(2005) 54 ACSR 583
- Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123
(2003) 46 ACSR 126
- Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186
(2008) 219 FLR 422
- Elliott v Australian Securities and Investments Commission [2004] VSCA 54
(2013) 97 ACSR 200
Source
Original judgment source is linked above.
Catchwords
(2005) 54 ACSR 583
- Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123(2003) 46 ACSR 126
- Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186(2008) 219 FLR 422
- Elliott v Australian Securities and Investments Commission [2004] VSCA 54(2013) 97 ACSR 200- Ketrim Pty Ltd v Jaeger Corporation Pty Ltd [2002] NSWSC 871(2003) 21 ACLC 8
- Lawstrane Pty Ltd and Victorian WorkCover Authority v Ruttmar [2013] VSCA 57(2005) 54 ACSR 410
- Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24(2001) 39 ACSR 305
- State of New South Wales v Bujdoso [2007] NSWCA 44
Judgment (6 paragraphs)
[1]
The application of UCPR r 36.4
Tibra also submits that order 2 made on 18 November 2015 is an order expressed in such a way that it enlivens UCPR r 36.4(3) and accordingly displaces the date otherwise fixed by that rule. Mr Krochmalik responds that, if the Court sought to make orders to the effect that the order dismissing the proceedings to set aside the Demand would only come into force at a later date (such as 9 December 2015), it had the power to make such an order under r 36.4(3) of the UCPR, and that it would do violence to the stay order to suggest that that is the type of order that was made. Mr Krochmalik therefore submits that the order dismissing the application to set aside the Demand therefore came into effect when it was entered on 18 November 2015, relying on UCPR r 36.4(1).
I accept that the same result as an effective stay of the order could have been achieved by an order that order 1 take effect from a future date, made under UCPR r 36.4(3). However, I was not asked to make, and did not make, an order in that form, and I do not think that I can now read the stay order that was made as supportable under r UCPR 36.4(3) to achieve the same result.
[2]
Whether the presumption of insolvency is rebutted
Tanamerah contends that if, contrary to the conclusion that I have reached, the presumption of insolvency is applicable, the evidence establishes that it is solvent and can pay its debts as and when they fall due and has set aside funds for the satisfaction of the relevant debts owed to Tibra, and that the winding up application should be dismissed on that basis. It is not necessary to address that question, where the presumption of insolvency is not applicable. I will, however, need to address the factual basis of those submissions in dealing with Tibra's claim to wind up Tanamerah on the basis that it is insolvent in fact, to which I now turn.
[3]
Whether Tanamerah is insolvent in fact
Tibra also contends that Tanamerah is insolvent in fact and relies on Mr Tydeman's evidence as to Tanamerah's lack of assets and income, at least in its own right, to support an inference that it cannot meet the judgment debts.
The legal principles applicable to the determination of Tanamerah's solvency are well-established. The question whether Tanamerah is solvent or insolvent is to be determined by reference to s 95A of the Corporations Act. That section has effect that a company is solvent if, and only if, it is able to pay all its debts, as and when they become due and payable. Section 95A(2) has effect that a person who is not solvent is insolvent. That definition adopts a "cashflow test" of insolvency which turns upon the income sources available to the company and the expenditure obligations that it has to meet, although a balance sheet test can provide context for the application of the cashflow test: Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 39 ACSR 305; Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123; (2003) 46 ACSR 126 at [370]ff, aff'd Elliott v Australian Securities and Investments Commission [2004] VSCA 54; (2004) 48 ACSR 621. Whether a company is able to pay its debts as and when they fall due and payable is a question of fact to be determined objectively and the court will have regard to commercial realities in that regard: Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation above at [54]; Lewis (as liquidator of Doran Constructions Pty Ltd (in liq) v Doran [2005] NSWCA 243; (2005) 54 ACSR 410 at [103]; Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186; (2011) 248 FLR 384 at [48]-[49]. In Playspace Playground Pty Ltd v Osborn [2009] FCA 1486 at [40]; Reeves J observed that a determination of solvency is not based on a simple analysis of a company's current assets and liabilities or liquidity at a particular point in time and must involve a consideration of its financial position in its entirety, including matters such as expected profits and other sources of income and funding.
In determining a company's solvency, the court may have regard to the likelihood that it will have funds available to it from sources with which it has no formalised agreement or understanding, including loans from its directors or from third parties, at least if they are not repayable in the short term: Mulherin v Bank of Western Australia Ltd [2006] QCA 175; Williams (as liquidator of Scholz Motor Group Pty Ltd (in liq)) v Scholz [2008] QCA 94 at [110]; International Cat Manufacturing (in liq) v Rodrick [2013] QCA 372; (2013) 97 ACSR 200; First Strategic Development Corporation Ltd (in liq) v Chan [2014] QSC 60 at [67]-[69]. The company's ability to borrow funds can also be taken into account: Lewis v Doran above at [109]-[112].
[4]
Whether a winding up order should be withheld on discretionary grounds
Tanamerah contends that, in all the circumstances, there is a reason not to make an order winding up Tanamerah within the discretion afforded by s 467(1)(a) of the Corporations Act. That section relevantly provides that the Court may, on hearing a winding up application, "dismiss the application with or without costs, even if a ground has been proved on which the Court may order the company to be wound up on the application." Mr Krochmalik submits, and I accept, that the Court has a discretion as to whether it should order that Tanamerah be wound up under that section: Lechmere Financial Corp v Aspermont Ltd [2003] FCA 1138 at [83]-[85]; TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd [2007] NSWSC 1410 at [110]-[118].
Prior to the introduction of that section by the Corporate Law Reform Act 1992 (Cth), the general law recognised that a finding of insolvency can result (as I noted above) in there being an entitlement to a winding up order ex debito justitiae, but nonetheless recognised a corresponding discretion to decline to make a winding up order: FAI Insurances Ltd v Goldleaf Interior Decorators Pty Ltd (No 2) (1988) 14 NSWLR 643 at 660 per McHugh JA; Expile Pty Ltd v Jabb's Excavations Pty Ltd [2003] NSWSC 699; (2003) 46 ACSR 446 at [57]; TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd above at [111]-[113]; Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551 at [60]. In several cases, involving facts that are not analogous with the present facts, the court has exercised its discretion in favour of the defendant in a winding up application, notwithstanding that the presumption of insolvency arising from noncompliance with a creditor's statutory demand had not been rebutted: for example, Lechmere Financial Corp v Aspermount Ltd above at [93]. Those cases generally involved short adjournments, in circumstances that a company would shortly receive funds which would allow payment of the relevant debt. However, in TS Recoveries Pty Ltd v Sea-Slip Marinasw (Aust) Pty Ltd above, Barrett J observed (at [118]) that where insolvency is established (as it was in that case by concession, and in this case by evidence) then:
"the discretion to dismiss the application will be exercised only if some good reason is shown for allowing the admittedly insolvent company to continue in the mainstream of commercial life. That course may be indicated where winding up is opposed on rational grounds by other creditors, or where the applicant's conduct precipitated the company's liability …"
[5]
Orders and costs
I therefore make the following orders:
The Defendant, Tanamerah Estates Pty Limited, be wound up in insolvency.
