FEDERAL COURT OF AUSTRALIA

Haridemos, in the matter of ACT Builders Pty Ltd v ACT Builders Pty Ltd [2017] FCA 25

ORDERS

THE COURT ORDERS THAT:

1.    The application is dismissed.

2.    The plaintiff must pay the defendant’s costs as agreed or taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Application

1    On 20 September 2016, the plaintiff, Ms Haridemos, filed an application pursuant to s 459P of the Corporations Act 2001 (Cth) for the defendant, ACT Builders Pty Ltd, to be wound up on the grounds of insolvency. Ms Haridemos relied on the presumption of insolvency arising under s 459C(2)(b) of the Corporations Act on the basis that a writ of execution of a judgment of the District Court of New South Wales (DCNSW) obtained by her against ACT Builders was returned wholly unsatisfied.

2    Unless indicated otherwise, all references to legislative provisions are references to provisions of the Corporations Act or the Federal Court (Corporations) Rules 2000 (Cth).

3    At the hearing of the application, Ms Haridemos also relied on two additional grounds which were not pleaded in the application: (1) ACT Builders’ proved insolvency; and (2) the just and equitable ground in s 461(1)(k). ACT Builders conceded that it had notice of Ms Haridemos’ intention to rely on those additional grounds and raised no objection to the hearing proceeding on that basis.

4    Ms Haridemos also seeks orders appointing Mr Michael Slaven and Mr Lachlan Abbott of Ernst & Young as joint and several liquidators of ACT Builders and for the costs of this application to be taxed and reimbursed out of the property of ACT Builders in accordance with s 466(2).

5    These are the reasons for dismissing the application, with costs.

Background

6    Ms Haridemos and ACT Builders were parties to proceedings in the New South Wales Civil and Administrative Tribunal (NCAT) relating to a residential building contract. In one proceeding, Ms Haridemos claimed damages of $500,000 from ACT Builders for defective building work. In another proceeding, ACT Builders originally sought $135,628.85 in relation to a final instalment withheld by Ms Haridemos, but the claim ultimately proceeded for an amount of $102,293 plus interest and costs.

NCAT’s orders

7    On 30 December 2014, NCAT ordered that:

    ACT Builders pay Ms Haridemos $179,973.93; and

    Ms Haridemos pay ACT Builders $157,847.83.

8    Ms Haridemos explained that, as NCAT’s orders were made in separate proceedings, NCAT declined to make an order that ACT Builders pay Ms Haridemos the net amount of the judgments, being $22,126.10.

9    NCAT ordered ACT Builders to pay Ms Haridemos’ costs in relation to her rectification claims but did not allow costs for eight other items. NCAT ordered Ms Haridemos to pay ACT Builders the costs of its proceedings. Neither costs order has been assessed or agreed. ACT Builders appealed NCAT’s decision against it, and that appeal was dismissed on 30 November 2015. On 8 June 2016, ACT Builders was ordered to pay Ms Haridemos’ costs of the appeal. That costs order has also not been assessed or agreed.

Transfers of strata units

10    Ms Julia Bridgewater is a solicitor employed by Ms Haridemos’ lawyers, Colquhoun Murphy Lawyers Pty Ltd. In her affidavit sworn on 4 November 2016, Ms Bridgewater says that a title search in relation to land in New South Wales conducted on 23 December 2015 indicated that eight lots in the same strata plan had been transferred by ACT Builders to its former directors and their relatives. Copies of the transfers are exhibited to Ms Bridgewater’s affidavit (Exhibit JB12). The transfers are signed but do not state a date on which the transfers were made. A printout at the top of each transfer bears the words “Rev: 09-Oct-2015/Sts/ SC.OK/Prt: 23-Dec-2015” followed by “13.15”, “13.16”, “13.20” (twice), “13.21”, “13.22” (twice) or “13:23”.

Registration of NCAT orders as judgment of DCNSW

11    On 5 February 2016, the DCNSW registered NCAT’s decision in Ms Haridemos’ favour and issued a notice of orders made for judgment in an amount of $196,409.97 payable by ACT Builders to Ms Haridemos. That amount is the aggregate of NCAT’s judgment in Ms Haridemos’ favour plus interest of $16,348.04. There is no dispute that the registration took effect as a judgment of the DCNSW.

Statutory demand

12    Ms Haridemos issued a statutory demand to ACT Builders dated 1 March 2016 for the sum of $24,257.18 (being the net amount of the NCAT judgments plus interest).

13    On 26 May 2016, Mr James Beresford Loel of Lillas & Loel Lawyers Pty Ltd (ACT Builders’ solicitor) wrote to Ms Haridemos’ lawyers pointing out that the costs orders made by NCAT had not been agreed or assessed. Mr Loel claimed that in those circumstances ACT Builders had an arguable offsetting claim. On 30 May 2016, the Supreme Court of Queensland made orders setting aside the statutory demand with no order as to costs.

Information on ASIC register as at mid-July 2016

14    A company and historical extract issued by the Australian Securities and Investments Commission (ASIC) for ACT Builders dated 18 July 2016 reported that:

(a)    ACT Builders’ principal place of business was Unit 3, 5 Gregory Street, Queanbeyan NSW 2620 (the Queanbeyan address) with effect from 4 December 2015;

(a)    Mr Francis Zadro became the sole director, shareholder and company secretary on 4 December 2015;

(b)    Mr Zadro’s residential address was the Queanbeyan address; and

(c)    The office of Lillas & Loel was ACT Builders’ registered office with effect from 14 December 2015. That office is in West End, Queensland.

