Hickie v Land Enviro Corp Pty Limited, in the matter of Land and Enviro Corp Pty Limited

Federal Court of Australia|2014-12-17|Before: Jacobson J

(1) That the defendant be wound up in insolvency. (4) That Robert Whitton be appointed as official liquidator of the defendant. (5) The costs of the plaintiffs are to be payable out of the assets of the defendant in accordance with s 556 of the Act. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 918 of 2014

AND: LAND ENVIRO CORP PTY LIMITED ACN 082 375 666

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 919 of 2014

IN THE MATTER OF AMY HOLDINGS PTY LIMITED ACN 082 375 666 BETWEEN: DAVID HICKIE

JUDGE: JACOBSON J DATE: 17 DECEMBER 2014 PLACE: SYDNEY

Introduction 1 These applications for the winding up of Land Enviro Corp Pty Limited and Amy Holdings Pty Limited (the LEC Companies) are brought after a lengthy history of proceedings in the Supreme Court of New South Wales. The LEC Companies and their principals, Mr and Mrs Zdrilic, were the plaintiffs in the Supreme Court. The present plaintiffs, Mr David Hickie and Vocifa Pty Limited (the Hickie interests) were two of the seven defendants in the proceedings which were determined by Stevenson J in 2012. 2 The LEC Companies were unsuccessful at the trial before Stevenson J. His Honour dismissed the proceedings against all of the defendants and made costs orders, including costs orders in favour of the Hickie interests. The costs orders were assessed and judgments in favour of the Hickie interests for $358,588.89 were entered in the Supreme Court on 14 March 2013. 3 The winding up orders which the Hickie interests now seek are founded upon the failure of the LEC Companies to comply with a statutory demand for the payment of the amount which is the subject of the costs orders. 4 The costs orders are not the subject of a stay, although enforcement was stayed for a period of time in 2013 pending an application to the Court of Appeal. However, the effect of orders made by the Court of Appeal in March 2014 is that the orders made by Stevenson J in favour of the Hickie interests, including the costs order, remain in force and are not subject to appeal. 5 An application for special leave to appeal against the Court of Appeal's decision in favour of the Hickie interests was dismissed by the High Court in August 2014. 6 On 27 August 2014 Brereton J dismissed an application by the LEC Companies to set aside the statutory demands served upon them by the Hickie interests. 7 The statutory demands have not been met and the LEC Companies are therefore presumed to be insolvent by virtue of s 459C(2) of the Corporations Act 2001 (Cth) (the Act). Indeed, the LEC Companies admit that they cannot pay the judgment debt and are in a state of actual insolvency. 8 Ordinarily it would follow that the Hickie interests should be entitled to a winding up order, virtually as of right: IOC Australia Ltd v Mobile Oil Aust Ltd (1975) 11 ALR 417 at 427; see also Deputy Commissioner of Taxation v Huon Foam Pty Ltd [2000] TASSC 99 at [8]. 9 However Mr Zdrilic who appeared with leave on behalf of the LEC Companies opposed the making of winding up orders. He contended that the insolvency of the LEC Companies was caused by the actions of some or all of the defendants in the proceedings before Stevenson J. He submitted that if the winding up orders were not made, the LEC Companies would be prevented from prosecuting their appeals against the remaining defendants in the proceedings that were heard by Stevenson J. He also submitted that if the LEC Companies are successful in the appeal they will no longer be insolvent and will be in a position to meet the costs orders in favour of the Hickie interests. 10 Although Mr Zdrilic opposed the making of the winding up orders on other grounds to which I will refer later, the gravamen of this application was that I should exercise the power conferred by s 467 of the Act to adjourn the hearing of the winding up order pending the determination of the appeal in the Court of Appeal.

