Counsel:
R Glasson (plaintiff)
T Orlizki (solicitor) (defendant)
[2]
Solicitors:
O'Neill Partners (plaintiff)
Kent Attorneys (defendant)
File Number(s): 2014/317083
[3]
Judgment (ex tempore)
HIS HONOUR: On 30 September 2014, the plaintiff First Debenture Ltd served on the defendant Vangory Holdings Pty Ltd a creditor's statutory demand dated 26 September 2014, accompanied by an affidavit of James Photios of the same date which verified that the debt was "due and payable by the debtor company to the creditor company" and that the deponent believed that there was no genuine dispute about the existence, amount or enforceability of the debt. The demand was for an amount of $572,000, described in the schedule to the demand as follows:
On or about 12 October 2012 First Debenture Project No 4 Pty Ltd advanced $572,000 which was repayable upon demand. The advance was made out of the proceeds of settlement of a loan made by First Debenture Project No 4 Pty Ltd. The moneys were paid to the use and benefit of the company.
The plaintiff claimed to be the assignee of First Debenture Project No 4 Pty Ltd.
Vangory did not apply pursuant to (CTH) Corporations Act 2001, s 459G, to set aside or vary the demand, nor did it comply with the demand. On 28 October 2014, First Debenture Ltd filed an originating process claiming an order that Vangory be wound up in insolvency and that a liquidator be appointed. The originating process was accompanied by an affidavit of Mr Photios, also of 28 October 2014, which, in addition to verifying service of the statutory demand and stating that the plaintiff relied upon ss 459A, 459C and 459P, deposed:
I have reviewed the plaintiff's books and records and say that:
(a) the defendant is indebted to the plaintiff in the sum of $572,000 referred to in the creditor's statutory demand; and
(b) the defendant has failed to pay or to secure or compound the debt to the plaintiff's reasonable satisfaction; and
(c) there is no genuine dispute about the existence or amount of the debt to which the demand relates.
Vangory made an application for leave pursuant to Corporations Act, s 459S, to dispute the existence of the debt on the hearing of the winding up application. That application was heard by Black J on 21 and 22 April 2015. Although finding that there was a serious question to be tried as to whether in fact the debt relied on by First Debenture existed, his Honour was not satisfied that there was a sufficient explanation for the failure to apply to set aside the demand, nor that the claimed debt was material to Vangory's solvency, and accordingly dismissed the application [see In the matter of Vangory Holdings Pty Ltd [2015] NSWSC 546]. Subsequently, on 22 June 2015, his Honour made costs orders; namely, that Vangory pay the plaintiff's costs of and incidental to the s 459S application on an indemnity basis as agreed or assessed and that Vangory pay the costs of the third and fourth defendants of and incidental to the same application on an indemnity basis as agreed or assessed, such costs to be payable forthwith. His Honour declined to order that the costs payable by Vangory to First Debenture under the first of those orders be payable forthwith.
In the course of the hearing before Black J, Mr Dawson, who had sworn an affidavit on behalf of Vangory and was a director of Vangory, gave evidence and was cross-examined. In the course of his evidence, various significant deficiencies in the corporate governance of Vangory emerged. On 9 June 2015, the plaintiff First Debenture, pursuant to leave granted that day, amended for a second time its originating process, this time to claim an alternative order that Vangory be wound up on the just and equitable ground.
Before me for determination is the application for winding up of Vangory in insolvency, or alternatively on the just and equitable ground.
[4]
Issues
There are four mains heads of issues which require consideration. The first is whether the plaintiff is entitled to rely on the presumption of insolvency arising from non-compliance with the creditor's statutory demand. If the plaintiff is so entitled, then Vangory accepts that it cannot rebut that presumption. The second main issue is whether, if First Debenture is not entitled to rely on the presumption of insolvency, it has standing as a creditor. The third is whether, if it has standing as a creditor, it has established either the ground of actual insolvency (as distinct from presumed insolvency), or alternatively the just and equitable ground. The fourth set of issues is whether in any event the proceedings should nonetheless be dismissed as a matter of discretion, including on grounds of abuse of process.
