In the matter of K-Bek Motors Pty Ltd [2017] NSWSC 1838

Supreme Court New South Wales

Medium Neutral Citation: In the matter of K-Bek Motors Pty Ltd [2017] NSWSC 1838 Hearing dates: 29 September 2017 Date of orders: 29 September 2017 Decision date: 29 September 2017 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Winding up order set aside and application dismissed Catchwords: CORPORATIONS – winding up – termination - where statutory demand and originating process served in compliance with (CTH) Corporations Act 2001, s 109X but did not in fact come to notice of company – where winding up order made in absence of company – where company is solvent – application to terminate winding up or set aside winding up order – whether terminating or setting aside appropriate - held, originating process seeking winding up dismissed. Legislation Cited: (CTH) Corporations Act 2001, ss 109X, 482, 466 (NSW) Supreme Court (Corporations) Rules 1999, r 16.1 (NSW) Uniform Civil Procedure Rules 2005, rr 36.13, 49.19 Category: Procedural and other rulings Parties: Chief Commissioner of State Revenue (plaintiff/respondent) K-Bek Motors Pty Ltd (defendant/applicant) Representation: Counsel: J M Ireland (defendant/applicant) S Lipp (plaintiff/respondent)

Solicitors: McGirr Lawyers (defendant/applicant) Stacks Champion (plaintiff/respondent) File Number(s): 2017/237513

