Expile Pty Ltd v Jabb's Excavations Pty Ltd

The evidence on which the Plaintiffs rely

1. The Plaintiffs rely on several affidavits, which refer to their respective claims against Epic in its capacity as trustee of the relevant trust. The Plaintiffs rely, first, on the affidavit of Mr Tarabori dated 15 November 2018, which refers to his employment by the Epic Mining Unit Trust, or, more precisely, by Epic as trustee for that trust. He refers to having commenced employment with Epic in June 2010, and to that employment having been terminated on 18 May 2018 when a receiver and manager was appointed to Epic, although he notes he was not provided with written notice of termination. He annexes PAYG payment summaries which appear to demonstrate his capacity as an employee of Epic and notes that he was not paid between the period of his last pay on 15 May 2018 and the date of termination of his employment on 18 May 2018. He also refers to a claim for annual leave and to a letter of demand dated 26 October 2018 for payment of outstanding entitlements for wages and annual leave. That letter of demand, apparently sent on behalf of the several Plaintiffs, referred to claims by them against Epic, as trustee of the trust, for wages totalling approximately $4,670 in respect of the several employees, holiday pay in excess of $100,000 and for total amounts due in excess of $108,000. That letter demanded payment of those amounts, which it will emerge below were not paid.
2. Mr Tarabori's affidavit also annexes a report as to affairs completed by Mr Casey, the then director of Epic, who had held that position for several years, which recorded employee entitlements owed by Epic in the amount that was claimed by the relevant employees, including liabilities for wages and holiday pay in the amounts now claimed. That report as to affairs also recorded other outstanding creditors in an amount exceeding $1,475,000. The receiver's report as to affairs, also annexed to that affidavit, reported that claimed employee amounts were "TBD", presumably to be determined, but did not contradict the director's assessment of those claims.
3. The Plaintiffs also relied upon the affidavits of Messrs Belcher, Cuthell, Vaquera, Tang and Darmanin, each of which addressed their respective employment status and claims in respect of unpaid wages and annual leave. The affidavit of Mr Jonathon Prowse dated 24 January 2019 recorded notification of the winding up proceedings to the Australian Securities and Investments Commission ("ASIC") and publication of the winding up applications.
4. The Plaintiffs also relied on an affidavit dated 2 April 2019 of Mr Dennis Pethybridge, a director of Epic, which referred to the Plaintiffs' claim for wages and holiday pay and recorded an instruction given to his lawyer to notify the receiver and manager to pay, without admission of liability, each employee the unpaid wages component of that claim. That affidavit did not concede that the Plaintiffs were actually entitled to that sum. However, Epic led no evidence establishing any basis for controverting the inference that the Plaintiffs were entitled to that sum, arising out of non-payment from the period for which they worked, between their last pay and the termination of their employment on the appointment of the receiver and manager.
5. A further affidavit of Mr Tarabori dated 11 April 2018 confirmed that he had not received the amount claimed by way of wages and annual leave from Epic. Similar confirmations were provided by two other Plaintiffs, Messrs Belcher and Cuthell by their affidavits dated 10 and 11 April 2019 respectively. I am conscious that such updating affidavits were not sworn by all Plaintiffs but, even having regard only to the three Plaintiffs who swore such updating affidavits, three significant debts are claimed in respect of outstanding wages and annual leave.