Mr Timothy James Cook be appointed as liquidator of the Defendant.
The Plaintiff's costs of the proceedings be costs in the winding up.
[6]
Amendments
25 November 2016 - Para 29 - change "2016" to "2015" (twice)
Para 49 - change "where it is no longer be possible" to "where it is no longer possible" (third last line).
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: 19 April 2018
37 VR 320
- Lechmere Financial Corp v Aspermont Ltd [2003] FCA 1138
- Lewis (as liquidator of Doran Constructions Pty Ltd (in liq)) v Doran [2005] NSWCA 243; (2005) 54 ACSR 410
- Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229
- Mulherin v Bank of Western Australia Ltd [2006] QCA 175
- Palmer Petroleum Pty Ltd v BGP Geoexplorer Pte Ltd [2016] QCA 149
- Penson v Titan National Pty Ltd (No 2) [2015] NSWCA 197
- Penson v Titan National Pty Ltd [2015] NSWCA 165
- Permewan Wright Consolidated Pty Ltd v Attorney-General (NSW) (1978) 35 NSWLR 365
- PJM Financial Services Pty Ltd v Citigroup Global Markets Australia Pty Ltd [2008] NSWSC 619
- Playspace Playground Pty Ltd v Osborn [2009] FCA 1486
- R v P (No 2) [2003] NSWCA 360
- Re Aquaqueen International Pty Ltd [2014] NSWSC 1645
- Re Aquaqueen International Pty Ltd [2015] NSWSC 212
- Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551
- Re Marks and Federated Ironworkers' Association; Ex parte Australian Building Construction Employees and Builders' Labourers' Federation (1981) 34 ALR 208
- Re Perth Freight Lines Pty Ltd [2010] VSC 395
- Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 39 ACSR 305
- State of New South Wales v Bujdoso [2007] NSWCA 44; (2007) 69 NSWLR 302
- SY Financial Services Pty Ltd v Risk Business Pty Ltd [2015] VSC 421
- Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1519
- Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1708
- TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd [2007] NSWSC 1410
- VFS Group Pty Ltd v BM2008 Pty Ltd (in liq) [2010] VSCA 277; (2010) 80 ACSR 240
- Williams (as liquidator of Scholz Motor Group Pty Ltd (in liq)) v Scholz [2008] QCA 94
- Zaccardi v Caunt [2008] NSWCA 202
Category: Principal judgment
Parties: Tibra Capital Pty Limited (Plaintiff)
Tanamerah Estates Pty Ltd (First Defendant)
Representation: Counsel:
M Klooster (Plaintiff)
D Krochmalik (9 September 2016), L Whiffen (10 November 2016) (Defendant)
A chronology of events
I should first set out a somewhat simplified factual history of the application, including the events which preceded it, which are largely not in contest in this application. Tanamerah was a former shareholder of Tibra, holding 231,830 shares. On 9 June 2011, those shares were bought back by Tibra pursuant to the provisions of a shareholders' agreement (Tydeman 7.7.16 [11(e)]) and Tanamerah contends that Tibra did not pay the market value of the shares, under the shareholders' agreement or in accordance with a representation made by Tibra, and owes Tanamerah the amount of $556,392 (Tydeman 7.7.16 [11(e)]).
On 29 August 2012, Tanamerah commenced proceedings 2012/269942 in this Court against Tibra ("First Proceedings"). Mr Tydeman, a director of Tanamerah, sought to represent Tanamerah in those proceedings, but Hallen J declined to grant leave to him to do so. Subsequent interlocutory applications were brought by Tanamerah and Mr Tydeman and heard by Bergin CJ in Eq and Hallen J. The First Proceedings were stayed and a costs order was made in Tibra's favour, enforceable forthwith, since Tanamerah was not prepared to engage legal representation in those proceedings. An application for leave to appeal from Hallen J's judgment was dismissed by the Court of Appeal, although the orders made at first instance were varied. Tibra's costs of several proceedings were subsequently assessed and the costs certificates were registered as four judgments of this Court, totalling $112,618.60. Tibra issued a creditor's statutory demand ("Demand") dated 22 May 2015 in respect of the judgment debts arising from those costs certificates.
On 15 June 2015, Tanamerah commenced proceedings 2015/176355 ("Statutory Demand Proceedings") seeking an order setting aside the Demand under s 459G of the Corporations Act. On 23 September 2015, Tanamerah filed an Amended Summons, signed by Mr Tydeman, who sought to carry on the Statutory Demand Proceedings on Tanamerah's behalf. On 1 October 2015, Tibra filed a motion in the Statutory Demand Proceedings seeking, inter alia, an order that those proceedings be stayed for a period in order for a legal representative to enter an appearance on behalf of Tanamerah and, if a legal representative did not do so, an order that the proceedings be dismissed.
On 12 October 2015, I heard Tibra's motion. I invited Mr Tydeman to seek leave to represent Tanamerah in accordance with the relevant provisions of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), which he declined to do, contending that he was entitled to represent Tanamerah by right. In my judgment delivered on that date ([2015] NSWSC 1519), I noted that Mr Tydeman had not accepted the invitation to seek such leave, and also noted the difficulties which can arise where lay persons seek to deal with the somewhat technical issues involved in applications to set aside a creditor's statutory demand, the protective purpose of the relevant rules, and that there was a real question whether Mr Tydeman would be able to identify the relevant issues or, having regard to his affidavit, conduct the application in a manner proportionate to the summary jurisdiction to set aside a creditor's statutory demand. I made the following orders:
"1 Order that the proceedings be stayed to 4.00pm, 16 November 2015 in order for the Plaintiff to obtain legal representation and for a legal representative to formally enter an appearance on behalf of the Plaintiff in these proceedings.
2. Relist the matter in the Corporations (Motions) List at 9.45am on 16 November 2015 with a view to determining the status of the proceedings and whether, if no legal representation has been obtained for the Plaintiff, they should be dismissed."
Whether a presumption of insolvency is available
Tibra seeks to rely on the presumption of insolvency that arises under s 459C(2)(a) of the Corporations Act from Tanamerah's failure to comply with the Demand. However, that section applies only where the creditor, relevantly Tibra, commenced the winding up proceedings within 3 months of the date by which the debtor, relevantly Tanamerah, failed to comply with the creditor's statutory demand. It is common ground that the date that Tanamerah failed to comply with the creditor's statutory demand and the presumption of insolvency arose is determined under s 459F of the Corporations Act which provides:
"When company taken to fail to comply with statutory demand
(1) If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.