Background 11 The full factual background is described in the judgment of Stevenson J given on 24 April 2012: Land Enviro Cop Pty Ltd v HTT Huntley Heritage Pty Ltd [2012] NSWSC 382. 12 The essential issue in those proceedings was whether the LEC Companies and Mr and Mrs Zdrilic (together the LEC Plaintiffs) were entitled to set aside an order made by the Supreme Court in 2004 dismissing earlier proceedings brought in 2001 (the 2001 Proceedings). 13 The court order dismissing the 2001 Proceedings was made on 6 September 2004. It was made in accordance with an agreement (the Heads of Agreement) and a deed (the Deed) entered into in May 2004. The LEC Plaintiffs also sought orders setting aside the Heads of Agreement and the Deed. 14 In the 2001 Proceedings the LEC Plaintiffs claimed, inter alia, that certain land comprising about 420 hectares near Dapto was held upon a constructive trust for LEC by one of the parties, HTT Huntley Heritage Pty Ltd (HTT): see judgment of Stevenson J at [70]. 15 The basis upon which LEC claimed relief in the 2001 Proceedings was described by Stevenson J at [71] as follows: LEC was said to have had a continuing equitable interest in the land; certain persons including Mr Hickie were directors of LEC when it obtained its equitable interest, and therefore owed fiduciary duties to LEC; and when HTT acquired its legal interest in the land it did so with knowledge that the directors, including Mr Hickie, were in breach of their fiduciary duties to LEC in permitting HTT to acquire its legal interest in the land. 16 The basis upon which the LEC Plaintiffs sought to set aside the Heads of Agreement, the Deed and the order dismissing the 2001 Proceedings was that they were induced to enter into the relevant instruments by 17 misrepresentations made by HTT: see judgment of Stevenson J at [81]. 17 The misrepresentations were not said to have been made by Mr Hickie. Rather they were said to have been made by a director of HTT, Mr Renshall, who was said to have acted as agent for, inter alia, the Hickie interests: see judgment of Stevenson J at [79], [81] and [82]. 18 His Honour dealt in considerable detail with each of the alleged misrepresentations. Ultimately he concluded at [800] that no case had been made out that: "the representations on which the plaintiffs relied provided a basis on which they were entitled to rescind either the Heads of Agreement or the Non-Dilution Deed." 19 His Honour went on to find at [801] that there was no basis upon which the orders dismissing the 2001 Proceedings should be set aside. He said at [802]: "Insofar as representations were made, and insofar as they were misleading or deceptive, for the reasons I have set out in detail above, they were not causative of the plaintiffs entering into the Heads of Agreement or the Non-Dilution Deed, or consenting to the dismissal of the 2001 Proceedings." 20 An issue was raised in the proceedings as to whether the 2001 Proceedings were bound to fail in any event. That issue arose because the relief claimed in the proceedings before Stevenson J included a claim for damages said to have been suffered by reason of the LEC Plaintiffs' consent to the dismissal of the 2001 Proceedings. 21 His Honour was not able to reach a firm conclusion as to whether LEC would have succeeded in the 2001 Proceedings but he said at [972] that in his opinion "they were not bound to fail". 22 However, his Honour went on to say at [979] that a fundamental plank in the LEC Plaintiffs' claim for damages was missing because he rejected the tender of an expert report prepared by Dr Ferrier as to what damages LEC would have recovered in the 2001 Proceedings. 23 His Honour concluded his consideration of the damages claim at [981] as follows: "There is no other evidence before me as to what account of profits or other financial remedy LEC would have recovered in the 2001 Proceedings and thus no material upon which I could base any assessment as to the value of the chance lost to LEC as a result of the dismissal of those proceedings on 6 September 2004." 24 Importantly, for present purposes, his Honour dealt with, and rejected, the LEC Plaintiffs' contention that Mr Renshall (or HTT) was acting as agent for the Hickie interests. His Honour recognised (at [983]) that in view of his rejection of the claims based upon the misrepresentations it was not necessary to express an opinion on the agency question but he went on to do so, relatively briefly, at [985]-[999].

