Plaintiff v Defendant

TO THE SHERIFF:

In respect of the judgment

...

Pay the amount so levied ... And Indorse on this warrant immediately after you have performed all your obligations under it a statement of date, time and place at which you have executed or attempted to execute the warrant and the results of the execution and send a copy of the statement to [judgment creditor].41F[42]

1. Drummond submitted that the Field Report (Annexure A of these reasons), which was sent to Merton Lawyers, satisfied all the requirements prescribed by the County Court Rules and Form 68A. The Warrant therefore, must be said to have been 'returned' within the meaning of s 459C(2)(b).
2. Drummond's submissions made reference to the distinction between 'unexecuted' and 'unsatisfied', contending that the language used in the Field Report extracted below does not preclude a conclusion that the Warrant has been returned unsatisfied:

Numerous calls have been made to the warrant address and no contact could be made with the judgment debtor [i.e. Roberts] or seizable goods located. No further action will be taken pending your further instructions for continued execution and payment of fees.

1. While accepting the Warrant is an execution or other process, Roberts disputes that the Warrant has been 'returned' and was 'unsatisfied'.
2. Roberts contended that the meaning of 'return' in the present context means the return to the court of issue, citing Guss v Deputy Commissioner of Taxation ('Guss')42F[43] in support of such proposition:43F[44]

Further, that warrant and the endorsement (or associated report) are to be returned to the court of issue, in this case the Magistrates' Court. That is what is envisaged by the concept of return.

1. Roberts observed that the Field Report was returned to the office of Merton Lawyers, the solicitors of Drummond, and not to the County Court which issued the Warrant.
2. Roberts submitted even if there was a 'return', it was not returned 'unsatisfied' as distinct from 'unexecuted'. In this regard, the Field Report contains no statement that the Warrant was returned unsatisfied; provides no specific details of the attempts to levy execution against Roberts (as distinct from the contents of a standard form 'Field Report'); and makes express reference to the prospect of the Warrant's 'continued execution'.
3. In its submissions, Roberts referred to the distinction between 'unsatisfied' and 'unexecuted' in the context of s 459C(2)(b) of the Act, discussed by Farrell J of the Federal Court in Haridemos v ACT Builders Pty Ltd ('Haridemos'):44F[45]

[43] ACT Builders submitted that the attempts to execute the writ in Lewis v Lamb are relevantly the same as in this case and the Court should find that the attempts to execute the writ were insufficient to satisfy the notion of a "genuine attempt". Further, the writ was returned "unexecuted" because:

(a) The attempts to execute the writ were perfunctory ...

...

[44] Had the proceedings concerned whether an act of bankruptcy had occurred under s 40(1)(d)(ii) of the Bankruptcy Act, the circumstances of this case would be the same in all relevant respects as those in Lewis v Lamb. I would find that the writ was not returned "unsatisfied" but, rather, the writ was returned "unexecuted". This is because:

(a) There is no statement in Sergeant Riley's letter of 31 October 2016 or in the Notice of Non-Levy that the writ was returned unsatisfied. The Notice of Non-Levy refers to an "execution attempted" at the Queanbeyan address and of an attempt to contact the judgment debtor. It states that the property appears to be vacant and a named person responded to a card left at the premises stating that she bought the property and is the only occupant. The document invites further information so that additional attempts at execution might be undertaken. Sergeant Riley states specifically that the Notice does not imply that the judgment cannot be satisfied. While the Court is not bound by the Sheriff's view as to whether or not a writ is "unsatisfied", these factors are all indicative that the writ has not been executed, and the Court is entitled to take them into account.

(b) These circumstances are far removed from those in Guss v DCT, in which the extrinsic evidence demonstrated contact by the Sheriff with the debtor who denied having any property which would respond to the writ so that the Court found that the writ had been returned unsatisfied. They are also removed from the circumstances in Re Ousley, in which the Sheriff's report referred to an unsuccessful payment demand made by the Sheriff on the debtor, where the Sheriff was refused peaceful entry and was unable to locate "external assets of value (including vehicle)" capable of being seized. The debtor also denied owning a vehicle. The endorsement on the writ was that the bailiffs "were unable to find any real or personal estate upon which to make a levy", leading to the conclusion that the writ was unsatisfied. In saying this, I am not importing the requirement which applied under prior enactments of s 40(1)(d)(ii) of the Bankruptcy Act (referred to by Knox CJ in King's Case at 153) to the effect that the Sheriff has called upon the debtor to satisfy the judgment which the Sheriff is executing and for the debtor to have failed to do so. Rather, these cases indicate the existence of evidence obtained before the writ was returned which established that there were no assets available on which to levy execution.

(c) The Sheriff did not comply with r 39.18 of the UCPR and I respectfully adopt the opinion expressed in Lewis v Lamb at [58] that this is significant, although I do not consider that that fact need be determinative in a different factual context. It is also significant, though not determinative, that the Sheriff advised that the Notice of Non-Levy could not be used as the basis of an affidavit required by r 39.21(1)(b).