Epic's position

1. Epic initially appeared in the proceedings, by notice of appearance filed on 20 February 2019, which indicated a number of grounds of opposition to the winding up; including, that the alleged debts claimed by the six Plaintiffs, who were there acknowledged to be its former employees, was disputed, although the basis of that dispute was not otherwise identified. Epic's grounds of opposition to winding up also included that the debts were not the subject of a judgment or judgments or the subject of a creditor's statutory demand, but I have pointed out above that it is possible to bring a winding up application in which insolvency is established, other than by the creditor's statutory demand process. Epic's grounds of opposition to the winding up also included a contention that the winding up proceedings were an abuse of process so far as the Plaintiffs were attempting to use the proceedings to avoid a trial of the merits of the disputed debt. As I will note below, no evidence has been led for Epic in the proceedings, including any evidence to identify any basis for denial of the relevant debts, on the merits. The fourth ground of defence to the application is that Epic was solvent, presumably notwithstanding the appointment of a receiver and manager, or, alternatively, if Epic was found to be insolvent, creditors have a greater prospect of payment without winding up. That proposition was not established by evidence led by Epic in this application. The sixth ground of defence is that the Court should exercise its discretion to dismiss the application.
2. Epic has been represented by solicitors and counsel for the bulk of the proceedings. However, today, Counsel was granted leave to withdraw, on the basis that he did not have instructions to put any position before the Court. I did not grant leave to the solicitors to cease to act, where there was no direct evidence before me or as to the extent of notice given to their client of any intention to do so, and no appearance by any director of Epic when the matter was called.

Determination

1. I have regard to the fact that a winding up application may properly be pursued by a plaintiff or plaintiffs for the purposes of securing the imposition of a scheme of insolvent administration ending the company's activities and seeing assets marshalled and the claims of creditors ascertained and a distribution made to creditors of whatever is available from the insolvent estate in accordance with the statutory order of priorities: TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd [2007] NSWSC 1074; (2007) 25 ACLC 1371. The case law has relevantly recognised, both before and after the introduction of s 467 of the Corporations Act, which provides a power for the Court to stay or dismiss winding up proceedings in certain circumstances, that a finding of insolvency can result in there being an entitlement to a winding up order ex debito justitiae, although the Court always retains a discretion to decline to make such an order: Expile Pty Ltd v Jabb's Excavations Pty Ltd [2003] NSWSC 699; (2003) 46 ACSR 446.
2. I am satisfied that the evidence of the Plaintiffs, partly acknowledged by the report as to affairs completed by Mr Casey, a former director of Epic, and not controverted by other evidence, established that they are creditors of Epic, at least in the amount of wages, and potentially also in the amount of annual leave. It is not necessary to establish the precise amount for which they are creditors, where that amount is not minimal and would be determined by a liquidator in liquidation. This is not a case where Epic has led evidence, or made submissions, identifying an explanation for non-payment of wages or annual leave other than an inability to make such payments. It is not suggested, for example, that Epic simply chose not to pay such wages or annual leave, even if that choice were otherwise open to them. It is not suggested that Epic had any legal entitlement not to pay such wages or annual leave whether arising from the appointment of a receiver and manager or otherwise. It seems to me that, where no evidence has been led beyond Mr Pethybridge's evidence referring to an instruction to the receiver and manager to pay relevant amounts without admission, I can infer that no such evidence would have assisted Epic including in respect of establishing its solvency.
3. I am satisfied that, absent any explanation arising from evidence or submissions of Epic's non-payment of the amounts of wages and annual leave, the Court may properly infer that those amounts have not been paid because Epic is unable to pay them, when they have fallen due. In these circumstances, I am satisfied that it has been established that Epic is insolvent, and that there is no reason to decline to make a winding up order as a matter of discretion. Such an order would ordinarily follow both in order to bring the distribution process applicable in a winding up into effect, and in order to protect other creditors, ex debito justitiae.
4. I have not neglected the fact that Epic is a trustee of a trust. Obviously, the trustee of a trust incurs liabilities in its own right and may be the subject of a winding up application in respect of such liabilities. There is no such suggestion here, on the evidence, that any indemnity available to Epic as trustee of the trust is sufficient to discharge those liabilities.
5. For these reasons, I make the following orders:
6. The Defendant, Epic Mining Pty Limited (receiver and manager appointed) be wound up in insolvency.
7. Mr Darren John Vardy be appointed as liquidator of the Defendant.
8. The costs of this application be costs in the winding up.

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: 14 July 2019