The Judgment of Allsop P 25 On 8 November 2012, approximately three months after the expiration of the time limited for filing a notice of appeal from the orders of Stevenson J, the LEC Plaintiffs sought to file a notice of appeal in the Court of Appeal. The notice of appeal contained only one paragraph dealing with the agency issue as follows: "The trial judge erred in not finding that Mr Renshall and HTT were the agent of Mr Hickie and Vocifa Pty Ltd." 26 On 21 February 2013 Allsop P (as his Honour then was) dismissed an application for an extension of time in which to file and serve the notice of appeal: Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2013] NSWCA 35. 27 His Honour's reasons were summed up at [27] of his judgment. He considered that the appeal had not been shown to have reasonable or significant prospects of success. His Honour observed that the appeal: "... would in all likelihood last up to a week, involving a review of credit and detailed documentation in a six week trial and the review of detailed factual findings apparently carefully made. "

The First stay application 28 Shortly after the order made by Allsop P dismissing the application for an extension of time, the LEC Plaintiffs filed an application in the Court of Appeal under s 46(4) of the Supreme Court Act 1970 for a review of his Honour's order. Some months before the application for review was due to be heard, the Hickie interests obtained the assessment of their costs of the trial. As I mentioned earlier, judgment for the unpaid costs order was entered on 14 March 2013. 29 The LEC Plaintiffs (other than Amy Holdings Pty Ltd) then sought a stay of execution of the costs order pending the determination by the Court of Appeal of the application to have the order made by Allsop P discharged. The stay application came before McCallum J. Her Honour noted at [9] that LEC had not sought to challenge the costs order obtained by the Hickie interests. Nevertheless, her Honour exercised her discretion to order a stay for a short period to enable the LEC Plaintiffs to pursue their challenge to the orders made by Allsop P. 30 Her Honour approached the matter upon the basis that it was not possible to form a judgment as to the LEC Plaintiffs' prospects of success in their application to the Full Court of the Court of Appeal. However, she considered that one of the most important factors in favour of granting a stay was that, if a stay were not granted, it would be likely to "stymie" the LEC Plaintiffs' application for a review of the orders made by Allsop P: see judgment of McCallum J at [40]-[41].

The First Court of appeal Decision 31 On 4 March 2014 the Court of Appeal (Beazley P, Basten JA and Leeming JA) handed down judgment on the application for review of the orders made by Allsop P: [2014] NSWCA 34. 32 The Court of Appeal set aside the orders made by Allsop P as between the LEC Plaintiffs and the HTT parties but, importantly, their Honours dismissed the application in relation to the Hickie interests. Notably, their Honours directed that an amended notice of appeal be filed omitting claims for relief against the Hickie interests. 33 In his reasons for judgment at [6] Basten JA observed that the trial judge found that there was no evidential basis for the claim of agency which was the only relevant claim against the Hickie interests. His Honour observed: "Nothing was said in the course of the proceedings in this court to cast doubt on that finding." 34 Basten JA went on to say at [7]: "In brief submissions to this court, the Hickie interests noted that they had incurred significant costs which it appeared they would be unlikely to recover, even if the application were to be dismissed, and that factor, combined with the absence of any arguable case in respect of their liability, meant that the proceedings for review should be dismissed with respect to them. That submission should be accepted." 35 His Honour then turned to the review of the orders dismissing the LEC Plaintiffs' application against the other defendants. He said at [19] that the LEC Plaintiffs should succeed on this aspect of their application for a review: "… not because they have demonstrated that the trial judge was necessarily wrong but because they have raised arguments which are credible and material and were arguably not adequately dealt with by the trial judge." 36 Basten JA continued at [19] by stating that: "It may be that the real criticism of the judgment below is not that it came to the wrong conclusion, but that it failed adequately to address the applicants' submissions. However, that conclusion is sufficient to warrant an extension of time within which to appeal." 37 Basten JA then dealt with the nature of the case brought by the LEC Plaintiffs, including details of the amount of money advanced by Mr Zdrilic toward the purchase of the parcel of land, and the representations said to have been made to induce the LEC Plaintiffs to enter into the Heads of Agreement and the settlement of the 2001 Proceedings. His Honour said at [44] that Mr Zdrilic, who argued the application in person, had established "a reasonably arguable case of error on the part of the trial judge" which was sufficient to warrant leave to appeal out of time, where the delay was only three months. 38 Basten JA reiterated those remarks in his conclusions at [55] stating that: "This Court may properly accept that there is a reasonably arguable case to be presented on an appeal." 39 Leeming JA (with whom Beazley P agreed) was also persuaded that Mr Zdrilic had discharged the burden of establishing reviewable error. 40 His Honour said at [67] that it was reasonably arguable that an aspect of the trial judge's reasons which addressed the alleged misrepresentations as to funding for the development of the land: "… fails fully to grapple with the contemporaneous documents." 41 Leeming JA went on to say at [68]: "Although it is perfectly possible that the appeal will be dismissed, I find it impossible to conclude that that outcome is inevitable, or close to inevitable, such that there is not a reasonably arguable case on appeal, without reviewing the contemporaneous documentary record in its entirety." 42 Finally, Leeming JA said at [69] that he agreed with Basten JA as to the absence of a case against the Hickie interests. 43 His Honour then concluded his judgment with an observation about Allsop P's estimate of the length of the appeal. He said his present view was that it would occupy "two or no more than three days", with the assistance of full written submissions.