Motion for writ of levy of property

15    On 26 July 2016, and in reliance on information in the ASIC extract, Ms Haridemos filed a motion in the DCNSW seeking the issue of a writ of levy against ACT Builders’ property.

16    The motion was supported by an affidavit sworn by Ms Bridgewater. In the affidavit and in response to questions on the affidavit form under the heading “Additional information to assist Sheriff’s office”. Ms Bridgewater stated that:

(a)    The amount claimed was $204,327.52, being the amount of the DCNSW judgment debt plus execution fees and solicitors’ fees.

(b)    She believed that property of the judgment debtor was located at the Queanbeyan address.

(c)    The “best time of day to contact the judgment debtor” was “Business Hours”.

(d)    The “specific details of any property owned by the judgment debtor that may be seized” were “Motor vehicle, office equipment, and construction equipment”.

The writ for levy of property

17    The form of the writ attached to the notice of motion provided that:

    The writ is enforceable against property of ACT Builders “situated in New South Wales”.

    The judgment creditor had nominated the Queanbeyan address as the location at which ACT Builders was believed to have property. Execution at “other locations nominated by the judgment creditor upon payment of further fees for execution” is also authorised.

    The amount of the judgment debt was $196,409.97. With further interest and costs the total amount to be levied was $204,327.52.

18    Ms Haridemos’ solicitors sent a copy of the notice of motion and writ to Lillas & Loel by way of service on 26 July 2016.

19    The order that the writ be issued was made by the DCNSW on 26 July 2016 and was entered the next day. The terms of the order were:

A writ issue authorising the Sheriff at Sheriff’s Office, Queanbeyan to levy on the property of ACT BUILDERS PTY LTD, the judgment debtor(s) to the amount of $196989.97 plus interest together with reasonable costs of the execution of the writ.

Execution Address: Unit 3 5 Gregory Street QUEANBEYAN NSW 2620.

20    On 13 August 2016, Mr Loel sent Ms Bridgewater an email complaining that the affidavit supporting the motion for the writ was misleading and seeking its withdrawal. By email dated 16 August 2016, Mr Loel made clear that his basis for saying that the affidavit supporting the motion was misleading was that the writ was an attempt to recover the whole amount of the judgment in favour of Ms Haridemos without taking into account the judgment in favour of ACT Builders.

Notice of Non-Levy

21    On 17 August 2016, Sergeant S Riley wrote to Ms Bridgewater. The letter was on the letterhead of the Sheriff of New South Wales and headed “Notice of Non-Levy”. The letter stated (as written, with a personal identifier redacted):

…

I have not made a levy under the above mentioned Writ for levy of Property for the following reasons

Execution attempted at [Queanbeyan address] on 12 August 2016

Please be advised that an initial contact letter was sent to the judgement debtor from this office on 04/08/2016.

An attempt has been made to contact the Judgment Debtor in this matter. Officers called at the given address on 12/08/2016 at 1.40 pm, however there was no response and a Calling Card was left requesting the Judgement Debtor contact this office.

Additional Information:

•    Given address appears to be vacant.

•    Enquiries were made at Dawson Heating & Cooling but the judgment debtor company is not known.

•    No listing in the White Pages for telephone contact.

•    No Information Request Sheet supplied to assist with the execution of this writ.

•    On 15/08/2016 at 10.01 am [named person] contacted this office and stated that she bought the given address and is the only occupant. Enquiries made, but the judgment debtor company is not known to her.

With reference to the Civil Procedures Regulation 2006 - Schedule 2 Sheriff’s Fees, any further attempt in relation to enforcement of this process will require an additional $82.00 (for each address at which and on each occasion on which service/execution is effected or attempted.)

If you would like the Sheriff’s Office to re-attempt this process, an additional fee of $82.00 is required.

The following information should be supplied, if available and not already supplied, to enhance the possibility of obtaining a result.

1.    Address you like officers to re-attempt execution …

2.    Best time …    

3.    Contact numbers for the Judgment Debtor.

4.    Any other information you feel may assist officers in serving/enforcing your process.

It should be noted that this Notice does not imply that the judgment cannot be satisfied and does not meet the requirements under Uniform Civil Procedure Rules Part 39.21 Section 1(b).

Fees expended, writ filed.

22    On 17 August 2016, Ms Bridgewater wrote to Lillas & Loel with an overview of the “long-standing dispute” between Ms Haridemos and ACT Builders, noting that it likely predated the time at which Mr Zadro became a shareholder and director. Ms Bridgewater stated the amounts of her client’s costs in the original NCAT proceedings and for the appeal. She asserted that ACT Builders owed Ms Haridemos an amount exceeding $372,000. She claimed that her affidavit in support of the motion was not misleading. I note that the letter of 17 August 2016 is not a “without prejudice” communication even if the amounts claimed by Ms Haridemos were the subject of other correspondence which was conducted on a “without prejudice” basis. Ms Bridgewater attached a copy of the Notice of Non-Levy. She asked Mr Loel to advise of the address of ACT Builders’ actual business premises so that it might be provided to the Sheriff.

