Manzo v 555/255 Pitt Street Pty Limited

1 The Plaintiff seeks to proceed today with a winding up application under s.459P of the Corporations Act 2001 (Cth), which was filed on 10 November 2003. The Defendant seeks an adjournment of that application on two grounds: first, because it wishes to put on evidence as to its solvency; second, because it says that if a winding up order is made today then there is a risk that a sale of a substantial property by the Defendant will be rescinded and the proceeds of sale thereby lost to creditors. The Plaintiff and two supporting creditors oppose any adjournment. I am dealing, at this stage, with the application for adjournment. 2 The winding up application is founded upon a Statutory Demand issued by the Plaintiff to the Defendant on about 10 October 2003. No application to set aside that Statutory Demand was made by the Defendant. Indeed the Defendant, according to the evidence which I have seen, does not dispute the debt. The debt claimed was some $90,513. After some payments in reduction of that debt, it is quite clear there is a substantial sum still owing by the Defendant to the Plaintiff. 3 The matter came before the Registrar on 9 December 2003. The Defendant made an application for an adjournment on the basis that it wished to prove solvency. The Registrar allowed an adjournment for seven days and directed the Defendant to file such evidence as it intended to rely upon by 18 December 2003. The Defendant has not complied with that direction. 4 Today the Defendant has filed in Court two affidavits of Mr G. Hart, the Managing Director of the Defendant. What emerges from those affidavits may be summarised thus: the accounts of the company as at 31 December 2002 are annexed. A request to the company's accountants clearly made some time late in December this year was answered on 18 December by the accountants, who said that the accounts for the company for the year ended 30 June 2003 would probably be ready by late January 2004, assuming that they were able to obtain the financial records which they needed. 5 There is no evidence in the affidavits of the company's present ability to meet its debts as and when they fall due. Indeed, quite the opposite emerges from that affidavit and the shorter affidavit of Mr Hart filed today. What emerges from those affidavits is that the Defendant is endeavouring to sell assets in order to meet liabilities, but even the assets to which it refers do not seem to be able to discharge on sale all of the present liabilities of the company. At least, there is no evidence to that effect. 6 In my view it was not necessary, perhaps even not relevant, for the Defendant to endeavour to procure its accounts for the year ended 30 June 2003 in order to be able to demonstrate its solvency as at the date of the hearing of the application. What was essential was some evidence that the company is presently able to meet its debts as and when they fall due. As I say, the affidavits of Mr Hart filed today do not show that. Indeed, they indicate the contrary. 7 There is no evidence that the appointment of a liquidator now poses a serious or appreciable risk that the sale of the company's real estate pursuant to exchanged contracts of sale due for settlement in early January will go off. The only evidence as to whether the sale will proceed is a letter from the purchaser's solicitor making a time for settlement of the sale on 7 January, 2004. 8 The application for adjournment, as I say, has been opposed by two supporting creditors. They have not adduced evidence of their debts. In relation to one of them, P & O Nedlloyd, the Defendant has produced a record of payments made by the Defendants in reduction of a debt which shows that the debt is now some $85,000. 9 It seems to me that the Defendant has had a reasonable opportunity to procure some evidence, if not the complete evidence, as to its ability to pay its debts as and when they fall due. It has not availed itself of that opportunity and I am not satisfied that there is any reasonable explanation for its omission to do so. 10 The Defendant is trading. The evidence that I have seen so far suggests that it is struggling to pay its creditors and, indeed, is paying off some of its creditors, apparently by instalments. There is, accordingly, an appreciable risk of continued insolvent trading. It seems to me, therefore, that the adjournment application should be refused and that I should proceed to hear the winding up application.

11 I am satisfied that all necessary elements have been proved in order to warrant the winding up of the Defendant on the basis of failure to comply with the Statutory Demand. The Defendant has been given the opportunity to prove solvency, but has failed to prove solvency, and I have earlier refused a further adjournment application on the part of the Defendant for the reasons which I have given. 12 The only submission now made by Mr M. Foley, who appears for the Defendant in opposition to the winding up order, is that there is evidence sufficient to show that the Plaintiff is not a creditor of the Defendant. The submission is founded upon evidence from a director of the Plaintiff, Mr Rohan, who was cross examined by Mr Foley today, that the Plaintiff has assigned the Defendant's debt to a mercantile agency. 13 There is no evidence of any notice of assignment of the debt which conforms to s.12 of the Conveyancing Act 1919 (NSW). If there is any assignment of the debt, and I should add that no deed of assignment has been produced in evidence, then the assignment can only take effect in equity. Mr Foley, I think, concedes as much, but he says that as this is a court of equity, it must have regard to the equities so that, as I understand his submission, in the eyes of equity the Plaintiff is no longer a creditor of the Defendant. He cited no authority for this submission and I cannot accept it. 14 In New South Wales the Equity Division of the Supreme Court is certainly one of the courts administering the Corporations Act . However, whether it be the Supreme Court or the Federal Court which is deciding whether or not a person is a "creditor" for the purposes of s.459E or for the purpose of an application to wind up a company under s.459P of the Corporations Act , the status of the applicant is determined simply according to the meaning which the word "creditor" has in the Corporations Act . It is well established that for the purposes of a winding up application "creditor" includes both a creditor at law and a creditor in equity: In re Steel Wing Co Limited [1921] 1 Ch 349, at 355. It seems to me that "creditor" must have the same meaning in s.459E for the purposes of a statutory demand, at least where the equitable creditor is the assignee in equity of the whole, rather than a part, of the company's debt: cf. In re Steel Wing at 357; Manzo v 555/255 Pitt Street Pty Limited (1990) 21 NSWLR 1, at 8; Reale Bros Pty Ltd v Reale [2003] NSWSC 666, at paras.56, 57. It follows that, where there is an equitable assignment of a debt, either the creditor at law or the creditor in equity may make a statutory demand on the debtor and may apply to have the debtor wound up in default of compliance; it is of no consequence that the creditor at law, if paid by the debtor, will have to account to the creditor in equity. 15 In the present case, in the absence of any evidence of a notice of assignment complying with s.12 of the Conveyancing Act , the Plaintiff is, at the very least, a creditor at law of the Defendant, so that it continues to have standing to sue the Defendant for the debt, to serve the statutory demand upon which it relies, and to make an application to wind up the Defendant founded on non-compliance with the demand. 16 Accordingly, I am satisfied that there is no proper basis upon which the Defendant is able to resist a winding up order at the instance of the Plaintiff. 17 I order that Glengor Pastoral Company Pty Ltd be wound up in accordance with the Corporations Act , and that Martin John Green be appointed as the Liquidator of the company. The exhibits may be returned. I direct that the orders be passed and ordered forthwith.

Last Modified: 02/20/2004 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.