Solicitors:
Drayton Sher Lawyers (LDA Capital LLC)
Nelson McKinnon Lawyers (Defendant)
File Number(s): 2024/158310
[2]
Preliminary issues
A substituted creditor, LDA Capital LLC ("LDA"), applies to wind up Care A2 Plus Pty Ltd ("Care A2") in insolvency. LDA is the third creditor that has sought to wind up Care A2 in these proceedings, after two other creditors ultimately did not proceed with their winding-up applications.
Three preliminary issues arise before turning to the winding-up application. The first is whether an application made by LDA to extend the period within which the winding-up application must be determined, under s 459R(2) of the Corporations Act 2001 (Cth) ("Act") should be adjourned, to be heard not today (in mid-December 2024) but in the new Court term (in February 2025). The second is whether the order under s 459R of the Act should be made, in respect of the exercise of the Court's power under the slip rule. The third, if that order is made, is whether the winding up application should then be adjourned.
I have regard to the chronology of events in this matter in dealing with these issues. By Originating Process filed on 29 April 2024, now some seven or eight months ago, GI 305 Pty Ltd ("GI 305") applied to wind up Care A2. It subsequently resolved its claim against Care A2 and did not proceed with its winding-up application. On 9 September 2024, a substituted creditor, Piper Alderman, filed an Amended Originating Process which sought to proceed with the winding-up application, relying on the presumption of insolvency that was available to it as a substituted creditor and, on 16 September 2024, I extended the time for determination of the winding-up application under s 459R of the Act to 9 December 2024, having then been satisfied that special circumstances existed to justify that extension. Subsequently, Piper Alderman also resolved its claim against Care A2 and also did not proceed with its winding-up application.
LDA then sought to be substituted as the petitioning creditor in the winding-up application. On 14 October 2024, I made orders directing LDA to file and serve its Interlocutory Process seeking substitution, directing Care A2 to file and serve any affidavit in opposition to the substitution application and in opposition to the winding-up by 28 October 2024, and listing the substitution application and the winding-up application for directions or hearing as appropriate in the Corporations Motions List on 4 November 2024. If those orders had been complied with, Care A2's evidence in opposition to the winding-up would have been filed and served by 28 October 2024 and the winding-up could and likely would have proceeded to hearing on 4 November 2024.
In the event, that timetable was further extended at the parties' request by orders made on 4 November 2024, which, inter alia, extended the time for LDA to file and serve any Amended Interlocutory Process or new Interlocutory Process and its evidence to 18 November and extended the time for Care A2 to file and serve its evidence to 21 November and stood over the winding-up application with a view to hearing in the Corporations Motions List on 25 November 2024. If those orders been complied with, the matter would have been ready for hearing and would likely have been heard on 25 November 2024.
When the matter was listed before Nixon J on 25 November 2024, his Honour made an order substituting LDA as the creditor in the winding up application and (presumably at Care A2' request) further extended the time for Care A2 to file and serve any evidence in response to the winding-up application to 9 December 2024, rather than hearing the winding-up application on 25 November as the earlier orders had provided. That was the third order for Care A2 to file and serve its evidence in the winding-up application, since I had previously ordered it to file that evidence on 14 October 2024 and again on 4 November 2024, before Nixon J made that order for the third time on 25 November 2024. His Honour also then made orders for LDA to file and serve its evidence in reply and listed the matter for directions or hearing today, noting that the matter would only proceed with a hearing if it could be accommodated today.
The matter can be accommodated for hearing today, but it has been twice adjourned in the course of today, to allow the parties an opportunity to consider a matter which was apparently identified this morning. That issues arises because, as I noted above, I had previously extended the time for determination of the winding-up application under s 459R of the Act to 9 December 2024, but Nixon J was not, when the matter was before him on 25 November, asked to further extend the time for determination of the winding-up application. Had that been raised with his Honour, he would obviously have recognised that a winding-up order could not be made at the hearing he had listed for today, unless he also made a further order was made under s 459R of the Act extending the time for determination of the winding up at least until today.
As noted above, the questions which then arise are, first, whether the application now made by LDA to extend the time for the determination of the winding up under s 459R of the Act, nunc pro tunc, should be further adjourned to February 2025, as Care A2 seeks, to allow Care A2 or its solicitors to further research any relevant legal issues arising from this matter. I am satisfied that application should not be further adjourned. First, the application of s 459R of the Act is not a mystery to Care A2, because this is the second occasion on which the question of such an extension has arisen. Second, the question whether an order under that section can be made nunc pro tunc is also not a mystery to Care A2, because its solicitor, Mr Di Bello, has properly recognised the detailed treatment of that issue in a leading text, Assaf's Winding Up and Insolvency 3rd ed [10.95] and has indicated that he has read the relevant cases. Third, the Court's obligation, in proceedings generally, is to bring about the just, quick and cheap resolution of the real issues in dispute in the proceedings, and it can hardly be said that a further adjournment for nearly two months of a winding-up application that has continued since April 2024 would promote either the just or quick determination of the real issues in dispute. Fourth, s 459R of the Act itself reflects a legislative intention that winding-up applications should be determined without unnecessary delay, and it would not be consistent with that legislative intention to now further delay the determination of the application.