[5]
The presumption of insolvency
I turn first to the availability of the presumption of insolvency. Corporations Act, s 459P, confers standing to apply for a company to be wound up in insolvency on a creditor. I will come subsequently to the question of a contingent creditor's position.
Where a plaintiff relies on the presumption that arises from a failure to comply with a statutory demand, the defendant company cannot oppose the winding up on grounds which could have been raised on a s 459G application [see s 459S]. Plainly, Vangory could have raised on a s 459G application that the debt did not exist, or that the plaintiff was not a creditor. The result is that, in terms of s 459S, "insofar as an application for a company to be wound up in insolvency relies on a failure by the company to comply with the statutory demand, the company may not, without the leave of the court, oppose the application" upon, inter alia, the grounds that the debt did not exist or that the plaintiff was not a creditor. Leave having been refused, that position stands.
It follows that in proceedings to which s 459S applies, upon proof of service of a creditor's statutory demand claiming to be a creditor and the absence of an application to set such a demand aside, the defendant company is precluded from contending that the plaintiff is not a creditor or that the debt does not exist. In essence, s 459S operates, where it is applicable, to create a statutory issue estoppel on those matters. The question of standing and of the existence of the debt is put beyond dispute. Thus, if and to the extent the present application relies on the presumption of insolvency, the defendant cannot dispute the plaintiff's standing or the existence of the debt claimed [see, inter alia, Radiancy (Sales) Pty Limited v Bimat Pty Limited [2007] NSWSC 962; (2007) 25 ACLC 1,216 (White J); Braams Group Pty Ltd v Miric [2002] NSWCA 417; (2002) 44 ACSR 124, [37] (Stein JA, Mason P and Ipp JA agreeing); Cedars Concrete Services v Maatouk [2006] NSWSC 884, [41] (Campbell J); Bibby Financial Services v Wolf Industries [2004] NSWSC 134; (2004) 49 ACSR 45, [22] (Austin J)].
The only question here, then, is whether the plaintiff is entitled to rely on the presumption of insolvency. That question arises because s 459Q requires that, if an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the application must, unless the debt to which the demand relates is a judgment debt, be accompanied by an affidavit that verifies that the debt is due and payable by the company and complies with the rules.
I have set out above what Mr Photios's accompanying affidavit in fact relevantly said. I entirely accept that s 459Q(3) does not require proof, in the sense of admissible evidence, of the existence of the debt. But it does require a sworn affirmation that the debt is both due and payable [Deputy Commissioner of Taxation v National Skin Institute (Aust) Pty Limited [2012] FCAFC 2; (2012) 200 FCR 146, 285 ALR 102, [17] (Finn, Gordon and Murphy JJ)].
In the context of the identical requirement in s 459E(3) in respect of an affidavit verifying and accompanying a creditor's statutory demand, it has been said that it is important that the deponent states that the debt is both due and payable, and that where a deponent simply states that one person "owes" a particular sum to another and is "indebted" in that sum, that asserts no more than the existence of the debt, and not that it is due and payable. Thus, it has been said that because of the serious and radical consequences that may flow from non-compliance with a statutory demand, it is essential that the accompanying affidavit states in unambiguous terms that the debt is both due and payable [Main Camp v Australian Rural [2002] NSWSC 219; (2002) 20 ACLC 726, [17], [22] - [23] (Barrett J)].
Prima facie, Mr Photios's affidavit does therefore not comply with s 459Q(3), because it does not affirm on oath that the debt is due and payable. The plaintiff submitted that this was, in effect, cured by the circumstances that Mr Photios's earlier affidavit verifying the statutory demand accompanied the originating process. However, the purpose of s 459Q is to require that the plaintiff advert again, when instituting winding up proceedings relying on a presumption of insolvency, to the existence of the debt as at the time when the winding up proceedings are instituted (not as at the earlier time when the statutory demand was served). The presence of an accompanying s 459E affidavit does not cure the shortcoming in compliance with s 459Q.