(d) Ms Haridemos did not direct the Sheriff to any other address in New South Wales at which to execute the writ and no further attempt at levy was made by the Sheriff. Before Sergeant Riley was requested to return the writ, the only enquiry Ms Haridemos' lawyers made which might have yielded information to found a further attempt at levying execution was a letter from Ms Bridgewater to Lillas & Loel dated 17 August 2016. However, Mr Loel, as ACT Builders' solicitor, had no obligation to respond to that enquiry unless instructed to do so by his client. Mr Loel's failure to respond to Ms Bridgewater's request does not have the same character as the information obtained by the Sheriff from the debtor in the circumstances considered by Beach J in Guss v DCT or by Heerey J in Re Ousley.

1. Roberts referred to the Field Report where the Sheriff's representative checked an option under the segment headed 'No Contact/Further Information Required'. It was submitted that this indicates that the Warrant was unexecuted as opposed to unsatisfied. Roberts submitted that these circumstances were analogous to those the subject of discussion in Haridemos, where the Sheriff's representative in that case was unable to contact the debtor and invited further information. Roberts contended that had the Sheriff's representative chosen to complete the segment headed 'Debtor contact', that might constitute the Warrant being returned 'unsatisfied'.

1. The evidence in respect of the Warrant is brief and is extracted above. The document reporting the outcome of the Sheriff's attempts to execute it, the Field Report, is annexed to these reasons. It seems clear that the Warrant came within the definition of 'execution or other process' issued on a decree or order of an Australian Court and so much is accepted by Roberts. The provisions of s 73(4) of the County Court Act contemplates a 'warrant of execution' being deployed to recover 'such judgment' including interest running on the judgment.
2. The question that then arises is whether the events that have occurred with respect to the execution of the Warrant are such as to constitute the Warrant being 'returned wholly or partly unsatisfied'.
3. The County Court Rules themselves do not prescribe what the Sheriff's responsibilities are when going about the execution and return of a warrant of execution, however, Form 68A, the form prescribed by r 68.08 of those rules for a warrant of seizure and sale, extracted above, does not require the Sheriff to 'return' the Warrant to the court of issue as required by some jurisdictions for some types of execution. Rather, Form 68A requires a copy the statement to be sent to the judgment creditor. I do not accept Mr McAloon's submission that the Warrant was required to be returned to the court by which it was issued.
4. The Field Report contains a statement of the several dates, times and place on which the Sheriff's representative 'executed or attempted to execute the warrant' and also reports the results of the attendances at the subject premises. As required, Drummond, as the judgment creditor, was provided with a copy of the 'statement', i.e. the Field Report. The Field Report met the requirement in respect of stating details of the execution or attempted execution of the Warrant as r 68.04 requires.
5. Assaf observed in his work Assaf's Winding Up in Insolvency in relation to the presumption under s 459C(2)(b):45F[46]

There is no definition of 'execution' or 'other process' in the Corporations Act. That said, the two expressions are well understood in the context of the law relating to the enforcement of judgments and in bankruptcy law.

1. The equivalent provision in the Bankruptcy Act 1966 (Cth), s 40(1)(d)(ii), provides that a debtor commits an act of bankruptcy if 'execution has been issued against [the debtor] under process of a court and has been returned unsatisfied'.
2. In this regard, in Re Johnson; Ex parte Greendale Engineering and Cables Pty Ltd ('Re Johnson'),46F[47] Gibbs J with reference to the legislative precursor to s 40(1)(d)(ii), s 52(e) of the Bankruptcy Act 1924-1952 stated:47F[48]

In the context of s. 52 (e) the word 'returned' is not used simply in the sense of 'sent back'. The word 'return' has of course a special and well-known sense in relation to a writ of execution. A return to a writ in the legal sense is the written report of the sheriff or his officer as to how far he has been able to carry out his instructions, and there have been a number of cases in which it has been recognized that 'returned' in s 52(e) refers to the written return of the sheriff or his officer --- King v. Commercial Bank of Australia Ltd; Re Huntington; Ex parte Warringah Shire Council; Re Worsley; Ex parte Gill. In the present case the writ in effect directed the bailiff to seize and sell the goods and lands of the debtors, and the writ would have been returned unsatisfied if the bailiff had reported that there were no goods or lands of the debtors within the bailiwick the proceeds of which were available to satisfy the writ. It was not a proper return to say that the premises to which the bailiff went were shut and that the bailiff had no response, for that did not mean that there were no goods in those premises available for execution. As long ago as 1841 it was held that a return to the effect that the premises of the defendant were so barricaded that the sheriff was unable to ascertain whether the defendant had goods within the bailiwick on which a levy might be made was a bad return and that the sheriff should have stated either that the defendant had goods or that he had none (Munk v. Cass). An act of bankruptcy within s 52 (e) is only committed if there has been a proper return, and there has been no proper return in the present case.

1. In Lewis v Lamb,48F[49] Smith FM distinguished a 'unexecuted' process from an 'unsatisfied' one:49F[50]

The sheriff's attendance at the nominated premises and his subsequent conversation with Mr Lamb only revealed that the address given by the judgment creditor was not a location at which there was, or could be expected to be, any property of the debtor available for execution. The sheriff's activities revealed only that Mr Lamb had some undefined connection with a business conducted at the premises by an entity which was not the debtor. They were far from negating the presence of property of Mr Lamb situated within NSW which might be capable of seizure for levy. They revealed that no further attempts were made by the sheriff, including by inquiries of the creditor, to locate and levy property of the debtor within NSW. Far from assisting or allowing a proper attempt at execution of the writ, the creditor instructed the sheriff to return the writ without giving any instructions which would have allowed a proper attempt at execution. It is significant that the return shows that at no time did the sheriff "cause a copy of the writ to be served on the judgment debtor or left in a conspicuous position at the place where the writ was executed" as required by UCPR r.39.18 "on executing the writ".

