By Originating Process filed on 21 May 2021, the Plaintiff, Ms Huybers, applies for an order under s 459A of the Corporations Act 2001 (Cth) that the Defendant, Wyse Accounting Pty Ltd ("Wyse") be wound up. That application relies on a presumption of insolvency arising from a creditor's statutory demand dated 15 February 2021 ("Demand") for the amount of $915,677.53. That amount is, in turn, described in a schedule to the Demand as comprising an amount due and payable by Wyse to Ms Huybers in respect of a judgment debt entered on 30 June 2016 in the amount of $535,151.62 and interest from 9 March 2012 to 15 February 2021 in the amount of $380,525.91.
There is no affidavit verifying the Demand in evidence; Mr Allen, who appears for Ms Huybers, submits that that reflects the fact that the Demand relies on a judgment debt. Such an affidavit would still be required, where the case law has established, now in multiple cases, that, although a judgment debt need not be verified by affidavit, a claim for interest must be verified by affidavit. However, nothing turns on that matter where Wyse has taken no point about it, and has, in particular, neither sought to set aside the Demand on that basis, nor was that point sought to be revised under s 459S of the Act.
[3]
Affidavit evidence
Turning now to the evidence on which Ms Huybers relies on the winding up application, by her affidavit dated 19 May 2021 she refers to the Australian Securities and Investments Commission ("ASIC") search of Wyse and deposes to her being owed $915,667.53 at the date of that affidavit, and refers to service of the Demand on 2 March 2021 and to Wyse's failure to comply with the Demand. She notes that, on 23 March 2021, Wyse commenced proceedings to set aside the Demand, but Williams J made an order, on 10 May 2021, on Wyse's application, that that application be dismissed, and that Wyse pay Ms Huybers' costs of that application. I will refer to further evidence concerning that matter below.
Ms Huybers relies on an affidavit dated 25 May 2021 of Mr Kekatos, her solicitor, which proves service of the winding up application and supporting affidavit of Ms Huybers. There is in any case no issue as to that matter, where Wyse has appeared in the application. By a further affidavit dated 27 May 2021, Mr Kekatos proves lodgement of notification of a Court action relevant to winding up with ASIC in Form 519. By an affidavit dated 1 June 2021, he proves publication of the notice of application for winding up on the ASIC Published Notices Website.
By an affidavit dated 11 June 2021, Mr Thomas, a solicitor also acting for Ms Huybers, refers to the application to set aside the Demand, to the circumstances in which it was dismissed by Williams J and to a subsequent application made by Wyse to set aside the orders made by Williams J, which was in turn dismissed by Williams J on 31 May 2021.
By a further affidavit dated 23 August 2021, Ms Huybers refers to a further ASIC search for Wyse, conducted today, and confirms that Wyse is still indebted to her in the amount of claim in the Demand. Ms Huybers has tendered a consent of liquidator of Mr Bailey and Mr Palmer, dated 21 May 2021, which confirms their hourly rates and indicates they are not aware of any relevant relationship for the purposes of s 60 of the Corporations Act or any conflict that would make it improper for them to act as liquidators.
Wyse in turn relies on an affidavit of Mr Nehme affirmed 26 July 2021 which refers, first, to steps taken by Mr Nehme to appoint a solvency expert, who is not otherwise identified, to provide a report as to solvency. He refers to certain matters which he contends have frustrated efforts to serve that report, which was not served within the time ordered by the Registrar or the further time as extended by the Court. I declined to vacate the hearing date today, in an earlier judgment, so far as one of the grounds relied upon was to allow a further opportunity for the unidentified expert to complete his report, and pointed to the deficiencies of the evidence as to when the expert was retained, what work he had done, what work remained to be done and why there was any reason to expect that that report would be completed within any further time that the Court might permit for it to be prepared.