Information on the ASIC register as at mid-September 2016

23    A company and historical extract issued by ASIC for ACT Builders dated 14 September 2016 indicated that:

(a)    a Form 484 changing ACT Builders’ principal place of business was lodged with ASIC on 13 August 2016;

(b)    ACT Builders’ principal place of business was Level 1, 106 Boundary Street, West End Queensland, 4101 and has been since 6 May 2016;

(c)    the Queanbeyan address was ACT Builders’ principal place of business from 4 December 2015 to 5 May 2016;

(d)    Mr Zadro’s residential address was at a place in Queensland; and

(e)    ACT Builders’ registered office remained the offices of Lillas & Loel.

Events following filing of the originating process

24    Following the commencement of these proceedings:

(a)    On 22 September 2016, Ms Bridgewater lodged a Form 519 Notification of Court Action Relating to Winding-up. On 28 September 2016, Ms Kristine Hertel, a clerk at Colquhoun Murphy, posted a sealed copy of the Originating Process and “Affidavit in Support of Application for Winding Up” of Ms Karen Narelle Fogarty dated 20 September 2016 to Lillas & Loel by way of service. On 10 October 2016, Ms Bridgewater caused a Notice of Application for Winding Up order to be published on the ASIC Insolvency Notices Website. A signed form of consent to act as liquidators has also been filed.

(b)    By letter dated 28 October 2016, Ms Bridgewater requested the Sheriff of New South Wales to return the writ.

(c)    Sergeant Riley returned the writ and the Notice of Non-Levy to the DCNSW under cover of a letter dated 31 October 2016 which stated:

Re: Catherine Haridemos, Represented by Julia Bridgewater - vs - ACT Builders Pty Ltd

Dear Sir/Madam,

As requested by Colquhoun Murphy Lawyers please find attached the original Writ for Levy of Property and our Notice of Non-Levy.

If you require further information please contact me on [number].

…

(d)    Ms Bridgewater searched the Service NSW public register on 4 November 2016 and found that ACT Builders’ contractor’s licence expired on 9 May 2014. Ms Bridgewater conducted a search of the land titles register on 9 November 2016 enquiring as to whether ACT Builders owns or leases property in New South Wales. A copy of the search (Exhibit JB11) is in evidence. Six properties are identified. Five are identified as being in “Queanbeyan Palerang Regional” and one at “Jerrabomberra”.

Notices of appearance and submissions

25    Lillas & Loel filed a notice of appearance on 20 October 2016. The notice did not include a statement of ACT Builders’ grounds of opposition as permitted under r 2.9(2). Mr Loel’s affidavit sworn on 11 November 2016 was filed on that day. Written submissions by Lillas & Loel were filed on 30 November 2016.

26    Ms Haridemos filed written submissions on 18 November 2016. She submitted that, by reason of s 465C and r 2.9(1), ACT Builders required leave to rely on grounds of opposition. She submitted that leave should not be granted because ACT Builders failed to comply with an order to file grounds of opposition and, based on the submissions filed by Lillas & Loel, the grounds of opposition were unclear. The form of the timetabling orders made by District Registrar Wall does not support the contention that ACT Builders had been directed to file grounds of opposition. However, Ms Bridgewater’s email to Mr Loel on 24 October 2016 did refer to the need to comply with r 2.9.

27    On 2 December 2016 at 6.32 pm, Lillas & Loel lodged a further notice of appearance stating grounds of opposition to the application for winding up. The document was accepted as filed on 5 December 2016 at 10.11 am. The grounds were (as written):

1.    execution of the Judgment on which the plaintiff relies in these proceedings, was not returned wholly or partly unsatisfied pursuant to section 459C of the Corporations Act 2001 (Cth), and the Court can not presume that the defendant is insolvent;

2.    the methods of execution of the Judgment on which the plaintiff relies in these proceedings, are deficient, and are a deliberate attempt to avoid a proper account of the total indebtedness between the plaintiff and the defendant; and

3.    the amount claimed by the plaintiff as owing by the defendant and to the plaintiff is not a proper account of the total indebtedness between the plaintiff and the defendant.

28    This matter was set down for hearing on 6 December 2016 at 10.15 am. If the hearing had occurred on that day, the filing of the notice of appearance stating grounds of opposition would not have complied with r 2.9 as it was taken to be filed on 5 December 2016. However, the hearing was deferred to 14 December 2016. On that basis the notice was received more than three days before the hearing. Mr Loel’s affidavit of 11 November 2016 appears to state the facts on which ACT Builders would rely. In those circumstances, leave would not appear to be required, but if I was wrong in that view, leave was granted.

29    At the commencement of the hearing, counsel for ACT Builders indicated that he had been briefed to appear shortly before the hearing. He handed up a brief outline of the submissions on which he intended to rely; this was done without objection from counsel for Ms Haridemos.

Grounds

30    ACT Builders contends that the net indebtedness of the parties (including the very question of who is a creditor) is unknowable as the NCAT costs orders have not been assessed or agreed and on that basis alone Ms Haridemos’ application should be dismissed.

31    The broad proposition that Ms Haridemos’ status as a creditor is in doubt cannot be sustained. Ms Haridemos has a judgment against ACT Builders which exceeds the judgment which ACT Builders has against Ms Haridemos by more than $20,000. Until the various cost orders have been quantified, they cannot be set off. The relevance of the unquantified cost orders will vary depending on which of the grounds is being considered.

Ground 1: Presumed insolvency

32    Counsel for ACT Builders told the Court that it accepts that, if s 459C(2)(b) is satisfied, it has not presented evidence sufficient to rebut the presumption of insolvency.