In my opinion, the effect of the documents constituting the sheriff's return was to show that he had, in fact, returned the writ 'unexecuted' as distinct from 'unsatisfied', as a result of instructions from the creditor. I am therefore not satisfied that the act of bankruptcy under s.40(1)(d)(ii) is established for this reason, as well as because of the defect in the writ itself.

1. Haridemos applied Smith FM's analysis in the context of s 459C(2)(b).50F[51]
2. The Field Report is the central and really the only physical evidence as to whether the Warrant has been executed and gives rise to a presumption. The narrative in the segment of the Field Report describing the outcome of the visits made to the premises by the Sherriff, headed 'No contact/Further Information required', reveals that attempts were made to execute the Warrant on the several occasions mentioned; it reports that there was no contact made with anyone at the premises nor were any seizable goods located. This is a clear indication that the warrant was unexecuted, not that it was unsatisfied.
3. I accept the submission of Mr McAloon in respect of the segment of the Field Report headed 'Debtor Contact'. That segment provides for a selection of options to be checked, including an option reporting '[T]he payment demand made on the judgment debtor was not satisfied in full and a search conducted at the warrant address ... failed to locate any seizable goods of the judgment debtor'. Another option was '[I]nsufficient goods were sighted. If sold would not result in a reduction of this judgment debt and costs'. If an option in this segment had been checked, in my opinion, it would be indicative that there had been execution of the Warrant and that it was 'unsatisfied' or 'partly unsatisfied', but it was not. Mr Rubenstein characterised that submission as a 'strawman argument' but I do not agree; the entries on the Field Report are of the utmost significance and as I have observed, that document is the central focus for consideration of this issue.
4. In my view, the Field Report indicates that the Warrant was not able to be executed and it could not therefore be characterised as being 'wholly or partly unsatisfied'. As such, I do not consider that Drummond has established a presumption of insolvency under s 459C(2)(b) which relies on execution of the Warrant being returned unsatisfied.

1. In the First Bycroft affidavit, Mr Bycroft asserts that the judgment in respect of the Statutory Interest Debt was registered at the NSW District Court at Murwillumbah on 11 June 2024 but the documents filed at that court to obtain such registration are not in evidence. On 2 July 2024, the NSW District Court issued the Westpac Garnishee Order. On 8 July 2024, Westpac responded to the garnishee notice by a letter of that date to Drummond's solicitors noting that a sum of $108.28 had been transferred to the solicitors. That payment was confirmed on 11 July 2024.
2. This is the totality of the evidence relied upon by Drummond in respect of the presumption said to arise in respect of the Westpac Garnishee Order. These events took place without notice to Roberts.
3. Roberts contends that Drummond has not demonstrated that the Statutory Interest Debt constituted a 'judgment, decree or order of an Australian court' within the meaning of s 459C(2)(b) of the Act as it was a claim for interest post-dating the judgment of Judge Burchell's order and not the order itself.
4. The Westpac Garnishee Order was issued in New South Wales and the relevant legislation is s 106 of the Civil Procedure Act 2005 (NSW) ('CPA') which provides:

(1) A judgment debt may be enforced by means of any one or more of the following -

1. Rule 39.04 of the UCPR prescribes the procedure involved in an application for a garnishee order:

(1) An application for a garnishee order in respect of a judgment is to be made by way of notice of motion.

(2) Unless the court orders otherwise, a notice of motion under this rule -

(a) may be dealt with in the absence of the parties, and

(b) need not be served on the judgment debtor or the proposed garnishee.

(3) The application must indicate the extent (if any) to which the judgment debt has been satisfied under any writ of execution, garnishee order or charging order issued by the court.