(2) The period for compliance with a statutory demand is:
(a) if the company applies in accordance with section 459G for an order setting aside the demand:
(i) if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand - the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or
(ii) otherwise - the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or
(b) otherwise - 21 days after the demand is served."
These proceedings were commenced on 11 March 2016 and the presumption of insolvency is therefore only available if it arose on or after 11 December 2015. It is common ground that Tanamerah applied under s 459G of the Corporations Act to set aside the Demand and that that application was not a nullity, although it was dismissed when Tanamerah declined either to retain legal representation or to seek leave to be represented by Mr Tydeman as its director. The Court was not asked to, and did not, then make an order extending the time for compliance with the Demand under s 459F(a)(i) of the Corporations Act, where there was no suggestion that Tanamerah accepted that the Demand had a proper basis or had any intention of complying with it, if the time to do so were extended. The period for compliance with the Demand is therefore to be determined under s 459F(2)(a)(ii), being 7 days after the application is "finally determined or otherwise disposed of".
As I noted above, it is also common ground that, if Tanamerah's application to set aside the Demand was "finally determined" or "otherwise disposed of" on 18 November 2015 (when the orders dismissing the proceedings were made but stayed) then Tanamerah did not comply with the Demand on 26 November 2015, a presumption of insolvency arose at that time, and that presumption of insolvency is not now available to Tibra since these proceedings were not commenced within the relevant 3 month period, by 26 February 2016. It is also common ground that, if Tanamerah's application to set aside the Demand was not "finally determined" or "otherwise disposed of" until 9 December 2015, when the stay that I had ordered lapsed, then Tanamerah did not comply with the Demand on 17 December 2015, a presumption of insolvency arose on that date and that presumption is available to Tibra, since that presumption arose in the 3 months prior to the commencement of the proceedings on 11 March 2016. It is also common ground that the proceedings to set aside the Demand were "finally determined" or "otherwise disposed of" at least by 9 December 2015, when the stay lapsed, although Tanamerah had not exhausted its ability to appeal against that determination, by right or by leave, at that time: Buckland Products Pty Ltd v Deputy Commissioner of Taxation of the Commonwealth of Australia [2003] VSCA 85 at [5]-[9]; Re Perth Freight Lines Pty Ltd [2010] VSC 395 at [21] (reversed on other grounds as VFS Group Pty Ltd v BM2008 Pty Ltd (in liq) [2010] VSCA 277; (2010) 80 ACSR 240).
Mr Klooster relies on five matters for the proposition that Tanamerah is insolvent in fact. The first is that, as I noted above, Mr Tydeman's evidence in his first affidavit dated 7 July 2016 is that Tanamerah does not conduct any business or have any commercial operations and has no cashflow, no assets, no property, no plant or equipment and no bank accounts, at least in its own right. Mr Whiffen, solicitor, who appeared for Tanamerah at the hearing on 10 November 2015, submitted that position would be typical of a company that solely functions as a trustee of a superannuation trust. While I accept that may be the case, such a company will be insolvent if it incurs debts that it cannot meet as and when they are due for payments from its own resources or funds lend to it (other than on a basis that they are also immediately repayable) or by exercising a right of indemnity against the assets of the relevant trust.
Second, Mr Klooster submits that the Deed of Credit Facility provided by Ms Tydeman does not establish solvency, where it substitutes loan funds available for a short term or payable on demand, being one form of an immediate or near immediate obligation, for an existing immediate obligation. Mr Klooster refers to Australian Securities and Investments Commission v Edwards [2005] NSWSC 831; (2005) 54 ACSR 583 at [99], where Barrett J (as his Honour then was) observed that:
"… the availability of such funds in the form of a loan will not enhance solvency (or have the potential to avoid a finding of insolvency) unless the loan terms are such as to exclude the loan liability from consideration in its own right as part of the debts due or near due. In other words, availability of loan funds for a very short term or payable on demand, as a source from which debts overdue may be paid, does not enhance solvency: it merely substitutes one form of immediate (or near immediate) obligation for another. There is also the point (emphasised by the Court of Appeal in Expile Pty Ltd v Jabb's Excavations Pty Ltd (2003) 45 ACSR 711; [2003] NSWCA 163) that the capacity to raise funds from external sources must be judged in a practical and businesslike way by reference to the commercial realities of the case, not by way of some theoretical textbook exercise. Possibilities are not enough. Genuine and realistic availability, as a matter of commercial reality, must be seen."
Both aspects of his Honour's observation are relevant here where, as I will note below, the loan facility provided by Ms Tydeman would be repayable on demand, if called upon, and there is no real prospect that that facility will be called upon to pay debts that Tanamerah and Mr and Ms Tydeman do not in fact wish to pay.
Mr Whiffen responds, in oral submissions, the loan funds will "usually" be made available on demand and a loan made on that basis is not something that would "necessarily render a company insolvent" (T62). I accept that a borrowing on a short term basis would not itself make a company insolvent. However, Tibra's submission is not that the Deed of Credit Facility, so far as it is repayable if it is called upon, itself makes Tanamerah insolvent, but that it does not displace the inference of insolvency that follows from the unpaid judgment debts, Mr Tydeman's evidence as to Tanamerah's lack of assets and income in its own right and the lack of evidence of any other assets, by way of indemnity or otherwise, that could be readily realised or applied to meet the judgment debts.
Third, Mr Klooster submits that the fact that the judgment debts have been unpaid for over two years, and that Tanamerah has been on notice of them for over 18 months, supports an inference that Mr Tydeman and Ms Tydeman do not propose to utilise their own funds to repay debts of Tanamerah generally but only such debts as they may choose to pay. Mr Klooster refers to my observation in Re Aquaqueen International Pty Ltd [2014] NSWSC 1645 at [29], affirmed by the Court of Appeal in Penson v Titan National Pty Ltd (No 2) [2015] NSWCA 197, that solvency is not established by the advance of personal funds to pay some, but not other, debts of a company. Mr Whiffen sought, in oral submissions, to distinguish the position in Re Aquaqueen International Pty Ltd [2014] above on the basis that those decisions involved a presumption of insolvency arising from noncompliance with a creditor's statutory demand (T64). While that case was determined in that context, it does not seem to me that the distinction is material, where Tibra has here established the evidentiary basis for a finding of insolvency arising from the unpaid judgment debts and Mr Tydeman's evidence as to Tanamerah's position.
Fourth, Mr Klooster points out, correctly, that Tanamerah does not lead objective evidence to support an assessment of its assets and liabilities. In submissions as to whether Tanamerah had rebutted the presumption of insolvency (which I have held is not applicable), which are also relevant to the question of its solvency in fact, Mr Krochmalik accepted that Tanamerah had not led detailed evidence of its financial position and that, for example, its financial statements were not in evidence. He submitted, by reference to authority, that it would be oppressive if a "small, viable company, with no creditors" were required to expend significant sums to employ an external accountant to analyse its books and records to rebut a presumption of insolvency: Commonwealth Broadcasting Corp Pty Ltd v Pacific Mobile Phones Pty Ltd [2008] QSC 210 at [29]; (2008) 219 FLR 422; SY Financial Services Pty Ltd v Risk Business Pty Ltd [2015] VSC 421 at [49]. It seems to me that that proposition is of little assistance to Tanamerah, since it is not a company "with no creditors" but instead a company which owes substantial judgment debts that have been unpaid for a long period.