Section 459C

33    Section 459C relevantly provides:

Presumptions to be made in certain proceedings

(1)    This section has effect for the purposes of:

(a)    an application under section 234, 459P, 462 or 464; or

(b)    an application for leave to make an application under section 459P

…

(2)    The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:

...

(b)    execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied; or

…

(3)    A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application.

34    The presumption under s 459C(2)(b) arises if the writ for levy of property was “returned unsatisfied”.

35    There is no issue between the parties that the writ for levy of property was “returned” by Sergeant Riley as it was sent back to the issuing Court accompanied by the Notice of Non-Levy under cover of a letter dated 31 October 2016: see, Guss v Deputy Commissioner of Taxation [2015] FCA 841 (Guss v DCT) at [133] per Beach J; Re Greenland; Ex parte National Westminster Finance Australia Ltd (1989) 21 FCR 247; [1989] FCA 109 at 249 per Pincus J and r 39.51 of the Uniform Civil Procedure Rules (NSW) (UCPR). Rule 39.51 provides:

39.51    Return of writ

On request by the judgment creditor, the Sheriff must return the writ to the court by which it was issued, together with a notice indicating:

(a)    what action, if any, has been taken in execution of the writ, and

(b)    whether or not the writ has been satisfied.

36    The issue between the parties is whether the writ was returned “unsatisfied” or “unexecuted”.

Ms Haridemos’ submissions

37    Ms Haridemos accepts that she must demonstrate that the writ was returned “unsatisfied”. She says that the proper approach is to look at all of the evidence to determine what “endeavours have been made to execute the warrant in its terms” and whether there has been “a genuine but unsatisfied attempt to levy execution against the debtor and his property”, relying on Guss v DCT at [135] following Re Ousley; Ex parte Commissioner of Taxation (1994) 48 FCR 131; [1994] FCA 883 at 135 per Heerey J. Further, Ms Haridemos says that the Court is not restricted to material on the face of the Notice of Non-Levy and is able to look more broadly at the circumstances of the case to determine whether the execution was wholly or partly unsatisfied. She argues that the cases that consider the issue of whether a writ is returned “unsatisfied” generally occur in the context of personal bankruptcy and a less constrained approach is justified in relation to corporations.

38    Ms Haridemos says that a genuine but unsatisfied attempt to levy execution was made prior to the return of the writ because:

(a)    Lillas & Loel was served with the notice of motion seeking the writ on 26 July 2016 and Mr Loel did not reply until 13 August 2016, the Sheriff having sought to execute the writ on 12 August 2016. ACT Builders’ lodged the Form 484 with ASIC after the date of the attempted execution and “backdated” the change to ACT Builders’ principal place of business to 6 May 2016. Ms Haridemos was entitled to rely on information derived from ASIC’s register. If that information cannot be relied on to found a genuine attempt at execution, then absconders could not fall within this regime.

(b)    The business conducted by ACT Builders is that of building construction; it is reasonable to expect that assets of the kind described in the writ would be found at its principal place of business as identified by a current search of the register maintained by ASIC.

(c)    Ms Haridemos’ solicitors wrote to Lillas & Loel on 17 August 2016 asking whether ACT Builders operated from a place of business other than that recorded on the ASIC register and to advise any alternative address so that it might be given to the Sheriff. This correspondence was designed to locate assets by asking someone who it might reasonably be expected would know the answer to this question. As Lillas & Loel’s offices were now listed as the registered office of ACT Builders it was reasonable to infer that they knew the answer to this question. Ms Haridemos says that this is in contrast to the circumstances in Lewis v Lamb [2012] FMCA 392, a case ACT Builders relied on, as the correspondence demonstrates that attempts were made by her to locate ACT Builders and its assets.

(d)    Ms Haridemos’ solicitors have conducted searches in relation to all of the known assets of ACT Builders on the basis of which it can be concluded that ACT Builders no longer owns those assets. The searches show that ACT Builders’ contractor’s licence expired in 2014. ACT Builders’ 2015 balance sheet (which is undated and unsigned) read with the list of property assets set out in Exhibit JB11 shows that it no longer holds income generating assets and did not, in all likelihood, hold those assets on 12 August 2016 when execution was attempted. The transfer of lots in a strata plan owned by ACT Builders to former directors and their relatives (see [10] above) all appear to have occurred in 2015, based on the read out at the top of the copy of the transfers obtained in the searches.

39    Ms Haridemos submitted that the genuine attempt to levy execution was frustrated and any other reasonable attempts which she might, hypothetically, have undertaken were bound to be frustrated due to the realities of ACT Builders’ financial position. She says that she has done everything that she could in order to enforce the judgment debt.

ACT Builders’ submissions

40    As discussed in Lewis v Lamb (at [18]-[23]), a controversy arises out of the judgment of Knox CJ in King v The Commercial Bank of Australia Ltd (1921) 29 CLR 141; [1921] HCA 3 (King’s Case) at 153 concerning the extent to which evidence extrinsic to the Notice of Non-Levy might be admissible to prove whether a genuine attempt to execute a writ had been made. ACT Builders submitted that the controversy does not need to be resolved in this case because there is no dispute about the steps disclosed in the Notice of Non-Levy.