The Second Stay Application 44 After the decision of the Court of Appeal was handed down, the LEC Plaintiffs filed a second application for a stay of the costs order obtained by the Hickie interests. The stay sought by the LEC Plaintiffs was for a sufficient period to enable them to pursue an application in the High Court for special leave to appeal against the order made by the Court of Appeal dismissing the application against the Hickie interests. 45 The application was dismissed by Harrison J who considered that no basis for the stay had been demonstrated: [2014] NSWSC 472. 46 In coming to that decision, his Honour referred at [43] to the statement made by Basten JA in the Court of Appeal that nothing had been said to cast any doubt about the finding made by Stevenson J that there was no evidential basis for the claim of agency. Harrison J also observed that the reasons given by Leeming JA reinforced that proposition. 47 His Honour considered that there was no reasonable prospect that the decision of the Court of Appeal would warrant the grant of special leave in the High Court. His Honour was also of the view that the balance of convenience favoured the Hickie interests in circumstances where the LEC Plaintiffs are insolvent and the subject matter of the proposed stay was not co-extensive with the subject matter of the proposed appeal to the High Court: see reasons of Harrison J at [44]-[45].

High Court Special Leave Application 48 The LEC Plaintiffs' application for special leave to appeal from the decision of the Court of Appeal refusing to extend time for an appeal against the dismissal of the claim against the Hickie interests came before the High Court on 15 August 2014. 49 Their Honours dismissed the application, stating that there was no basis for doubting the correctness of the decision of the Court of Appeal: Land Enviro Corp Pty Ltd & Ors v Huntley Heritage Pty Ltd & Ors [2014] HCASL 146 at [5].

The Second Court of Appeal Decision 50 Before the High Court had heard the special leave application, the LEC Plaintiffs filed an application for leave to appeal against the orders of Harrison J. The leave application and a related notice of motion were heard and determined by the Court (Leeming JA and Sackville AJA) on 17 October 2014: Land Enviro Corp Pty Ltd v Hickie [2014] NSWCA 363. 51 Their Honours observed at [7] that the subject matter of the application dealt with by Harrison J was confined to a limited stay pending the determination of the application for special leave to appeal to the High Court. 52 Their Honours went on to observe at [8]-[10] that, in the light of the refusal of special leave, the application to the Court of Appeal was, subject to one exception, now moot. 53 The exception to which their Honours referred was that the LEC Plaintiffs made a fresh application, not made to Harrison J, for a stay of the costs orders obtained by the Hickie interests pending determination of the appeal which the first Court of Appeal (Beazley P, Basten JA and Leeming JA) permitted the LEC Plaintiffs to bring against the other defendants. 54 Leeming JA and Sackville AJA refused to grant that relief. They said at [10] that there was no basis for a stay of the costs orders obtained by the Hickie interests whose success had been confirmed by the Court of Appeal and the High Court. 55 Their Honours referred at [12] to a number of submissions made on behalf of the LEC Plaintiffs. The submissions included an acknowledgement that the LEC Plaintiffs are impecunious and an assertion that if they succeed in the appeal against the HTT respondents there will be more than sufficient funds to pay the outstanding costs order obtained by the Hickie interests. 56 Their Honours concluded by stating at [13] that even if the factual matters referred to by Mr Zdrilic for the LEC Plaintiffs were correct: "… there is no sound basis for staying what amounts to an undisputed order in favour of Mr Hickie and Vocifa … . That order has been confirmed by this court and the High Court. It is not capable of any other challenge."