Mr Nehme also refers to the fact that Ms Huybers relies on a judgment dated 30 June 2016 and submits that the proceedings are still ongoing and are case managed by Parker J. It is not apparent whether that proposition requires qualification, so far as Parker J has delivered a recent judgment in the matter, but in any event no evidence has been led that indicates that the judgment entered in 2016 was not still in effect; the application to set aside the Demand was dismissed; and no application under s 459S has been pressed in the period in which these proceedings have been on foot, although there was reference to such an application in the Interlocutory Process seeking to vacate the hearing date.
Mr Nehme also refers to a stay application, presumably made in the substantive proceedings, but again an application of that kind, which has not been granted, does not impeach the judgment debt. Mr Nehme refers to the fact that he is a director of other companies and to an intention to rely on the solvency report, which I noted above has not been filed, and applies for an order to extend the time for the filing of Wyse's evidence and for a short adjournment. I have dealt with the application to vacate the hearing date today in an earlier judgment.
[4]
Applicable principles and determination
Turning now to the applicable principles, Mr Allen, who appears for Ms Huybers, puts the application on a straightforward basis. He points out that the application relies on the presumption of insolvency arising from an unsatisfied creditor's statutory demand; that the application to set aside the Demand was dismissed by Williams J, and the application to set aside that dismissal was in turn dismissed by Williams J; and that the formal matters necessary to wind up a company based on a presumption of insolvency arising from a creditor's statutory demand are satisfied.
It seems to me that in these circumstances Ms Huybers is entitled to rely on the presumption of insolvency that arises from a creditor's statutory demand that was unsatisfied. In Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) (2011) 244 CLR 1; (2011) 277 ALR 243; (2011) 83 ACSR 126; [2011] HCA 18 at [28], the High Court described the effect of that presumption as follows:
"...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."
I noted the effect of that presumption in Re Leasing Holdings Pty Ltd (formerly Charlie Lovett Pty Ltd) [2015] NSWSC 771 and again in Re Sails Corp Pty Ltd [2021] NSWSC 1046 at [15].
Whether a company has established its solvency, in the face of the presumption, is to be determined by reference to the statutory test in s 95A of the Corporations Act which has the effect that a company is solvent if and only if it is able to pay all its debts as and when they become due and payable. That test adopts a cash flow test of insolvency, although a balance sheet can provide context for the application of that test: Re Leasing Holdings Pty Ltd above, Re Sails Corp Pty Ltd above. Here, Wyse has led no evidence as to its financial position so as to establish its solvency, although it had a period in which to do so under the orders made by the Registrar, and a further period in which to do so under the orders extending that time which I had made. It is not clear that Mr Nehme offers to provide financial support to Wyse, from his affidavit, or suggests that other companies may do so, although it may be the reference to other companies in his affidavit is intended to convey such an implication. If it is, then that is not sufficient to establish solvency, because there is here no undertaking by those other companies to provide support to Wyse, enforceable by Wyse, which would be sufficient to establish solvency on that basis: see Quin v Vlahos [2021] VSCA 205; Re Sails Corp Pty Ltd above.
No submission was made by Mr Adelstein, who appears for Wyse, that the Court should decline to order a winding up on discretionary grounds, and there seems to me to be no basis on which it would do so given the history of the matter.
For these reasons I make the following orders:
Wyse Accounting Pty Ltd be wound up in insolvency and Messrs Bailey and Palmer be appointed as its liquidators.
The Plaintiff's costs of the winding up application be costs in the winding up.
[5]
Stay application
Following the delivery of my judgment making an order winding up Wyse and appointing liquidators, Mr Adelstein seeks an order staying that judgment for 28 days. No evidence is read in support of that application, but Mr Adelstein points to the fact that the Court has power to stay a judgment, and indicates that Wyse seeks an opportunity to consider its position whether it will proceed with another application which was apparently to be brought before the Equity Duty Judge, challenging an aspect of the judgment entered several years ago, on which the Demand and winding up application are founded, and to consider the position generally, including, presumably, the prospects of any appeal.