41    ACT Builders relied on the distinction between the return of a writ “unexecuted” as opposed to “unsatisfied” considered by Smith FM (as his Honour was then known) in Lewis v Lamb. At [22] Smith FM held that a writ would be returned “unexecuted” if it “discloses on its face that in truth no proper process of execution was attempted by the sheriff in accordance with the terms of the writ before it was returned”. Smith FM reviewed the authorities as to the proper return of a writ at [45]-[51]:

    Smith FM concluded that the use of the word “unsatisfied” on the returned writ, or in the accompanying report of the Sheriff, may be sufficient to establish an act of bankruptcy. However, that usage is not conclusive if the returned documents indicate that, in fact, no activities by way of execution preceded the return of the writ or that the activities in evidence did not do what was required by the writ.

    In Re Worsley; Ex parte Gill (1957) 19 ABC 105 the final notation on the writ was “writ returned unsatisfied”, but Manning J (at 107) found that there is a clear distinction between a writ which is returned “unexecuted” and one retuned “unsatisfied” and the writ was returned “unexecuted” despite the endorsement on the writ. I note that in Re Worsley, a levy was made upon a vehicle which prima facie belonged to the judgment debtor but on instructions from the creditor’s solicitors the bailiff withdrew when a receipt was produced to the bailiff which indicated that the car had been sold before levy was executed.

    In Re Greenland at 250-251, after considering the authorities on an earlier enactment of s 40(1)(d)(ii) of the Bankruptcy Act 1966 (Cth), Pincus J described the Court’s examination of the Sheriff’s return as being directed at whether there was “a proper return” and dismissed the petition. Pincus J found that “the return made was not of the kind required because it merely disclosed there were no goods or chattels and did not deal with any other property mentioned in the writ of execution”.

    In Re Johnson; Ex parte Greendale Engineering and Cables Pty Ltd (1967) 11 FLR 335, the writ in effect directed the bailiff to seize and sell the goods and land of the debtors. At 339, Gibbs J noted that:

A return to a writ in the legal sense is the written report of the sheriff or his officer as to how far he has been able to carry out his instructions, and there have been a number of cases in which it has been recognized that “returned” in s. 52(e) refers to the written return of the sheriff or his officer … In the present case … the writ would have been returned unsatisfied if the bailiff had reported that there were no goods or lands of the debtors within the bailiwick the proceeds of which were available to satisfy the writ. It was not a proper return to say that the premises to which the bailiff went were shut and that the bailiff had no response, for that did not mean that there were no goods in those premises available for execution. As long ago as 1841 it was held that a return to the effect that the premises of the defendant were so barricaded that the sheriff was unable to ascertain whether the defendant had goods within the bailiwick on which a levy might be made was a bad return and that the sheriff should have stated either that the defendant had goods or that he had none (Munk v. Cass). An act of bankruptcy within s. 52(e) is only committed if there has been a proper return, and there has been no proper return in the present case.

    In Re Johnson; Ex parte Atkins (W.A.) Ltd (1968) 14 FLR 147 at 149, Nevile J dismissed a petition because the bailiff’s return was “improper … and quite irregular” because:

First, there was the ground suggested by Jackson J. that the return referred only to the goods of the debtor and made no reference to any land, and the second reason is that the return on its face referred only to the fact that the partnership had no goods on which to levy and made no reference to any separate property of either of the partners.

42    Smith FM found that the writ was not returned “unsatisfied” in Lewis v Lamb because:

    There had been no proper return (at [57]) and the effect of the documents constituting the Sheriff’s return were to show that he had, in fact, returned the writ “unexecuted” as distinct from “unsatisfied” (at [59]).

    The Sheriff’s activities were far from negating the presence of property situated within New South Wales which might be capable of seizure for levy (at [58]). The Sheriff’s activities revealed only that Mr Lamb had some undefined connection with a business conducted at the premises by an entity which was not the debtor. They revealed that no further attempts were made by the Sheriff, including by enquiries of the creditor, to locate and levy property of the debtor within New South Wales. Far from assisting or allowing a proper attempt at execution of the writ, the creditor instructed the Sheriff to return the writ without giving any instructions which would have allowed a proper attempt at execution. It is significant that the return showed that at no time did the Sheriff “cause a copy of the writ to be served on the judgment debtor or left in a conspicuous position at the place where the writ was executed” as required by UCPR r 39.18 “on executing the writ”.

43    ACT Builders submitted that the attempts to execute the writ in Lewis v Lamb are relevantly the same as in this case and the Court should find that the attempts to execute the writ were insufficient to satisfy the notion of a “genuine attempt”. Further, the writ was returned “unexecuted” because:

(a)    The attempts to execute the writ were perfunctory. Ms Haridemos conducted an ASIC search, sent the Sheriff to ACT Builders’ old address and then demanded the writ’s return. The request for information from Lillas & Loel was insufficient; that firm had no obligation to respond to the enquiry and it did not. Ms Haridemos could, at any time, have caused ACT Builders to be examined about the whereabouts of its assets under s 108 of the Civil Procedure Act 2005 (NSW). All other enquiries post-date the return of the writ and therefore can have no bearing on whether the attempts to execute the writ were genuine.

