New South Wales Supreme Court CITATION : Miric v Braams Group Pty Ltd [2001] NSWSC 736 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3393/01 HEARING DATE(S) : 20/08/01 JUDGMENT DATE : 20 August 2001 PARTIES : Peter Miric (P) Braams Group Pty Limited (D) JUDGMENT OF : Young CJ in Eq COUNSEL : T G R Parker (P) R K Eassie (D) SOLICITORS : Boskovitz & Associates (P) Etheringtons (D) CATCHWORDS : CORPORATIONS [206]- Winding up- Discretion- Statutory demand based on judgment debt- Appeal lodged- Appeal apparently arguable- No stay ever sought- No application to set aside demand- Winding up order made but stayed for short period. LEGISLATION CITED : Corporations Act, Pt 5.4, ss 109Y, 459F, 459G, 459S, 467A House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 14 ACLC 1536 CASES CITED : L & D Audio Acoustics Pty Ltd v Pioneer Electronic Australia Pty Ltd (1982) 7 ACLR 180 Pacific Communication Rentals Pty Ltd v Walker (1993) 12 ACSR 287 DECISION : See paras 18 and 24. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in Eq MONDAY 20 AUGUST 2001 3393/01- MIRIC v BRAAMS GROUP PTY LTD JUDGMENT 1 HIS HONOUR: This is an application by a company against whom process for winding up has been filed, to adjourn the application or, alternatively, to stay the application. 2 The plaintiff was involved with Mr Garry Braams in a development project at Balmoral in the course of which it was necessary to borrow some monies from a finance company. The plaintiff said in proceedings 2930 of 1997 that he was entitled to be paid the monies he borrowed from the finance company by Mr Braams/the defendant company. Those proceedings were decided in the plaintiff's favour by a judgment of Foster AJ on 23 April 2001. His Honour granted a stay for seven days but, in due course, judgment was entered for the present plaintiff against Mr Braams for $744,792.30 and costs and a judgment was also entered against the present company for the same amount plus costs. 3 An appeal was lodged but nothing has yet occurred in the Court of Appeal by way of application for stay or otherwise. 4 The company says that it was clearly wrong for Foster AJ to have made orders against both Mr Braams and the present company. There would appear to be something to be said for that point of view, but his Honour's judgment quite clearly indicates that in his view, the course of the trial and the pleadings moved in different directions and it may be that when the full transcript is available the judgment may stand. 5 Although his Honour granted a seven day stay, no protest was made to Foster AJ as to the form of the order he proposed and no application has been made for a stay before the Court of Appeal. 6 The plaintiff gave a statutory demand to the company about the 21 May 2001. Mr Braams received that demand, it would seem, the next day. There was no application made to set the demand aside. Mr Braams says in his affidavit, which I admitted over objection as to its relevance, that when he received the demand he had no knowledge of what had to be done with it and was in the middle of trying to deal with stressing personal financial problems, including problems with respect to a proposed Part X of the Bankruptcy Act application of his own and that he did not give to the demand the attention it should have been given. 7 I asked Mr Eassie, who appeared for the company, what relevance that matter had and the reply was that the present application was in the inherent jurisdiction of the Court to stay the proceedings and in such a jurisdiction it was relevant to know the substantive view of the people concerned and it was necessary to differentiate between the case where a statutory demand had been merely neglected as opposed to one where deliberate decision had been made to take a particular tactical route. 8 There is no doubt that there is an inherent power in the Court to police its own process and to stay winding up proceedings which are an abuse of process, including cases where there is a bona fide disputed debt; see L & D Audio Acoustics Pty Ltd v Pioneer Electronic Australia Pty Ltd (1982) 7 ACLR 180, 181 and Pacific Communication Rentals Pty Ltd v Walker (1993) 12 ACSR 287, 289. However, that discretion and power has to be exercised bearing in mind the general scheme of Pt 5.4 of the Corporations Act; see House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 14 ACLC 1536, 1538-9. 9 The evidence filed by the company includes evidence which shows that the company is a trustee company and that apart from its right to indemnity against the beneficiaries or the assets, it has no assets and it has debts for legal fees in the proceedings before Foster AJ and accounting fees which it would not seem to be able to meet from its assets. The company does not appear to have current accounts, the reason being, according to Mr Braams, it has not traded in the current financial year. It would appear, accordingly, as Mr Parker for the plaintiff submits, that the company is insolvent in any event. However, it may be that the present plaintiff is not a creditor. 10 The question on this motion is whether I should adjourn the proceedings for a period of say, three weeks, so that the company can obtain a stay from the Court of Appeal. 