Fifth, Mr Klooster submits that, even if Tanamerah had a right of indemnity from the assets of ASF, there is no evidence as to the value of those assets. Tanamerah, on the other hand, submits that it has a right of indemnity and reimbursement from the superannuation fund of which it is trustee under s 59(4) of the Trustee Act 1925 (NSW) and equitable principles. There is no evidence as to the value of the assets of AFT (including the value of the asserted cause of action against Tibra, as distinct from the amount claimed) and also no evidence that any such assets can be realised in a timely way to meet the judgment debts.
Tanamerah also relied on the matters raised in Mr Tydeman's third affidavit dated 27 September 2016, by reference to the suggested offsetting claim, to submit that it was solvent. That affidavit refers to matters which I understand to be the substance of the issues in dispute in the First Proceedings. Mr Tydeman contends that Tibra was required to pay market value to acquire Tanamerah's shares in Tibra under the terms of a shareholders' agreement; Tanamerah served a transfer notice in accordance with clause 11.3 of that shareholders' agreement on 10 January 2011; Tibra's chief financial officer determined the market value for the shares to be acquired from Tanamerah as $4.28 per sale share, or $992,232.40 in total on 1 March 2011; Tanamerah gave notice requiring Tibra to proceed with the transaction on 30 March 2011; and Tibra completed the transaction by transferring the sale shares held by Tanamerah to itself, at a value of $1.88 per share for a total of $435,840.40. Tanamerah submits that there is a "genuine unresolved and offsetting claim" against Tibra for at least $556,392 to complete the sale of the shares, together with interest of $204,836.02 from 9 June 2011.
No evidence was led by either party that would allow the Court to determine whether the earlier value of $4.28 per sale share attributed by Tibra to the shares, or the later value of $1.88 attributed by Tibra to the shares, or a different value for the shares, was correct, if that is a relevant matter. The evidence establishes only that Tibra had assessed those shares at two different values at different times; Tanamerah now seeks to support the higher value; Tibra now seeks to support the lower value; and the First Proceedings addressed to that dispute have been stayed since 2012, by reason that Tanamerah has not appointed legal practitioners to conduct them on its behalf. As I have noted above, these matters are not available to support an offsetting claim in this application. It seems to me that these matters also do not support Tanamerah's solvency, where its claim in the First Proceedings will not lead to a recovery in the foreseeable future, since, quite apart from any question of the merit of that claim, it cannot be pursued while the stay of the First Proceedings remains in place.
Mr Whiffen also submits that Tibra and Tanamerah are in litigation and are not "well disposed towards each other" and that Tanamerah "simply does not wish to pay" Tibra, "because it believes it has a genuine offsetting claim that is subject to those proceedings" (T62). However, that proposition does not assist Tanamerah if the fact is, not only that it does not wish to pay the judgment debts, but that it also cannot pay them as and when they fall due.
The determination of Tanamerah's solvency seems to me to follow from largely undisputed facts. The judgment debts against Tanamerah have existed, and not been satisfied by Tanamerah, for a lengthy period, although I accept that (as Mr Whiffen submits) Tanamerah has no wish to satisfy those debts even if it had capacity to do so. It seems to me that Mr Tydeman's evidence establishes that Tanamerah does not, in its personal capacity, have the capacity to satisfy the judgment debts even if it had wished to do so. Tanamerah has led no evidence to establish that it has a right of indemnity against any assets of ASF on which it could rely to satisfy the judgment debts, or as to the nature or value of any such assets or how quickly they could be realised. I infer that evidence of the state of Tanamerah's financial position as indicated by its financial records would not have assisted its case, where evidence of those records was not led in that case, and I can more readily draw an inference that is otherwise available on the evidence led by Tibra on that basis: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419; Zaccardi v Caunt [2008] NSWCA 202 at [27].
It seems to me that the deed of indemnity dated 7 July 2016 given by Ms Tydeman in favour of Tanamerah does not provide any real support for its solvency. As I noted above, Ms Tydeman has agreed to indemnify Tanamerah in the specified amount, but only if Tanamerah's board including Ms Tydeman unanimously invokes the indemnity. Tanamerah has not invoked that indemnity in the four months since it was given in order to meet the judgment debts, Mr Tydeman leads no evidence of any intent now to do so and I infer that it does not propose now to do so. An indemnity that will not be called upon does not assist Tanamerah in order to meet judgment debts that are now due and payable. It seems to me that the Deed of Credit Facility between Ms Tydeman and Tanamerah also does not provide any real basis to be satisfied that Tanamerah can meet the judgment debts, both because Ms Tydeman may vary the amount of the facility (including reducing it to nil) at her absolute discretion (albeit by reference to "changed circumstances" such as, for example, any further attempt to enforce the judgment debts against it) and because I also infer that Tanamerah has no intention of calling on the credit facility, where Mr Tydeman leads no evidence of any intent to do so and Tanamerah has not done so in the several weeks in which that facility has been available. Even if Tanamerah did draw upon the facility, it would then replace the judgment debts that are now due and payable with a debt owed to Ms Tydeman that is repayable on demand, which there is no evidence that it could repay.
In these circumstances, this is not a case where Tanamerah has the capacity to meet the judgment debts and simply chooses not to do so. This is instead a case where Tanamerah does not have the capacity to meet the judgment debts, possibly because it chooses not to have assets to which Tibra could have recourse by taking other enforcement steps, and is therefore unable, and not only unwilling, to meet its debts as and when they fall due.
The formal requirements for a winding up are satisfied. There is evidence of service of the winding up application, supporting affidavit and consent of liquidator upon Tanamerah which has in any event appeared in the proceedings. There is evidence that notification of the winding up application has been given to the Australian Securities and Investments Commission and a notice of the application has been published on the ASIC insolvency notices website. An affidavit of debt of Mr Pickwell dated 7 November 2016 confirmed that the amount of $118,545.73 remained due and payable by Tanamerah to Tibra, and indicated the total amount owing by Tanamerah to Tibra would be a higher amount, after adjusting for interest and the small amount received by Tibra pursuant to the garnishee order. A consent of liquidator has been filed with the Court.