(b)    The terms of the Notice of Non-Levy itself are inconsistent with execution of the writ:

    The Notice of Non-Levy only indicates that the Sheriff sent an “initial contact letter” to ACT Builders and the Sheriff left a “Calling Card” at the Queanbeyan address on 12 August 2016. There is no evidence that the Sheriff complied with r 39.18 of the UCPR; that matter is significant as acknowledged by Smith FM in Lewis v Lamb at [58]. Rule 39.18 of the UCPR provides:

39.18    Sheriff to serve copy of writ when executing or attempting to execute writ

On executing a writ of execution, the Sheriff must cause a copy of the writ to be served on the judgment debtor or left in a conspicuous position at the place where the writ was executed.

    The Notice of Non-Levy states only that execution was “attempted”. It does not say that execution occurred but was unsatisfied. The Notice of Non-Levy gives details of how Ms Haridemos could provide additional information to facilitate further attempts at execution.

    In response to the “Calling Card”, a named person contacted the Sheriff to say that she did not know ACT Builders. (The name has been redacted for privacy reasons).

    The Notice of Non-Levy states that it “does not imply that the judgment cannot be satisfied and does not meet the requirements under Uniform Civil Procedure Rules Part 39.21 Section 1(b)”. That is, Ms Haridemos would not, on the basis of the Notice of Non-Levy, be entitled to file an affidavit verifying that she had received advice from the Sheriff to the effect that the Sheriff cannot obtain satisfaction of the writ by proceeding further against the goods of the judgment debtor. Under r 39.21(1)(b) of the UCPR, this requirement is a prelude to giving notice in relation to the sale of the judgment debtor’s land.

Consideration of submissions

44    Had the proceedings concerned whether an act of bankruptcy had occurred under s 40(1)(d)(ii) of the Bankruptcy Act, the circumstances of this case would be the same in all relevant respects as those in Lewis v Lamb. I would find that the writ was not returned “unsatisfied” but, rather, the writ was returned “unexecuted”. This is because:

(a)    There is no statement in Sergeant Riley’s letter of 31 October 2016 or in the Notice of Non-Levy that the writ was returned unsatisfied. The Notice of Non-Levy refers to an “execution attempted” at the Queanbeyan address and of an attempt to contact the judgment debtor. It states that the property appears to be vacant and a named person responded to a card left at the premises stating that she bought the property and is the only occupant. The document invites further information so that additional attempts at execution might be undertaken. Sergeant Riley states specifically that the Notice does not imply that the judgment cannot be satisfied. While the Court is not bound by the Sheriff’s view as to whether or not a writ is “unsatisfied”, these factors are all indicative that the writ has not been executed, and the Court is entitled to take them into account.

(b)    These circumstances are far removed from those in Guss v DCT, in which the extrinsic evidence demonstrated contact by the Sheriff with the debtor who denied having any property which would respond to the writ so that the Court found that the writ had been returned unsatisfied. They are also removed from the circumstances in Re Ousley, in which the Sheriff’s report referred to an unsuccessful payment demand made by the Sheriff on the debtor, where the Sheriff was refused peaceful entry and was unable to locate “external assets of value (including vehicle)” capable of being seized. The debtor also denied owning a vehicle. The endorsement on the writ was that the bailiffs “were unable to find any real or personal estate upon which to make a levy”, leading to the conclusion that the writ was unsatisfied. In saying this, I am not importing the requirement which applied under prior enactments of s 40(1)(d)(ii) of the Bankruptcy Act (referred to by Knox CJ in King’s Case at 153) to the effect that the Sheriff has called upon the debtor to satisfy the judgment which the Sheriff is executing and for the debtor to have failed to do so. Rather, these cases indicate the existence of evidence obtained before the writ was returned which established that there were no assets available on which to levy execution.

(c)    The Sheriff did not comply with r 39.18 of the UCPR and I respectfully adopt the opinion expressed in Lewis v Lamb at [58] that this is significant, although I do not consider that that fact need be determinative in a different factual context. It is also significant, though not determinative, that the Sheriff advised that the Notice of Non-Levy could not be used as the basis of an affidavit required by r 39.21(1)(b).

(d)    Ms Haridemos did not direct the Sheriff to any other address in New South Wales at which to execute the writ and no further attempt at levy was made by the Sheriff. Before Sergeant Riley was requested to return the writ, the only enquiry Ms Haridemos’ lawyers made which might have yielded information to found a further attempt at levying execution was a letter from Ms Bridgewater to Lillas & Loel dated 17 August 2016. However, Mr Loel, as ACT Builders’ solicitor, had no obligation to respond to that enquiry unless instructed to do so by his client. Mr Loel’s failure to respond to Ms Bridgewater’s request does not have the same character as the information obtained by the Sheriff from the debtor in the circumstances considered by Beach J in Guss v DCT or by Heerey J in Re Ousley.

45    I accept ACT Builders’ submission that the enquiries made by Ms Haridemos’ lawyers before they requested the return of the writ were insufficient to answer the description of a “genuine attempt” and the searches made after that date cannot bear on the question of whether a genuine attempt to levy execution was made. In the circumstances, it would have been consistent with a genuine attempt to levy execution if, before her lawyers requested return of the writ, Ms Haridemos had caused searches of publicly available registers to be conducted (in addition to the search conducted in relation to New South Wales land titles in December 2015) or to have sought to examine ACT Builders (through its officers) pursuant to s 108 of the Civil Procedure Act. Ms Haridemos would then have been in a position either to advise the Sheriff of other steps that might be available to execute the writ or that she had exhausted enquiries and the writ should be returned. The fact that Ms Haridemos’ lawyers made many of these enquiries after the writ was returned does not establish that ACT Builders had no assets in New South Wales against which execution might have been levied such that further enquiry by Ms Haridemos, her lawyers or the Sheriff would have been futile.

