Brookfield, in the matter of Real Estate Now Pty Ltd v Real Estate Now Pty Ltd

1. The winding-up application filed on 20 November 2019 is dismissed.
2. The interlocutory application filed on 9 March 2020 is dismissed.
3. The applicant pay the respondent's costs of and incidental to the winding-up application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

GREENWOOD J: 1 This matter is listed for determination of a number of questions. The primary matter is the question of Mr Brookfield's application for the winding-up of the respondent company. That application was filed on 20 November 2019. There was a further matter, which is an interlocutory application filed on 9 March 2020, in which particular orders are sought concerning orders for substituted service upon the respondent, and also an order that service of a statutory demand of 28 October 2019 be deemed to have been served by having been served on Mr Cliff of Mills Oakley Lawyers, by email on 28 October 2019. 2 This morning, I have discussed extensively aspects of the winding-up application with the applicant, Mr Brookfield. There are many difficulties with the application as I explained to Mr Brookfield. The transcript as to those matters ought to be read in conjunction with these reasons. Mr Brookfield says that he is an assignee of monies owed by the respondent company, Real Estate Now Pty Ltd, to a former company called Blueprop Pty Ltd. He says that pursuant to the assignment, he has standing to bring a claim against the respondent for an amount which was said to be the agreed sale price of a rent roll of $100,650.00, inclusive of GST. That amount was the subject of an invoice to the respondent on 11 July 2019. 3 The solicitors for the respondent responded by email on 31 July 2019 saying that the respondent company continued to dispute the claim. The email says that not only was the claim disputed, but the email says that the claim continues to be disputed for all of the reasons previously ventilated before this Court and the Supreme Court of Queensland. There has been a history between the parties which Mr Brookfield describes as a period of approximately three years, in which there has been a contest about this debt. 4 Mr Brookfield says that he has made efforts to try and secure evidence from the respondent of the contended payment of the debt, as the respondent has apparently said on previous occasions that the debt has been paid. In any event, the fundamental matter is that the debt is disputed and a decision needs to be made as to such a claim, with findings of fact made about all of the matters in contest going to the proof of that debt. No proceeding has been commenced to vindicate Mr Brookfield's claim, but rather, winding-up proceedings have been commenced to seek a winding-up order on the basis of that disputed claim, supported by a statutory demand based on that claim. 5 There are two fundamental matters in issue here. One is the entire question of recourse to the winding-up proceedings under the Corporations Act 2001 (Cth) for such a purpose in circumstances where there is a long history of dispute about the fundamental underlying debt. The second matter of fundamental concern is that the statutory demand, even if it were assumed that the invoking of the process was proper, has not been served in accordance with the requirements for service of such an important document. 6 Accordingly, it must necessarily follow that the winding-up application be struck out because Mr Brookfield is seeking to have recourse to the winding-up proceedings to prove the disputed debt in question. What should happen is proceedings are commenced to vindicate the claim. Once a judgment has been obtained on the contested questions in issue between the parties, then other things would naturally follow. The solicitors for the respondent have said this morning that should Mr Brookfield commence a proceeding to vindicate his claim, the solicitors have instructions to accept service of that claim. 7 This is clearly the most focused, disciplined and appropriate thing to do in all of the circumstances. There is thus, no point dealing with the interlocutory application and considering whether orders for substituted service of the kind sought by Mr Brookfield should be made, because it would simply operate to give rise to substituted service in respect of a proceeding which is an "abuse" in any event. Accordingly, the winding-up application filed on 20 November 2019 is to be dismissed, and the interlocutory application of 9 March 2020 is also to be dismissed. 8 The next question that arises is the question of costs. 9 Obviously enough, Mr Brookfield must pay the respondent's costs of those two applications. 10 The additional difficulty is that the respondent seeks an order for costs on an indemnity basis in relation to the winding-up application of 20 November 2019. There is some pre-history to these matters which should be briefly mentioned. The debt which is the subject of the statutory demand of 28 October 2019, upon which the application for winding-up is made, is the same debt which was recently considered by Derrington J in a recent proceeding which was the subject of his Honour's judgment on 27 June 2019, in the matter QUD 913/2018: Brookfield v Real Estate Now Pty Ltd (2019) FCA 993. 11 In that case, Derrington J found that Mr Brookfield could not establish that he had standing to bring the application to wind up the respondent on the basis of the debt upon which he was relying, because for all the reasons I have already indicated and discussed with Mr Brookfield this morning, the debt is disputed and has been disputed for some time. Mr Brookfield has now filed an application to seek to set aside the orders made by Derrington J in that proceeding, but that matter is not relevant for present purposes today. The fundamental matter is that the debt is disputed, and has been found to be disputed, and as Mr Brookfield says, the debt has been a controversy between these parties for up to three years. 12 It follows that recourse to the winding-up proceedings, in the context of the history of the matter, is an abuse of the process of winding-up in the classic sense of that term. Since Mr Brookfield has known that the debt has been disputed for a long time and that the inappropriateness of a winding-up proceeding to vindicate a disputed debt has been pointed out to Mr Brookfield by Brown J in the Supreme Court of Queensland and by Derrington J in this Court quite apart from exchanges between Mr Brookfield and the solicitors for the respondent, I am also satisfied that there is a proper basis for making an order that the costs be paid on an indemnity basis. The costs of the respondent of and incidental to the application of 20 November 2019 will be ordered to be paid on an indemnity basis. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.