Section 467A provides that an application for a company to be wound up must not be dismissed merely because of a defect or irregularity in connection with the application, unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied - for example, by an adjournment or an order for costs.
In the context of affidavits verifying statutory demands under s 459E, defects in the accompanying affidavit (as distinct from in the demand itself) have frequently resulted in the demand being set aside. That is because of the requirement that a person seeking to rely on the rigorous consequences that flow from the service of a statutory demand should comply with the associated requirements before doing so, and in particular that the requirement for the affidavit is intended to ensure that the process is not invoked in cases where it ought not be. It is true, the requirement for "substantive injustice" does not apply to an application to set aside a statutory demand under s 459J(1)(b), which is the head relied upon when the accompanying affidavit is defective. Nonetheless, courts have frequently pointed to the role and importance of a compliant affidavit in ensuring that the creditor gives close attention to the existence of the debt and the absence of a genuine dispute, so that the process is not improperly invoked in a case where there is a doubt or a dispute.
In my view, the role of s 459Q(3) is very similar. Its function is to require a creditor, before instituting proceedings reliant on the presumption of insolvency - and in which, by reason of s 459S, the defendant will ordinarily be precluded from disputing the existence of the debt - to give close and serious attention to the existence of the debt a second time, this time before instituting proceedings. In such proceedings, a creditor has many advantages, s 459S being perhaps the most obvious of them. It is not asking too much of a creditor who seeks to invoke those draconian consequences first to comply strictly with the requirements that trigger them.
If it were clear enough that the defendant was in fact indebted to the plaintiff, then it could well be said that there was no substantive injustice. But here, not only is there doubt as to whether the defendant is indebted to the plaintiff as alleged in the statutory demand, but on balance the evidence favours the view that the defendant is not so indebted. Essentially, the debt is described in the statutory demand, as it was by Mr Photios in his evidence, as arising from an "advance". It was not asserted that it was a loan. It was said to be repayable on demand, but how, in the absence of some agreement for loan, it was an advance repayable on demand is a legal mystery. It is said to have arisen upon the completion of the purchase of a property by the plaintiff's assignor FDL No 4 from the vendor Gillieston. It appears that upon completion of that purchase, FDL No 4 borrowed funds from a third party and paid them to or at the direction of the vendor Gillieston. Of the funds so paid, the $572,000 in question was paid to Vangory. The payment of part of the purchase price apparently at the direction of the vendor to a third party such as Vangory does not create of itself any liability on the part of the recipient to the purchaser.
The plaintiff claims that its assignor FDL No 4 overpaid the vendor, and that although the contract appears to have stated a price of $12 million, it was meant only to pay $6 million, yet for some reason or another in fact paid over $8.4 million, including the $572,000 that was paid to Vangory. The difficulty is perhaps best illustrated from the cross-examination of Mr Photios (at transcript page 89, line 30):
Q. The vendor did not get that $6 million in cash, did it?
A. The vendor?
Q. Yes?
A. It got 8.4, it got 8.4. Just because it directs it in various areas, into various areas, doesn't mean that it didn't get it. It got 8.4.
Q. Yes, and one of the various areas it directed was to pay $572,000 to Vangory?
A. Correct, but we should never have paid $8.4 million. It comes back to that matter.
HIS HONOUR
Q. Doesn't it follow you should be suing the vendor for $2.4 million?
A. I could if I - I could if I was able to, your Honour. The only problem is the vendor is now in liquidation.
Q. Did you lodge a proof of debt in its liquidation?
A. We did that.
Q. For how much?
A. 2, I think it was 2 point - I think it was for the full amount 2.4. I didn't do it. I didn't do it personally.
Q. So you've proved in the liquidation of Gillieston for $2.4 million--
A. Well, I was the -
Q. --which includes--
A. Not in Rockcliffe; in Gillieston Project No. 1.
Q. In Gillieston Projects, which includes the same $572,000 that you're claiming from Vangory?
A. The $572,000 was a separate claim. I think it was all up -
Q. It is part of the $2.4 million, isn't it?
A. It was part of $2.4, correct, I have got to look back through my documentation and have a clear understanding of the liquidation, of what happened in the liquidation because the Tax Office was involved as well.
