New South Wales Supreme Court CITATION : Chief Commissioner of State Revenue v SPV2 Pty Ltd; Chief Commissioner of State Revenue v SPV7 Pty Ltd; Chief Commissioner of State Revenue v Wollongong City Plaza Pty Ltd; Chief Commissioner of State Revenue v Industrial Corp Pty Ltd; Chief Commissioner of State Revenue v Belmorgan Holdings Pty Ltd [2008] NSWSC 829 HEARING DATE(S) : 7 August 2008 JURISDICTION : Equity JUDGMENT OF : Austin J EX TEMPORE JUDGMENT DATE : 7 August 2008 DECISION : Leave to withdraw granted CATCHWORDS : CORPORATIONS - winding up - plaintiff and defendant to winding up proceedings agree to discontinue, before return date - whether most appropriate course is to grant leave to plaintiff to withdraw under s 467(3)(e) - whether the court should allow withdrawal before return date, thereby preventing any other creditor from applying for substitution as plaintiff - whether there is an inconsistency in policy between s 465A and Form 519, on the one hand, and Corporations Rule 5.6 on the other LEGISLATION CITED : Corporations Act 2001 (Cth), ss 465A, 467, Form 519 Supreme Court (Corporations) Rules 1999, rule 5.6 CASES CITED : Australian Beverage Distributors v Evans and Tate (2007) 61 ACSR 441 3998/08 Chief Commissioner of State Revenue (Plaintiff) SPV2 Pty Ltd (Defendant) 3999/08 Chief Commissioner of State Revenue (Plaintiff) SPV7 Pty Ltd (Defendant) 4000/08 PARTIES : Chief Commissioner of State Revenue (Plaintiff) Wollongong City Plaza Pty Ltd (Defendant) 4003/08 Chief Commissioner of State Revenue (Plaintiff) Industrial Corp Pty Ltd (Defendant) 4005/08 Chief Commissioner of State Revenue (Plaintiff) Belmorgan Holdings Pty Ltd (Defendant) FILE NUMBER(S) : SC 3998/09; 3999/08; 4000/08; 4003/08; 4005/08 COUNSEL : B J Skinner (Defendants) SOLICITORS : Matthews Folbigg Pty Ltd (Plaintiff) Thomson Playford (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST AUSTIN J THURSDAY 7 AUGUST 2008 3998/08 CHIEF COMMISSIONER OF STATE REVENUE V SPV2 PTY LTD 3999/08 CHIEF COMMISSIONER OF STATE REVENUE V SPV7 PTY LTD 4000/08 CHIEF COMMISSIONER OF STATE REVENUE V WOLLONGONG CITY PLAZA PTY LTD 4003/08 CHIEF COMMISSIONER OF STATE REVENUE V INDUSTRIAL CORP PTY LTD 4005/08 CHIEF COMMISSIONER OF STATE REVENUE V BELMORGAN HOLDINGS PTY LTD JUDGMENT (Ex tempore; revised on 12 August 2008) 1 HIS HONOUR: The application before the Court, in each of five proceedings brought by the Chief Commissioner of State Revenue, is for the proceedings to be dismissed, or in the alternative for the Court to grant leave for the winding up applications to be withdrawn under section 467(3) of the Corporations Act. 2 The evidence before me indicates that the parties in the proceedings have reached an accommodation in respect of the plaintiff's claims and the plaintiff no longer wishes to proceed to wind up the defendants. Further, there is evidence that if the proceedings are allowed to continue to the return date, the defendants will suffer substantial prejudice vis-a-vis financiers. 3 In my view, in a case such as this it is more appropriate to proceed under section 467(3)(e) than to make orders for the dismissal of the proceedings. I say this because the Court can take judicial notice of the fact that creditors may well keep watch over winding up proceedings, and there is some risk that a creditor, observing what has happened, may make deductions from dismissal of the proceedings that would not accurately reflect what had really occurred. Essentially what is occurring is better described as the plaintiff withdrawing from the proceedings having made an accommodation with each of the defendants. 4 The question whether I should grant leave under section 467(3)(e) depends upon a consideration of the possible prejudice that might arise to any party or to any other creditor of any of the defendant companies. So far as the parties are concerned, considerations of prejudice point strongly in favour of granting the leave. The plaintiff seeks the order and the defendants have adduced evidence of significant potential prejudice. My concern is about other creditors, who may be watching these proceedings and would perhaps be contemplating an application for substitution should the plaintiff seek to withdraw on the return date. 5 Section 465A of the Act says that a person who applies for winding up in insolvency is required to lodge a Form 519 notice with ASIC, signifying that the application has been made. Such a form has been lodged in each of the five cases. Although there is no direct evidence of this, my understanding (confirmed by the legal representatives of the parties) is that when a Form 519 is lodged with ASIC, it becomes publicly available on ASIC's data base, and any person interested is able to search the data base and discover that a winding up application has been made in respect of the designated company. 6 On the other hand, and perhaps reflecting a policy somewhat inconsistent with s 465A, Rule 5.6 of the Supreme Court (Corporations) Rules, together with section 465A(c), requires the publication of an advertisement in the prescribed form, no earlier than three days after the originating process is served on the company and at least seven days before the date fixed for the hearing of the application. In none of the present proceedings has such a publication occurred. Moreover, there has been no appearance or other indication of specific interest in the proceedings on behalf of any other creditor. 7 The policy underlying Rule 5.6 was explored by Beazley JA in Australian Beverage Distributors v Evans and Tate (2007) 61 ACSR 441 at 460. As her Honour indicated, the publication rule is designed to give the defendant company a short period of grace to enable it to pay the debt claimed by the plaintiff before the advertisement is made and notoriety is accordingly afforded to it. The problem with that policy today is, according to my understanding, the lodgment of a Form 519 provides notoriety and that is likely to have occurred within the three-day period that the rule contemplates. In my opinion there is a case for revisiting the policy and if it is thought that a period of grace should be allowed, then the lodgement of a Form 519 should be deferred until that period has expired. 8 Be that as it may, in the present case I am persuaded by the strong evidence of prejudice to the defendants that I should intervene under s 467(3)(e). In my view the potential prejudice to the defendants will be sufficiently weighty to outweigh whatever prejudice would be suffered by a supporting creditor who might be planning to make an application for substitution on the return date. The supporting creditor can, after all, initiate its own proceedings and have the carriage of those proceedings independently of the present proceedings, although it may lose the advantage of the plaintiff's relation-back day. 9 On balance, I have decided to make the orders granting leave in each case under s 467(3)(e). There is no order for costs. ********** 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.