FEDERAL COURT OF AUSTRALIA CCH Workflow Solutions Pty Ltd v E.Discovery Australia Pty Ltd [2011] FCA 994 Citation: CCH Workflow Solutions Pty Ltd v E.Discovery Australia Pty Ltd [2011] FCA 994 Parties: CCH WORKFLOW SOLUTIONS PTY LTD ACN 070 975 398 v E.DISCOVERY AUSTRALIA PTY LTD ACN 101 933 304 File number(s): NSD 1155 of 2011 Judge: JAGOT J Date of judgment: 19 August 2011 Catchwords: BANKRUPTCY AND INSOLVENCY – presumption of insolvency due to non-compliance with statutory demand – whether presumption arose where affidavit accompanying statutory demand was witnessed by a person who was not a registered Justice of the Peace – where applicable procedures otherwise complied with Legislation: Corporations Act 2001 (Cth) ss 459E, 459P, 459Q, 459S Federal Court (Corporations) Rules 2000 (Cth) Cases cited: Dolvelle Pty Ltd v Australian Macfarms Pty Ltd (1998) 43 NSWLR 717 Hamilhall Pty Ltd (in liq) v AT Phillips Pty Ltd (1994) 54 FCR 173 Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962 Victorian Workcover Authority v Kay's Pty Ltd (2001) 39 ACSR 281 Date of hearing: 19 August 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 16 Solicitor for the Plaintiff: Ms A Crittenden of Clayton Utz Counsel for the Defendant: The defendant did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1155 of 2011 BETWEEN: CCH WORKFLOW SOLUTIONS PTY LTD ACN 070 975 398 Plaintiff AND: E.DISCOVERY AUSTRALIA PTY LTD ACN 101 933 304 Defendant JUDGE: JAGOT J DATE OF ORDER: 19 AUGUST 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. E.Discovery Australia Pty Ltd ACN 101 933 304 be wound up in insolvency. 2. Robyn Louise Duggan be appointed as liquidator of E.Discovery Australia Pty Ltd ACN 101 933 304. 3. The defendant pay the costs of the application as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1155 of 2011 BETWEEN: CCH WORKFLOW SOLUTIONS PTY LTD ACN 070 975 398 Plaintiff AND: E.DISCOVERY AUSTRALIA PTY LTD ACN 101 933 304 Defendant JUDGE: JAGOT J DATE: 19 AUGUST 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application under s 459P of the Corporations Act 2001 (Cth) (the Corporations Act) that the defendant company be wound up on the ground of insolvency and that a liquidator, Robyn Louise Duggan, be appointed to the defendant company. The plaintiff relies on the defendant's failure to comply with a statutory demand (see ss 459C, 459F and 459Q of the Corporations Act). The plaintiff has provided written submissions filed on 18 August 2011 in support of the application. Those written submissions refer to the relevant documents, namely the originating process filed 14 July 2011 (which attaches the creditor's statutory demand for payment of the debt) and the affidavit which accompanied it. This affidavit (of Murray John Press, sworn 30 March 2011) was witnessed by Eric Tomas Felipe, who is identified on the face of the affidavit as a Justice of the Peace. 2 The application is also accompanied by: a further affidavit of Mr Press sworn 11 July 2011; an affidavit of service of Peter Gibson, sworn 6 April 2011; another affidavit of service of Mr Gibson, sworn 15 July 2011; an affidavit of lodgement of notice of the application with the Australian Securities and Investments Commission (ASIC) and the relevant advertisements sworn by Alissa Crittenden, solicitor, on 21 July 2011; an affidavit in support of the application for winding-up in insolvency by Mr Press, sworn 18 August 2011, confirming that the whole sum identified in the statutory demand ($164,457.84) remains due and payable by the defendant to the plaintiff, as well as the fact that Mr Press believes there is no genuine dispute about the existence or amount of that debt; and the consent of Ms Duggan of Ferrier Hodgson to be appointed to act as liquidator of the defendant company. 3 In addition I have before me an affidavit of Mr Felipe, the person who witnessed the affidavit of Mr Press which accompanied the statutory demand. Mr Felipe's affidavit, sworn 16 August 2011, explains that he first became registered as a Justice of the Peace in New South Wales on 24 April 2001. He has annexed his certificate of registration of appointment of that date, which bears registration number 200002374. 4 In or about 2003, certain legislative amendments took place the effect of which was that the system for Justices of the Peace altered from one in which appointment was for life into one in which appointment was required to be renewed. According to his affidavit, Mr Felipe was not aware at any time before 12 August 2011 of these amendments. Mr Felipe did not until that date receive any written notification of the changes or of the fact that his registration as a Justice of the Peace had lapsed on 8 December 2006 pursuant to the amended legislative provisions. Accordingly Mr Felipe, who intends to apply for reappointment as a Justice of the Peace, was not in fact a Justice of Peace at the time he witnessed Mr Press's affidavit of 30 March 2011. It is this issue with which the plaintiff's written submissions are chiefly concerned, apart from the formal matters to which I shall now return. 5 The evidence in support of the application establishes that the statutory demand and accompanying affidavit were served on the defendant at its registered office on 30 March 2011 (albeit with the effectiveness of service being subject to the issue about the witnessing of the affidavit). The defendant did not at any time file an application to set aside the statutory demand under s 459G of the Corporations Act. The time for compliance with the statutory demand expired 21 days after service (that is, on 20 April 2011) (see s 459F). The defendant did not comply with the statutory demand by that time and indeed, as Mr Press's subsequent affidavit shows, has not complied with the statutory demand at any time since. 