Judgment (ex tempore) 1. The defendant company K-Bek Motors Pty Ltd was wound up in insolvency by order of the Court made on 5 September 2017, consequent upon its failure to comply with a statutory demand served on it by the plaintiff Chief Commissioner of State Revenue claiming a debt of $22,073.16, which arose from a land tax assessment in respect of premises on Parramatta Road at Homebush, which the company operated and continues to operate as a car yard. 2. The creditor's statutory demand and accompanying affidavit were (according to the affidavit of Alan McNamara of 26 June 2017, which was relied upon on the winding-up application, which proceeded ex parte before the Registrar), served on 9 June 2017 "by leaving them in the letterbox at 66 Sorrel Street, North Parramatta being their registered office". The deponent added, "[a]t the time of service I was advised that the business who previously occupied the address have moved out and that property had been purchased by a family for residential use". 3. The originating process and supporting affidavits were (according to the affidavit of Perry Gamsby sworn 28 August 2017, which was relied upon before the Registrar) served on 9 August 2017 "by placing the documents at the given address of 66 Sorrel Street, North Parramatta ... being their registered office". Mr Gamsby added, "At the time of the service I had a conversation with a female person in or to the following effect. I asked, 'Is this the registered office of K-Bek Motors Pty Limited and will you accept service on their behalf?' The female replied, 'No, I bought this place recently. The accountant's firm were the previous occupants'." 4. The applicant Terry Kabeck, who is the principal of the company, explains (in his affidavit of 15 September 2017) that the company owns the Parramatta Road Homebush premises, from which it continues to operate; that he had communications with the Chief Commissioner in respect of the land tax assessment and lodged a formal objection to the assessment on 23 May 2017 and was advised on 30 May that his objections would be considered and an outcome notified within 90 days but none was ever received; and that when he ultimately made contact to ascertain what had happened in mid-September, he was told that a decision was still pending. He further explains that prior to 2015, the company and he personally had retained accountants then located at 66 Sorrell Street, Parramatta, who had since moved to another address, and that he had since changed accountants, but his new accountant had failed to change the company's registered office, although he had been instructed to do so. 5. It is clear that neither the statutory demand nor the originating process in fact came to the notice of the company, though they were duly served in accordance with the provisions of (CTH) Corporations Act 2001, s 109X. 6. The evidence of Mr Kabeck, of the liquidator's assistant Matthew Bore, and of the company's accountant Mr Worsley, taken together, establishes that the company is solvent. 7. By interlocutory process filed on 15 September 2017, Mr Kabeck sought an order pursuant to Corporations Act, s 482, and, alternatively, pursuant to (NSW) Uniform Civil Procedure Rules, r 36.16, that the winding up be terminated. Today, leave is sought to amend the interlocutory process by adding an application under UCPR, r 49.19, for review of the Registrar's decision. As Mr Lipp, for the respondent liquidator and Chief Commissioner, points out, the applicable provisions for "reviewing" a Registrar's decision in this context are those provided by (NSW) Supreme Court (Corporations) Rules 1999, r 16.1, which provides for an appeal to a judge of the Court from a winding up order made by a Registrar, analogous to an appeal from an Associate Judge. 8. Where a winding up order is made in the absence of a defendant company, there are a number of courses open to the company to reverse its effect. One is an appeal under Supreme Court (Corporations) Rules, r 16.1; a second is an application to set aside the Registrar's order under UCPR r 36.16, and a third is to apply pursuant to Corporations Act, s 482, for an order terminating the winding up. 9. It has been suggested that the first (an appeal) is usually appropriate where there has been a hearing on the merits; however, as the Registrar does not have jurisdiction to deal with contested applications, this tends to beg the question of its utility. It might be appropriate if it is contended that the Registrar's decision was wrong in law or in fact on the material before the Registrar. Ordinarily, an application under r 36.16 is the appropriate vehicle where the application has proceeded in the absence of the company and it seeks, in effect, to be let in to defend. An application under s 482 may be the appropriate course where there has been no defect or error in the winding up proceedings and the order was rightly made in the sense that even if the company had appeared it could not have resisted a winding up order, but since then the position has changed so that the circumstances which required that the company be wound up no longer obtain. All that said, there is no bright line that separates any of these particular jurisdictional bases, and in any particular case more than one basis may be available. 10. In this case, the basis is of some significance because the company seeks not only to put an end to the liquidation, but also to impugn the costs consequences, namely that pursuant to Corporations Act, s 466(2), the plaintiff's costs – which the Registrar fixed in the amount of $3,099.42 – are to be paid out of the assets of the company. . 11. From what I have already said, it will be evident that the company has explained why it did not appear to oppose the winding up application. For that, it bears some responsibility through its failure to update its registered office. On the other hand, it ought to have been evident to the plaintiff Chief Commissioner, from both the affidavits of service to which I have referred, that the statutory demand and the originating process, left as they were at the Sorrell Street address, would not come to the attention of the company. Moreover, the Chief Commissioner had postal addresses at which there had been recent communications with the company, and the business address of the property at Homebush in respect of which the land tax assessment had issued, in respect of which some further enquiries might well have made to ensure that all that was reasonable had been done to bring the proceedings to the company's attention. 12. In this respect, it is not without significance that the impact of a winding up order made on a trading company is a very serious one with potentially catastrophic consequences and inflicting, as appears in this case, significant costs. Where it appears that there is reason to doubt that the proceedings have come to the notice of the company, a plaintiff ought to bring those matters to the attention of the Court - all the more so where it has other means of contacting the company. 13. It will also be apparent from what I have already said that the circumstances which apparently warranted or required that a winding up order be made when the matter was before the Registrar - namely insolvency - do not in fact exist. The Chief Commissioner has been paid. There are no other supporting creditors, and the evidence establishes that the company is able to pay its debts as and when they fall due. 14. On any view, then, by whatever legal route, the winding up should be brought to an end. 15. So far as concerns the costs before the Registrar and the costs of the present proceedings, it seems to me ultimately that both parties must bear some responsibility for what has happened: the company, because had it not failed to update its registered office, none of these events would have ensued; and the plaintiff, because had it been somewhat more diligent in ensuring that reasonable steps were taken to notify the company, none of them would have followed. I am therefore of the view that the proper outcome is that there be no order as to costs of the proceedings before the Registrar, or those before me. 16. Because of the view to which I have come about the costs order before the registrar, it seems to me that the preferable course is to set aside the order under r 36.16, and as the company's solvency has been established, to dismiss the winding up application. As that basis of jurisdiction was invoked in the company's original interlocutory process, there is no need to deal with the application for leave to amend the interlocutory process. 17. That leaves outstanding the question of the liquidator's remuneration, about which there is potentially a dispute which can be addressed on another occasion. 18. The Court orders that: 1. Pursuant to UCPR r 36.16, the orders made by the Registrar on 5 September 2017 be set aside. 2. The originating process filed on 4 August 2017 be dismissed. 3. There be no order as to the costs, with the intent that each party bear its own costs. 4. Liberty be reserved to the liquidator to apply in respect of remuneration. 5. Until further order, and pending the remuneration application referred to in order 4, the liquidators would be justified in retaining in the liquidator's trust account the sum of $75,000 on account of liquidator's remuneration and expenses. 6. There be liberty to both parties to apply in respect of order 5.