Mr Krochmalik submits that the discretion should be exercised in favour of declining to wind up Tanamerah, because the evidence does not establish that it is insolvent and, in reality, "it could well be solvent". I do not accept that submission, where I have held that Tanamerah is insolvent as a matter of fact. Second, Mr Krochmalik submits that winding up proceedings are not a substitute for debt collection and a failure to pay a debt is not, without anything else, conclusive of insolvency. While I am content to proceed on that basis, for present purposes, that proposition does not assist Tanamerah where I have found that it was insolvent as a matter of fact and unable as well as unwilling to pay the judgment debts, at least without calling on the deed of indemnity or Deed of Credit Facility, which it will not do. Mr Krochmalik also submits that Tanamerah's application to set aside the Demand was dismissed because it did not have legal representation, rather than being dismissed on its merits. I have set out the unfortunate history of that application above. That matter also does not appear to me to assist Tanamerah where I have held that it is insolvent as a matter of fact.
Tanamerah points to the risk that, if it is wound up, it will lose the benefit of any cause of action in the First Proceedings, if a liquidator elects not to pursue the claim, and will at least lose the right to control the conduct of those proceedings. I accept that that is a relevant consideration, notwithstanding the fact that the First Proceedings are presently stayed. However, it seems to me that the existence of Tibra's claims in the First Proceedings, as set out in paragraphs 63-64 above, do not support an exercise of a discretion not to wind up Tanamerah. First, the Court cannot assess the merit of Tanamareh's claim on the evidence before it. Second, any adjournment of the winding up application to allow that claim to be pursued could continue indefinitely into the future, because the claim cannot be pursued while the stay remains in place. Third, any loss of the benefit of the proceedings seems to me to result from Tanamerah's choice not to call upon its arrangements with Ms Tydeman, so that it does not in fact have the capacity to meet the judgment debts against it.
I am not satisfied that good reason to adjourn or dismiss the winding up application and allow Tanamerah to continue in existence as an insolvent company has been established here, where that would leave Tanamerah in the position that it cannot, and will not, pay the judgment debts and Tibra would be deprived of any other practical means to enforce the costs orders in its favour.
Finally, Tanamerah submits that the Court has the power to adjourn the application to permit Tanamerah to pay the amount of the debt and, as a last resort, the Court should exercise that power to permit the debt to be paid. I invited Tanamerah to consider whether it wished to take that course, and potentially deprive Tibra of its standing as a creditor, at the conclusion of the first day of the hearing on 9 September 2016. Tanamerah has chosen not to take that course in the several weeks since that hearing, Tibra has now been put to the costs of two days of this hearing, and the community has funded the Court time devoted to that hearing. I am not satisfied that the matter should be further adjourned to allow Tanamerah now to do, or again not do, what it has had the opportunity to do and has not done over the last eighteen months, namely to pay the judgment debts.
On 9 November 2015, Tanamerah commenced proceedings in the Court of Appeal seeking to set aside my judgment of 12 October 2015.
When the matter was relisted before me on 16 November 2016, Tanamerah had not obtained legal representation. I delivered a further judgment ([2015] NSWSC 1708) in which I observed (at [7]-[11]) that:
"It seems to me the preferable course, consistent with my earlier judgment, will be to allow [Tanamerah] until 4.00pm today for any change of mind, and make a direction that any Notice of Appearance of a legally qualified representative which it files by that time should also be copied to my Associate. If a Notice of Appearance by such a person is not filed by that time, I propose to make an order dismissing the proceedings in Chambers, consistent with the conclusion which I reached in my earlier judgment. There seems to me to be no reason not to take that course, in circumstances where it appears the Company will not take the opportunity to retain a legally qualified representative which had been afforded to it.
It seems to me, however, that it would be consistent with s 56 of the Civil Procedure Act and established principle to stay the order that I propose to make dismissing the proceedings, if the Company has not filed a Notice of Appearance of a legally qualified representative, for a relatively short period of 21 days, to allow the Company to pursue its appeal against my earlier judgment with expedition. Mr Klooster, who appears for Tibra, has pointed out that an appeal in respect of another issue between the Company and Tibra is already listed in the Court of Appeal in early December 2015, although it will be a matter for the Court of Appeal whether it is prepared to deal with the two issues on that date, where the second of those issues, arising from my judgment, may be in relatively narrow scope. In any event, even if the Court of Appeal were not prepared to deal with both issues on the same date, a stay of the proposed order dismissing the proceedings for a 21 day period would allow the Company an opportunity to pursue its application for leave to appeal, or an appeal so far as my judgment is final in character, on an expedited basis. The Court of Appeal would then have the opportunity to consider whether to extend the stay which I would order, for a further period, depending upon its assessment of the prospect of the appeal. …
I recognise that the Court of Appeal may take a different view from that which I have taken in my judgment, and that there would be at least some potential prejudice to [Tanamareh], if a stay were not granted for a short period, since it could then be exposed to the commencement of a winding up application, notwithstanding that winding up application might well be adjourned pending the determination of its application for leave to appeal, or its appeal from, my judgment. There is little disadvantage to Tibra from a stay for a short period, particularly where the parties will already be before the Court of Appeal on another matter, and Mr Klooster, fairly, did not oppose a stay for 21 days on that basis.
In those circumstances, it seems to me that the proper course will be to order a stay for a short period, of an order made dismissing the proceedings if no Notice of Appearance is filed by 4pm today particularly in circumstances where the respective parties are before the Court of Appeal within that relatively short period in any event."
I then made the following orders:
"1. Direct the Plaintiff to file and serve any Notice of Appearance by a legally qualified representative, which it seeks to file, by 4.00pm today and deliver or send a copy of that Notice of Appearance to the Associate to Black J by that time.
2. Note that, if no such Notice of Appearance is delivered to or received by the Associate to Black J by that time, Black J will make an order in Chambers dismissing the proceedings with costs, and staying that order for 21 days, to allow the Plaintiff to bring such application for leave to appeal or such appeal as it may be advised."
Tanamerah did not subsequently file and serve a notice of appearance by a legally qualified representative and, on 18 November 2015, I made orders in chambers as I had foreshadowed, that:
1. The proceedings be dismissed with costs.
2. Stay Order 1 to 6pm 9 December 2015.
Those orders were entered on that date.
On 25 November 2015, Tanamerah filed a notice of motion in the Court of Appeal seeking leave to appeal my further decision and to stay that decision pending the determination of its appeal. On 30 November 2015, the Court of Appeal, constituted by Leeming JA, allowed Tanamerah to amend its existing application for leave to appeal to extend it to both of my decisions but declined further to extend the stay that I had ordered, which lapsed on 9 December 2015 in accordance with its terms. Tanamerah subsequently brought further applications in the Court of Appeal and for special leave to appeal to the High Court, which were not successful.
As I noted above, on 11 March 2016, Tibra filed the Originating Process in these proceedings, seeking to wind up Tanamerah. It is common ground that that application was filed outside the three month period in which a presumption of insolvency is available arising from noncompliance with a creditor's statutory demand, if Tanamerah's application to set aside the Demand was "finally determined" or "otherwise disposed of" on 16 or 18 November 2015, and within the three month period in which that presumption is available if that application was "finally determined" or "otherwise disposed of" at the time the stay of the order made on 18 November 2015 lapsed on 9 December 2015.