Q. But will you accept that if you have claimed, as you say you have, the $2.4 million from Gillieston, then you are claiming this $572,000 from two different parties?
A. I guess you can look at it that way, your Honour, but it's not the way it happened. We were not going to get the money out of Gillieston. We were not going to get one penny back from Gillieston. Already had a tax debt there over one and a half, nearly $2 million, with no assets".
Mr Photios was invited to locate and produce the proof of the debt referred to. He endeavoured to do so and as it emerged, it appeared that there was no such proof of debt and he may well have been mistaken in that respect. In re-examination, he explained (at transcript page 158, line 35) that there was no such proof of debt, and he formed the view that there was no such proof of debt lodged by First Debenture Limited in the winding up of Gillieston. But the absence of any such proof of debt or any double claim does not detract from the general effect and force of that passage in his evidence which, as it seems to me, makes clear at least that the payment to Vangory was at the direction of Gillieston and - assuming in the plaintiff's favour that it was an overpayment, a curious enough circumstance where the contract referred to $12 million - that does not begin to establish a liability on the part of Vangory.
After the creditor's statutory demand was served, there was correspondence which alerted Mr Photios to the circumstance that the debt was disputed. I entirely accept that Mr Photios is subjectively convinced that Vangory, on some basis or another, is liable to First Debenture Limited; but in my view a reasonable director of the plaintiff could not, when the originating process was filed, have properly and reasonably deposed that the debt was due and payable by Vangory to First Debenture Limited.
Accordingly, in my view there is substantive injustice, because objectively the proceedings for winding up in insolvency reliant on the presumption of insolvency could not have been validly instituted, as the affidavit required by s 459Q(3) could not reasonably and properly have been made. It follows, in my view, that proceedings for winding up in insolvency in reliance on the presumption of insolvency have not been validly instituted by reason of non-compliance with s 459Q(3) or, at the very least, if they have been validly instituted, they are attended by a defect or irregularity which has caused substantive injustice.
In those circumstances, insofar as the originating process relies on the presumption of insolvency, it should be dismissed.
The next question is that of actual insolvency.
[6]
First Debenture Limited's standing to bring proceedings
Shorn of the presumption of insolvency, s 459S does not apply. The plaintiff's standing to bring proceedings thus depends, under s 459P(1)(b), on establishing that it is a creditor, including a contingent creditor.
For the reasons I have just given, I am not satisfied on the evidence that the plaintiff is a creditor in respect of the debt that was referred to in the creditor's statutory demand. However, the plaintiff claims standing as a result of the costs order made in these proceedings on the s 459S application. Although those costs have not yet been assessed, such an order gives the plaintiff the status of a contingent creditor [see Leveraged Capital Pty Limited v Modena Imports Pty Ltd [2009] NSWSC 509, [20] - [22] (Brereton J)]. But that was not a standing which it had when the proceedings were instituted. Its status as a contingent creditor arose only when the costs order was made on 22 June 2015. It did not accordingly have standing as a contingent creditor when the proceedings were instituted, which is the time when standing is to be assessed.
In any event, to bring proceedings for winding up in insolvency, a contingent creditor requires leave under s 459P(2)(a). As it seems to me, the matters that would tell against the grant of such leave include, if the plaintiff has standing as a contingent creditor at all, that such standing has arisen only relatively recently in the course of these proceedings, that the liability remains unquantified, and that it is not unforeseeable that set-offs against it may arise from other costs orders - especially in the context where the liability is not payable forthwith, even once quantified.