The application to set aside the statutory demand 57 The application made by the LEC Companies to the Supreme Court to set aside the statutory demands served by the Hickie interests was determined by Brereton J on 27 August 2014. His Honour's decision was handed down after the High Court's refusal of special leave but before the second Court of Appeal decision refusing to grant a stay of the costs order: In the matter of Amy Holdings Pty Ltd; In the matter of Land Enviro Corp Pty Ltd [2014] NSWSC 1176. 58 Brereton J found at [14] that there was no genuine dispute as to the existence or amount of the judgment debt that founds the statutory demands. His Honour then considered whether there was "some other reason" why the demand should be set aside pursuant to s 459J(1)(b) of the Act. 59 His Honour said at [20] that Stevenson J did not deal with the agency issue in detail, because he had decided the case on other grounds and the agency issue was therefore not necessary to the ultimate decision. 60 Brereton J went on to observe at [24] that the Court of Appeal and the High Court have now determined that there is no error in the finding made by Stevenson J as to the absence of any evidential basis for the contention that Mr Renshall was acting as agent for the Hickie interests. 61 Notwithstanding that observation, Brereton J proceeded to consider the issue. His Honour said at [29] that if he had decided the matter without the benefit of the High Court's decision he would have found there was an arguable case of error. But, having said that, he concluded at [31] that, since the special leave application had failed, the application for leave to appeal from the decision of Harrison J refusing to stay the costs order (which at that stage had not been determined by the second Court of Appeal) could not have any prospects of success. 62 It followed, as his Honour said at [42] that there was no basis for contending that there was "some other reason" for setting aside the demand. 63 His Honour also rejected, at [32]-[33] a submission that the LEC Plaintiffs had a genuine offsetting claim which was said to be based upon their prospects of succeeding in the appeal against the HTT respondents. 64 Additionally, his Honour rejected a contention made by the LEC Plaintiffs that the statutory demands were an abuse of process. 65 Accordingly, his Honour concluded that none of the grounds on which the LEC Plaintiffs relied could be sustained and he ordered that the applications to set aside the statutory demands be dismissed. 66 However, his Honour then added the following observation at [47]: "It does not follow that the companies will necessarily be wound up before the hearing of the appeals against the HTT parties. It is well-established that the Court has a discretion to adjourn the hearing of winding-up proceedings, and the existence of a reasonable prospect that as a result of that appeal the companies would be in a position to pay their debts to the Hickie parties, in circumstances where the companies are not trading, might well afford a ground for the exercise of that discretion."

The discretion to refuse to make a winding up order 67 The effect of s 467(1)(a) of the Act is that the Court may, in the exercise of its discretion, dismiss a winding up application even if a creditor has proved that the company is insolvent. 68 However, this provision does not change the law as it stood prior to the enactment of s 467(1)(a). It was well established at that time that there was always a residual discretion to refuse to make an order: TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd [2007] NSWSC 1410 at [113]-[114] (Barrett J). 69 But the discretion will be exercised only if some good reason is shown for allowing an insolvent company to continue to carry on business. Examples of this may be where the winding up is opposed by other creditors on rational grounds or where the conduct of the applicant for the winding up order precipitated the company's liability: TS Recoveries at [118]. 70 For reasons stated later I do not consider this case to be an appropriate one in which to exercise the discretion to refuse to make a winding up order.

