Supreme Court New South Wales Medium Neutral Citation: In the matter of C2C Investments Pty Limited (No 9) [2013] NSWSC 269 Hearing dates: 28 February 2013 Decision date: 28 February 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: The Defendant wound up with specified orders. Catchwords: CORPORATIONS - Winding up - Winding up in insolvency - Application for an order that the defendant be wound up under s 459P Corporations Act 2001 (Cth) - Application for winding up by a creditor substituted under s 465B - Whether statutory presumption of insolvency applies. Legislation Cited: - Corporations Act 2001 (Cth) ss 459P, 459S, 465A, 465B, 561(1)(k) Corporations Regulations 2001 (Cth) reg 5.4.01A Supreme Court (Corporations) Rules 1999 (NSW) Cases Cited: - Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) [2011] HCA 18; (2011) 244 CLR 1; (2011) 83 ACSR 126 - Bibby Financial Services Australia Pty Ltd v Wolf Industries Pty Ltd [2004] NSWSC 134; (2004) 49 ACSR 45 Texts Cited: - F. Assaf, Statutory Demands and Winding Up in Insolvency - 2nd ed Category: Principal judgment Parties: Commonwealth Bank of Australia (Plaintiff/Respondent) C2C Investments Pty Limited (Defendant/Applicant) Representation: Counsel: P. Newton/A. Kaufmann (Plaintiff/Respondent) S.A. Benson (Defendant/Applicant) Solicitors: Gadens Lawyers (Plaintiff/Respondent) Platinum Lawyers (Defendant/Applicant) File Number(s): 2012/62000 Judgment - ex tempore 1By Amended Originating Process filed 17 September 2012, the Plaintiff, Commonwealth Bank of Australia ("CBA") seeks an order that the Defendant, C2C Investments Pty Limited ("C2C"), be wound up under, relevantly, section 459P of the Corporations Act 2001 (Cth). An earlier, and alternative, ground of winding up under section 561(1)(k) of the Corporations Act is not pressed. CBA has been substituted for an earlier applicant for the winding up of C2C, Community Association DP270158 ("Community Association"), which had applied to wind up C2C relying on a failure by C2C to comply with a creditors statutory demand dated 1 December 2011. There is no suggestion that C2C had set aside the demand served by Community Association, or complied with it within the period required under the Corporations Act, although it appears that C2C had paid out Community Association after it had commenced its winding up application in reliance on non-compliance with its statutory demand. 2As I noted, CBA was substituted for Community Association in the winding up proceeding under section 465B of the Corporations Act, by orders initially made by a registrar, and an application to set aside those orders was unsuccessful. CBA now moves, as substituted creditor, to wind up C2C in reliance on a presumption of insolvency that arises, not from its own dealings with C2C, but from C2C's failure to comply with the creditors statutory demand dated 1 December 2011 issued by Community Association. CBA's standing to bring that application is established, first, by the Court's order substituting it as creditor, which required the Court to be satisfied of its standing as creditor, and, second, by evidence of Mr Iain Stevens, by affidavit dated 27 February 2013, that C2C is currently indebted to CBA in the sum of $179,587.95. 3The position in respect of an application for winding up by a creditor who has been substituted under section 465B is summarised in F. Assaf, Statutory Demands and Winding Up in Insolvency, 2nd ed, [19.44]. A substituted creditor relies on the presumption of insolvency arising from the failure to comply with the statutory demand issued by the earlier creditor. In Bibby Financial Services Australia Pty Ltd v Wolf Industries Pty Ltd [2004] NSWSC 134; (2004) 49 ACSR 45 [24]-[25] Austin J noted that the effect of substitution was to permit the substituted creditor to proceed as if it had been the original applicant and therefore placed it in a position to rely on the original applicant's statutory demand, without any challenge to its standing as a creditor, subject only to section 459S of the Corporations Act. 4In this matter, C2C initially foreshadowed an application under section 459S of the Corporations Act to seek to oppose the winding up on grounds in respect of the debt claimed by CBA, although that application was not pressed. In my view, the decision not to press it was soundly made, not least because it appeared to misconceive the structure of substitution under the Corporations Act, by seeking to challenge the winding up, not by reason of any challenge to the demand originally served by Community Association, but instead by reference to matters involving dealings between CBA and C2C. 5It would also have been open to C2C, without leave, to seek affirmatively to establish its solvency in opposition to a winding up application. It has ultimately not sought to do so. In these circumstances, as a unanimous High Court noted in Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) [2011] HCA 18; (2011) 244 CLR 1; (2011) 83 ACSR 126 at [28]: "...where a demand has not been complied with, the statutory presumption of insolvency applies unless the demand is set aside in proceedings brought for that purpose prior to the hearing of the application for an order to wind up. Unless the demand is rendered ineffective, by an order setting it aside, the company is required to prove to the contrary of the presumption." 6Turning to the formal requirements for a winding up, there is evidence of service of the statutory demand for payment of the debt by Community Association on C2C. There is evidence of service of an originating process by Community Association seeking to wind up C2C. There is evidence filed by Community Association, in support of that application, that the amounts of the debts due and payable by C2C had not been paid at the date of the commencement of the winding up by Community Association. There is also evidence of service of an amended originating process, by which CBA, as substituted creditor, moved for the winding up on the ground of insolvency in place of Community Association. 7Notification of the winding up proceedings was lodged with the Australian Securities and Investments Commission. A notice of the winding up was also posted on the insolvency website maintained by the Australian Securities and Investments Commission in accordance with s 465A of the Corporations Act and reg 5.4.01A of the Corporations Regulations 2001 (Cth). 8A search of the records of ASIC has been conducted, as required by the Supreme Court (Corporations) Rules 1999 (NSW) and does not disclose any previous winding up order made in respect of C2C. A consent of liquidator and that consent of liquidator has been obtained and served upon C2C. 9In these circumstances, I am satisfied that a presumption of insolvency arises from the matters to which I have referred and has not been rebutted by affirmative evidence of C2C's solvency. The procedural requirements in respect of a winding up have been satisfied. Accordingly, I make orders that: 1. The Defendant be wound up. 2. Katherine Elizabeth Barnet and Hugh Armenis be appointed as liquidators of the Defendant. 3. The Defendant pay the Plaintiff's costs as agreed or as assessed. 10I further direct that exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined. ********** 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: 24 April 2013