Long Nominees Pty Ltd v Roandale Holdings Pty Ltd; Long Nominees Pty Ltd v Rossview Holdings Pty Ltd

CATCHWORDS : CORPORATIONS - winding up - application for winding up in insolvency on basis of non-compliance with statutory demand - where time for compliance with demand had not expired when application filed and has still not expired - abuse of process - proceedings dismissed

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 459F(2)(a) and (b), 459G, 459Q, 465A(c) Supreme Court (Corporations) Rules 1999, rule 5.6

CASES CITED : Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374

(1) Long Nominees Pty Limited - Plaintiff PARTIES : Roandale Holdings Pty Limited - Defendant (2) Long Nominees Pty Limited - Plaintiff Rossview Holdings Pty Limited - Defendant

COUNSEL : Mr N P Guttengag - Plaintiff Mr M W Young - Defendant

Guttentag Lawyers - Plaintiff SOLICITORS : Back Schwartz Vaughan - Defendant

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

4116/2009 LONG NOMINEES PTY LIMITED V ROANDALE HOLDINGS PTY LIMITED

4119/2009 LONG NOMINEES PTY LIMITED v ROSSVIEW HOLDINGS PTY LIMITED

1 The circumstances of proceedings 4116/09 and 4119/09 are relevantly identical. I shall deal with both matters together. 2 The application now before me is an application by the defendant for an order that the plaintiff's claim be dismissed or struck out. The plaintiff's claim is a claim for an order that the defendant be wound up in insolvency and an order that a liquidator be appointed. 3 The relevant sequence of events may be briefly stated. On 2 July 2009, the plaintiff served a statutory demand on the defendant. On 22 July 2009, the defendant filed and served an application under s 459G of the Corporations Act 2001 (Cth) seeking an order that the statutory demand be set aside. The s 459G application was accompanied by a supporting affidavit. On 14 August 2009, the plaintiff filed an originating process seeking a winding up order and an order for the appointment of a liquidator, which originating process was made returnable on 19 September 2009. Also on 14 August 2009, the plaintiff lodged with ASIC a notice of the winding up application. The defendant's notice of motion now before me was filed on 7 September 2009. 4 In initiating its winding up application, the plaintiff relied on grounds stated thus in the originating process: "1. The plaintiff relies on failure by the defendant to comply with a statutory demand. A copy of the demand, marked A, is attached to this originating process. 2. The demand and an accompanying affidavit were served by Raymond McGrath who hand delivered them to the registered office of the defendant at MBS, 151 Georges River Road, Croydon Park NSW 2133 on 2 July 2009. A copy of the accompanying affidavit, marked B, is attached to this originating process. 3. The defendant failed to pay the amount of the debt demanded or to secure or compound for that amount to the plaintiff's reasonable satisfaction within 21 days after the demand was served on the defendant." 5 These particulars were included in the originating process in conformity with s 459Q. The affidavit filed in support of the originating process was sworn by a director of the plaintiff who said: "The matters stated in the originating process concerning the demand and failure of the defendant to comply with it are true and correct." 6 This affidavit was sworn on 11 August 2009, the date that the originating process itself bears. Both were filed on 14 August 2009. 7 The defendant contends that the proceedings as now constituted cannot succeed, that they are doomed to fail and they were doomed to fail at the point of the filing of the originating process. I accept these submissions. No presumption of insolvency had arisen then and none has arisen now. That is because the defendant's s 459G application was filed on 22 July 2009, with the result that the period for compliance with the statutory demand thereupon ceased to be the period of twenty-one days after service of the demand as referred to in s 459F(2)(b) and became a period determined under s 459F(2)(a) measured by reference to final disposition of the s 459G application which is still undetermined. 8 It may be that a presumption of insolvency will arise in the future by reason of a failure to comply with the statutory demand served on 2 July 2009. For that to happen, the s 459G application would have to be dismissed; and one simply cannot know at this point whether that will happen nor can one speculate. Yet the plaintiff, in seeking winding up, bases itself squarely on the quite untenable proposition that a presumption of insolvency has arisen by reason of failure to comply with the statutory demand. And that untenable proposition is advanced by means of misstatements in the originating process and the supporting affidavit. 9 A plaintiff cannot commence an action upon a hope or speculation that an essential and central element of its cause of action that is for the moment lacking will later fall into its lap. It cannot adopt the stance that the proceedings should be allowed to remain pending upon a hope or speculation that the essential and central element will somehow be forthcoming. It makes no difference that the plaintiff adopts the stance that it will stay its hand until that element materialises and that it will vacate the field if it does not. The only correct approach is for a plaintiff to wait until a complete cause of action is actually available to it before initiating proceedings. In saying this, I note that the plaintiff has, in the originating process, tied its fortunes exclusively to non-compliance with the particular statutory demand and does not intend to make any other move towards proving insolvency. 10 There is in the present case clear prejudice to the defendant. Notice of the pending winding up application has been lodged with Australian Securities and Investments Commission. A person searching the ASIC records in relation to the defendant will become aware of the fact that an application for its winding up is pending. Indeed, that information is at this point freely available to the whole world by means of internet access to the ASIC web site. 11 The plaintiff says that it has not advertised the application and does not intend to do so until the s 459G application has been disposed of. How it hopes to achieve that while observing the requirement the rules of court as to the advertising of an application I do not know. Rule 5.6 of the Supreme Court (Corporations) Rules 1999, the rule made as contemplated by s 465A(c), requires advertising at least seven days before the date fixed for the hearing of the application, being the return date of 15 September 2009 to which I have already referred. That return date is now only slightly more than seven days away and it is not possible to see how the plaintiff will both obey the rules of court and implement its stated intention of not advertising. 12 In any event, the plaintiff's indication that it does not intend to advertise for the time being does not alleviate the prejudice to which the defendant is already subject - prejudice which is in existence and potentially severe. 13 I am satisfied that the winding-up application was at its inception and remains an abuse of process, in that the bringing of the proceedings doomed to fail was unreasonable and inappropriate in the circumstances, to adopt language used by Beazley JA in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374 at [84]. Indeed, as I observed in the course of argument, it would be a quite unacceptable distortion of the order of things if all issuers of statutory demands were to consider themselves free to initiate a winding up application a week or two weeks after service of the demand and relying on a hoped for non-compliance with that demand, when it might well happen that, within the balance of the 21 days after service, the demand was satisfied by payment or a s 459G application was filed. 14 In the present case, the plaintiff's conduct may be seen to be particularly unworthy in that the affidavit in support of the winding up application sworn 11 August 2009 contains the statements to which I have referred but conspicuously says nothing about the fact that a s 459G application had been filed so that the period of 21 days referred to in the originating process was no longer the relevant period in deciding whether there had been compliance with the demand, that being something to be determined under s 459F. 15 I order that the originating process be dismissed.

[SUBMISSIONS ON COSTS] 16 The defendants seek an order for costs and submits that costs should be assessed on the indemnity basis. There is no doubt that the defendant should have an order for costs on the basis that costs follow the event. As to the indemnity basis, I am satisfied that this is a case for such an order. This is a case of abuse of process. The proceedings should never have been brought in the form and at the time in which they were brought. The defendant is entitled to be compensated fully for costs. 17 I therefore order that the plaintiff pay the defendant's costs of the proceedings, such costs to be assessed on the indemnity basis. **********

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