1. I now turn to the parties' submissions in respect of the Westpac Garnishee Order.

1. In the context of consideration of whether the Westpac Garnishee Order was 'execution or other process on a judgment, order or decree of an Australian Court' Drummond referred to the decision of Mossop J in Bloc (ACT) Pty Ltd v Crafted Capitol Pty Ltd ('Bloc').51F[52] It was submitted that Mossop J was satisfied that a 'debt redirection order', which was returned partially unsatisfied, was sufficient to give rise to the presumption of insolvency under s 459C(2)(b).
2. Drummond submitted that the debt redirection order in Bloc was made under Div 2.18.652F[53] of the Court Procedure Rules 2006 (ACT) and is closely akin to a garnishee order.
3. On my reading of Bloc it appears to have been assumed that a 'debt redirection order' (referred to on occasion in the judgment as a garnishee order) amounted to execution of the type mentioned in s 459C(2)(b). There did not however appear to be any argument, considered analysis or submissions directed to this question.53F[54] I do not consider Bloc to be of any utility in clarifying the rationale as to whether garnishee orders meet the description of execution in s 459C(2)(b).
4. Drummond referred to the provisions of the UCPR and the CPA which are extracted above in support of its submission that the Westpac Garnishee Order should be considered 'execution or other process issued on a judgment'.
5. Drummond submitted that the Statutory Interest Debt is amenable to the process of execution as such interest accrues by operation of s 73(4) of the County Court Act.
6. Drummond's submissions then turned to the issue of the expressions 'returned wholly or partly unsatisfied'.
7. Drummond submits that in Haridemos,54F[55] the expressions 'returned' or 'unsatisfied' were given the same meaning as that attributed to it in the authorities dealing with s 40(1)(d)(ii) of the Bankruptcy Act 1966 (Cth) where a person is taken to have committed an act of bankruptcy if an enforcement process issued against that person is returned 'unsatisfied'. Drummond accepted that it is not sufficient that the enforcement process was returned 'unexecuted'.55F[56]
8. Drummond's submissions cited Gibbs J's observations in Re Johnson which are extracted above in the section of these reasons dealing with the Warrant.56F[57]
9. Drummond submits the relevant test with respect to the unsatisfied return of garnishee order is whether, at the time the garnishee order took effect, it attached to funds standing to the credit of the judgment debtor with the financial institution garnished. Drummond accepted that if no accounts are held by the judgment debtor, then the garnishee order is returned unexecuted rather than unsatisfied.
10. Applying this formulation, Drummond submits the Westpac garnishee order was 'returned' partly unsatisfied. In compliance with the order, Westpac located accounts and funds it held for Roberts and garnished the sum of $108.28 from Drummond's nominated account.
11. Drummond contended that the meaning of the term 'return' is not to be construed in the abstract; rather, consideration should be given to the provisions of the legislation and court rules applying to the particular type of execution involved. Drummond observed that in Haridemos, r 39.51 of the UCPR required that 'the Sheriff must return the writ to the court by which it was issued';57F[58] in the case of the Westpac Garnishee Order issued out of the NSW District Court, there was no such requirement in the UCPR for there to be a 'return' to the court of issue.
12. In relation to the requirement of the 'genuine attempt', Drummond proffers a different interpretation of the principle in Guss v Deputy Commissioner of Taxation ('Guss')58F_[59]_ to that adopted by Roberts outlined below. Drummond submits that upon examining Beach J's statement in its entirety, it becomes clear that the 'genuine attempt' requirement is imposed on the recipient of the warrant, who in this case is Westpac, not Drummond:59F[60]

It must be demonstrated that endeavours have been made to execute the warrant in its terms. There must be a genuine but unsatisfied attempt to levy execution against the debtor and his property.

1. Drummond submits there was a 'genuine attempt' on the part of Westpac to levy execution of the Westpac Garnishee Order but there were insufficient funds. The sum of $15,591.56 remained outstanding to Drummond after the garnishee order had been executed and therefore it was 'returned partly unsatisfied'.

1. In its submissions in respect of the Westpac Garnishee Order, Roberts focused on the issue of what constitutes a 'judgment'. Roberts contended there was nothing in the evidence to show exactly what judgment, if any, was registered at the District Court to obtain the Westpac garnishee order. It was contended the sum of $15,699.84 as referred to in Drummond's application for the Westpac Garnishee Order was not a judgment as such like the order of Judge Burchell, but was rather a claim for statutory interest flowing from that judgment; there is no judgment as such issued in respect of the Statutory Interest Debt. It was contended that the claim for statutory interest was therefore, not 'issued on a judgment of an Australian court' within the meaning of s 459C(2)(b).
2. Roberts submits that even if the Statutory Interest Debt could be considered a component of the Judgment Debt by operation of s 73(4) of the County Court Act, the Westpac Garnishee Order nevertheless could not be considered to be execution on that judgment. This is because s 73(4) provides that 'such interest may be seized under a warrant of execution on such judgment'; 'warrant of execution' is a term of art defined in the County Court Rules. Rule 68.01 provides:

68.01 Definitions

In this Order, unless the context or subject matter otherwise requires -

...

warrant of execution means a warrant of seizure and sale, a warrant of possession and a warrant of delivery.

1. Roberts contended that recovery of the Statutory Interest Debt on the Judgment Debt can only be achieved by resort to the defined set of processes of execution prescribed by r 68.01; a garnishee order from NSW is evidently not such a process.
2. Roberts contends that Drummond's formulation of the test for the 'return' of a garnishee order, that if no accounts are held by the judgment debtor at the institution garnished, then the garnishee order is returned unexecuted rather than unsatisfied, but if, as it is the case with the Westpac Garnishee Order, the garnishee order attached to funds standing to credit of the judgment debtor but the garnisheed amount does satisfy the quantum sought in the order, then it could be said that the garnishee order is returned partly unsatisfied, is unsupported by authority.
3. Roberts also rehearses the same submissions which were made above in relation to the Warrant that the execution must be returned to the court of issue. It was observed that the Westpac Garnishee Order has not been returned to the NSW District Court which issued the order.
4. Reference was made to the observations of Beach J of the Federal Court of Australia in Guss v Deputy Commissioner of Taxation:60F[61]

First, the concept of "returned" does not simply embrace being sent back. In form there should be a documentary endorsement or certificate from the sheriff (or associated report) as to what in fact had been done under the warrant and how far the sheriff had been able to carry out his instructions. Further, that warrant and the endorsement (or associated report) are to be returned to the court of issue, in this case the Magistrates' Court. That is what is envisaged by the concept of return.