6 The evidence establishes that, subject to the issue about the witnessing of Mr Press's first affidavit, the plaintiff has complied with the requirements of the Corporations Act and the Federal Court (Corporations) Rules 2000 (Cth) by: serving on the defendant the originating process and the affidavit of Mr Press of 11 July 2011, the affidavit of service of Mr Gibson of 6 April 2011 and the consent of Ms Duggan to act as a liquidator of 13 July 2011; filing notice with ASIC of the winding-up application on 15 July 2011; causing notice of the winding-up application to be published in the Daily Telegraph newspaper on 20 July 2011; and verifying that the debt which is the subject of the statutory demand remains due and payable by the defendant as at yesterday's date. 7 When the matter came before me this morning the defendant did not appear, including after the matter was called outside the Court. The Court's records show that the defendant has not filed any appearance in the proceeding. 8 In these circumstances, the only issue relevant to the presumed insolvency of the defendant is the fact that Mr Felipe's registration as a Justice of the Peace lapsed on 8 December 2006. 9 Ms Crittenden for the plaintiff has provided decisions relevant to the significance of this issue. In Hamilhall Pty Ltd (in liq) v AT Phillips Pty Ltd (1994) 54 FCR 173 at 175, in obiter dicta, Branson J expressed the view that a defect in the affidavit would not mean that the statutory demand was not a statutory demand, but was inclined to the view that the affidavit in compliance with s 459E(2) of the Corporations Act had not been served as required by that section. Her Honour accordingly observed that: On this approach a statutory demand which when served is not accompanied by such an affidavit will not support a presumption of insolvency. 10 However, more recently there has been extended consideration of this issue, albeit in different factual contexts. In Dolvelle Pty Ltd v Australian Macfarms Pty Ltd (1998) 43 NSWLR 717 (Dolvelle), Santow J analysed the position in circumstances where the affidavit accompanying the statutory demand was not an affidavit as at the date of the demand, but rather an affidavit sworn two days earlier. His Honour first considered whether this defect (which was argued to constitute a failure to comply with s 459E(3)) took the application based on the statutory demand outside Part 5.4 of the Corporations Act. His Honour answered this question in the negative, concluding that the time requirement relating to the affidavit, while important, was not an "essential integer" of the relief sought under s 459Q in circumstances where there was no dispute that the amount subject of the demand remained unpaid. 11 His Honour then considered the effect of s 459S of the Corporations Act, which provides that: (1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground: (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). 12 Leave is not to be granted under subsection (1) unless the Court is satisfied that the ground in question is material to the company's solvency (s 459S(2)). Santow J concluded that leave was required to rely on the issue of the time requirement but that such leave should not be granted because, in circumstances where there had been no contention pursuant to s 459G that the debt was genuinely in dispute, the defect in the affidavit was not material to the company's solvency. It followed that the application for winding-up could not be opposed on this ground. 13 In Victorian Workcover Authority v Kay's Pty Ltd (2001) 39 ACSR 281, Senior Master Mahony in the Supreme Court of Victoria explained his reasons for adopting the approach of Santow J in Dolvelle in circumstances where the affidavit in support of the statutory demand was defective. The Senior Master concluded that the same approach should be applied in the matter before him. 14 The most recent and directly relevant decision is that of White J of the Supreme Court of New South Wales in Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962. In that case the relevant affidavits were fraudulently attested, leading his Honour to the conclusion that it was clear that no oath or affirmation was administered to the deponent when the document described as an affidavit was signed. Although, of course, there is no suggestion of anything other than inadvertence in the present case, the factual result of Mr Felipe not being a Justice of the Peace is effectively the same: namely, that there was no effective oath administered when Mr Press swore his affidavit. 15 Despite describing the result in the matter before him as "a serious omission which would have resulted in the demand being set aside had an application been made [to do so]" (at [53]), White J concluded as follows (at [54]): It does not follow that Bimat can oppose the winding-up application on the ground that the application is an abuse of process because it relies on a statutory demand accompanied by a purported affidavit containing a forgery. Leave could only be given to rely on such a ground if the ground were material to proof of Bimat's solvency (s 459S(2)). The absence of verification of the statutory demand is not relevant to Bimat's solvency. 16 In the present case, having regard to these matters, I am satisfied that the circumstances do not mean that the presumption of insolvency does not arise. As the plaintiff submitted, despite the defect in respect of the witnessing of the affidavit, the statutory demand properly came into existence, was properly served, was not the subject of any application to be set aside, and was not complied with under the Corporations Act within the requisite time. The demand remains outstanding. The defendant has not filed an appearance and, accordingly, the defect in the affidavit is not material to proof of the defendant's solvency. The defendant has not appeared in Court today. In these circumstances, I am satisfied that orders should be made in accordance with the originating process. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 19 August 2011