Kenjad Pty Ltd v Anzius Holdings Pty Ltd [2020] VSCA 255

1 On 27 May 2020, an associate judge dismissed an application by the applicant, Kenjad Pty Ltd, pursuant to s 459G of the Corporations Act 2001 (Cth) ('the Act'), to set aside a statutory demand served by Anzius Holdings Pty Ltd on 7 February 2019.

2 On the same day the associate judge dismissed a like application by the applicant to set aside a statutory demand served by French Family Holdings Pty Ltd on 13 February 2019.

3 The two applications were heard together on 19 July 2019 and 9 August 2019 as they raised common issues. On 21 May 2020, the associate judge's chambers notified the parties that judgment would be delivered on 27 May 2020 and that, due to COVID-19 restrictions, appearances were not permitted and the judgment would be delivered electronically by email to the parties on that day. On 27 May 2020, a single judgment giving reasons for dismissing both applications, and a separate order to that effect in each proceeding ('the dismissal orders'), were delivered to the parties by email.[1] Both parties acknowledged receipt.

4 On 12 June 2020, following written submissions from the parties, the associate judge made costs orders in each proceeding.

5 The applicant seeks leave to appeal from the decision of the associate judge on various substantive grounds which, for the reasons given below, it is unnecessary to consider.

6 The applications for leave to appeal were filed late and the applicant has applied for an extension of time to file them. At the conclusion of oral argument on the applications for an extension of time, the Court dismissed the applications and said that reasons would later be published. These are those reasons.

7 Rule 64.08 of the Supreme Court (General Civil Procedure) Rules 2015 gives the Court a discretion to extend time for the filing of an application for leave to appeal. On several occasions this Court has said that an extension of time will not be granted if the proposed appeal is so devoid of merit that it would be futile to do so.[2]

8 Upon the dismissal orders being made, s 459F of the Act became relevant. Section 459F is in the following terms:

459F 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 - the statutory period after the demand is served.

9 No order extending the time for compliance with either of the statutory demands was applied for or made within the seven day period mentioned in s 459F(2)(a)(ii). As a result, the amount which was the subject of each statutory demand became payable seven days after the application pursuant to s 459G was dismissed, that is seven days from 27 May 2020. The amounts were not paid by that date and have not been paid since. Thus, pursuant to s 459F of the Act, the applicant was taken to have failed to comply with each demand. A further consequence was that, pursuant to s 459C(2)(a) of the Act, the Court must presume that the applicant is insolvent. By s 459C(3), that presumption may be rebutted at the hearing of the winding-up application based on the failure to comply with each demand. We note that Anzius and French have since made winding-up applications, and the applicant will thus have an opportunity to prove its solvency at the hearing of those winding‑up applications.

10 In order to avoid the consequence of presumed insolvency, s 459F(2)(a)(i) permits a court to make an order that extends the period for compliance with the statutory demand. However, the court only has power to make an extension order before the time for compliance has expired, in this case within seven days of 27 May 2020. There is no power for the Court to extend this seven day period. The applicant accepts that this is the effect of the decision of the High Court in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited,[3] where the plurality concluded that: 'if the period for compliance with a statutory demand has expired, the Act does not permit the making of an order extending the period for compliance'.[4]

11 In Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd,[5] this Court considered similar issues to those which arise in this case. Bodycorp brought an application under s 459G of the Act to set aside a statutory demand. An associate justice dismissed the application to set aside the statutory demand. As in this case, the judgment and dismissal order were delivered electronically to the parties. However, unlike in this case, no prior notice that this was to happen had been given by the judge's chambers.

12 Bodycorp did not apply for an extension of time within seven days of its application to set aside the statutory demand being dismissed. It was thus presumed to be insolvent. Bodycorp sought to avoid this consequence by contending in its proposed grounds of appeal that the order dismissing its application to set aside the statutory demand was a nullity, either because of apprehended bias by the associate justice or because of the mode of delivery of the reasons and orders. In this context, the Court said that there was 'no point in considering' the other proposed grounds of appeal because the presumed insolvency had already occurred when no order extending the time for compliance with the statutory demand had been obtained within the seven day period provided for in s 459F(2)(a)(ii).[6]

13 The Court in Bodycorp determined that there was no reasonable apprehension of bias, and thus the challenge to the dismissal of the application to set aside the statutory demand failed on that basis.[7] The Court also held that the fact the judgment and orders were delivered by email did not render them a nullity, at least 'where the reasons are themselves adequate'.[8] However, given that the failure to seek and obtain an extension of time for compliance with the statutory demand within seven days had 'immutable consequences' - in the sense that there was a presumed, but rebuttable, insolvency - the Court said that: 'it would have been preferable for notice to have been given to the parties that orders were to be made and for the orders to have been pronounced in open court.'[9] As we have said, prior notice was given here but, due to COVID-19 restrictions, the Judgment and dismissal orders were delivered by email and not in open court.

