On 29 June 2015, the plaintiff Julie Ann Orsini, a solicitor, served a creditor's statutory demand dated 26 June 2015, addressed to Allfunds Finance Australia Pty Limited ACN 161 707 900, by post to 494 Marrickville Road, Dulwich Hill, demanding a sum of $240,503.36 described in the schedule to the demand. The ACN referred to in the demand is that of the defendant company Allfunds Australia Pty Limited. The registered office at which the demand was served is the registered office of Allfunds Australia Pty Limited. There does not appear to be any company by the name of Allfunds Finance Australia Pty Limited. However, there is a company Allfunds Finance Pty Limited ACN 097 117 658, of which the defendant's sole shareholder, director and secretary Miss Carmel Cappelleri was, until 14 January 2013, a director and at all material times was one of two apparently equal shareholders. Carmel Cappelleri ceased to be a director of Allfunds Finance, as I have said, on 14 January 2013 when one Marisa Cappelleri was appointed director in her place.
Allfunds Finance went into voluntary administration on 16 January 2013 when Mr Cvitanovic was appointed administrator. It seems that a deed of company arrangement was entered into on 9 May 2013, and the company ceased to be subject to the deed of company arrangement on 4 August 2015.
Following service of the creditor's statutory demand on 29 June 2015, no application was made pursuant to (CTH) Corporations Act 2001, s 459G to set aside or vary the demand. On 4 August 2015, the plaintiff filed an originating process seeking an order that the defendant Allfunds Australia be wound up in insolvency and a liquidator appointed. On 31 August 2015, the defendant Allfunds Australia filed a notice of appearance identifying five grounds of opposition, as follows:
1. there is no available presumption of insolvency under s 459(2)(a) of the Corporations Act 2001 as the creditor's statutory demand for Payment relied upon by the plaintiff was addressed to "Allfunds Finance Australia Pty Limited", a separate legal entity;
2. the plaintiff is not a creditor of the defendant entitled to commence and maintain the present proceeding pursuant to the provisions of s 459P of the Corporations Act 2001;
3. alternatively to paragraphs 1 and 2 above, to the extent that it is necessary to do so, the defendant intends to make an application under the provisions of s 459S of the Corporations Act 2001 to challenge the indebtedness and/or standing of the plaintiff as a creditor of the defendant;
4. subject to the dispute as to standing of the plaintiff as a creditor of the defendant and any indebtedness capable of being recovered, the defendant is solvent;
5. further, and in the alternative, the commencement and maintenance of the present proceeding by the plaintiff constitutes an abuse of the process of the Court in that:
1. the plaintiff is not a creditor of the defendant;
2. any liability that might be due to the plaintiff is a liability due by Allfunds Finance Pty Limited (ACN 097 117 658);
3. requests have been made for the plaintiff to provide to the defendant, by its solicitors, details of relevant invoices and costs agreement relied upon by the plaintiff and they have not been made available. Further grounds will be identified following response to a notice to produce by the defendant;
4. the issue of the relevant creditor's statutory demand for payment and the filing of the originating process relying upon that creditor's statutory demand for payment by the plaintiff is in the circumstances improper, there having been no appropriate disclosure in accordance with the provisions of the Legal Profession Act 2004 or assessment of any relevant costs to or as against the defendant as required by the Legal Profession Act such that the plaintiff is precluded from seeking to recover any costs.
By interlocutory process also filed on 31 August 2015, Allfunds Australia seeks leave, pursuant to (CTH) Corporations Act 2001, s 459S, to the extent necessary, to challenge the standing of the applicant as a creditor of the respondent and the indebtedness claimed to be due by the respondent.
On an application for leave pursuant to (CTH) Corporations Act 2001, s 459S, there are three main considerations. The first - which is mandatory - is imposed by s 459S(2), which provides that the court is not to grant leave unless it is satisfied that the ground, leave to raise which is sought, is material to proving that the company is solvent. The second - which goes to the discretionary question of whether leave should be granted but is, generally speaking, also regarded as essential - is whether there is a serious question to be tried on the ground, leave to raise which is sought. The third is the adequacy of any explanation for the failure to apply within the time permitted by s 459G to vary or set aside the demand.
It is convenient to deal first with whether a serious question to be tried on the grounds sought to be raised has been established. The applicant company bears the onus of showing that there is a serious question to be tried, and adducing evidence to discharge that onus.
[2]
The claimed debt
The company needs to adduce some evidence to point to the non-existence of the debt. To show that it is seriously arguable that there is a genuine dispute about a debt, it is generally speaking insufficient merely to point to the absence of evidence probative of the debt. In this case, the company disputes that it is indebted to the plaintiff, and thus that the plaintiff would have standing as a creditor to bring winding up proceedings on two main grounds. The first, is that it never entered into a contract with the plaintiff, and the second, is that even if it did, it has not been given a bill of costs, so that any debt has not yet become payable.