46    Ms Haridemos submitted that the cases that consider the issue of whether a writ is returned “unsatisfied” generally occur in the context of personal bankruptcy and a less constrained approach is justified in relation to corporations. She argued that she should be able to rely on a current ASIC search to correctly disclose the principal place of business of a construction company where a person might expect to find motor vehicles, office equipment and construction equipment, the seizure of which is authorised by the writ.

47    There is some force to the argument that a creditor should be entitled to rely on the ASIC register as to the location of the company’s principal place of business. However, I am not persuaded (either generally or in this case) that circumstances in which a court will find that a writ is “returned unsatisfied” under s 459C(2)(b) of the Corporations Act should be interpreted differently to that under s 40(1)(d)(ii) of the Bankruptcy Act.

48    First, absent any statutory direction or context indicating a contrary intention, the same words used in different statutes dealing with similar subject matter should be given the same meaning: see D C Pearce & R S Geddes Statutory Interpretation in Australia (8th ed, LexisNexis Butterworths, 2014) at [3.36]. In this case, the words “execution” issued against the debtor under process of a court “returned unsatisfied” are words used in s 40(1)(d)(ii) of the Bankruptcy Act and s 459C(2)(b) of the Corporations Act. Both provisions operate as triggers to insolvent administration under the processes of the Bankruptcy Act and Part 5.4 of the Corporations Act. The policy considerations which underlie those enactments are generally the same, although there will be some instances where differences must be recognised: see, for example, Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2007) 212 FLR 56; [2007] VSCA 121 at 88-89 [105] (per Chernov JA).

49    Second, in this case the fact that the ownership and control of ACT Builders had changed on 4 December 2015 was apparent from the ASIC search undertaken in July 2016. That search revealed that the principal place of business changed to the Queanbeyan address on 4 December 2015, an address which was also specified as Mr Zadro’s residential address. The search conducted in relation to ACT Builders’ contractor’s licence (on 9 November 2016, after the writ had been returned) indicated that ACT Builder’s contractor’s licence expired on 9 May 2014. In those circumstances, the assumption that there would be assets such as construction equipment at the principal place of business cannot safely be made. There is, in fact, no evidence as to the business operated by ACT Builders since 4 December 2015 or what or where its assets might be.

50    I am therefore not satisfied that the presumption under s 459C(2)(b) has been made out.

51    If I am wrong in that conclusion, as a matter of discretion I would not make the order that ACT Builders be wound up in the circumstances of this case, even though ACT Builders conceded that it has not submitted evidence on the basis of which the presumption of insolvency would be rebutted. The writ which Ms Haridemos seeks to enforce is for an amount approximately 10 times the amount of the known net indebtedness of ACT Builders to Ms Haridemos based on the awards made by NCAT. It is not clear what the true position will be when the respective costs orders made by NCAT are assessed and judgment entered for the assessed amount. Until that time, Ms Haridemos’ attempts to have ACT Builders wound up are misconceived.

Ground 2: Proved insolvency

52    Without the benefit of the presumption under s 459C(2)(b), Ms Haridemos must prove ACT Builders’ insolvency on the balance of probabilities to make out this ground. Ms Haridemos relies on the matters outlined above at [38(d)] above and the fact that the Court is entitled (under s 459D) to take into account ACT Builders’ contingent liability for her costs under awards made in the NCAT proceedings. In support of this ground Ms Haridemos also relies on the fact that there is no evidence from the director attesting to the solvency of ACT Builders. In these premises, Ms Haridemos says that ACT Builders should be wound up under s 459A.

53    I accept that, as the financial statements of ACT Builders for the year ended 30 June 2015 are undated and unsigned, they do not establish ACT Builders’ solvency. I also accept that there are strong grounds for belief that ACT Builders has transferred strata units which it owned to its directors and their relatives, most likely in October 2015 (based on the print out at the top of the searches referred to at [10] above), and that it may no longer own properties from which it may previously have earned income. The evidence also suggests that ACT Builders ceased to conduct a construction business in New South Wales during 2014.

54    However, the financial statements also do not establish that ACT Builders was insolvent as at 30 June 2015; on their face they indicate that ACT Builders was solvent. Further, acceptance that changes occurred in the ownership of ACT Builders’ assets (as Ms Haridemos identified) does not inexorably lead to the conclusion that ACT Builders has no assets and is insolvent. The six transfers of strata units in evidence are undated but each acknowledges receipt of consideration of $230,000. The 2015 unsigned financial statements indicate that the amount of ACT Builders’ total liabilities was $45,508. Based on ASIC’s records, there has been a change of ownership and it appears that its principal place of business and the place its director now resides are both in Queensland. All of the asset searches conducted by Ms Haridemos concern property in New South Wales; but that is not evidence that ACT Builders does not have property elsewhere or property of a different character, such as cash at bank. There is nothing in evidence as to the business ACT Builders now carries on or its current financial condition. Despite Ms Bridgewater’s assertion in her letter of 17 August 2016 that ACT Builders owes Ms Haridemos more than $372,000 in costs, there is no evidence of the basis of that claim or what the net position will be when her unquantified liability for costs in the NCAT proceedings is taken into account. Against the background of the acrimony between Ms Haridemos and ACT Builders (under its previous management) and the fact that ASIC records indicate that a change of control has occurred, the inference which I draw is that ACT Builders is unwilling to pay Ms Haridemos the net amount of the judgments in the NCAT proceedings at least until costs have been taxed (or possibly at all), given that ACT Builders has not agreed the amount of costs and there is no evidence that it has taken steps to have the costs awards quantified. That, however, is not evidence of insolvency.

