Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Nasr v Etihad Airways PJSC [2012] NSWCA 70 Hearing dates: 2 April 2012 Decision date: 02 April 2012 Before: Basten JA at 1; Sackville AJA at 9 Decision: 1. Application for leave to appeal dismissed. 2. Applicant to pay first respondent's costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: CORPORATIONS - winding up - appeal from judgment dismissing application to set aside winding up order - whether applicant has standing to apply to set aside winding up order CORPORATIONS - winding up - appeal from judgment dismissing application to set aside winding up order - company failed to comply with statutory demand - company required to seek leave to oppose the winding up - whether ground on which company sought to rely was material to proving that it was solvent - whether evidence that company is solvent - Corporations Act 2001 (Cth), s 459S Legislation Cited: Corporations Act 2001 (Cth), s 459S Uniform Civil Procedure Rules 2005 (NSW), rr 36.13, 36.16 Category: Principal judgment Parties: Nabil Nasr - Applicant Etihad Airways PJSC - First Respondent Jireh Karalae Pty Ltd - Second Respondent Representation: Counsel: Applicant in person M A Campbell - First Respondent O Anderson - Second Respondent Solicitors: Applicant self-represented Karl Balian & Co Pty Ltd - First Respondent Watson Mangioni Lawyers - Second Respondent File Number(s): CA 2011/311333 Decision under appeal Jurisdiction: 9111 Citation: In the matter of Jireh Karalae Pty Ltd [2011] NSWSC 1162 Date of Decision: 2011-08-29 00:00:00 Before: White J File Number(s): 2011/13237 Judgment 1BASTEN JA: In July 2009, Etihad Airways PJSC ("Etihad") commenced proceedings in the District Court seeking to recover $91,000 by way of a payment due under a contract for goods sold and delivered and services rendered by Etihad to Jireh Karalae Pty Ltd ("Jireh"). Neither party has troubled the Court with relevant evidence in admissible form, nor with a useful chronology of events. What follows is extracted from a transcript of proceedings before Bergin CJ in Eq on 4 July 2011 and further proceedings before White J in the Equity Division on 29 August 2011. 2Jireh appears to have been a travel agency under the control of Mr Nasr, which did a significant volume of business with Etihad on behalf of a client known as Future Movement Australia Ltd ("Future Movement"). At one stage Jireh apparently instituted proceedings against Future Movement claiming an amount in excess of $800,000. Those proceedings were later discontinued and may have been settled. There is reference in Justice White's judgment to there being an agreement for payment by Future Movement of $400,000. At the risk of oversimplification, Jireh claimed that it was unable to pay Etihad because it had not been paid by Future Movement. 3On 10 December 2009, Etihad sought default judgment on a liquidated claim in the District Court proceedings. Judgment was entered in favour of Etihad on 10 December 2009. On 14 January 2011, Etihad filed an originating process seeking to wind up Jireh. 4On 5 April 2011 Jireh sought to have the District Court judgment set aside and execution stayed pending determination of the matter. That application was probably made in response to the service of a statutory demand by Etihad, claiming a sum of $102,858, plus interest. On 17 May 2011 Jireh was wound up. 5It was not in dispute that Jireh failed to comply with the statutory demand. Thus, in order to oppose the winding up, the company was required to seek leave of the Court under s 459S of the Corporations Act 2001 (Cth). To obtain leave, the company needed to satisfy the Court that the ground on which it sought to rely was material to proving that it was solvent: s 459S(2). No step was taken pursuant to s 459S, although the Registrar had given directions in respect of any such application on 3 May 2011. 6Following the winding up, Mr Nasr (presumably on behalf of the company) sought relief on 8 June 2011 to have the winding up set aside. This application came before White J on 29 August 2011, but was dismissed: In the matter of Jireh Karalae Pty Ltd [2011] NSWSC 1162. In giving judgment, White J noted the following matters: "[14] This is not an appeal from the making of the winding-up order. If it were, it would not succeed because there is nothing to indicate that the Registrar was in error in making the winding-up order. The presumption of insolvency had been raised by non-compliance with the statutory demand served on the defendant by the plaintiffs. [15] Though the Registrar was acting properly in making the winding-up order there is power under r 36.15 and r 36.16 of the Uniform Civil Procedure Rules 2005 for the court to set aside a winding-up order on various grounds. None of those grounds is engaged in the present case. In particular, the order was not made irregularly, illegally or against good faith. Nor was it made in the absence of the defendant. [16] Even had there been a ground for setting aside the winding-up order under one of those rules, as the order was regularly obtained, it would be necessary on this application for the defendant to prove that the company was solvent. The applicant's evidence does not establish solvency. [17] The other, more usual, way in which a winding-up is brought to an end is by application under s 482 of the Corporations Act for an order staying or terminating the winding-up. Such an application may only be made by a limited class of persons including a creditor of the company or a contributory, that is to say, a shareholder, of the company. Mr Nasr is neither a creditor of the company, nor a contributory. He does not have standing to apply for an order terminating the winding-up. Mr Ali El Hamed would have that standing and though there is evidence that he is supportive of the application being brought by Mr Nasr, the application is Mr Nasr's application and not Mr Ali El Hamed's. Nor is the application expressed to be for an order terminating the winding-up. [18] If an application were brought under s 482 it would be necessary for the applicant, by the fullest and best evidence, to establish that the company is solvent and has an excess of assets over liabilities. The evidence on the present application does not show that." 7On 24 November 2011 Mr Nasr sought leave to appeal. He did so, presumably, because the company has been wound up. The company is a respondent to the appeal and is therefore before the Court. However, as explained by White J, he has no standing to make that application. The only ground of appeal in the draft notice of appeal filed with the application for leave is in the following terms: "False sworn Affidavits under oath by Etihad Airways Accounts manager and Accounts executive." 8This is not a legitimate ground of appeal from the judgment of White J. Indeed, the proceedings in the Equity Division being misconceived, the application for leave to appeal must also fail. As Justice White pointed out, there was no evidence to indicate that Jireh is solvent. The application should be dismissed with costs. 9SACKVILLE AJA: I agree with the orders proposed by the presiding judge and with his Honour's reasons. 10I would only add that White J recognised in his judgment at [15] that the court had power under rr 36.15 and 36.16 of the Uniform Civil Procedure Rules to set aside a winding up order on various grounds, including the ground that the order was made irregularly and where it was made in the absence of the defendant. His Honour made the point that even if the terms of those rules had been satisfied and that there was power to set aside the winding up order, there was no basis for doing so in the absence of any evidence demonstrating that the company (Jireh) was solvent. 11For those reasons I agree with the orders that the presiding judge has proposed. ********** 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: 11 April 2012