[3]
Was there a contract between the plaintiff and the defendant?
As to the first, the defendant points to the costs agreement and the costs disclosure which were elicited by a notice to produce served on the plaintiff at an earlier stage of the proceedings. The costs agreement dated 20 April 2013 is addressed to Carmel Cappelleri and Allfunds Finance Pty Limited. The Disclosure also dated 20 April 2013 is likewise addressed to Carmel Cappelleri and Allfunds Finance Pty Limited.
The plaintiff's retainer was to act for Miss Cappelleri in proceedings in which she was a defendant and cross-claimant in this court. It does not appear that any Allfunds company was a party to those proceedings, or that Ms Orsini did any work directly for any Allfunds company. The plaintiff accepts that the liability of the Allfunds company, whichever it was, was as an associated third party payer. Subsequently, from time to time, communications took place between Ms Orsini and Ms Cappelleri concerning the proceedings. Although Ms Cappelleri used a number of email addresses, one of them was "allfundsfinance@aol.com". A list of emails received by Ms Orsini between 14 May 2013 and 25 August 2014 identifies the sender as "Allfunds Finance". Payments in respect of Ms Orsini's costs were from time to time made by Ms Cappelleri from the account of Allfunds Australia.
At this stage, I am concerned not with the question whether the creditor's statutory demand was defective, but whether it is arguable that the plaintiff was not a creditor of the defendant. This turns, principally, on the contractual documents of April 2013 and the circumstances in which they were made. Those circumstances include that Allfunds Australia had previously acquired the business of Allfunds Finance; that Ms Cappelleri was no longer a director of Allfunds Finance; that Allfunds Finance was in administration - implicit in which is that it was insolvent or likely to be insolvent; and that Ms Cappelleri was using, at least occasionally, an email address which included the words "Allfunds Finance". All these circumstances point to an improbability, to a high degree, that either Ms Orsini or Ms Cappelleri would have intended to contract with Allfunds Finance as distinct from with Allfunds Australia - of which, as I have said, Ms Cappelleri was the sole shareholder, director and secretary. Moreover, therefore, when requests were made for payment of costs, Ms Cappelleri caused them to be paid by Allfunds Australia. The defendant has adduced not the slightest evidence, through Ms Cappelleri or otherwise that it did not believe that it had contracted with Ms Orsini, or that some other party had done so.
The law relating to misnomer of a corporate identity in the contractual context has been recently and comprehensively reviewed by Kunc J in New South Wales Land and Housing Corporation v Australia and New Zealand Banking Group Limited [2015] NSWSC 176 (at [46] to [62]). It is unnecessary to repeat or even endeavour to summarise in this judgment what his Honour has there set out, save to say that it makes clear that where there is an obvious mistake in the naming of a party in a contract, it can be "corrected" as a matter of interpretation or construction of the contract, without resorting to any requirement for rectification. In addition, it was pointed out that a useful approach to the question is to hypothesise what would have happened had the correct name been propounded at the time. Kunc J summarised the test, in a manner which I am content to accept, (at [49]):
Whether the misnomer was the product of a mistake made in circumstances in which it would have been plain to all who are concerned with the relevant document as to who the party was that was referred to in the document.
Had the name Allfunds Australia been propounded at the time when the costs agreement was submitted by Ms Orsini to Ms Cappelleri, and when thereafter it was accepted by instructions which continued to be given, there is in my view no doubt that the matter would have gone ahead. It is inconceivable that either party intended that the contracting party be a company then under the control of an administrator. All this is confirmed by the subsequent resort to Allfunds Australia to make payments from time to time during the currency of the retainer, and the absence of any evidence on behalf of the company to the effect that it never had any intention of contracting with Ms Orsini.
In my view there is no serious question to be tried that Allfunds Australia was not the contracting party and thus not the debtor to Ms Orsini.
[4]
Was the debt claimed payable?
I turn then to whether it can be seriously argued that the debt claimed is not currently payable, and it was not payable when the originating process was issued, on the footing that no bill has been given to Allfunds Australia. Because instructions were first given before the commencement of the (NSW) Legal Profession Uniform Law 2015, the matter is governed by the (NSW) Legal Profession Act 2004, s 331. Under s 331, which provides by subsection (1) that subject to s 332A (which permits a person to request an itemised bill), a law practice must not commence legal proceedings to recover legal costs from a person until at least 30 days after the law practice has given a bill to the person in accordance with s 332 and s 333 (although there are circumstances in which the court may authorise a law practice to commence proceedings sooner). Under s 332, a bill may be in the form of a lump sum bill or an itemised bill, and by s 332(5)(a), that a bill is to be given to a person by delivering it personally to the person or to an agent of the person. However, under s 332(7), 'agent' means "an agent, law practice or Australian legal practitioner who has authority to accept service of legal process on behalf of the person".