Tibra's primary submission is that the stay that I foreshadowed by my judgment of 16 November 2015 and ordered on 18 November 2015 deprived the order dismissing the proceedings of all legal effect and operation as at that date, so that they were not "finally determined" or "otherwise disposed of" until that stay lapsed on 9 December 2015. Alternatively, Tibra submits that, even if Tanamerah's application to set aside the Demand was "determined" by the judgment of 16 November 2015 or when I made orders on 18 November 2015, it was not "finally determined" until 9 December 2015 on the basis that the Court was not functus officio until that time in that the proceedings were still on foot and Tanamerah was free to make any applications it considered appropriate. Mr Klooster, who appears for Tibra, emphasises that the phrase "finally determined" is used in s 459F(2)(a)(ii) of the Corporations Act and not in s 459R of the Corporations Act which requires that winding up proceedings be "determined" within six months.
Mr Klooster refers to the decision of the Court of Appeal in Frumar v The Owners of Strata Plan 3695 [2010] NSWCA 172 where Handley AJA (with whom Macfarlan JA agreed) observed that a permanent stay of a judgment of the District Court of New South Wales deprived that judgment of all legal effect or operation and observed (at [62]) that:
"It seems to me therefore that the permanent stay of the 'judgment' of 15 November 2005 deprived it of all legal effect or operation. It ceased to be the source of any legal right or duty, there was no judgment debt and nothing was owing under it. The 'judgment' had become a scrap of paper."
Mr Klooster also relies on Handley JA's observation in R v P (No 2) [2003] NSWCA 360 (at [8]) that:
"… it seems to me that the stay of final orders, that is the suspension of them, must deprive them of continuing legal effect while the stay continues … ."
Mr Klooster also refers to other decisions that have treated the legal effect of a stay as being to suspend the operation and legal effect of a judgment and consequential orders: Bunnings Forest Products Pty Ltd v Bullen (1994) 126 ALR 660 at [28]; Lawstrane Pty Ltd and Victorian WorkCover Authority v Ruttmar [2013] VSCA 57; (2013) 37 VR 320 at [17].
Mr Klooster also relies on the decision of the Court of Appeal in State of New South Wales v Bujdoso [2007] NSWCA 44; (2007) 69 NSWLR 302 which considered whether proceedings were "finally determined" for the purposes of a transitional provision under the Civil Liability Act 2002 (NSW) which applied to proceedings so long as they had not been "finally determined" by a court or tribunal before the commencement of an amendment. Hodgson JA there observed (at [16]) that:
"In my opinion, there is a final determination of proceedings, for the purposes of [the transitional provision], when there has been a final judgment at first instance, unless and until that judgment is set aside on appeal, at least unless there has been a stay of the judgment."
Mr Klooster relies on Hodgson JA's observation as authority that proceedings are not "finally determined" in circumstances where a stay has been granted. Mr Krochmalik, who appeared for Tanamerah at the hearing on 9 September 2016, responds, and I accept, that that observation does not go so far and leaves that question open for further determination.
Mr Krochmalik submits, first, that the language of s 459F of the Corporations Act supports the conclusion that the application to set aside the Demand was finally determined when the order was made dismissing the proceedings, although that order was stayed at the time it was made. Mr Krochmalik rightly points out that that provision refers to "the application under section 459G" (being an application to set aside a creditor's statutory demand) and not to the determination or conclusion of the proceedings by which the application is brought. Mr Krochmalik submits that the relevant application was "finally determined" when the order was made dismissing the proceedings, although the proceedings persisted after that date because that order was the subject of a stay. But for the authorities to which I refer in paragraphs 42 - 46 below, I would not have accepted that submission, and would have preferred the view that a contemporaneous stay had the effect of depriving the order dismissing the proceedings of legal effect, and neither the application to set aside the Demand or the proceedings was determined, still less finally determined, until that order had legal effect.
Secondly, Mr Krochmalik relies on the proposition, which is common ground as I noted above, that the mere fact that an order dismissing an application to set aside a creditor's statutory demand is susceptible to appeal (or, even, that an appeal has been lodged from such an order) does not mean that the application is not finally determined or otherwise disposed of when the order is made: Buckland Products Pty Ltd v Deputy Commissioner of Taxation of the Commonwealth of Australia above at [6]-[9]; Palmer Petroleum Pty Ltd v BGP Geoexplorer Pte Ltd [2016] QCA 149. Mr Krochmalik also relies on the observation of Young CJ in Eq (as his Honour then was) in Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229 at [64] that:
"[A] 'final determination' under s 459F occurs when the master or judge at first instance gives his or her decision".
Mr Krochmalik submits that decisions of intermediate appellate courts have held that an application under s 459G of the Corporations Act is finally determined when the final orders are made, and that there is no reference in those cases to such applications being determined only after a stay of such orders has expired. While I would follow those decisions, if they determined a relevant matter, they do not assist Tanamerah where (as Mr Krochmalik recognises) they are not directed to the position where the order that is said to "finally determine" or "otherwise dispose of" the proceedings is stayed at the time it is made. It is not to the point that, obviously enough, an order that was not stayed would have finally determined the matter, where that was not the order that was made.
Third, Mr Krochmalik submits that, as a matter of logic, an application is concluded when orders are made dismissing the proceedings in which the application is brought, and the fact that such orders are stayed does not detract from the fact that such orders have been made. It seems to me that proposition is, with respect, no more than an assertion of the correctness of the conclusion for which Mr Krochmalik contends and of the lack of effect of a contemporaneous stay. That assertion takes the matter no further unless the correctness of that conclusion was already self-evident.
Mr Krochmalik submits that this is not a case where the stay deprived the order of all meaning, by suspending the operation of the order. Mr Krochmalik accepts that that the court has power to make an order suspending the operation of ancillary orders, although he also points to authority that such a power is "seldom invoked" and of an "exceptional course": Permewan Wright Consolidated Pty Ltd v Attorney-General (NSW) (1978) 35 NSWLR 365 at 367; Re Marks and Federated Ironworkers' Association; Ex parte Australian Building Construction Employees and Builders' Labourers' Federation (1981) 34 ALR 208 at 211-212. It seems to me that this case was of an exceptional character that may have warranted such an order. It is not the ordinary experience in the Corporations List that a corporate plaintiff, still less a trustee of a regulated superannuation fund, refuses either to retain legal representation to protect its (and its beneficiaries) interests in an important application or to seek leave for a director to represent the company, with the result that that application cannot go to a hearing on the merits. There seems to me to be particular reason to preserve Tanamareh's opportunity to appeal in such a case, against the contingency that an appellate court might consider that the matter should be allowed to go to a hearing on the merits despite the unsatisfactory position in respect of Tanamerah's representation and the risks to which that hearing would have exposed Tanamerah and Tibra.