14 The Court also rejected Bodycorp's alternative contention that, because the judgment and order dismissing its application to set aside the statutory demand was delivered by email, it was ineffective because Bodycorp had not been given the opportunity to apply for and obtain an order extending the time for compliance with the statutory demand pending an application for leave to appeal. In that regard, the Court firmly stated:

The suggestion that Bodycorp was deprived of the opportunity to seek an extension is unfounded. Bodycorp was not deprived of the opportunity to seek an extension. It was deprived of an opportunity to make an application for an extension, that opportunity being the occasion upon which the reasons might have been delivered and the orders made in open court. Bodycorp still had the opportunity to apply for an extension. It had to do so within seven days of the orders. There is no suggestion that Bodycorp's solicitors did not receive the judgment and the orders on the day that they were emailed to them. There is no substance in this proposed ground and we would not grant leave to appeal in relation to it.[10]

15 Notwithstanding the decisions in Aussie Vic and Bodycorp, the applicant contended in its written submissions that this Court should set aside the dismissal orders and extend the time for compliance with the statutory demands in each case, so as to allow its application for leave to appeal to be determined on the substantive merits as to whether the associate judge was right to make the dismissal orders. The suggested basis in the written submissions was that the dismissal orders were in some way infected by the failure of the associate justice to give the applicant an opportunity to make an application under s 459F(2)(a)(i) for an extension of time to comply with the statutory demands. In this respect, it was asserted - without any evidentiary basis - that if the Judgment had been delivered in open court applications for extensions of time would there and then have been made. On this basis, the applicant sought to characterise the manner in which the Judgment was delivered and the dismissal orders were made as involving a 'denial of natural justice'. It contended that, in such circumstances, there was an exceptional jurisdiction in this Court, which it should exercise, to reopen the dismissal orders. For that proposition, it relied on the statement of Dawson J in Autodesk Inc v Dyason (No 2) that:

Whilst the Court has jurisdiction to entertain an application to vacate orders which it has made, at all events before those orders have been perfected by the entry of judgment (that not having occurred in this case), it is a jurisdiction to be exercised cautiously, bearing in mind the public interest in the finality of litigation. In Wentworth v Woollahra Municipal Council, the Court said:

[T]he circumstances in which this Court will reopen a judgment which has been pronounced are extremely rare. The public interest in maintaining the finality of litigation necessarily means that the power to reopen to enable a rehearing must be exercised with great caution. Generally speaking, it will not be exercised unless the applicant can show that by accident without fault on his part he has not been heard. [11]

16 The applicant's reliance on this statement by Dawson J is misplaced. First, because this is a case where the dismissal orders have been perfected by the entry of judgment. Second, because the exceptional jurisdiction is peculiar to the High Court as a 'court of appeal of last resort'.[12] Third, because the applicant cannot in any event show that by accident, and without fault on its part, it was not heard on an application to extend the time for compliance with the statutory demands.

17 As the decision in Bodycorp demonstrates, there was a seven day opportunity after the dismissal orders were made for the applicant to make an urgent application to the Court for an extension of time to comply with the statutory demands pending an application for leave to appeal. Notwithstanding the COVID-19 restrictions, the Court remained fully equipped to hear such an application if it had been made. In this regard, it is relevant to note that the Judgment and dismissal orders were not simply emailed to the parties on 27 May 2020 without any prior notice. Rather, on 21 May 2020 the parties were advised that judgment would be emailed on 27 May 2020. This period gave sufficient opportunity for the applicant to consider its position as to whether to apply for extension orders in the event that its applications failed. The fact that the dismissal orders were authenticated did not present any obstacle to such applications being made within the seven day period.

18 In oral submissions, counsel for the applicant submitted that the only permissible time to seek an extension of time to comply with the statutory demand was 'on hearing the application under section 459G' - relying on the opening words of s 459F(2)(a)(i) - and that the circumstances in which the dismissal orders were made precluded the applicant from making an extension application at that hearing. We do not accept that contention, as s 459F(2)(a)(i) expressly provides a separate right to apply for an extension of time after dismissal orders have been made ('or on an application made by the company under this section'). Such an application could have been made and brought on for hearing within the seven day period after the dismissal orders.

19 It follows that the applicant has failed to persuade the Court that there is an arguable case that the dismissal orders are a nullity or in any sense ineffective at the time they were made. Accordingly, the seven day period having expired without extension orders having been made, the Court has no power to extend the time for compliance with the statutory demands. The presumption that the applicant is insolvent cannot be undone by the proposed appeal. It would thus be futile to extend the time for the filing of applications for leave to appeal, and this is why we refused to do so at the conclusion of oral argument. Finally, as we have noted, the presumed insolvency is rebuttable on the hearing of the winding-up applications which have been filed,[13] and so the applicant will have a full opportunity to demonstrate its solvency if it can.

[1] Kenjad Pty Ltd v Anzius Holdings Pty Ltd; Kenjad Pty Ltd v French Family Holdings Pty Ltd [2020] VSC 295 ('the Judgment').

[2] Muto v Secretary to the Department of Planning and Community Development [2013] VSCA 85, [13] (Nettle AP and Neave JA). See also Song v Cmr of the Australian Federal Police [2019] VSCA 206, [20] (Kaye JA); Kambouris (also known as Kambouris) v Kiatos [2016] VSCA 266, [23], [34] (McLeish JA and Riordan AJA); Dudley v A Judge of the County Court of Victoria [2020] VSCA 179, [25] (Priest and Kaye JJA).

[3] [2008] HCA 9; (2008) 232 CLR 314 ('Aussie Vic').

[4] Ibid 327 [27] (Gleeson CJ, Hayne, Crennan and Kiefel JJ).

[5] [2018] VSCA 33 ('Bodycorp').

[6] Ibid [16] (Ferguson CJ, Whelan and McLeish JJA).

[8] Ibid [106]. The applicant did not contend here that the associate justice's reasons were inadequate.

[10] Ibid [112] (emphasis in original).

[11] [1993] HCA 6; (1993) 176 CLR 300, 317 (emphasis added) (citations omitted).

[12] Lollis v Loulatzis (No 3) [2008] VSC 231, [16]-[20] (Kaye J).