The second question is whether an order should now be made, nunc pro tunc, under s 459R of the Act, extending the time for determination of the winding up. It has not been necessary to hear Mr Phillips, who appears for LDA, in respect of that issue. Mr Di Bello has drawn attention to the relevant case law, which is noted in Mr Assaf's text, and includes the decision of the Full Court of the Federal Court of Australia in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 18 ACSR 807, where the Court noted that s 459R of the Act does not displace the operation of the slip rule so as to prevent the Court making an order under that section, nunc pro tunc, where that order was not made by error. Lockhart J, a judge of the highest authority and experience in corporations matters, there explained the "misconception" involved in the proposition that the slip rule was not available in matters of this kind. His Honour also noted the relevance of the intention of the Court and the parties in that case that an order under s 459R(2) should be made extending the six month period. Here, although Nixon J's attention was not drawn to that matter, the parties must have intended that such an order should be made so as to give effect to the other orders which they sought from Nixon J, extending the time for Care A2's evidence and listing the matter for hearing. Those orders would be pointless unless the time to determine the application was extended under s 459R of the Act. I return to that question below.
Mr Di Bello fairly refers to the observation of Hammerschlag J (as the Chief Judge in Equity then was) in Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd [2008] NSWSC 285 that the use of the slip rule, in respect of s 459R of the Act, should not be permitted to undermine the policy of Pt 5.4 of the Act which requires winding-up applications to be dealt with expeditiously. I accept that proposition and I proceed on that basis. Having said that, the Full Court of the Federal Court has also observed in Flint v Richard Busuttil & Co Pty Ltd [2013] 216 FCR 375 [46] that it is difficult to see why the slip rule should not apply:
"If the surrounding circumstances are such … that it can be concluded that proper attendance for the matter (had the error not occurred) could only have resulted in the discretion being exercised in one way."
Here, it seems to me plain beyond doubt that, had Nixon J's attention been drawn to the potential expiry of the earlier extension I had ordered under s 459R of the Act, when the matter was listed before him on 25 November 2024, he would have made a further order to extend the time for determination of the application under s 459R of the Act, to a date which extended for a reasonable period beyond today, when he listed the winding up application for hearing today. I recognise that Mr Di Bello submits that Nixon J could have, on that occasion, listed the question whether there should be a further extension under s 459R of the Act for a separate hearing, and deferred the winding-up application. I consider it inconceivable that Nixon J would have taken that course. First, applications under s 459R of the Act are regularly dealt with in this List, as they were dealt with on the previous occasion in this matter, at the time they are made. There would be no reason for Nixon J to defer, or allocate a separate hearing, for a straightforward application of that kind, which would then have been made within the time specified in the previous s 459R order, and which needed to be granted to allow the matter to go to hearing today.
Second, it is inconceivable that his Honour would not have extended the time for a hearing, under s 459R of the Act, had the matter been drawn to his attention. The contrary view would require me to accept the extraordinary proposition that his Honour would, on the one hand, make orders to extend the time for Care A2's evidence and set the matter down for hearing today, but would do nothing to preserve the Court's ability to make effective orders today. That proposition need only to be stated to be rejected. I am satisfied that the time to determine the winding up should be extended, nunc pro tunc, under s 459R of the Act.
The third question that arises is whether, having determined that the time under s 459R of the Act should be extended, the winding-up application should now be further adjourned to February 2025 at Care A2's request. I do not propose to take that course. This winding-up application has had a long history and directions have been made, on several occasions, for Care A2 to file and serve its evidence. The applicant in a winding-up application, like all litigants in this Court, has a proper expectation that its application will be determined in a just, quick, and cheap way. Further delay would be inconsistent with that policy and also inconsistent with s 459R of the Act and the legislative policy that it reflects. For these reasons, I will not further adjourn the winding-up application.
[3]
Order as to preliminary issues
Accordingly, the only order I make at this point, before proceeding to a determination of the winding-up application is:
Pursuant to the slip rule, the Court extend the period within which the winding-up application must be determined, for the purposes of s 459R of the Corporations Act 2001 (Cth), to 30 December 2024.
