Supreme Court New South Wales Medium Neutral Citation: In the matter of Kay Investment Holdings Pty Ltd [2011] NSWSC 1033 Hearing dates: Monday, 15 August 2011 Decision date: 15 August 2011 Before: White J Decision: Refer to paras [32]-[34] of judgment. Catchwords: CORPORATIONS - practice and procedure - winding up in insolvency - application to set aside order dismissing application to set aside statutory demand made in the absence of the party - where party did not receive notification of hearing date due to incorrect email address being used - plaintiff entitled ex debito justitiae to have orders set aside - orders set aside pursuant to r 36.16(2)(b), Uniform Civil Procedure Rules 2005 - effect of setting aside order on presumption of insolvency - presumption of insolvency arose 7 days after application to set aside statutory demand was finally determined or otherwise disposed of - make order setting aside order dismissing application to set aside statutory demand with retrospective effect Legislation Cited: Retail Leases Act 1994 Corporations Act 2001 (Cth) Cases Cited: Cameron v Cole [1994] HCA 5; (1944) 68 CLR 571 Buckland Products Pty Ltd v Deputy Commissioner of Taxation of the Commonwealth of Australia [2003] VSCA 85 Jem Developments v Hansen Yuncken [2006] NSWSC 1378; (2006) 60 ACSR 393 Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559 Texts Cited: Ritchie's Uniform Civil Procedure New South Wales Category: Interlocutory applications Parties: Kay Investment Holdings Pty Ltd (Plaintiff) North East Developments Pty Ltd (Defendant) Representation: C R de Robillard (Plaintiff) S Chapple (Defendant) Bobi Damcevski Corporate & Civil Legal (Plaintiff) Herbert Geer Lawyers (Defendant) File Number(s): 2011/50106; 2011/214676 Judgment 1HIS HONOUR: This is an application under r 36.16(2)(b) of the Uniform Civil Procedure Rules 2005 for an order setting aside an order made on 7 June 2011 dismissing these proceedings. Rule 36.16(2)(b) provides: " 36.16 Further power to set aside or vary judgment or order ... (2) The court may set aside or vary a judgment or order after it has been entered if: ... (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order. " The rule is applicable to the current proceedings by virtue of r 1.3 of the Supreme Court (Corporation) Rules 1999. 2The proceedings were commenced on 15 February 2011. The plaintiff sought an order to set aside a statutory demand served by the defendant on the plaintiff dated 25 January 2011. The statutory demand claimed a debt said to be owing by the plaintiff as lessee pursuant to a lease with the defendant for $74,245.20. 3The affidavit filed in support of the application to set aside the statutory demand raised contentions to the effect that prior to entering into the subject lease, the defendant made various representations to the plaintiff which were not honoured. The plaintiff's director deposed, in effect, that substantial moneys were spent in connection with the leased premises and that the plaintiff's trading was adversely affected by what was said to be the failure of the defendant to honour those representations. 4The director deposed that he did not know how the sum claimed in the statutory demand had been calculated. He disputed any liability to pay that sum and said that the plaintiff proposed to institute proceedings under the Retail Leases Act 1994 based on the matters set out in the supporting affidavit seeking an order that the lease be set aside de novo and that rents and other moneys paid by the plaintiff to the defendant be refunded. 5The matter came before Barrett J on Monday, 11 April 2011. Mr V R Gray of counsel appeared for the plaintiff and Mr C R de Robillard for the defendant. The transcript states that the parties were seeking dates, that Mr de Robillard advised June dates were suitable and his Honour said that he would allocate dates in chambers and " you will be notified by email ". 6On 12 April 2011, the associate to Barrett J prepared and sent an email advising that the matter had been fixed for hearing before the Corporations Judge on 7 June 2011, with an estimate of two hours. His Honour made the usual order for hearing in accordance with Practice Note SC Eq 1 and noted the requirements of Practice Note SC Eq 2. 7The usual order for hearing in accordance with Practice Note SC Eq 1 provided, amongst other things, that not later than ten working days before the hearing, the parties' barristers or solicitors were to cause to be filed with the Court a court book, and that not later than five working days before the hearing, each barrister or solicitor was to cause to be filed and served, amongst other things, a short outline of submissions and statement of the real issues for determination. 8The email from Barrett J's associate advising the parties of his Honour's orders was sent to the email address provided by Mr de Robillard. It was also sent to two email addresses intended to reach the plaintiff's solicitor and counsel, namely, " cc.legal@ccls.com.au " and " gray@stjames.net.au ". Unfortunately, both email addresses were wrong. The email address for the plaintiff's solicitor was " cclegal@ccls.com.au ", that is, without the first dot. The email address for the plaintiff's counsel was relevantly " vgray@stjames.net.au ", not " gray@stjames.net.au ". 9The plaintiff's solicitor, Mr Damcevski, deposed that he did not receive notice from the Court or from the defendant that the proceedings had been fixed for hearing on 7 June 2011 and that he had been advised by counsel, Mr Gray, that Mr Gray had also not received notice that the proceedings had been so fixed. 