The power to adjourn 71 The Court's discretion to adjourn a winding up application is found in s 467(1)(b). 72 The discretion was expressed in narrow terms by Murphy J of the Supreme Court of Victoria in Re Presha Engineering (Aust) Pty Ltd (1983) 1 ACLC 675 at 677. His Honour said that the discretion was exercised "in exceptional circumstances" where there would be better prospects existing for the creditors as a whole if the company was allowed to continue to trade. 73 A similar approach was stated by Hodgson J in Fire & All Risks Exploration Co Ltd v Southern Cross Exploration NL (1986) 10 ACLR 683 at 685. His Honour considered that there was "possibly some point" to be served by an adjournment because the company had substantial assets and its inability to pay its debt may have been caused by the activities of the creditor. 74 In those circumstances, Hodgson J granted an adjournment for a short period to give "some reasonable possibility" to the company to pay its debts. His Honour also observed that a short adjournment would not involve great hardship or detriment to the petitioning creditor: see Fire & All Risks at 685. 75 Although these authorities were decided before the enactment of s 467(1)(b), the same considerations inform the exercise of the discretion under the Act: In the matter of C2C Investments Pty Ltd (No 8) [2013] NSWSC 267 at [8]-[9] (Black J). 76 I will address the discretionary considerations which arise in the present case in the next section of this judgment.

Whether to exercise the adjournment power 77 Mr Zdrilic seeks to bring the present application within the approach stated by Black J in C2C and by Hodgson J in Fire & All Risks. He also relies upon the observations of Brereton J about the exercise of the discretion to adjourn a winding up application where there are reasonable prospects that as a result of an appeal a company will be in a position to pay its debts. 78 The substance of Mr Zdrilic's submissions is that the Hickie interests caused the insolvency of the LEC Companies and that there are good prospects that as a result of the appeal against the other defendants the LEC Companies will be able to pay the costs order. 79 There are a number of reasons why I cannot accept the submission that it is appropriate to exercise the discretion in this case. 80 First, there is no basis for the submission that the Hickie interests caused the LEC Companies' insolvency or their inability to pay the judgment debt. 81 That proposition rests upon an unsupportable assertion that Mr Renshall made the impugned representations as agent for the Hickie interests. Stevenson J rejected the agency contention. His Honour's finding has been affirmed by the Court of Appeal and the High Court. 82 The observations made by Hodgson J in Fire & All Risks at 685 about the activities of Mr Adler have no application in the present case. 83 Second, this is not a case in which an appeal is brought by a judgment debtor against the judgment creditor. Any possibility of such an appeal has been foreclosed by the refusal of special leave. 84 Thus, any possibility of the LEC Companies generating funds to pay out the judgment debt (or meet the debts of other creditors) is entirely dependent upon the outcome of further litigation against other persons. 85 Third, even if the LEC Plaintiffs succeed in an appeal to the Court of Appeal against the orders of Stevenson J that will not produce a monetary judgment. At best, it would result in an order setting aside the dismissal of the 2001 Proceedings. The question of the value of the loss of the opportunity to conduct the 2001 Proceedings would have to be determined in further litigation. 86 Moreover, the value of any such litigation, if it were to eventuate, is uncertain and there is no admissible evidence on the question of damages. 87 Fourth, it follows from what I have said that any adjournment of the winding up application would be of uncertain duration. The most that can be said is that it would take some years before a claim for damages could be heard and determined. 88 Cases such as Fire & All Risks, in which an adjournment was granted demonstrate that the discretion to order an adjournment should only be exercised so as to permit a short adjournment. This is consistent with the policy of the statutory scheme embodied in Part 5.4 of Div 4 of the Act that winding up applications should be determined expeditiously. In that regard, s 459R(1) provides that an application for a company to be wound up in insolvency is to be determined within six months after it is made. 89 Plainly, this is not a case in which a short adjournment may enable the LEC Companies to pay the judgment debt. 90 Fifth, the observations of Basten JA and Leeming JA in the first Court of Appeal Decision do not demonstrate that the LEC Plaintiffs have strong prospects of success. 91 As Basten JA pointed out at [19], all that the court was required to do in an application for an extension of time was to review the arguability of the appeal. Neither Basten JA nor Leeming JA considered the prospects of success of the appeal. In so far as they made any comments about prospects, both of their Honours' remarks included considerable reservations about the prospects of success. 92 Sixth, the appeal will not be short. Leeming JA considered that it may conclude in two or three days but a lengthier estimate was made by Allsop P. The nature of the appeal with heavy emphasis upon factual findings demonstrates the likelihood of a long appeal, and the need for the Court to reserve its judgment. 93 Seventh, it is not certain when the appeal will be heard. The admitted insolvency of all of the LEC Plaintiffs suggests that the respondents to the appeal will seek an order for security for costs. That is likely to delay the hearing of the appeal. 94 Eighth, in summary, there are no special circumstances in this case which provide a ground for an adjournment, let alone an adjournment of the length which would be required for there to be any utility to the LEC Companies. 95 The judgment debt is an unsatisfied costs order which was made and entered after a long and expensive trial. The claims made by the LEC Companies were dismissed and all avenues of appeal have been exhausted. It is apparently true that the LEC Companies are not trading but they are continuing to pursue litigation and are thereby incurring further liabilities. An adjournment of the winding up application would merely exacerbate that position.