Mr Krochmalik also submits that an order staying the operation of order 1 made on 18 November 2015 would need to have been clearly expressed in its terms, and that there is nothing in the terms of the stay order (being, order 2 of the orders made on 18 November 2015 in the Statutory Demand Proceedings) that suggests that such an order was made. Again with respect, it does not seem to me that there was any real doubt, on the terms of the order and in its context, as to the operation of that order and it was sufficiently clear for the relevant purpose.
Mr Krochmalik also submits that, although there is only limited authority that has considered the question of the interaction of a stay of an order dismissing proceedings under s 459G of the Corporations Act and the timing regime in s 459F of the Corporations Act, that authority supports Tanamerah's position. Mr Krochmalik draws attention to PJM Financial Services Pty Ltd v Citigroup Global Markets Australia Pty Ltd [2008] NSWSC 619, where Barrett J (as his Honour then was) considered an application by a debtor for an order staying an order dismissing an application to set aside a creditor's statutory demand under s 459G of the Act, made after the time for compliance with the Demand had expired. His Honour observed (at [7]-[10], [14]) that:
"Apart from the very real question of the meaning, if any, of an order staying execution of an order of dismissal, it is the contention of the defendants that utility of any such order is denied by the legislative scheme concerning statutory demands in Div 2 of Pt 5.4 of the Corporations Act. …
When, on 4 June 2008, the court ordered that each s 459G application be dismissed, that application was, as mentioned in s 459F(2)(a)(ii) "finally determined"; and this was so even though rights of appeal may have then been available …
Because each s 459G application was "finally determined" on 4 June 2008 and there was no order under s 459F(2)(a)(i) extending the time for compliance with the statutory demand (nor, indeed, any application by any plaintiff for such an order), the period for compliance was that stated in s 459F(2)(a)(ii). That period ended at the expiration of seven days after the making of the order of 4 June 2008. …
In the circumstances of each of the cases now before me, an appeal to the Court of Appeal will be pointless because non-compliance with the statutory demand became established and complete at the end of 11 June 2008 and cannot now be undone. A stay of execution of each order of dismissal made on 4 June 2008 pending determination of an appeal, if otherwise in some way meaningful or efficacious according to its terms, is therefore equally pointless."
Mr Krochmalik submits that his Honour there held that the relevant order extending time for compliance with the creditor's statutory demand had to be made by way of an order under s 459F(2)(a)(i) of the Corporations Act, rather than by way of an order staying the ancillary order dismissing the proceedings in which the s 459G application was brought. He also submits that that reasoning is consistent with the position that the statutory regime provided by Division 2 of Part 5.4 of the Corporations Act is designed to ensure that the time for compliance with a statutory demand (and thereby, the time for determining when the presumption of insolvency operates) is to be determined by reference to the existence of orders made under s 459F(2)(a) of the Corporations Act, rather than by the rules of Court.
It does not seem to me that the reasoning of Barrett J (as his Honour then was) has the effect for which Mr Krochmalik contends. First, his Honour was dealing with the position where an order dismissing an application to set aside a creditor's statutory demand had been made and taken effect, the time for compliance had lapsed and a presumption of insolvency had already arisen. His Honour's decision was plainly correct in that context, but does not seem to me to deal with the position where a stay is ordered at the same time an order that would have the effect of dismissing the proceedings is made. That question did not arise in that case. It is also plainly correct that an order under s 459F of the Corporations Act could extend the time for payment and delay a presumption of insolvency arising, but that does not address the position where a plaintiff cannot or will not seek such an order, including because it contends the decision not to set aside the Demand is incorrect and cannot or will not pay the amount that is the subject of the Demand. I will address that position further below. Mr Krochmalik's further submission that the time for compliance with a statutory demand is to be determined by reference to the existence of orders made under s 459F(2)(a), rather than by the rules of Court, is inconsistent with Tanamareh's acknowledgement that that time could also be affected by an order made under UCPR r 36.4, to which I will refer below.
Mr Krochmalik also relies on Ketrim Pty Ltd v Jaeger Corporation Pty Ltd [2002] NSWSC 871; (2003) 21 ACLC 8 at [18]-[20], where Campbell J (as his Honour then was) observed that the language of s 459F of the Corporations Act draws a distinction between the "hearing" of an application under s 459G of the Act, and the time when "the application under s 459G is finally determined or otherwise disposed of" and observed, by reference to authority, that the "final determination or final disposition" of the application under s 459G of the Act is not deferred to when any appeals from an initial refusal of a judicial officer to extend the time for compliance have been heard, or the last of the rights of appeal have run out; and that a construction of the section should not be adopted which had the result that:
"… if there were to be an application to set aside a statutory demand, and an appeal were to be lodged in accordance with the court rules, then, automatically, the time for compliance with the statutory demand would not arise until seven days after (at least) the time when the last of the appeals had been decided. It seems to me inconsistent with the policy which underlies the sections that any such result should arise."
Tibra does not contend for the position rejected by Campbell J (as his Honour then was) and the question here is not the effect of the filing of an appeal, or application for leave to appeal, but the effect of a stay of a judgment made by a judge who gave that judgment. If that stay deprived that judgment of legal effect while it was in place, then there seems to me there would be no inconsistency between that result and the time limits imposed by s 459F of the Corporations Act, by contrast with the position to which Campbell J referred, if the filing of an appeal were automatically to extend the time for compliance with a statutory demand.
Mr Krochmalik also relies on an analogy with s 459R of the Corporations Act, which requires a winding up application to be "determined within 6 months after it is made". Mr Krochmalik refers to the decision in Re Aquaqueen International Pty Ltd [2015] NSWSC 212, where Aquaqueen International Pty Ltd ("Aquaqueen") contended that a winding up application was not "determined" until after a stay of the winding up order had expired. Mr Krochmalik rightly points out that Brereton J rejected that argument, observing (at [11]) that:
"In my view, the application was determined on 20 November 2014 when the winding-up order was made, notwithstanding that a stay was granted."
Leave to appeal from the decision of Brereton J was refused by the Court of Appeal in Penson v Titan National Pty Ltd [2015] NSWCA 165, where Ward JA (with whom Leeming JA agreed) observed (at [33], [35]) that:
"[T]he fact that the operation of the orders was stayed, by successive orders, until 11 February 2015 does not alter the fact that they were pronounced on 20 November 2014 and that is the date on which they were made. …
Here, Black J made the winding up orders in question at the time that he handed down his reasons for judgment and pronounced those orders. They took effect, subject to the operation of the subsequent stay orders, from that time. The orders had the effect of finally determining the winding up application. On the discharge of the stay on the operation of those orders on 11 February 2015 there was no winding up application still to be determined. It had already been determined as at 20 November 2014."