10It appears that neither party complied with the requirements of the usual order for hearing. The plaintiff was unaware that the order had been made. Unfortunately, the defendant also did not comply, and hence the plaintiff's legal advisers did not become aware by that means that the matter had been fixed for hearing on 7 June 2011. Mr Damcevski also deposed that he did not receive notice of a court hearing allocation fee. 11On 7 June 2011 the matter was listed for hearing before Windeyer AJ. There was no appearance for the plaintiff. His Honour ordered that the originating process be dismissed and that the plaintiff pay the defendant's costs. These orders are now sought to be set aside. 12In Cameron v Cole [1994] HCA 5; (1944) 68 CLR 571, Rich J said at 589: " It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae , to have any determination which affects him set aside ... The setting aside of the invalid determination lays the ghost of the simulacrum of a trial, and leaves the field open for a real trial. " 13The plaintiff's counsel contends that the plaintiff is entitled to have the orders of 7 June 2011 set aside ex debito justitiae . Counsel also submits that if it is necessary to establish that the plaintiff has reasonable grounds for the relief sought in the originating process, that requirement is also satisfied. 14A potentially difficult question arises if the order is set aside as to whether the presumption of insolvency under s 459C of the Corporations Act 2001 (Cth) has, in any event, arisen under s 459F(2)(a)(ii). I will return to that question later in these reasons. 15Mr Gray did not swear an affidavit in support of the application. Counsel for the defendant points to this. I was told that on 11 April 2011 the parties were asked to provide to the associate to Barrett J their email addresses. I was asked to infer that the address provided for the plaintiff's counsel was the address " gray@stjames.net.au ", to which the email was addressed. There was evidence from the defendant's solicitor that in July 2011 she telephoned the chambers of Mr Gray and asked for his email address and that the receptionist gave the name " gray@stjames.net.au ". 16This is a possible scenario. The other possible scenarios are that the correct address was provided and that the incorrect address was used by mistake, or even that his Honour's associate had to make the same kind of enquiry as the defendant's solicitor later made, and was given the same information. 17However that may be, I cannot be satisfied in the circumstances of this case that the plaintiff has been given a reasonable opportunity of appearing and presenting its case. The fact that the failure to do so is a result of administrative error does not make it less fundamental. In my view, having regard to what was said in Cameron v Cole quoted at [12] above, the plaintiff is entitled ex debito justitiae to have the orders of 7 June 2007 set aside. 18If it were necessary for the plaintiff also to establish that there are reasonably arguable grounds for its claim, I think that requirement would, in any event, be satisfied on the material read on the present application. The tests for establishing a genuine dispute or an offsetting claim are not demanding. 19As it will be necessary for the question of the merits of the plaintiff's claim to be determined at some future date, I do not think it appropriate to go into that question any further, lest the trial of the questions which arise on the originating process be embarrassed by observations I made. As I have concluded that the plaintiff is entitled to an order under r 36.16(2)(b) in any event, it is undesirable to do so. 20However, the question is, what would be the effect of an order setting aside the orders of 7 June 2011? The first effect, clearly enough, would be that the originating process would not be treated as having been dismissed. However, s 459F provides: " When company taken to fail to comply with statutory demand (1) If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period. (2) The period for compliance with a statutory demand is: (a) if the company applies in accordance with section 459G for an order setting aside the demand: (i) if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand--the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or (ii) otherwise--the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or (b) otherwise - 21 days after the demand is served." 21An order of a superior court is not a nullity. Subject to the observations below, it appears to me that the application under s 459G was finally determined or otherwise disposed of on 7 June 2011 and thus the presumption of insolvency arose on 14 June 2011. 22This question has arisen in another context, namely, where the plaintiff has failed on its application under s 459G and wishes to appeal. In Buckland Products Pty Ltd v Deputy Commissioner of Taxation of the Commonwealth of Australia [2003] VSCA 85, Phillips JA, with whom Chernov and Eames JJ agreed, held that an application was " finally determined " under s 459F notwithstanding the determination was subject to appeal. His Honour said at [9]: " Application under s 459G to set aside the statutory demand was 'finally determined' within the meaning of s 459F(2)(a)(ii) when the Master's order was made on 21 June 2001 and the fact that that order was liable to appeal was nothing to the point. If the company was wishing to appeal it could do so, but unless the appeal was heard and determined before the expiry of the period for compliance otherwise fixed, an extension of the time for compliance has to be obtained. Without it there could be no point in the continued prosecution of the appeal, for the period of compliance having ended before the appeal was heard and determined, the consequence described by s 459F(1) attached, with all that followed under the statute. There can be no occasion, in my opinion, for adopting a construction of s 459F(2)(a)(ii)that would require that the consequence described by subs (1), having once attached, should then be undone because of the exercise of some right of appeal. Once that consequence attached it remained attached ... " 23In Jem Developments v Hansen Yuncken [2006] NSWSC 1378; (2006) 60 ACSR 393, Austin J observed that: " The case law indicates that an application under s 459G is 'finally determined or otherwise disposed of' for the purposes of s 459F(2)(a)(ii) when the judicial officer hearing the case at first instance makes final orders after hearing the application. " (Citation of authority omitted.) 