Ekes v Hyde Page

Consideration

The Corporations Act, s 198G(1) provides that while a company is under external administration, an officer of the company must not perform or exercise a function or power of that office. "External administration" in s 198G has the same meaning as in Sch 2 to the Corporations Act: s 198G(9). In Sch 2, being the Insolvency Practice Schedule, s 5-15 provides that "external administration" includes when a liquidator has been appointed in relation to a company. The prohibition in s 198G(1) may be relaxed where, relevantly, the officer of the company obtains the written approval of the external administrator of the company or the Court: s 198G(3)(b). By reason of s 198G, Mr Ekes is not entitled to continue to prosecute an action on behalf of the company: In the matter of Day & Night Online Transport Pty Ltd (in liq) [2018] NSWSC 796; Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85. [1] Leave was sought under s 198G(3)(b) in writing but not pursued orally.
The proceeding is being prosecuted in Mr Ekes' name. Mr Ekes thus required leave under s 471B of the Corporations Act to bring these proceedings against the company in liquidation. In Distinctive FX 9 Pty Ltd v Statewide Developments Pty Limited [2012] NSWCA 393 at [13], Beazley JA held that the commencement of an appeal (or an application for leave to appeal), triggered the leave requirement contained in s 471B with respect to a winding up in insolvency. As recently noted by Gleeson JA in Zervas v Burkitt, [2019] NSWCA 112 at [14], and the Court in Huang v Hua Cheng International Group Pty Ltd [2019] NSWCA 155 at [21], Distinctive FX 9 has been followed consistently by this Court. An application was made orally by Ms Wong for leave to proceed under s 471B nunc pro tunc. It is unnecessary for the reasons which follow to address this issue. If it were necessary to decide there would be difficult issues raised, not least being that Payne JA raised this issue at a directions hearing with counsel then appearing for Mr Ekes and no application under s 471B was then made or notified to the liquidator.
In addition, s 101(2)(n) of the Supreme Court Act provides that leave to appeal is specifically required in this case. That section provides: (2) An appeal shall not lie to the Court of Appeal, except by leave of the Court of Appeal, from: … (n) a judgment or order of the Court in a Division for the winding up of a corporation,
In Penson v Titan National Pty Ltd [2015] NSWCA 165, Ward JA (Leeming JA agreeing) said: "[38] As to the proposed appeal from the decision of Black J, the grounds of appeal identified by Ms Penson make clear that her complaint in substance is that his Honour concluded that Aquaqueen was in fact insolvent in circumstances where she had proffered an undertaking that she would satisfy the company's liability from her own resources by way of loan to the company and had resources from which she could do so. [39] His Honour noted at [29] that there are circumstances in which an undertaking, even if not legally enforceable, by a director or third party to provide financial support to a company may support its solvency. His Honour was not, however, satisfied that Ms Penson would take any steps to place the company in funds to pay the judgment debt or other debts owing to the substituted creditors, even if she has the personal means to do so, having concluded that she was unlikely to utilise her personal funds to pay the company debts generally as opposed to only such debts as she chose to pay ([29]-[30]). His Honour reached that conclusion having regard to the history of the matter and to the way in which her statements of intention were couched (see [28]). … [43] The other matter to take into account on this application is the public policy in relation to insolvent companies. In circumstances where his Honour's conclusion as to insolvency is challenged largely by reference to the import of the undertaking proffered by Ms Penson, to stay the ongoing liquidation of the company would be at the risk of permitting an insolvent company to continue to trade. That factor not only speaks against any further stay but against the grant of leave to appeal."
Applying those principles to this case, the public policy against permitting an insolvent company to continue to trade tends strongly against the grant of leave.
The primary judge concluded, on the basis of a vast amount of evidence which Mr Ekes chose not to put before this Court, that the company was clearly insolvent. None of the attacks upon her Honour's reasoning are persuasive: 1. The company had not "paid" the amount claimed in the statutory demand. As set out at [23] it is clear that at the time of the hearing that the company had not paid the barrister an invoice for $25,300 rendered 15 months prior. In any event, no error was shown in her Honour's finding that "there is a positive reason for ordering that the company be wound up going beyond the mere deemed insolvency arising from the company's failure to comply with the barrister's statutory demand." 2. The complaint that it is somehow relevant that Mr Hyde Page induced "payment" to him by forwarding a page from an insolvency text is risible. No arguable error was made by her Honour in relation to that matter. 3. Her Honour was correct to give little weight to the bald assertions from Mr Ekes that the company had "no debts" in circumstances where her Honour had abundant evidence available to her that this assertion was simply not correct. 4. Her Honour's finding that the company had a debt due and payable to the ATO was attacked in this Court but no evidence or sufficiently cogent argument was advanced to cause us to think, even arguably, that her Honour had erred. Her Honour's treatment of the so-called "credit" from the ATO does not give rise to any arguable error. 5. No error was shown in relation to the way her Honour dealt with the guarantee given by company, particularly in light of her Honour's unchallenged finding that the "assertions as to solvency fall far short of 'the fullest and best' evidence of the company's financial position." 6. We are not satisfied that grounds have been shown to doubt her Honour's conclusion that the company was insolvent. The submission that Mr Hyde Page's debt was paid before the hearing or the orders appointing the liquidator were made cannot be accepted. There was no error of discretion in her Honour refusing an adjournment given the inadequate state of the evidence before her. No arguable miscarriage of justice occurred.
Before leaving this case there is one final issue to address. In a directions hearing Payne JA was informed that the liquidator has incurred fees of about $30,000. No offer to pay those fees was forthcoming from Mr Ekes. If, as was submitted on Mr Ekes' behalf orally, circumstances have changed and cogent evidence could be marshalled proving the various assertions made in this Court, no doubt a further application could be made under relevant provisions of the Corporations Act. If, for example, it could be demonstrated by cogent evidence that: 1. the liquidator's fees have been paid; 2. the liquidator is prepared to advise the Court that there are no creditors of the company or other irregularities which need to be investigated; 3. ASIC has no objections; and 4. the Commissioner of Taxation had issued further amended assessments in effect allowing the company's various claims, no doubt an application could be made to the Corporations List judge under s 482 of the Corporations Act on the basis of those changed circumstances.
The order of the Court on the application for leave to appeal is that leave to appeal is dismissed with costs.
It follows that the applicant's motion dated 19 June 2019 seeking a stay of the orders made by Rees J must also be dismissed with costs.
In relation to costs, Mr Hyde Page submitted that a lump sum costs order in the sum of $10,000 for costs of preparation including detailed written submissions and an appearance should be made in his favour as a self-represented barrister based on the Chorley exception: Pentelow v Bell Lawyers Pty Ltd [2018] NSWCA 150. It is to be noted that special leave to appeal was granted in that matter and the decision of the High Court is reserved.
We accept, as Mr Hyde Page submitted, that we should approach the case on the basis that Pentelow represents the law in this State and should not speculate about the outcome of the High Court proceedings. Having regard to the issues in the case, the length of the hearing, and the evidence as to Mr Hyde Page's professional rates, we are satisfied that the sum of $7,500 is reasonable in the circumstances as a lump sum. The Court orders costs be paid by Mr Ekes in a lump sum in the amount of $7,500 under s 98(4) of the Civil Procedure Act.

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