Pugh v Pro Stainless Pty Ltd

Legal Principles 6 Rule 39.05(a) of the Rules provides that the Court may vary or set aside a judgment or order after it has been entered if it was made in the absence of a party. 7 In George Ward Steel Pty Limited v Kizot Pty Limited (1989) 15 ACLR 464 at 465, Hodgson J set out the principles to be applied when considering an application to set aside a winding up order: [I]f an order winding up a company is made in the absence of the defendant company, and an application is brought promptly by the company, with notice being given to the liquidator, to the plaintiff and to any creditor who appeared at the hearing; and if the evidence shows an explanation for the non-appearance at the hearing and indicates solvency of the company; and if there is consent to setting aside, or at least non-opposition; and if the liquidator indicates that nothing in his investigations to date shows a reason for the company to be stopped from trading, then the court will normally set aside the order. 8 The approach taken by Hodgson J has been followed in this Court on numerous occasions: see, for example: Workers Compensation Nominal Insurer, in the matter of Deli Glenbrook Pty Limited (ACN 118 296 325) [2010] FCA 380 (Deli Glenbrook); Twin Peaks Leisure Pty Limited (in liq), in the matter of Twin Peaks Leisure Pty Limited (in liq) v Workers Compensation Nominal Insurer [2012] FCA 1501; Workers Compensation Nominal Insurer v Total Transaction Management Pty Ltd [2013] FCA 1334; Turner v Stylewise Security & Glass Pty Ltd (In Liq) [2015] FCA 518 (Turner). 9 In Turner, Edelman J noted at [13] that: The six considerations enunciated by Hodgson J are not exhaustive. They are simply some of the major factors to be weighed in the exercise of the discretion whether to set aside orders winding up the company. Further, the order might be set aside even if all the factors in this list are not satisfied or if there are doubts concerning some of the factors. In George Ward itself, Hodgson J remarked that the evidence of solvency was not as satisfactory as one would like. 10 In relation to the requirement for evidence of solvency of the company, what is necessary to be established is that "the evidence indicates solvency of the company": GFK & Sons Pty Limited, in the matter of GFK and Sons (Balmain) Pty Limited [2010] FCA 953 at [8]. In Deli Glenbrook, Jacobson J at [10] relied upon the non-opposition to the setting aside of the winding up order by the liquidator as a "sufficient indication of insolvency".

Non-appearance and Explanation for Non-appearance 11 The order made to wind up Pro Stainless was made in its absence in the circumstances described in Mr Pugh's First Affidavit and in Ms Hurford's affidavit. Mr Pugh is the sole director of Pro Stainless and Ms Hurford is an administrative assistant employed by Pro Stainless. 12 The evidence discloses that until 9 September 2015, Pro Stainless retained Hilliers Advisers Chartered Accountants (Hilliers) as its external accountants. Until about 24 April 2015 the business address of Hilliers was Level 1, 572 Pacific Highway, Belmont, NSW 2280. From 25 April 2015, Hilliers' business premises moved to 609 Pacific Highway, Belmont, NSW 2280. The registered office of Pro Stainless was at all relevant times, Level 1, 572 Pacific Highway, Belmont, NSW 2280. It does not appear to have been changed following Hilliers' move to new business premises. 13 Ms Hurford is responsible for the initial receipt, collation and distribution of all incoming mail received into the Pro Stainless office which is located at 258 Macquarie Road, Warners Bay, NSW. Her evidence is that she has no record of receiving the correspondence from the plaintiff's solicitors, de Mestre and Company, dated 14 August 2015 which enclosed the originating process and supporting documents (the de Mestre Letter). Similarly, she has no record of receiving the statement of claim filed by the plaintiff in proceedings No. 2015/00068080 in the Local Court (the Local Court Statement of Claim). This is so notwithstanding Hilliers' assertion that those documents were sent to Pro Stainless. 14 The originating process commencing these proceedings, which is included in the exhibit to Mr Pugh's First Affidavit, records that a creditor's statutory demand dated 16 July 2015 was served on Pro Stainless at its registered office at Level 1, 572 Pacific Highway, Belmont, NSW 2280 on 22 July 2015 (the Statutory Demand). It relied on a judgment obtained in Local Court proceedings No. 2015/00068080. Neither Hilliers nor Ms Hurford has any record of receiving that document. 15 Mr Pugh deposes that he was not aware of the Local Court Statement of Claim, the Statutory Demand or the de Mestre Letter. He first became aware of the de Mestre Letter and the Statutory Demand when the liquidator provided copies of those documents to him upon attending the business premises of Pro Stainless on 11 September 2015. Mr Pugh says that if he had been aware of the plaintiff's claim and the significance of the application to wind up Pro Stainless, he would have caused Pro Stainless to pay the amount owed to the plaintiff. 16 The Orders made on 9 September 2015 were made in the absence of Pro Stainless and the applicants. I am satisfied with the explanation provided by Mr Pugh and Ms Hurford as to the reason for the non-appearance of the company at the hearing of the originating process and that Pro Stainless did not become aware of the debt owing to the plaintiff and the application to wind up the company until after orders were made.

Application to be Brought Promptly 17 It appears from Mr Pugh's evidence that he first became aware of the Orders made by the Court to wind up Pro Stainless when the liquidator attended the business premises of Pro Stainless on 11 September 2015. The applicants filed the interlocutory application on 24 September 2015. I am satisfied that the application was brought promptly.

Notice of the Application to Other Parties and their Attitude 18 The interlocutory application, Mr Pugh's First Affidavit and Ms Hurford's affidavit were served on the Australian Securities and Investments Commission which confirmed that it did not propose to intervene in or seek leave to appear at the hearing of the application. 19 The interlocutory application was served on: (1) those creditors of Pro Stainless with a debt owing in excess of $2,000, including the Australian Taxation Office. Mr Pugh deposes that as at 6 October 2015, none of those creditors had contacted him or his solicitors about the application. Further, when the application was called for hearing, there was no appearance on behalf of any of the creditors; (2) the plaintiff which indicated its consent to the application provided certain outstanding amounts were paid to it, including the costs of the winding up and the costs of this application, and certain information was provided. The applicants have agreed to those arrangements; (3) the liquidator, who did not oppose the application provided certain amounts were paid, including the liquidator's legal and other fees incurred in the liquidation, and an undertaking is provided to pay what are described as "trade-on-costs" incurred by the liquidator in the running of the company. 20 I was informed by Mr Darams of counsel, on behalf of the applicants, that no creditors appeared at the hearing of the application to wind up Pro Stainless. No evidence has been provided in that regard. However, I note those creditors who were notified of the interlocutory application did not appear or notify any objection to it to the applicants or their solicitors.

Evidence to Indicate Solvency 21 Mr Pugh provided relatively detailed evidence about the solvency of Pro Stainless. In my view, that evidence is sufficient to indicate the solvency of Pro Stainless. 22 As noted, the liquidator does not oppose the application. That non-opposition, of itself, provides an indication of solvency. In addition, given the attitude of the liquidator to the application, I can infer that there is nothing in the liquidator's investigations which shows any reason why Pro Stainless should be stopped from trading.

CONCLUSION 23 In all the circumstances, I was satisfied that it was appropriate that I exercise the power conferred on me under r 39.05(a) and I made the orders sought by the applicants in the interlocutory process setting aside the Orders made by the District Registrar on 9 September 2015. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.