1. Second, the expression 'unsatisfied' has to be demonstrated. It must be demonstrated that endeavours have been made to execute the Warrant in its terms. There must be a genuine but unsatisfied attempt to levy execution against the debtor and his property. In discussing the requirements of 'returned unsatisfied', Roberts draws upon Beach J's judgment in Guss in stipulating that 'there must be a genuine attempt to levy execution against the debtor and his property.'61F[62] Roberts submits there was no genuine attempt to levy execution of the Westpac garnishee order on the part of Drummond.
2. Roberts submitted that Drummond's behaviour falls short of the requirement of a 'genuine attempt'. Reference was made to Haridemos, where the creditor filed a motion in the NSW District Court seeking a writ of levy of property, which was served on the debtor. There was an attempted execution of the writ and a notice of non-levy was then produced which was returned to the District Court along with other documentation constituting return. The question before Farrell J in the Federal Court was whether there was a genuine attempt. The Court considered that the limited inquiries made by the creditor to the debtor before requesting the return of the writ were insufficient to establish a genuine attempt.
3. Roberts submitted this Court is equally bound to follow the reasoning of the Federal Court given Drummond's conduct was far less transparent and involved than that of Ms Haridemos.
4. Moreover, Roberts submits other features of Drummond's conduct establishes that no genuine attempt was made to levy execution of the garnishee orders. Drummond obtained multiple garnishee orders, including to banks with which Roberts held no account and there was no basis for a legitimate expectation that debts would be due or accruing to Roberts capable of being garnished, and only one of which was capable of being garnished.

1. The Judgment Debt was a 'judgment of an Australian court' within the meaning of s 459C(2)(b). The entitlement to interest on the Judgment Debt arose by operation of s 73(4) of the County Court Act which provision made recovery of that interest amenable to execution. There was no requirement for a separate order of the County Court to be made in respect of the interest which accrued since the entry of the Judgment Debt.
2. When the Statutory Interest Debt was registered as a judgment in the NSW District Court, I consider that judgment had the character of a 'judgment of an Australian court'.
3. The terms of s 73(4), by use of the word 'may' permitted, not required, that a warrant of execution could be used to enforce such judgment and in my opinion it does not impose a limitation that only warrants of execution could be deployed to recover the interest component of a judgment. Drummond was entitled to use other means of execution to recover such interest. I reject Roberts' submissions in that regard.
4. When registration of the judgment occurred in the District Court, it became capable of enforcement under s 106 of the CPA. One of the means of enforcement prescribed under s 106 was a garnishee order. I consider that a garnishee order comes within the meaning of the expression 'execution or other process'. The Westpac Garnishee Order was an order in respect of a 'judgment debt of an Australian court' properly so called, I consider it constituted execution on such judgment by operation of s 106 of the CPA.
5. One then turns to a consideration of whether what has occurred on the evidence establishes that such execution has been 'returned partly unsatisfied'. Rule 39.34 appears to be the only relevant provision in the UCPR which has application in the current context. There is no other provision in the UCPR to which I have been referred which obliges a creditor or the garnishee to file a physical 'return' to the District Court or that required any other procedure, such as the filing of a prescribed form, to be performed by or on behalf of the creditor. In my view, what constitutes a 'return' is to be construed by reference to the relevant court rules and procedure which apply to the particular method of execution which has been issued. In respect of garnishee orders, physical return of the nature discussed in the authorities dealing with other types of execution is not required.
6. The evidence indicates that Westpac identified an account in which Roberts held a credit funds and attached such funds, and remitted them to Drummond's solicitors. The amount remitted did not discharge the statutory interest debt and so the execution was returned partially unsatisfied. I accept Drummond's submission that a 'genuine attempt' has been made within the meaning of that expression which is discussed by Beach J in Guss.
7. On the evidence it would appear that Drummond has complied with the procedure prescribed by the UCPR when obtaining the Westpac Garnishee Order. I also consider that the evidence establishes the Westpac Garnishee Order was returned partly unsatisfied and gives rise to a presumption of insolvency under s 459C(2)(b).

1. Roberts contends that even if a presumption of insolvency is established, the Court should nonetheless dismiss the application by exercising the discretion given to the court under s 467(1)(a).

1. Drummond accepts that notwithstanding a presumption of insolvency has arisen and whether it has subsequently been rebutted, the Court still retains a discretion under s 467 of the Act as to whether to make an order winding up a company in insolvency.62F[63]
2. Drummond submits that if a company is insolvent, then the Court will exercise any residual discretion against winding up, only for compelling reasons.63F[64] This is because the Court should guard vigilantly against insolvent trading.64F[65]
3. Drummond contends that the general principle, that a court will not order a winding up where a debt is bona fide disputed on some substantial ground, does not apply to an insolvent company, and it cannot apply in the context of the current Part 5.4 of the Act where the statutory presumption of insolvency operates.65F[66]
4. Drummond submits that Roberts has put no evidence before the Court which could logically be said to provide a compelling reason why the Court should exercise its discretion. To the contrary, the existence of the supporting creditors and the failure of Roberts to show any revenue, let alone evidence of assets it owns in Victoria or Australia, should provide the Court with comfort in making a winding up order.
5. In relation to the issue of 'abuse of process', Drummond submits that:

(a) The winding up proceeding is predicated on the admitted failure of Roberts to pay the interest component of the County Court Judgment. Roberts only paid that debt once the winding up proceeding was on foot. Further, the Judgment Debt at all times 'carried' interest and Roberts was aware of the claim for the interest component, as this was expressly identified in the schedule to creditors' statutory demand.