55    Although Mr Zadro gave no evidence about ACT Builders’ solvency, it was not necessary for him to do so. Ms Haridemos carries the burden of proving ACT Builders’ insolvency and the circumstances disclosed by Ms Haridemos are not sufficient to establish, on the balance of probabilities, that ACT Builders is unable to pay its debts as they fall due.

Ground 3: It is just and equitable to wind up ACT Builders

56    This argument is based on s 461(1)(k) and counsel for Ms Haridemos acknowledged that the claim is “unconventional”. Indeed, Ms Haridemos identified no case in which a creditor has secured the winding up of a company based on this ground. She submitted that it is just and equitable that ACT Builders be wound up because of the matters identified at [38] above and because Ms Haridemos’ capacity to make a claim for her costs in relation to the NCAT proceedings under an insurance policy in relation to the building works is dependent on Ms Haridemos being able to demonstrate that ACT Builders has either disappeared or become insolvent. She says that the policy will expire in early 2017 and ACT Builders is seeking to prevent any claims being brought on the insurance policy.

57    In Australian Securities and Investments Commission, in the matter of Sino Australia Oil and Gas Limited (prov liq apptd) v Sino Australia Oil and Gas Limited (prov liq apptd) [2016] FCA 201 at [5]-[6], Davies J summarised the principles applicable to winding up a company under s 461(1)(k) as follows (as written):

[5]    The classes of conduct which justify the winding up of a company on the just and equitable ground are not closed, and each application will depend upon the circumstances of the particular case: Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 374, 376–9. There are some well settled principles, nonetheless.

[6]    In Australian Securities and Investments Commission v International Unity Insurance Pty Ltd (2004) 22 ACLC 1416; [2004] FCA 1059 at [136]–[139], Lander J usefully provided a summary of the authorities and principles relevant to the exercise of the Court’s power under s 461(1)(k) of the Act. His Honour said:

136.    There are a number of separate grounds which justify the making of a winding up order under this head. If mismanagement, misconduct or lack of confidence in the conduct and management of the affairs of a company is established, it may be appropriate to wind up the company under this head: Australian Securities Commission v AS Nominees Limited [(1995) 62 FCR 504] at 532–533; Australian Securities & Investments Commission v ABC Fund Managers Ltd [2001] VSC 383; (2001) 39 ACSR 443 at 469.

137.    If the plaintiff can establish that there have been breaches of the provisions of the Act, including, but not limited to, breaches of directors’ duties, inadequacy of accounts and inadequacy of record keeping, it may be appropriate to make an order under this head: Australian Securities Commission v AS Nominees Limited at 532–533; Australian Securities & Investments Commission v ABC Fund Managers at 469.

138.    If there is a need to ensure investor protection, a winding up order may be made under this head: Australian Securities Commission v AS Nominees Limited and Others at 532–533; Australian Securities and Investments Commission v ABC Fund Managers and Others at 469.

139.     An order may be made if a company has not carried on its business candidly and in a straightforward manner with the public: Australian Securities & Investments Commission v Austimber Pty Ltd [1999] FCA 566; (1999) 17 ACLC 893. Such an order would also be appropriate where the corporation has acted fraudulently or entered into sham transactions.

Insolvency is not a precondition for the appointment of a liquidator on the just and equitable ground but, as the authorities caution, if a company is solvent, the winding up of a solvent company is an extreme step requiring a strong case: Australian Securities and Investments Commission v ABC Fund Managers Ltd (2001) 39 ACSR 443; [2001] VSC 383 at [124].

58    The circumstances in which a creditor might successfully bring a claim under s 461(1)(k) are likely to be rare. In this case, Ms Haridemos has not established that ACT Builders’ conduct is attended by fraud or other serious misconduct which would indicate that an order should be made on the basis of protection of the public.

59    It is true that ASIC was not notified of the change of the address for both ACT Builders’ principal place of business and Mr Zadro’s residential address as the sole director and secretary. While such filings can appear to be routine, I accept that they are important. Creditors of a company are entitled to have access to current information about the company’s registered office, principal place of business and the location of its directors so that legal proceedings may be conducted in a timely way. However, there is no evidence that the failure to notify ASIC of the changes said to have occurred in May 2016 represents an intentional or consistent course of conduct which would justify winding up a company which (in the absence of sufficient evidence that it is insolvent) I must take to be solvent. It is also not clearly the case that Ms Haridemos has a claim for her costs in the NCAT proceedings under the terms of the insurance policy (as her counsel conceded at hearing) but in any event, there is no evidence that ACT Builders has defended these proceedings so as to avoid the insurer’s liability under the policy, as claimed by Ms Haridemos. In the absence of quantification of the costs awards, there can be no certainty as to the amount actually owing to Ms Haridemos. I do not consider that Ms Haridemos’ frustrated attempts to enforce the NCAT judgments is a sufficient basis for making an order that ACT Builders be wound up on the just and equitable ground.

Disposition

60    I will dismiss the application and order that Ms Haridemos pay ACT Builders costs as agreed or taxed.

Associate:

Dated:    6 February 2017