Mr Krochmalik submits that no distinction can be drawn between the words "finally determined or otherwise disposed of" in s 459F of the Corporations Act, and the word "determined" in s 459R of the Corporations Act, especially having regard to the fact that Ward JA used the phrase "finally determin[ed]" in the passage set out above. It does not seem that the parties, in Re Aquaqueen International Pty Ltd above or in the application for leave to appeal in Penson v Titan National Pty Ltd above, relied on the appellate decisions on which Tibra now relies to establish that a stay made at the time of an order can deprive that order of legal or operative effect.
Mr Klooster seeks to distinguish the decisions in Re Aquaqueen International Pty Ltd above and Penson v Titan National Pty Ltd above from the present case on several bases. First, Mr Klooster points out, s 459R of the Corporations Act uses the concept "determined" not the concept "finally determined or otherwise disposed of", although it must be noted that Ward JA referred to "finally determin[ed]" in the passage set out above; second, he submits, s 459R of the Corporations Act appears in a different Part of the Corporations Act and has a different statutory purpose, to encourage the prompt determination of winding up applications rather than to provide for the currency of a presumption of insolvency. It should also be recognised that my decision at first instance in Re Aquaqueen International Pty Ltd above was a decision that determined a winding up application on its merits, whereas my decision in this case was reached on procedural grounds, reflecting Tanamareh's refusal to either obtain legal representation or seek leave to be represented by its director and comply with the requirements for such leave. It may be arguable that a decision on a procedural basis would less readily be characterised as a "final determination" where a stay of it was ordered, and would more readily have been reopened if, for example, Tanamerah had belatedly determined to seek leave for its director to represent it, prior to the stay of the order lapsing on 9 December 2015.
I see force in each of these matters. However, I consider that I must give substantial weight to the reasoning in Re Aquaqueen International Pty Ltd above and the application for leave to appeal in Penson v Titan National Pty Ltd above, whether or not it is strictly binding in respect of this application, and that coherence in the construction of similar phrases appearing in ss 459F and 459R of the Corporations Act requires that I follow that reasoning in this application. The orders made on 18 November 2015 were, on the reasoning in Re Aquaqueen International Pty Ltd above and Penson v Titan National Pty Ltd above, at least a "determination" of the matter, notwithstanding the stay of those orders; it seems to me that, once those orders are treated as a "determination" of the matter, they must also be treated as a "final determination" of the matter since they would take effect unless and until set aside on appeal; and, notwithstanding that ss 459F and 459R of the Corporations Act appear in different Parts of the Corporations Act and have somewhat different statutory purposes, the phrase "finally determined" appearing in s 459F and "determined" appearing in s 459R must, to avoid incoherence, operate similarly in this context.
I would not have reached that view, but for the decisions in Re Aquaqueen International Pty Ltd above and Penson v Titan National Pty Ltd above. But for those decisions, I would have been inclined to the view that the appellate authorities on which Tibra relies, to which I have referred above, were sufficient to support the conclusion that the stay in order 2 made on 18 November 2015, when imposed at the same time as the order made on that date, had the effect of depriving the order of legal or operative effect until that stay lapsed on 9 December 2015. I recognise that Tanamerah submits that such a result "should", as a matter of mechanism, have been achieved by an order extending the time for compliance with the Demand under s 459F(2)(a)(i) of the Corporations Act. However, that submission is undermined by Tanamareh's concession that the same result could also have been achieved by making an order that order 1 take effect from 9 December 2015, made under r UCPR 36.4(1), to which I refer below, so that an order extending the time for compliance under s 459F(2)(a)(i) of the Corporations Act was not the only mechanism to achieve that result.
I would have been reinforced in that view by the significant artificiality in the position for which Tanamerah contends. Assume that Tanamerah took the view that the debt claimed was not properly founded (albeit that view was not reasonably open to it, where the debts were judgment debts arising from costs assessments under judgments that had not been set aside); that I was in error in not permitting Mr Tydeman to appear without leave in order to set aside the Demand for the reasons which he wished to advance; that an appellate court would readily correct that error; and that it would not comply with the Demand where it did not consider it was well-founded. In such a case, it is difficult to see why the Court should prefer an artifice by which Tanamerah would be required to seek an extension of the time for compliance with the Demand under s 459F(2)(a)(i) of the Corporations Act in order to preserve its position on appeal, where it had no intention of making a payment within the extended time or at all. It may seem preferable that a party in Tanamerah's position is not required expressly or impliedly to misrepresent its intention, if its position can be protected by a stay of the order dismissing the application for a short period for the matter to be brought before the Court of Appeal, or, as Tanamerah now accepts, by an order under UCPR r 36.4 that the order take effect from a future date.
Tibra also supports its submission that the legal effect of the stay was to suspend the operation and legal effect of the judgment on the basis that, had Tibra commenced enforcement action (including commencing winding up proceedings) prior to 9 December 2015, such an action would plainly amount to an abuse of process. That submission does not seem to me to assist Tibra, because it assumes, rather than establishes, the matter in issue. If, as Tanamerah contends, the winding up application had been finally determined on 18 November 2015, then it would not have been an abuse of process for Tibra to commence a winding up application prior to expiry of the stay. I note, for completeness, that, even if the winding up application was not finally determined until 9 December 2015, it would also arguably not have been an abuse of process to commence a winding up application in the intervening period, at least if it had made clear that it was content to have that application stayed while the order of 18 November 2015 was stayed. It was, of course, not necessary for it to do so, since ample time was in any event available from 9 December 2015 until 18 February 2016, the earliest date on which that 3 month period expired, to commence such an application.
Tibra also submits that, if required, the Court should make an order under UCPR r 36.15 (the slip rule) that the time for compliance with the Demand be extended to 9 December 2015. Tibra submits that, while the Court does not have power to extend time for compliance with a creditor's statutory demand after the applicable period for compliance has expired, the operation of the slip rule has retrospective effect and is not rendered unavailable by operation of the Corporations Act: Elyard Corporation Pty Limited v DDB Needham Sydney Pty Ltd [1995] FCA 1685. I do not consider that I can fairly make such an order where it would extend the time for the presumption of insolvency to be available for a winding up application on a retrospective basis, where it is no longer possible to extend the time for Tanamerah to make payment of the amount claimed (if the stay I had ordered had not had that effect) and avoid the presumption of insolvency arising.
Accordingly, I consider that I should follow the decisions in Re Aquaqueen International Pty Ltd above and Penson v Titan National Pty Ltd above, although I would not have reached that result in the absence of those decisions. For that reason, I am not satisfied that the stay order on 18 November 2015 had the effect of depriving the order dismissing the proceedings to set aside the Demand made on that date of legal effect. The presumption of insolvency is therefore not available to Tibra where the application for the winding up of Tanamerah was not brought within the 3 month period specified in s 459C(2)(a) of the Corporations Act.