(b) Roberts engaged in tactics and stratagems to obfuscate, delay and or avoid payment of debts due to its subcontractors. It is uncontested that Roberts did not make payment of the interest component of the Judgment Debt until after the winding up proceeding was issued. Supporting creditors to this application are also owed at least $810,755.62 for judgment debts, adjudicated amounts, statutory debts and tax invoices. Roberts purports to use contractual liquidated damages to refuse to pay those debts.

(c) Roberts' submissions that Drummond 'eschewed conventional recovery' in attempting to recover the accrued interest on the County Court Judgment is baseless. The steps undertaken by Drummond have singularly been directed at recovering the debts owed to it by Roberts including the Judgment Debt, the Statutory Interest Debt and the associated costs of executing judgment. Drummond employed straightforward and direct recovery methods prescribed under the relevant court rules and acts. The lawful recovery methods employed by Drummond all find a basis in statute. This is not a case where the actions of Drummond were designed to obtain a collateral advantage beyond what the law offers.66F[67]

(d) Roberts has intentionally made no effort to positively prove solvency. In light of this strategy, the Court ought to infer that the decision not to adduce evidence to positively prove solvency supports a finding that Roberts cannot do so. In the circumstances, the Court should not exercise its discretion to allow an insolvent company to continue to trade. Further, this is a case in which there is a preponderance of supporting creditors that are subcontractors that are clearly not being paid by Roberts for their work in the construction of the Two Birds project. The Court should ensure that the continuing risk that Roberts poses to current and potential future creditors comes to an end.

(e) The Court's discretion should be directed to the public interest, which normally requires that an insolvent company be wound up to prevent it from incurring further debts. The presumption of insolvency has arisen and has not been rebutted. The matters submitted by Roberts, even if they are taken at their highest, cannot outweigh the public policy considerations in ensuring further harm from insolvent trading is not inflicted on the Victorian economy.

1. Drummond also submits other relevant matters including:

(a) Roberts owns no known property in Australia and has no known income. It admits it may owe its own principal approximately $1.68m in contractual liquidated damages.

(b) Roberts remains liable to Drummond for untaxed costs orders in the approximate sum of $125,000.00 arising from the judicial review proceeding, which is a contingent or prospective liability of Roberts. A proper quantification of that estimate and demand for payment has been provided to Roberts, but no response has been received.

(c) Roberts owes the supporting creditors to this application and that amount is increasing week by week as Roberts continues to refuse to pay debts. The evidence filed in support of those creditors establishes a pattern of behaviour on the part of Roberts in which it seeks to use contractual liquidated damages to exert commercial pressure on its subcontractors at the Two Birds project so that they do not pursue debts properly owed to them.

(d) Drummond filed an application seeking security for its costs in the County Court proceeding on the basis that it considered there was a real risk that Roberts would not be able to meet an adverse costs order should it be unsuccessful in the proceeding.

1. In its submissions Roberts emphasises the unconventional manner in which Drummond conducted the proceedings and highlights that Drummond eschewed conventional recovery of a relatively modest, quantified debt (the Statutory Interest Debt), which was paid on 7 August 2024, prior to the first return of the application, in favour of:

(a) taking steps designed to trigger a statutory presumption of insolvency (namely, registering a Judgment Debt in the NSW District Court and then obtaining garnishee orders to be issued to four banks, including banks with which the debtor kept no accounts capable of being garnished), all without providing notice to the debtor and a time when the claimed liability was specified in a statutory demand that was the subject of an extant proceeding in this Court;

(b) upon believing that a statutory presumption may have arisen, threatening Roberts with the prospect of making a winding up application while obscuring the premise of the foreshadowed application and demanding payment of a much larger sum on behalf of multiple parties claiming to be creditors; and

(c) delaying service of the application, once filed, on the defendant while it provided a copy to a non-party.

1. Roberts urges the Court to exercise its powers under pt 5.4 of the Act to control and prevent conduct that is an abuse of process.67F[68] Roberts further invokes the observations made by the Court of Appeal of Western Australia in Createc Pty Ltd v Design Signs Pty Ltd:68F[69]

Adopting the criterion from Williams v Spautz ( 1992) 174 CLR 509; 107 ALR 635; [1992] HCA 34 (Williams), suggested by Gummow J in David Grant, there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers - such as the application of pressure to compel payment of the disputed debt.

