Supreme Court New South Wales Medium Neutral Citation: Crouch v Transly Investment Pty Limited [2011] NSWSC 1028 Hearing dates: Tuesday, 23 August 2011 Decision date: 23 August 2011 Jurisdiction: Equity Division - Corporations List Before: White J Decision: Make orders 1, 2 and 3 in the originating process. Catchwords: CORPORATIONS - winding up - winding up in insolvency -non-compliance with statutory demand - no application to set aside statutory demand - company cannot dispute the applicants standing as a creditor - presumption of insolvency arising under s 459C, Corporations Act 2001 (Cth) - no evidence rebutting presumption of insolvency - winding up order made Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWCA 37; (2000) 48 NSWLR 661 Chief Commissioner of Stamp Duties v Paliflex Pty Ltd [1999] NSWSC 15; (1999) 17 ACLC 467 State Bank of New South Wales v Tela Pty Limited (No 2) [2002] NSWSC 20; (2002) 188 ALR 702 Bibby Financial Services v Wolf Industries [2004] NSWSC 134; (2004) 49 ACSR 45 Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962; (2007) 25 ACLC 1216 Category: Principal judgment Parties: Nicholas James David Crouch as trustee of the bankrupt estate of Minh Chanh Tran (Plaintiff) Transly Investment Pty Limited (Defendant) Representation: G George (Plaintiff) P Le (Defendant) Pateman Legal (Plaintiff) Le Vaccaro Lawyers (Defendant) File Number(s): 2011/81583 Judgment 1HIS HONOUR : This is an application that the defendant be wound up in insolvency. On 19 January 2011 the plaintiff served a creditor's statutory demand dated 18 January 2011 by ordinary prepaid post addressed to the registered office of the defendant. 2The demand claimed that the company owed the bankrupt estate of Mr Minh Chanh Tran the amount of $57,000. The amount of the debt was described in the schedule as: " Monies due and payable by the Company to the Creditor in respect of a loan made by the Creditor to the Company on or about 21 June 2006 to be used by the Company for the purpose of payment of a deposit for a purchase of property located at 106 Yarrara Road, Pennant Hills and associated fees, such monies not being so used as being liable to be refunded in full to the Company. " 3The statutory demand was accompanied by an affidavit of Mr Nicholas Crouch, the trustee of the bankrupt estate of Minh Chanh Tran. He deposed that the debt was due and payable by reason of an executed contract of sale for the property with the company as purchaser and admissions made by former solicitors for the bankrupt creditor, that the debt was owed by the company to the creditor. Such admissions were said to be contained in a facsimile from Metrop Lawyers to Pateman Legal dated 4 June 2007, a copy of which was annexed to Mr Crouch's affidavit. 4No application was made to set aside the statutory demand. Under s 459G of the Corporations Act 2001 (Cth) an application to set aside the statutory demand had to be made within 21 days of service of the statutory demand on the company. 5The originating process seeking an order winding up the company in solvency was filed on 14 March 2011. Section 459S of the Corporations Act provides: "(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)." 6Pursuant to subsection (2), the court is not to grant leave under subs (1) unless the ground is material to proving that the company is solvent. 7In Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWCA 37; (2000) 48 NSWLR 661 the Court of Appeal held that an application for leave under s 459S should be brought and heard prior to the hearing concerning the winding-up application. Under s 459R, unless there are special circumstances that justify an extension of time the winding-up application is required to be determined within six months after it is made. No application was brought by the defendant for leave under s 459S to oppose the winding-up application on the ground that the company did not owe the debt claimed in the statutory demand to be owed to the plaintiff. 8It is well settled that unless leave is given pursuant to s 459S, a company which has not applied under s 459G to set aside a statutory demand cannot dispute the applicant's standing as a creditor (see Chief Commissioner of Stamp Duties v Paliflex Pty Ltd [1999] NSWSC 15; (1999) 17 ACLC 467 at [35]-[39]; State Bank of New South Wales v Tela Pty Limited (No 2) [2002] NSWSC 20; (2002) 188 ALR 702 at [2]; Bibby Financial Services v Wolf Industries [2004] NSWSC 134; (2004) 49 ACSR 45 at [19]-[24]; and Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962; (2007) 25 ACLC 1216 at [21]). 9The defendant sought to rely on an affidavit of Ms Ly Hahn Chi Tran affirmed on 20 April 2011. She deposed that the company paid $57,500 to a firm of solicitors as a deposit under a contract for the purchase of property at 106 Yarrara Road, Pennant Hills and that it was she who deposited those moneys into the company's account for the purpose of its paying the deposit. 10The substance of her affidavit was that the company did not owe the sum of $57,500 to the bankrupt estate of Minh Chanh Tran. I rejected the affidavit because it raised a ground for opposing the winding-up application that the company could not rely on without leave of the court pursuant to s 459S. No application had been or was made for leave under that section. 11There is no evidence to rebut the presumption of insolvency under s 459C. 12It was submitted for the company that the presumption of insolvency under s 459C did not arise where there was a significant defect in the statutory demand and where a substantial injustice would be caused if the defective statutory demand were not set aside. 13Mr Le, solicitor, who appeared for the defendant, relied upon s 459J. However, s 459J sets out grounds in addition to those in s 459H on which a statutory demand may be set aside. This is not the hearing of an application to set aside the statutory demand. Any such application is made under s 459G and must be brought within 21 days after service of the demand. 14I do not accept that the statutory demand contains a relevant defect. It may be that there was a genuine dispute as to the debt that, had an application been made within time under s 459G, could have led to the demand being set aside under s 459H. That question does not presently arise. But even it there were a defect in the demand, that would not mean that the presumption of insolvency would not arise under s 459S. A statutory demand is a document that is, or purports to be, a demand served under s 459E or such a document varied by an order under s 459E. (See the definition of " statutory demand " in s 9.) 15Even if a statutory demand contains a defect, provided it purports to a demand made under s 459E, it is a statutory demand for the purpose of s 459C. Failure to comply with it gives rise to the presumption of insolvency. 16As I have said, there was no evidence to rebut the presumption of insolvency. 17For these reasons I make orders 1, 2 and 3 in the originating process. 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