They also include that the case for actual insolvency is not apparently a strong one, depending as it does upon an assignment by the company of its assets to a new trustee on its being replaced as trustee of a relevant trust, so that it is said to have no assets against a number of potential but as yet unquantified liabilities. In particular, I do not accept, as was repeatedly submitted, that the defendant is "admittedly insolvent". What was said on behalf of the defendant, as I understand it, was that it accepted that it could not discharge the burden of affirmatively proving solvency to rebut the presumption of insolvency. But that is far from equating to an admission of insolvency. Importantly, there is no evidence of a failure by the defendant to pay any current liability (other than that the subject of the creditor's statutory demand, which for reasons already given, it seems it was not obliged to pay, or at least it had reasonable grounds for not paying).
In those circumstances, despite the raft of potential or not yet payable liabilities identified in the plaintiff's latest submissions of 10 September 2015, it seems to me that an inability to pay debts as and when they fall due has not been proved.
Accordingly, I would not grant leave under s 459P(2)(a). Even if leave were granted, I would not be satisfied that actual insolvency was established. The case for winding up in insolvency therefore fails.
I turn to the just and equitable ground.
[7]
Winding up on the just and equitable ground
Section 462(2)(b) confers standing to apply for a winding up on the just and equitable ground on a creditor, including a contingent creditor. Although a contingent creditor does not require leave in the same terms as under s 459P(2), s 462(4) provides that:
The Court must not hear an application by a person being a contingent creditor of a company for an order to wind up the company unless and until:
…
(b) a prima facie case for winding up the company has been established to the Court's satisfaction.
As I have already mentioned, I accept that as a result of the costs order made by Black J on 22 June, the plaintiff is a contingent creditor of Vangory and acquired standing as such on 22 June. However, it did not have that standing when the originating process was filed, and although it may have acquired it when the further amended originating process was filed on 9 June 2015, from a provisional costs order made on 22 April, the time for evaluating standing is when the proceedings are commenced, not when they are later amended. In those circumstances, it seems to me, as already explained, that it did not have standing to make this application. Accordingly, if the view is taken that the amendment does not relate back to the date of the originating process but is treated as having effect from the date of the amendment on 9 June 2015, the plaintiff was by then a contingent creditor of the defendant and may thus have had standing.
If the plaintiff had standing, it would be required first to persuade the Court that there was a prima facie case for the winding up of the company on the just and equitable ground. The fact is that in this case, the Court was not asked at any early stage to decline to proceed to hear the application, and the issue has arisen only after the full hearing of the winding up application. No doubt that was because the plaintiff claimed status on grounds other than as a contingent creditor. As the hearing has taken place, it is difficult to see that s 462(4) has any remaining work to do, except perhaps in the field of discretion. In any event, it seems to me that the requirement that there be a prima facie case requires that on the evidence tendered by the plaintiff, there be evidence on which the Court could, though not necessarily would, make a winding up order on the just and equitable ground.
As Black J explained in In the matter of DJG Securities Pty Ltd [2013] NSWSC 588 (at [13]), it is well established that the Court can make a winding up order on the just and equitable ground under that section by reason of, inter alia, lack of confidence in the conduct and management of a company's affairs, or if a company has not carried on its business bona fide, or has failed to comply with the requirements of the Corporations Act with respect to financial records and reports. His Honour referred to the numerous authorities in the field, and in particular to the useful summaries of the principle by Warren J (as her Honour the Chief Justice of Victoria then was) in Australian Securities and Investments Commission v ABC Funds Managers Ltd [2001] VSC 383; (2001) 39 ACSR 443 to the effect that there could be a winding up on the just and equitable ground on the lack of confidence in the management of the affairs of the company and the risk to the public interest that warrants protection, but noting that the company would be reluctant to wind up a solvent company. Similarly, Gordon J summarised these principles in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) [2013] FCA 234 to the effect that a company would be wound up where there is a lack of justifiable confidence in the conduct and management of its affairs and the risk to the public interest warrants protection, noting that that could be established where the Court could not have confidence that the company's controllers would comply with their obligations, including keeping books, records and documents and looking after the company's affairs.