1. Roberts contends that Drummond took steps to issue and serve the NAB Garnishee Notice (and subsequent garnishee notices to other banks) for an improper and collateral purpose of the kind described in Williams v Spautz.69F[70] Roberts contends that the purpose of Drummond and its solicitors was not to secure payment of the Statutory Interest Debt, which was never demanded from Roberts, but, rather, to contrive a premise to threaten and then, if the demands were not met to the satisfaction of alleged creditors (represented by the same solicitor and with which Roberts has disputes), commence a winding application against Roberts (apparently in anticipation that multiple parties claiming to be creditors would support the application, once filed).
2. Roberts refers to Re Huizhong Investment Group Pty Ltd,70F[71] where Black J stated: 'it may constitute an abuse of process to serve a creditor's statutory demand in respect of a debt that is plainly known to be disputed'.71F[72] It is argued that by extension, it is an abuse of process to procure, on an ex parte basis, and then seek to rely upon, the issue of garnishee notices in respect of an alleged debt where:

(a) the debtor has not been afforded a proper opportunity to pay the debt (including where the quantum of the debt has not been disclosed);

(b) the subject debt (in a different amount) is the subject of statutory demand that is the subject of an extant court proceeding filed by the debtor;

(c) the debtor does not hold accounts with some of the garnishees, such as would enable an amount to be garnished (despite the creditor's director having given sworn evidence to the contrary in order to obtain the garnishee notices); and

(d) there is a genuine prospect that, upon details of the debt being provided, the debtor will satisfy the debt (as occurred in the present case, when payment of the unsatisfied portion of the Statutory Interest Debt was made by Roberts in advance of the first return of this application).

1. Roberts asserts that to the extent that a debt of Roberts to Drummond has been quantified and was properly incurred, it was paid in full on 7 August 2024. The amounts which remain comprise of the costs of issuing the Warrant of $1,195.30 and the fees of the Sheriff being $218. Roberts emphasises the modesty of these figures. It was submitted that in Bloc where Mossop J decided to wind up the defendant, there was a judgment debt of $2.35 million which was the basis of the plaintiff's standing.
2. Roberts also maintains offsetting claims against Drummond, including the entitlement to be paid the costs of the set aside application and the sum claimed in the Roberts' County Court proceeding.
3. Roberts submits that even if the court is not satisfied that Drummond's conduct constituted an abuse of process, given the circumstances detailed above, the court should nevertheless exercise its discretion to decline to make an order for the winding up of Roberts.
4. Finally, Roberts submits there are obvious policy reasons that weigh heavily against the Court accepting Drummond's submission as to the existence of a statutory presumption of insolvency. The outcome advocated by Drummond would mean that any creditor capable of securing a garnishee order addressed to any bank that, once served on the bank, does not result in payment of the subject sum would, regardless of a demand for payment of that sum not having been made to the debtor, be entitled to rely upon a resulting presumption in a winding up proceeding that the debtor is insolvent. Similarly, if insolvency could be established through the Sheriff having obtained a warrant attempting but failing to contact the debtor, that outcome would confer significant and unwarranted commercial leverage on the creditor. The debtor would be confronted with the cost, inconvenience and reputational risk associated with needing to establish its solvency.

1. Section 467(1) of the Act provides for the Court's power on hearing an application for winding up. It provides:

467 Court's powers on hearing application

(1) Subject to subsection (2) and section 467A, on hearing a winding up application the Court may:

(a) 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; or

(b) adjourn the hearing conditionally or unconditionally; or

(c) make any interim or other order that it thinks fit.

that the authorities establish that as a general rule of a creditor who cannot obtain payment is, as between itself and the company that owes the debt, entitled to a winding-up order as a matter of right (ex debito justitiae).

1. However, the author observes that this is only a 'prima facie right' and it is necessary to accommodate the undoubted discretion explicitly provided for in s 467(1)(a). Reference was made to the observations of McHugh JA in FAI Insurances Ltd v Goldleaf Interior Decorators Pty Ltd (No 2)73F[74] as to the width of that discretion.
2. In Bungey v Magnate Projects, 74F_[75]_ Austin J observed: 75F[76]

Under s 467(1) of the Corporations Act, on the hearing of a winding up application (including an application for winding up in insolvency) the court has a discretion. It may dismiss the application with or without costs, even if the ground has been proved, or adjourn the hearing conditionally or unconditionally, or make any interim or other order that it thinks fit. The terms of the subsection make it clear that the applicant for winding up is not entitled to an order once the grounds are made out, and the court always has a discretion: Expile Pty Ltd v Jabb_'s Excavations Pty Ltd [2003] NSWSC 699 at [57] per Campbell J. The court's attention will be directed to the public interest, which normally requires that an insolvent company be wound up to prevent it from incurring further debts. Counsel for Magnate referred me to two decisions where a winding up order was refused partly on the basis that the order would not achieve anything for the creditors, as there were insufficient funds even to pay for the costs of liquidation, although there were valuable income-producing assets (Re St Thomas'_ Dock Company [1876] UKLawRpCh 64; (1876) 2 ChD 115 and Re Chapel House Colliery Company [1883] UKLawRpCh 158; (1883) 24 ChD 259). But the circumstances of those cases were unusual. Normally the court exercises its discretion to wind up a company in insolvency once insolvency is proved or a presumption of insolvency is established and not rebutted - but nevertheless, the discretion remains and is available to be exercised in an appropriate case.