[4]
Determination of the winding up application
As I indicated above, by Originating Process filed on 29 April 2024, the original plaintiff in these proceedings, GI 305, applied to wind up Care A2 in insolvency. I will refer to evidence which goes to that application below. Subsequently, by leave, LDA now continues the application for the winding-up order as a substituted creditor. I should refer to the well-established principles that apply in such an application, before turning to the evidence on which LDA relies.
An order was here previously made by Nixon J under s 465B of the Act substituting LDA as creditor in the winding-up application. That order allows LDA to proceed with the winding-up application as substituted creditor and s 465B(4) of the Act has the effect that, after a substitution order is made, LDA as substituted creditor may rely on a presumption of insolvency that was available to the original creditor (GI 305) for which LDA has been substituted in the winding-up application: see Re C2C Investments Pty Ltd (No 9) [2013] NSWSC 269 [4]; 640 Esplanade Pty Ltd v Splash Bay Pty Ltd (No 2) [2017] 247 FCR 519; [2017] FCA 89 at [96]; Re Parkmeng Pty Ltd [2024] NSWSC 157 at [11].
Here, LDA reads evidence which was originally led by GI 305 in support of its winding up application, namely an affidavit dated 29 April 2024 of Mr Epstein, which then proved service of the creditor's statutory demand by GI 305 ("GI 305 Demand") and that, at the date of GI 305's winding-up application, the sum demanded remained due and payable by Care A2 to GI 305. I recognise that GI 305 subsequently did not proceed with the winding-up application, but that is the occasion for a substitution order, rather than a matter that prevents the continuance of the winding-up application. LDA also reads an affidavit dated 17 April 2024 of Mr Roppolo, a process server, and a second affidavit dated 24 April 2024 of Ms Mansell, a paralegal, both of which go to service of the GI 305 Demand on Care A2.
LDA also reads the affidavit dated 29 October 2024 of Mr Baker, which refers to the circumstances of a debt owed by Care A2 to LDA and to the service of a creditor's statutory demand by LDA on Care A2. In the context of a winding-up brought by LDA as substituted creditor, it does not need to prove, although it in fact proves, non-compliance with that creditor's statutory demand, but only that there had been a previous noncompliance with the GI 305 Demand, and that LDA proceeds with the winding-up in its capacity as a creditor of Care A2. That position is confirmed by two further affidavits of Mr Baker dated 17 November 2024 and 15 December 2024. The second confirms that, as at 15 December 2024, the day before this application was heard, the amount of $3 million owed by Care A2 to LDA had not been paid.
LDA also leads evidence of a consent of liquidator dated 15 October 2024, by which Messrs Resnick and Kwok consent to be appointed as liquidators of Care A2, and evidence that that consent of liquidator was served on Care A2, by the affidavit dated 12 December 2024 of Mr Sher. By a second affidavit dated 12 December 2024 of Mr Sher, he proves publication of notice of the application for the winding-up order, originally brought by GI 305, on the website maintained by the Australian Securities and Investments Commission ("ASIC") on 9 May 2024.
I recognise that LDA does not read two further affidavits which would ordinarily be led in respect of a winding-up application. The first would ordinarily prove the giving of notice of the winding-up application to ASIC. The second would ordinarily annex a current company search to establish that an order winding up Care A2 had not been made in another Court. However, I would readily infer that such an order has not been made in another Court, where Care A2 has steadfastly resisted the winding-up application, although on procedural grounds rather than by proof of its solvency, and that resistance would have been pointless had Care A2 already been wound up by another Court. I am comfortably satisfied that I should dispense with the requirements for proof of each of those matters under s 467 of the Act.
The Court has here three times ordered Care A2 to file any evidence in response to the application and Care A2 has not sought to establish its solvency by filing such evidence.
The service of the GI 305 Demand, which was not complied with, gives rise to a presumption of insolvency as described by the High Court in Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (2011) 244 CLR1 at [28]. Where Care A2 has not lead evidence of solvency, it cannot negative that presumption of insolvency that arises from the unsatisfied GI 305 Demand, and that is sufficient basis for the winding up order that is sought by LDA as substituted creditor in reliance on Care A2's failure to comply with the GI 305 Demand. Where that winding-up application is made, and pursued over a substantial period, although with changes of the petitioning creditor along the way, the Court should now make that a winding-up order, where the presumption of insolvency has not been contested or rebutted by Care A2.
[5]
Orders
For these reasons, I make the following further orders:
Care A2 Plus Pty Ltd be wound up in insolvency.
Messrs Resnick and Kwok be appointed as liquidators of Care A2 Plus Pty Ltd.
The Plaintiff's costs of these proceedings be costs in the winding-up.
[6]
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: 27 December 2024