The evidence tendered by the plaintiff included the cross-examination of Mr Dawson before Black J, in which the relevant evidence as to corporate governance delinquencies emerged. Essentially, what emerged was that the company had never lodged an income tax return, a business activity statement or annual returns with ASIC; that it had not maintained any appropriate books of account; that its management was dysfunctional, as the director appeared to have no knowledge of significant transactions and undertakings entered into by the company; and that at least for a substantial period, the director appeared to have been little more than a front for Mr Huxley, who at relevant times was an undischarged bankrupt. Those matters are closely analogous to the circumstances referred to by Black J in DJG Securities, and it seems to me would have established a prima facie case.
As I have concluded that the plaintiff had no standing at the relevant time to make the application, it is strictly unnecessary for me to determine whether the Court would have proceeded to make a winding up order on the just and equitable ground. However, a number of considerations would have inclined me not to do so, either for not ultimately being satisfied that it was just and equitable that the company be wound up, or for being persuaded that relief should be declined as a matter of discretion. Those matters include, first, that so far as the evidence reveals, the company is not presently trading and is not presenting any risk to the public interest warranting protection, of the nature referred to by Warren J and Gordon J; secondly, that the only person seeking the winding up is a contingent creditor whose legitimate interest in the internal management and governance of the company is at best minimised; and thirdly, that the winding up is a drastic remedy for defects, albeit gross ones, of corporate governance, where it is not established that the company is insolvent.
[8]
Abuse of process
In light of the conclusions I have already reached, it is unnecessary to consider in detail the question of abuse of process, but because it occupied a large part of the case, I should make some observations about it.
As to the contention that the proceedings had some improper or collateral purpose, in my view that was not at all established. It is no doubt true that there is bitterness and angst between the parties, some of which arises from related proceedings, and that the plaintiff would no doubt be delighted not to have the defendant survive, so to speak, to contest those other proceedings. But if it be the case, as was submitted for Vangory, that the plaintiff's true purpose was to "rub out the defendant by starving it of its ability to recover money owing to it and to pursue a personal vendetta," that purpose is not inconsistent with the plaintiff having the proper purpose of winding up the defendant so as to be paid its claimed debt, if possible, out of the proceeds and otherwise to have a proper investigation by a liquidator into the affairs of the defendant. The availability of such benefits, and the existence of personal animus, does not render proceedings otherwise properly brought an abuse of process.
The more difficult question in the area of abuse of process arises from an argument founded on the judgment of Barrett J in RH Mortgage Corporation Ltd v Kerry Ann Properties Pty Ltd [2011] NSWSC 298. It is clear that the preclusionary effect of the statutory estoppel arising from s 459S extends to prevent a company from seeking the dismissal of winding up proceedings as a matter of discretion by reference to a contention that the debt does not exist [TS Recoveries Pty Limited and Sea-Slip Marinas Pty Limited [2007] NSWSC 1074; (2007) 25 ACLC 1,371]. However, it does not preclude reliance on an abuse of process in respect of the winding up application, which is a distinct concept from an abuse of process by serving a creditor's statutory demand; nor does it apparently preclude adducing evidence to make good such submission, even if that evidence includes evidence of facts that might have been relied upon in a s 459G application [TS Recoveries (at [16])] - although this might not be so where it was merely a colourable means of running an issue which could have been exclusively conducted on an s 459G application.