Other considerations 96 Mr Zdrilic submitted that the winding up application was an abuse of process. That ground was raised in the application to set aside the statutory demands before Brereton J. It is therefore not open to the LEC Companies to raise it in this application without leave: see s 459S(1). 97 In order to demonstrate abuse of process it must be established that the purpose of the proceeding is not to prosecute it to its conclusion but to use the proceeding as a means of obtaining an advantage for which it was not designed: Williams v Spautz (1992) 174 CLR 509 at 526-527. 98 There is no evidence of abuse of process. The Hickie interests were entitled to issue the statutory demands and they were entitled to issue the winding up applications when the demands were not met. As the authorities make clear, the Hickie interests as judgment creditors of the LEC Companies, both of which are admitted to be insolvent, are entitled to a winding up order, subject to the exercise of any relevant discretionary considerations. 99 It may be that a winding up order will have the effect of preventing the LEC Companies from pursuing the appeal against the other defendants. But that is by no means certain because it will be a matter for the liquidator as to what course is taken. 100 In any event, whatever effect a winding up order against the LEC Companies may have on the continuation of the appeal is a consequence which flows from the making of the winding up orders. It is not a collateral advantage beyond what the law offers. 101 Mr Zdrilic submitted that there is an interconnection between the Hickie interests and LEC because he said the Hickie interests were shareholders of LEC. However, no such shareholding interest was demonstrated. 102 In any event, even if it were to be shown that the Hickie interests have an interest in the outcome of the proceedings against the other defendants, that it not a ground for refusing a winding up order founded upon the Hickie interests' status as creditors of the LEC Companies. 103 Mr Zdrilic also submitted that the costs which were the subject of the costs orders were not paid by the Hickie interests but were paid in whole or in part by HTTP. However, that submission was not supported by the evidence. 104 In addition, Mr Zdrilic submitted that it was not in the interest of the Hickie interests to obtain a winding up order because of their prospect of obtaining payment as a result of the further litigation against the remaining defendants. 105 I have dealt with that submission in considering the question of whether to exercise the discretion to adjourn the applications. 106 My reasons for refusing an adjournment are also applicable to Mr Zdrilic's submission that it is not in the public's interest to wind up the LEC Companies because they are not trading. As I said, they are admittedly insolvent but are continuing to incur liabilities for costs of litigation. 107 Nor is the opposition by Mr and Mrs Zdrilic to a winding up order a ground for refusing to make such an order. They claim to be creditors for a substantial sum of money but it is not open to them to rely upon that claim as a ground of opposition in the absence of any evidence of a rational basis for refusing to make a winding up order.

Conclusion and Orders 108 There are no grounds for the exercise of the discretion under s 467(1)(a) to refuse to make winding up orders against the LEC Companies. The discretionary considerations to which I referred in refusing to grant an adjournment apply with equal force to the exercise of the jurisdiction to make the orders that are sought. The approach taken by Leeming JA and Sackville AJA in the second Court of Appeal decision to the refusal of a stay applies equally to the making of a winding up order. 109 All of the formal requirements for the making of winding up orders have been satisfied. 110 Accordingly, in each of the matters I will make the following orders: (1) That the defendant be wound up in insolvency. (2) That Robert Whitton be appointed as official liquidator of the defendant. (3) The costs of the plaintiffs are to be payable out of the assets of the defendant in accordance with s 556 of the Act. I certify that the preceding one hundred and ten (110) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Corporations Act 2001(Cth)s 459C(2)

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