Mr Allen submits that the order has already been pronounced, and that in those circumstances, it is too late to stay it. I do not accept that submission where the court has power both to stay and terminate a winding up under s 482 of the Corporations Act, and it seems to me that a stay granted shortly after the order had been pronounced would be determined by the principles which would ordinarily apply to a stay of the Court's judgment. Mr Allen submits, with perhaps greater substance, that there is no basis for a stay of the judgment and no utility in a stay, where a presumption of insolvency arises and there is no evidence of Wyse's solvency.
The principles which apply in respect of a stay of judgment generally are, of course, well established and I proceed on the basis that the Court would have regard to them, by way of challenge in determining whether to stay the winding up order made shortly after it was made, under s 482 of the Corporations Act. The overriding principle that applies when determining an application for a stay is to ask what the interests of justice require, and special or exceptional circumstances need not be made out to grant a stay; it is sufficient that a defendant demonstrates a reason or appropriate case to warrant the exercise of discretion in its favour; and it is relevant whether there are, inter alia, reasonably arguable grounds for an appeal: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694-695; New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83].
A reasonably arguable case for an appeal would require at least that there be reasonably arguable questions for the determination of the appellate Court: Alexander v Cambridge Credit Corporation above at 695; Kalifair Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737; [2002] NSWCA 383 at [18]; Aquaqueen International Pty Ltd v Titan National Pty Ltd [2015] NSWCA 9 at [46]. It is relevant, in considering a stay application, that an appeal would be rendered nugatory if a stay were not granted: Kalifair above at [18]. However, as McColl JA noted in Aquaqueen above at [48], it is not sufficient to order a stay that otherwise the appeal would be rendered nugatory, because it is first necessary that the appellant demonstrates that the appeal raises serious issues for the determination of the appellate Court.
I am not satisfied that the basis for a stay is established so far as Mr Adelstein seeks an opportunity to consider the position whether to proceed with its application attacking the judgment delivered in the underlying proceedings, now many years ago. It seems to me that there is no detriment to Wyse, and it may well be an advantage to Wyse, if a liquidator, who is independent of the long history of the proceedings and the multitude of disputes between the parties, determines whether that application is arguable, and brings an independent mind to bear in that respect. If the director of Wyse, Mr Nehme, considers that the application has sufficient prospects, then he can also, of course, seek leave to bring a derivative action, in the Court's equitable jurisdiction, notwithstanding that a liquidator is in place.
So far as Mr Adelstein indicated that Wyse wished to consider the position generally, and implicitly to consider any appeal, I accept that the failure to order a stay will make it more difficult to bring an appeal, where the company would be under the liquidator's control. However, I bear in mind McColl JA's observation that the starting point is whether the appellant demonstrates that the appeal raises serious issues for the determination of the appellant Court. The first difficulty here is that Mr Adelstein has not identified any grounds for an appeal, and in those circumstances it is plainly more difficult to determine that any such ground, whatever it might be, would raise a serious issue. So far as the ground might be an attack on the Court's decision not to vacate the hearing date, that is a question of procedure, as to which I have applied established principles under ss 56-58 of the Civil Procedure Act 2005 (NSW), in the light of the reference to the surrounding circumstances, and the Court of Appeal would, of course, consider that exercise of judicial discretion under House v King principles.
I recognise that there is always difficulty in a trial judge determining the prospects of appeal from his or her own decision but, so far as I am required to do so in dealing with a stay application that has been brought before me rather than the Court of Appeal, it seems to me that there is little prospect that the Court of Appeal would find that I made a House v King error in declining to vacate a hearing date that had been specially fixed, in an application brought two hours before it is listed to commence, in the circumstances to which I referred above.
So far as the underlying prospects are concerned, the matter is otherwise a straightforward winding up, on the basis of a presumption of insolvency arising from an unsatisfied creditor's statutory demand. In these circumstances, it seems to me that there is little or no prospect that an appeal would succeed on the substantive issues in the winding up application.
For these reasons the application for a stay is dismissed, and I order that the Plaintiff's costs of the stay application be costs in the winding up.
[6]
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Decision last updated: 16 September 2021