Hanson Construction Materials Pty Ltd v FEC Civil Pty Ltd [2009] NSWSC 161

New South Wales Supreme Court

CITATION : Hanson Construction Materials Pty Ltd v FEC Civil Pty Ltd [2009] NSWSC 161

HEARING DATE(S) : 10/03/09

JUDGMENT DATE : 18 March 2009

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

DECISION : Leave under s 459S refused.

CATCHWORDS : CORPORATIONS - winding up - alleged insolvency through non-compliance with statutory demand - defendant intends to prove solvency - application for leave to defend on grounds that could have been asserted on application to have statutory demand set aside - relevant considerations examined

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 459C(2)(a), 459G, 459S

CATEGORY : Principal judgment

Chief Commissioner of Stamp Duties v Paliflex [1999] NSWSC 15; (1999) 149 FLR 179 Deputy Commissioner of Taxation v Neo Rock Pty Ltd [2009] FCA 129 CASES CITED : Grant Thornton Services (NSW) Pty Ltd v St George Wholesale Distributors Pty Ltd [2008] FCA 1777 Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962; (2007) 25 ACLC 1216 Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWCA 37; (2000) 48 NSWLR 661

PARTIES : Hanson Construction Materials Pty Ltd - Plaintiff FEC Civil Pty Ltd - Defendant

FILE NUMBER(S) : SC 5765/08

COUNSEL : Ms P A Conway - Plaintiff Mr D A Hassall - Defendant

SOLICITORS : Oliveri Lawyers - Plaintiff S & T Lawyers - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

WEDNESDAY 18 MARCH 2009

5765/08 HANSON CONSTRUCTION MATERIALS PTY LTD v FEC CIVIL PTY LTD JUDGMENT 1 These are winding up proceedings in which the plaintiff relies on the insolvency ground and has the benefit of a presumption of insolvency under s 459C(2)(a) of the Corporations Act 2001 (Cth) because of the defendant's non-compliance with a statutory demand dated 7 October 2008 which was served on or soon after that day. 2 In opposing the winding up application, the defendant wishes to rely on grounds which it acknowledges to be unavailable to it because of s 459S(1) of the Corporations Act unless it obtains the court's leave under that section. Section 459S is as follows: "(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). (2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent." 3 The Court of Appeal said in Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWCA 37; (2000) 48 NSWLR 661 at 676 that an application for leave under s 459S is ordinarily expected to be determined before the hearing of the winding up application. Spigelman CJ (with whom Handley JA and Giles JA agreed) added: "If applications under s 459S are, as a general rule, heard with the winding up summons, this would establish a path permitting the delay of, and prolonging the hearing of, such applications. The new scheme sought to change pre-existing practices and ensure that issues of this character would be determined in the main at an early time and on a strict timetable. The objectives of the scheme, including the strict time-limit of s 459G(2) would be compromised if s 459S applications were routinely deferred to the time of the hearing of the application." 4 It was for this reason that I directed that the defendant's s 459S application be separately argued when the matter came before me on 10 March 2009. 5 On that occasion, Ms P A Conway appeared for the plaintiff and Mr D A Hassall appeared for the defendant. Ms Conway opposed the grant of leave under s 459S sought by the defendant. 6 The principal ground on which the defendant proposes to defend the winding up application is that it is solvent. Additional grounds are formulated as follows: "2. The Defendant Company has an Offsetting Claim against the Plaintiff in the amount of some $320,000 being a genuine claim against the Plaintiff by way of a counterclaim, set-off or cross demand, arising from the Plaintiff's supply to the Defendant company of sub-standard concrete to at least four building project sites; and the Defendant Company seeks the leave of this Honourable Court, under Section 459S of the Corporations Act 2001 (Commonwealth), to oppose the Plaintiff's application herein on the further ground of that Offsetting Claim, as that ground is a ground material to proving that the company is solvent, inasmuch as in view of that offsetting claim, the debt claimed by the Plaintiff offset by a countervailing claim by the Defendant for an amount not only equal to, but well exceeding, the amount claimed and relied upon the Plaintiff. 3. The Defendant Company is moving the District Court of New South Wales for leave to file, out of time, an application to set aside the default judgment obtained by the Plaintiff upon which it relies in respect of the debt claimed and the Statutory Demand and upon which it relies herein; and the Defendant Company likewise seeks the leave of the Court herein; 4. The Plaintiff's said claim and Statutory Demand did not come to the attention of the Defendant Company until such time as it was too late for the Defendant Company to have an opportunity to be heard to oppose the said claim in the District Court and to move to set aside the Statutory Demand; and that, in view of the said Offsetting Claim referred to in Ground 2 (above) and the other matters and circumstances deposed to in the Affidavit of Francesco Barbaro, sole Director of the Defendant, (which Affidavit accompanies this Notice), the said Default Judgment ought to be set aside and judgment entered for the Defendant Company upon its said Counterclaim against the Plaintiff for an amount equal to the difference between the Plaintiff's claim and the said offsetting claim; and that the Defendant Company has good grounds and reasonable prospects of obtaining such leave and judgment from the District Court; and the Defendant Company likewise seeks the leave of this Honourable Court." 7 An application for leave under s 459S relates to these additional grounds. It must be approached by reference to three considerations identified by Austin J in Chief Commissioner of Stamp Duties v Paliflex [1999] NSWSC 15; (1999) 149 FLR 179 at [49]: "In my opinion the exercise of the discretion to grant leave under s459S(1) involves three considerations, namely: