Aon Risk Services Australia Ltd v Australian National University [2019] NSWSC 1092 | Case summary

Supreme Court of NSW|2019-07-30|Before: Rees J

Solicitors: Matthew Folbigg Pty Ltd (Plaintiff) Grays Legal (Defendants) CLI Lawyers (Supporting Creditors) File Number(s): 2019/166258; 2019/166271; 2019/166277; 2019/166283

Judgment

HER HONOUR: The defendants in the four proceedings listed for hearing at noon on 30 July 2019 sought an adjournment to allow them to file an expert report as to solvency by no later than 12 August 2019. The defendants are Wise & Young Pty Ltd, Wyse Partners Pty Ltd, Wolgan Consulting Pty Ltd and Defined Property Group Pty Ltd. I granted that adjournment, with reasons to be published. These are those reasons.
In support of the application, the defendants sought leave to rely on two affidavits: (a) an affidavit of George Dimitriou sworn on 26 July 2019 but not electronically filed until 9.55 am on 30 July 2019, and then served on the plaintiff's solicitor whilst he was in transit to the hearing; and (b) an affidavit of an accountant, Navneet Kaur, filed in two of the four proceedings at 11.45 am and 11.48 am respectively, one not filed but handed up during the course of the adjournment application and no affidavit sought to be relied on in the fourth proceeding. Notwithstanding the most unsatisfactory circumstances in which the evidence in support of the application to adjourn the proceedings was filed and served on the plaintiff, I granted leave to the defendants to rely on the affidavits.
The plaintiff, the Commissioner of Fines Administration, relied on an affidavit of Laura Brace sworn on 29 July 2019 in each proceedings to the effect that the statutory demands issued by the plaintiff to the four companies were served by email on Mr Dimitriou on that date at an email address which Mr Dimitriou had been using, at least, until 12 December 2018 and, as no non-delivery email was issued by Microsoft, presumably continued to use. One of the issues in these proceedings is whether the statutory demands were properly served on the four companies. Ms Brace's affidavit was relied upon, as I understand it, to support the submission that Mr Dimitriou, as director of each of the four companies, had been on notice of the statutory demands, and by extension the possibility of a winding up application being brought, since 11 April 2019.

Procedural history

On 28 May 2019, an Originating Process was filed in these four proceedings seeking to appoint a liquidator to the four companies on the ground of insolvency, with the plaintiff relying on a presumption of insolvency arising from non-compliance with the statutory demands. Mr Dimitriou says he first became aware of the proceedings on 24 June 2019 when he was perusing the court list in respect of other proceedings. Also on that date, a notice of appearance was filed by three supporting creditors in respect of the proceedings against Wolgan Consulting Pty Limited.
On 1 July 2019, the four proceedings were listed before Registrar Walton. The defendant in each proceedings appeared, as did the supporting creditors. The matter was stood over to 15 July 2019.
On 11 July 2019, Mr Dimitriou swore an affidavit in each of the proceedings, including as to solvency. The affidavits are in like terms, but I will in this judgment refer to his affidavit in the Wise & Young proceeding, in which Mr Dimitriou deposed: I have discussed the solvency of the company with a solvency expert and he will require six weeks so that a report as to solvency is able to be prepared … I therefore expect the report to be completed and served on the plaintiff for consideration no later than six weeks. Navneet Kaur, a chartered accountant, is in the process o[f] correlating the evidence as to the solvency for the report to be prepared by Ms Kaur.
Further: I am informed and verily believe this to be true that the report as to solvency will require 6 weeks to be prepared. This is merely because I am the director of the four entities that are subject to four different causes of action by the plaintiff all being at the one time and as it stands the defendant company has the onus of proving its solvency …
On 15 July 2015, Mr Dimitriou swore a second affidavit in each proceedings. He deposed: I require time to provide a proper report as to solvency compiled by an expert to the satisfaction of the Court. I have instructed the defendants' accountant, Navneet Kaur to compile the required documentation to provide to an appropriate expert on corporate solvency. I have discussed the provision of an expert report on solvency with Baxendale & Associates. Mr Baxendale informs me that it will take six weeks to prepare such a report.
Mr Dimitriou does not go so far in either affidavit to say that he had retained Mr Baxendale, but simply that Mr Dimitriou had discussed a report with him. I would not conclude, based on these affidavits, that Mr Baxendale had been retained.
In a directions hearing on 15 July 2019 before Black J, the defendants were represented by counsel and sought an adjournment, which was opposed. The defendants' counsel advised his Honour: RADOJEV: … We are seeking a further two weeks in order to put on further evidence of solvency. … HIS HONOUR: Mr Brown, what's the difficulty with the two week adjournment? BROWN: I was under the impression that it was three weeks. RADOJEV: What can be done in three weeks can be done in two, your Honour. HIS HONOUR: Mr Brown, now that it is two weeks, is there a difficulty with it? BROWN: Beyond the usual complaints about prejudice to the plaintiff by this delay. I also have seen no evidence in respect of solvency and the matter has been on foot for some time. But apart from that I can say nothing specific about this.
His Honour stood the matter down to allow the parties to discuss the matter further and advised of hearing dates which were then available to list the matter for final hearing. The matter was re-mentioned before his Honour during the course of the day and his Honour was informed that the parties had agreed by consent to have the matter listed for hearing on 30 July 2019. Orders were also made for the defendants to file their evidence by noon on 26 July 2019.

Evidence in support of the application

On 26 July 2019, Mr Dimitriou swore a third affidavit which was not served on the plaintiff. The affidavit was described in its title as being in support of an adjournment application. It is troubling, therefore, that it was not served immediately. As to the events on 15 July 2019, Mr Dimitriou deposed that he had given instructions to counsel to ask for the later of the available hearing dates proposed by Black J but then left the matter with his counsel as he was required in another court room in respect of another set of proceedings. Mr Dimitriou deposed that, when the matter was determined by Black J, "the time frame of six weeks was not properly considered by the decision makers". I do not accept that the six weeks was not properly considered by the decision-makers in circumstances where his counsel consented to an earlier timeframe.
Mr Dimitriou continued, "as a consequence it is near impossible that a report would be prepared in as little as 15 days, however I am informed and believe to be true that the reports will be completed by 12 August 2019". The source of this belief is not disclosed. Mr Dimitriou deposed that Navneet Kaur was busy completing all financial reports for the 2019 financial year and: I am informed by Guy Baxendale and verily believe to be true that the affidavit as to solvency will be served on the plaintiffs by no longer than 12 August 2019. Again, Mr Dimitriou did not go so far as to say that he had actually retained Mr Baxendale. No correspondence from Mr Baxendale is annexed to Mr Dimitriou's affidavit, which would put the existence of such a retainer beyond doubt. I repeatedly asked the defendants' counsel during the course of the adjournment application today whether there were any documents which he could tender which answered this description and there were not. Accordingly, whilst it is possible to draw an inference that Mr Baxendale has been retained, I am not prepared to draw that inference.
Mr Dimitriou also deposed that he had requested the company accountants to provide him with a balance sheet for the company as at 30 June 2019 and had been told that it would be ready tomorrow, that is, 27 July 2019. Even if there was such a retainer, it is apparent from Mr Dimitriou's third affidavit that the financial statements on which Mr Baxendale would base his report as to solvency are still in the course of preparation. On the basis of Mr Dimitriou's third affidavit, I would not grant an adjournment.
The defendants relied on three affidavits of Navneet Kaur. In respect of Defined Property Group, Ms Kaur, a chartered accountant, deposed that her staff were completing the financials for the 2019 financial year and needed a few more days to complete the task but, in her opinion, "having regards to the supporting documents I have been provided in my view this company is completely solvent". In respect of Wise & Young Pty Limited, Ms Kaur deposed to like effect, adding "I have drafted trial balances for 2018 FY and provided them to the director for the defendant previously and they are yet to be cross-checked" but confirmed her opinion that, having regard to the supporting documents provided, the company was solvent. In respect of Wyse Partners, Ms Kaur deposed to like effect. There was no affidavit of Ms Kaur in respect of Wolgan Consulting, but I have assumed in the defendants' favour that the same position applies in respect of that company. It is troubling to see that Mr Dimitriou has apparently had draft trial balances for the 2018 financial year "previously" but is yet to check the documents. It would appear, therefore, that Mr Dimitriou is part of the reason why the documents which Mr Baxendale would have to consider, if he has been in fact retained, are not presently in existence. This also tells against granting an adjournment.
The plaintiff is right to complain that the defendants' approach to this matter. In particular, I am concerned that Mr Dimitriou has known of his intended application for an adjournment since 26 July 2019 but has, apparently, chosen not to let the plaintiff have timely notice of the application and the evidence to support it. This strategic approach to the service of evidence is inconsistent with modern case management principles.

Law

Section 66(1) of the Civil Procedure Act 2005 (NSW) provides that the court may adjourn proceedings or "any aspect of any such proceedings". While this power is cast in broad terms, its exercise is governed by section 58 of the Act, which requires that, when deciding whether to grant an adjournment, "the court must seek to act in accordance with the dictates of justice," in respect of which the court must have regard to sections 56 and 57 of the Civil Procedure Act.
The interaction of these provisions was considered extensively by Beazley JA (with whom Giles and Whealy JJA agreed) in Hamod v New South Wales [2011] NSWCA 375. In particular, her Honour considered, at [139] ff, that the exercise of section 66 is subject to the principles of case management set out by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27. See likewise Menzies v Paccar Financial Pty Ltd (No 4) (2014) 101 ACSR 25; [2014] NSWCA 210 at [48]-[64].
In Thornberry v The Queen (1995) 69 ALJR 777, the High Court held, per curiam (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ), that a refusal of an adjournment which results in a party being unable to adequately present its case is a miscarriage of the Court's discretion. This decision has been followed in civil matters: Singh v Deputy Commissioner of Taxation [2011] FCA 889; Kerr v American Express Australia Ltd [2009] FCA 1219; Lennox v Amcor Ltd trading as Amcor Cartonboard (No 2) [2009] FCA 962; Cohen v McWilliam (1995) 38 NSWLR 478; (1995) 128 FLR 263 (Court of Appeal).
The plaintiff relied on Switz Pty Limited v Glowbind Pty Limited (2000) 48 NSWLR 661; [2000] NSWCA 37, in which Spigelman CJ, with whom Handley and Giles JJA agreed, noted, by reference to the judgment of Gummow J in David Grant & Co Pty ltd (receiver appointed) v Westpac Banking Corporation (1995) 184 CLR 265; [1995] HCA 43, that the provisions of Part 5.4 of the Corporations Act 2001 (Cth) provide for a quick resolution of the issue of solvency: at [37] ff. His Honour explained, at [55]-[56]: The process of proving solvency is not some kind of forensic game. Solvency is a matter peculiarly within the knowledge of the company. The primary source of information on the solvency of the company must be the company itself. It may well prove to be the case that whether or not a particular debt is owing is material, indeed crucial, to a company being able to establish its solvency. However, if the company itself is not prepared to mount a case which contemplates that as a possibility, then it is not open to the Court to be "satisfied" in the sense required by s459S(2) on the basis that the company should be protected from itself. As I have said, the fact that the company does intend to so contend would not determine the issue of whether the disputed debt is "material", let alone whether leave should be granted under s459S(1). On the submissions made to this Court, these issues do not arise. The appeal should be dismissed.
The plaintiff submits, correctly, that Mr Dimitriou has yet to annex to any of his affidavits a single financial statement or business record of the defendant companies which indicates the financial state of those companies. However, having regard to two matters, being: 1. the fact that these proceedings were commenced in May 2019 and thus the delay which will result if I grant the adjournment is not unacceptable, even having regard to the short timeframe prescribed by section 459R(1) of the Corporations Act; and 2. the affidavits of Ms Kaur indicate that the defendant companies may be in a position to put forward expert evidence as to solvency by the date requested, I consider that the dictates of justice point to granting the adjournment of that aspect of the proceedings. However, so that the hearing time today is not wasted, I will commence the hearing in respect of the other three issues before the Court and then stand the matter over part-heard until 15 August 2019. The expert report may be tendered and any further submissions in respect of it may be made on that occasion.

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Aon Risk Services Australia Ltd v Australian National University

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