11 In favour of that view is that the company would seem to have an arguable appeal and that if the appeal succeeds the present petitioner would not be a creditor who would be entitled to pursue winding up proceedings. 12 Against that view is that the company cannot, because of s 459S of the Corporations Act, oppose the application for winding up on a ground that it could have relied upon for the purposes of an application to set aside the statutory demand. 13 The question of the debt is a matter which is covered by s 459S and it seems to me that that must also carry with it the fact that the debt is owing to the person who made the statutory demand. Accordingly, under the statute, as the company would appear to be insolvent on the evidence and because of s 459S, the winding up order, assuming that the appropriate evidence has been presented to the Court, would have to be made notwithstanding what Mr Eassie has put up. 14 Is there then any substantial reason for postponing the evil day? I cannot really see sufficient reason. Indeed, that view is reinforced by the fact that Pt 5.4 of the Act envisages a more or less mechanical process whereby if a statutory demand is not challenged in the appropriate way within 21 days, then the Court should not be particularly free with exercising its inherent power or discretion to prevent the process. It does not seem to me that the instant case demonstrates circumstances where I should intervene and, accordingly, I will dismiss the present motion with costs. 15 That means that I must now proceed to hear the application. I am not precluding any application that might be made to stay the winding up order for a short period either so that it can be challenged on its merits or, alternatively, a further stay could be made by the Court of Appeal if the Court of Appeal also grants a stay for Foster AJ's orders, but I will dismiss the present motion. 16 I have now heard the evidence on the winding up process. The only matter which causes me some concern is that the statutory demand was not addressed to the company but rather to "The Directors, Braams Group Pty Ltd ...". There must be some doubt in view of s 109Y of the Act as to whether that was service of a statutory demand because it was not addressed to the company. However, the evidence on the motion showed that, in fact, Mr Braams treated the document as having been served on the company. It did, in fact, go to its registered office and then was in fact communicated to the directors, and I believe in view of section 467A of the Act on that evidence I should not permit the matter to be defeated on that ground. 17 Mr Parker submitted that even if that was a defect it would have been a matter which could have been dealt with in setting aside the demand. I am not at all sure that that proposition is correct because s 459F requires the demand to be served and s 459G gives a time for the date of service, so that if there has been no service those processes are not activated. The real problem is where there has been irregular service and that one, I can leave for another day. 18 Accordingly, the prescribed matters having been proved, I order that the company be wound up and I appoint Max Christopher Donnelly, of 17/2 Market Street, Sydney, the liquidator. 19 Mr Eassie has submitted that I should, even in my discretion, dismiss the proceedings or, alternatively, stay the winding up for a short period, perhaps three weeks. 20 In view of the structure of Pt 5.4 of the Corporations Act and because of the reasons I gave in dismissing the notice of motion, I do not consider that I should, in my discretion, decline to order a winding up. 21 The application for stay has given me more concern. Ordinarily, a litigant should be entitled to make an application for stay or otherwise within a reasonable time. The company wishes to make, so I am led to believe by Mr Eassie's submissions, an application to stay Foster AJ's original order which, had it been made and succeeded, may have provided an impediment to the winding up order. 22 Mr Donnelly can, of course, make the application to the Court of Appeal but, commercially speaking, he may not have the funds or the inclination to do it. Accordingly, there is something to be said for leaving the control of the company in the hands of the directors for a short period so that they can do so if they feel so inclined. 23 The company is not trading so that there is not the usual problem of leaving an apparently insolvent company in the hands of the directors. It is not the usual case of a stay as the company would appear not to be able to escape from liquidation and there is no actual appeal against the winding up order. It is rather an appeal against some collateral process. 24 However, having taken all of those matters into account I think I should allow the company as controlled by the directors one last opportunity to make an application to the Court of Appeal for the stay of Foster AJ's judgment and perhaps a renewed stay of this winding up order. The Court of Appeal sits on Mondays so if I granted a stay up to and including 4 September that would allow two Mondays for the application to be made and that is the order I make. 25 I give liberty to apply. Exhibits may be handed out after 4 September 2001. *************** Last Modified: 08/29/2001 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. 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