24In this case there was no substantive hearing of the application. The case is obviously different from one in which a plaintiff has been heard but wishes to appeal. It is open to such a plaintiff to seek an order extending the period for compliance with the demand. In the present case the plaintiff had no such ability. It did not know that the orders had been made setting aside its originating process. Hence it did not have the opportunity to seek any extension of the period for compliance with the demand in order so that its application to set aside the orders of 7 June 2011 could be determined. 25Rule 36.4(3) provides: " 36.4 Date of effect of judgments and orders (cf SCR Part 40, rule 3; DCR Part 31, rule 13A (2)) ... (3) Despite subrules (1) and (2), the court may order that a judgment or order is to take effect as of a date earlier or later than the date fixed by those subrules. " 26In the notes to Ritchie's Uniform Civil Procedure New South Wales , the learned authors say (at [36.16.90]) that where an order is set aside or varied under r 36.16, the Court should make an order under r 36.4(3) specifying the date the new order takes effect, and that it will usually be appropriate to order that the new order take effect as at the date of the original order. They refer to Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559. In that case a registrar had made an order for reinstatement of a dissolved company but the order was expressed to be made subject to a condition that the reinstatement was only for the purpose of continuing litigation in a certain proceeding. McLelland CJ in Eq held that there was no warrant for any limitation being placed on the effect of reinstatement of a company. If the company were reinstated it must exist for all purposes. His Honour observed that being an order of a superior court, the order could not be treated as void or invalid, but also held that the necessary correcting order should be expressed to operate retrospectively so as to avoid any future doubt about the legal effect of the order. 27In my view there would be utility in making an order setting aside the orders of 7 June 2011 with retrospective effect. Although I am aware of no authority on the question, it seems to me that if an order were made that the orders of 7 June 2011 be set aside by an order expressed to take effect on 7 June 2011, it could not then be said that the application under s 459G had been finally determined or otherwise disposed of. 28That does leave the defendant in an invidious position. It filed an originating process on 1 July 2011 seeking an order that the plaintiff be wound up in insolvency. The originating process relies upon the service of the statutory demand and the dismissal of the plaintiff's application on 7 June 2011 for the setting aside of the statutory demand. 29The effect of the order setting aside the orders of 7 June 2011 in my opinion will be that the presumption of insolvency had not arisen when the originating process for winding-up was filed, even though as at 1 July 2011 it could properly be said, as matters then obtained, that the presumption of insolvency had arisen. That, however, is a necessary consequence of making the order with retrospective effect. 30I do not think that any hardship to the defendant in this regard outweighs the injustice that would otherwise obtain if the plaintiff's application to set aside the statutory demand remains undetermined without a proper hearing. To a certain extent the defendant is not without fault. Had the defendant complied with the usual order for hearing, its service of the pre-trial documents would have alerted the plaintiff's legal representatives to the pending hearing date. But even without that consideration, the interests of justice require that the plaintiff have the reasonable opportunity for its claim to be determined on its merits. 31If the order were not set aside, the plaintiff would not necessarily be wholly without remedy. It could seek leave in the winding-up proceedings pursuant to s 459S of the Corporations Act to oppose the winding-up application on a ground on which it could have relied for the purposes of the application to set aside statutory demand. However, it would have to establish that the grounds on which it sought to set aside the statutory demand were material to proving solvency. Moreover, if it were successful in an application under s 459S, that would not mean that the presumption of insolvency was removed. The possibility of an application under s 459S is not a sufficient reason not to make an order under r 35.16(2)(b) with retrospective effect. 32For those reasons I make the following orders: 1. Order that the orders made on 7 June 2011, that the originating process be dismissed and that the plaintiff pay the defendant's costs, be set aside. 2. Order that the first order take effect as of 7 June 2011. 3. Order that the costs of the plaintiff's interlocutory process filed on 15 July 2011 be costs in the proceedings. 33I will fix the matter for Friday 9 September 2011 at 10 am before the second Corporations judge for half a day. The usual order for hearing in practice note SC Eq 1 has been amended with effect from earlier this month. I make the usual for hearing in Annexure A to practice note SC Eq 1 and I draw to the parties' attention the requirement of para [30] of practice note SC Eq 4. 34I will stand over for mention at the same time the proceeding number 214676 of 2011. 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. Decision last updated: 07 September 2011