But in RH Mortgage Corporation, where the company had not made an application to set aside the statutory demand under s 459G, his Honour found that there was "no rational basis" on which the company could have believed, when it served the statutory demand, that the debt referred to in the demand was owing, due and payable - essentially because at best it was plainly, and known to be, a claim for an unliquidated sum. His Honour reasoned that the situation was one in which the defendant resorted to the statutory demand procedure for a purpose for which the law did not permit, as the legislation did not countenance the obtaining of the benefit of the presumption of insolvency by a person to whom a debt is not owing, due and payable; who has no more than an imperfectly articulated claim for damages; and who knows that the person's position is as just described. His Honour concluded that to resort to the statutory demand procedure in respect of such a claim was a perversion of the statutory process. His Honour said that the plaintiff would have succeeded in having the statutory demand set aside had it made a valid s 459G application; however, although it had not done so, "in the circumstances of grievous misuse of the statutory demand procedure exhibited by the facts of this case", any application for the winding up of the plaintiff relying on non-compliance with the demand would be an abuse of the process of the court.
RH Mortgage Corporation is a difficult case. It is not easy to reconcile with s 459S and the cases which narrowly confine the circumstances in which an abuse of process defence will succeed on an application for winding up in insolvency reliant on a presumption of insolvency where there has been non-compliance with the creditor's statutory demand. Although Mr Glasson argued that it was a fundamental and distinguishing aspect of the case that the company was comfortably solvent, I do not read the decision in that way; the reference to the company's solvency was made after his Honour had concluded that there was an abuse of process, and in connection with whether or not an injunction restraining filing of an originating process should be granted. It seems to me that the case is best explained on the basis that it is one in which the then defendant creditor knew when it instituted the winding-up proceedings that there was not a debt due, and it accordingly must have known subjectively that it could not swear the affidavit referred to in s 459Q(3). As presently minded, I do not think that it should be extended to a case in which a person may have believed, though incorrectly, that the company was indebted as alleged. In any event, it is unnecessary to decide that issue in the present case, because Mr Photios did not make any such claim as required in his affidavit verifying the originating process.
[9]
Conclusion
Accordingly, to summarise the position: first, the plaintiff is not entitled to rely on the presumption of insolvency, because insofar as the proceedings rely on it, they are affected by a defect or irregularity which occasions substantive injustice, because the requisite affidavit verifying the originating process was not, and could not have properly been, made.
Secondly, the plaintiff has not established that it has standing as an actual creditor. While the plaintiff has standing as a contingent creditor on and from 22 June, if not from 22 April, it did not have standing when the originating process was filed. Accordingly it fails on all grounds.
In any event, it would have failed on actual insolvency for want of proof of an inability of the company to pay its debts as and when they fell due.
Although there is a prima facie case for winding up on the just and equitable ground, in the circumstances of this company, the relevant interest of the plaintiff as a creditor, and the absence of any supporting creditors, I am unpersuaded that it would be just and equitable that the company be wound up; alternatively, I would as a matter of discretion decline to do so.
The Court therefore orders that the originating process be dismissed.
There are some remaining issues in relation to the first defendant's interlocutory process filed on 4 March 2015. That was the s 459S application, but it also included an application that First Debenture Limited be wound up on the ground of insolvency. Nothing further has been put in respect of that application, and it is appropriate that the balance of the interlocutory process be dismissed.
The Court further orders that the balance of the first defendant's interlocutory process filed 4 March 2015 be dismissed
[10]
Costs
The position prima facie is that while the company has succeeded in resisting the winding-up application, it has essential done so on an issue raised at a very late stage; and it has not succeeded on the abuse of process issue, which occupied much of the time. I am inclined to the view that each party should bear its own costs, but I will hear the parties on that, if they wish.
Counsel addressed
In my view, the plaintiff has won on a point that was first raised in written submissions on the final day of the hearing. Section 465C requires or provides that a person may not, without the leave of the Court, oppose an application on a ground unless, within the periods prescribed by the rules, that person has filed and served on the applicant a notice of grounds on which the person opposes the application and an application verifying the matter stated in the notice. It is implicit in the reasons that I have already given that the company should have leave under s 465C, but the consequence is that in circumstances where until that issue was raised, that at the heel of the hunt the plaintiff was entitled to think that is a practically answerable case, having regard to s 459S, I do not think the plaintiff should have its costs.
There will be no order as to the costs, with the intent that each party bear its own costs.
[11]
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Decision last updated: 09 February 2016