. 3 At the conclusion of the hearing of that application counsel then appearing for the defendant stated that the defendant would not be opposing the application today. There has been no appearance for the defendant today after the matter has been called. 4 The evidence establishes that the defendant is indebted to the plaintiff pursuant to a judgment obtained in the Supreme Court of Queensland on 8 May 2009 pursuant to s 31 of the Building and Construction Industry Payments Act 2004 (Qld). Judgment was entered for $817,251.31. 5 Although an application is pending in the Court of Appeal in Queensland to appeal from the orders of Applegarth J imposing a condition on the defendant's application to set aside the judgment, and although the defendant contends that if that application is successful, it will seek to have the judgment set aside, there is no doubt that both at the time these proceedings were commenced and at the time of hearing, the plaintiff is a creditor of the defendant. 6 The statutory demand was served on or about 24 August 2009. An application was made to this Court to set aside the statutory demand. That application was dismissed by Palmer J on 18 February 2010 (JSBG Developments Pty Ltd v Kozlowski [2010] NSWSC 97). 7 The originating process for winding up was filed on 7 May 2010. Rule 2.7 of the Supreme Court (Corporations) Rules 1999 requires that the originating process be served as soon as practicable after filing and, in any case, at least five days before the date fixed for hearing. The originating process was returnable before the Registrar on 21 June 2010. It was not served until 18 June 2010, in breach of r 2.7. However, on the return date of 21 June 2010 the defendant appeared through its director, Mr Bradbury Golledge, and the proceedings were adjourned by consent to 19 July 2010. 8 On 19 July 2010 orders were made by consent for the service of evidence and the matter was fixed for hearing before me today. 9 The Associate's record of proceedings records that on that occasion the plaintiff mentioned the matter for the defendant. As I have said, the defendant appeared by counsel before me yesterday. I am satisfied that the non-compliance with r 2.7 for service of the originating process is a defect or irregularity. It is not one that has caused substantial injustice. The present application must not be dismissed merely by reason of that irregularity (Corporations Act, s 467A). 10 The next irregularity is that contrary to s 470 of the Corporations Act the notice of the filing of this application was not lodged with ASIC until 12 May 2010 instead of on the next business day. Again, I am satisfied that no substantial injustice has been occasioned by reason of that irregularity. 11 The third and most significant irregularity is that the application has not been advertised, contrary to s 465A(c) of the Corporations Act. Today the plaintiff sought an adjournment for a period of 14 days in order to deal with that irregularity. 12 In M Gronow, K R Mason, McPherson's Law of Company Liquidation, Legal Online, Thomson Reuters, at [3.950] the learned authors state that although the court has power to dismiss the winding up application for a breach of the advertising laws, it is more common to direct that the winding up application stand over for re-advertisement. The learned authors observed that on some occasions re-advertisement has been dispensed with. 13 In refusing the application made yesterday for an adjournment I took into account the public interest in the administration of justice that matters which have been fixed for hearing, particularly those fixed for hearing before a judge, should prima facie proceed on that day because the adjournment to another day before a judge will deprive some other litigants of a hearing date which would otherwise be available on that adjourned date. I do not think that I ought to adjourn the present application. For this reason I have refused the application to adjourn the present hearing for 14 days. 14 The questions are whether I am satisfied that the failure to advertise is a defect or irregularity which has not caused substantial injustice and hence does not warrant dismissal of the application (s 467A), or whether I should dispense with the step of advertising (s 467(3)(b)) or, if not, whether I should dismiss the application. 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. 16 On the present application there is no evidence that there are any creditors other than the plaintiff. The defendant has not put on any evidence. There is a presumption of insolvency which has not been rebutted. Any opposition by a creditor on such a ground would be unlikely to succeed if the company were insolvent. 17 Section 467A provides that the application must not be dismissed merely because of a defect or irregularity in connection with the application, unless the court is satisfied that substantial injustice has been caused and cannot be otherwise remedied. In my view the failure to advertise was a defect or irregularity (Re Vaportec International Pty Ltd; re Parktec International Pty Ltd (1993) 12 ACLC 123). 18 As in that case, there is nothing in the present case to show that the failure to advertise has caused any substantial injustice. There is nothing to rebut the presumption of insolvency. 19 For these reasons I order that the defendant, JSBG Developments Pty Ltd (ACN 121 926 770) be wound up. 20 The plaintiff has tendered a consent by Paul Desmond Sweeney and Timothy Paul Heesh of SV Partners Pty Ltd, official liquidators, to be appointed as joint and several liquidators of the defendant. Section 472(1) provides that on an order being made for the winding up of a company, the court may appoint an official liquidator to be liquidator of the company. I see no reason to appoint more than one official liquidator as the liquidator of the company. Whilst the consent which has been tendered is the consent of both liquidators to be appointed jointly and severally, official liquidators may be required to accept appointments. 21 I order that Timothy Paul Heesh of SV Partners Pty Ltd be appointed as liquidator for the defendant. 22 Having regard to the irregularities in the conduct of this application I do not think it appropriate to make the usual order for costs. I make no order as to costs of the application. 23 Exhibits A and WK-1 may be returned. 24 Orders are to be entered forthwith.

Kozlowski v JSBG Developments Pty Ltd

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