On 12 February 2014, the plaintiff gave a bill, for $109,000 approximately, addressed to Carmel Cappelleri by hand. She gave another bill, for the period from 12 February to the date of the bill, on 26 January 2015, also addressed to Carmel Cappelleri by hand, for $143,000 approximately. Neither bill referred to the Allfunds company by whatever name or description, nor does it appear that the bill was separately addressed or delivered to any Allfunds company. The question is whether there is a seriously arguable case that in those circumstances the bill, though given to the company's sole director, shareholder and secretary, was not given to the company.
There are many cases in which a person may have two capacities. In many of those cases, it may well be that notice to the person in one capacity will not serve as notice in the other capacity. But in this case, a number of circumstances persuade me to the other view.
The provisions of the Legal Profession Act - to which I have referred - authorised service of a bill by delivery to an agent who has authority to accept service of legal process on behalf of the person. There may be some doubt as to whether the phrase "who has authority to accept legal service on behalf of the person" qualifies 'agent' as well as 'law practice' and 'Australian legal practitioner', but in my view, the better view is that it does. While it might have been preferable had the bill been addressed also to the company, as the costs agreement and disclosure was, s 331(1) does not require the bill to be addressed to the person from whom the costs are to be recovered; only that it be given to that person - or, as I have explained, to that person's duly authorised agent. In this case, where the additional context is that up to that point requests for payment made by Ms Orsini to Ms Cappelleri had been responded to by payments made by the defendant company, it seems to me that, although it is true to say that neither bill refers to or is addressed to the company, in this case the company by its duly authorised agent, Ms Cappelleri, was given the bill. Instructively, nowhere in the evidence is there to be found any assertion that Ms Cappelleri did not appreciate that the bill she received was not also relevant to the position of the company.
In my view, there is not a seriously arguable case that the costs claimed were not due and payable when the proceedings were instituted by reason of a bill not having been given to the company.
[5]
Sufficient explanation for delay?
I turn next to the question of explanation for delay - which is sufficient, of itself, to dispose of the application. Counsel for the defendant frankly conceded that there was no evidence of any explanation for the delay, and none was advanced in submissions. Thus, this is not a case in which there is even some slight, if unsatisfactory, explanation for the failure to make an application to set aside the demand. There is simply no explanation at all. The absence of any such explanation is a powerful discretionary factor, sufficient of itself to warrant the refusal of leave under s 459S.
[6]
Solvency
While it is, in the light of the conclusions which I have so far expressed, strictly unnecessary to deal with the question of solvency, I shall touch on it. While there is some difference of opinion in the cases as to just how far evidence of solvency need go on a s 459S application, I accept that it is not necessary to adduce the "fullest and best" evidence of solvency, such as would be required on the hearing of a winding up summons to rebut the presumption of insolvency. But an applicant seeking leave under s 459S must at least adduce sufficient evidence of solvency to show that the existence or otherwise of the debt in question has the capacity to affect the ultimate conclusion as to solvency.
If the company contends and intends to prove that it is solvent, if it does not owe the debt, then it must lead evidence of its financial position which, if accepted, is capable of satisfying the court of that fact. As has repeatedly been said, mere assertions by a witness are generally not sufficient. In this case, the evidence adduced boils down to an assertion by Ms Cappelleri that the company has, in the form of an asset, a contract under which it derives income of around about $195,000 per annum, coupled with an assertion that it has no liabilities. There does not appear to be any evidence, even a sworn assertion, that the company is able to pay its debts as and when they fall due.
Ms Cappelleri puts into evidence balance sheets of the company which, it is fair to say, tend to show that payments are made from its account and that it is sometimes in overdraft and sometimes in credit, and perhaps at the highest, that it does not seem that cheques have bounced on the account. In that sense, there is nothing to suggest or point to insolvency; but the absence of indicia of insolvency is not sufficient to show that the disputed debt might be or is material to proving the solvency of the company.
I am unable to ascertain on the evidence adduced in this case whether, apart from the disputed debt, the company would be solvent. I am therefore unable to be satisfied that the ground sought to be raised is material to proving solvency.
[7]
Conclusion
Accordingly, the application fails on three grounds - I am not satisfied that the ground sought to be raised is material to proving solvency; the grounds sought to be raised is not seriously arguable; and fundamentally, there is no explanation whatsoever for the failure to raise the ground on an application under (CTH) Corporations Act 2001, s 459G.
The Court orders that the interlocutory process be dismissed, with costs assessed in the sum of $5,500.
[8]
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Decision last updated: 20 April 2018