1. There are a number of features of this matter which, to my mind, result in a conclusion that I should exercise my discretion under s 467(1)(a) not to make a winding up order, despite the finding I have made in respect of the presumption of insolvency arising from the Westpac Garnishee Order.
2. The evidence demonstrates that Drummond and Roberts are obviously locked in a most acrimonious and protracted dispute in respect of the project. Over the course of time, Drummond has sought to recover amounts owed to it by resort to the statutory demand mechanism. It has had no success in pursuing that means of establishing a presumption that Roberts is insolvent in order to ground a winding up application. Indeed, the second statutory demand was set aside by consent and an order made that Drummond pay Roberts' costs.
3. It seems clear that the second statutory demand was withdrawn and Drummond consented to an order that it pay Roberts' costs because its prospects of upholding the second statutory demand were forlorn by reason that Roberts would be able to establish offsetting claims which would extinguish the claim remaining owing on the demand for the Statutory Interest Debt. After the payment of the court held funds it was only the claim for the Statutory Interest Debt which remained and there did not appear to be any evidence that Drummond made a claim for it after the withdrawal of the demand.
4. During the period that the second statutory demand was on foot, and when compliance with a second statutory demand had been extended by operation of the statute pending the determination of the application to set it aside, Drummond went about the process of establishing a presumption of insolvency by operation of s 459C(1)(b). It commenced that exercise by obtaining the Warrant in the County Court of Victoria and by obtaining garnishee orders against all of the major trading banks, attaching any funds standing to Roberts credit. Two of the banks, CBA and ANZ, held no accounts for Roberts at all.
5. Although Roberts had credit cards, loans, joint accounts or trust accounts with NAB, it had no accounts which were susceptible of attachment by a garnishee order. Despite Drummond's solicitors being informed by NAB of the facts which would result in a conclusion that there was no possibility of execution on the NAB Garnishee orders and therefore the establishment of a presumption on that basis. The solicitors proceeded a week later to issue this winding up application, relying on a presumption of insolvency arising from the NAB Garnishee Order.
6. The process of obtaining the Warrant and the garnishee orders was conducted without notice to Roberts and Roberts' evidence is that no specific demand was made for the amount of the Statutory Interest Debt after the withdrawal of the second statutory demand in order that Roberts could avoid such presumption arising by payment of that debt.
7. Drummond does not explain why it made no demands for the Statutory Interest Debt before embarking on the process of obtaining the Warrant and the garnishee orders.
8. While the County Court Rules and the UCPR did not require Drummond to have given Roberts notice that it was in the process of obtaining the warrant and the garnishee orders, it seems clear that Drummond adopted this process in order that it could embark on the process of establishing a presumption of insolvency under s 459C(1)(b) without giving Roberts the opportunity to discharge the debt and avoid the establishment of a presumption. The Statutory Interest Debt was a relatively modest one and Roberts paid it before the first return of the winding up application.
9. I consider Drummond went about the process obtaining the warrant the garnishee orders, in order to obtain presumptions of insolvency under the s 459C(1)(b) because it knew it could not do so by maintaining a statutory demand by reason that the demand would be set aside because of Roberts offsetting claims.
10. Of course a presumption of insolvency has in a technical sense been established, but I think it is relevant in the exercise of the Court's discretion under s 467(1)(a) to have regard to the circumstances of how that presumption arose. As has been perhaps laboured, the presumption in respect of the Westpac Garnishee Order was established without notice to Drummond. It was a comparatively modest claim and met before the first return of the winding up application. That does not of course prevent the Westpac Order presumption from being the basis of the winding up application but, by itself, having regard to the circumstances it was established, it could not be regarded as a reliable indicator of insolvency. I also note that while Drummond contends that it has a contingent claim for costs of the order of $150,000, it did not bring this application in that capacity. Rather, it relied for its standing on very modest debts totalling $1,413.30.
11. My view concerning Drummond's approach to this matter is I think supported by the 2 July email. In my opinion, the statement by Drummond's solicitors 'that they were instructed that their client had become aware of the presumptions' when it was those solicitors themselves that had set in train the process of setting up the establishment of such presumptions is disingenuous. That email was cast in threatening terms and made after the events Drummond's solicitors considered had given rise to the presumptions and were designed to threaten Roberts with the winding up application which, indeed, followed shortly thereafter. The 2 July email also observed that the other proceedings in court would 'yield to the winding up application', it seems a reference to the Roberts' County Court Proceeding. Roberts was given less than 24 hours by the 2 July email to come to terms with Drummond.
12. I note that in Haridemos, Farrell J, after concluding that a presumption of insolvency of the same type being considered here had not been established, decided that if she was wrong on that issue that she would, nonetheless, exercise the discretion not to make a winding up if it was considered that a presumption did exist. She observed:76F[77]

If I am wrong in that conclusion, as a matter of discretion I would not make the order that ACT Builders be wound up in the circumstances of this case, even though ACT Builders conceded that it has not submitted evidence on the basis of which the presumption of insolvency would be rebutted. The writ which Ms Haridemos seeks to enforce is for an amount approximately 10 times the amount of the known net indebtedness of ACT Builders to Ms Haridemos based on the awards made by NCAT. It is not clear what the true position will be when the respective costs orders made by NCAT are assessed and judgment entered for the assessed amount. Until that time, Ms Haridemos' attempts to have ACT Builders wound up are misconceived.

1. I observe that a feature of the use of s 459C(2)(b) may enable a creditor to contend that a presumption of insolvency arises if, by chance, in the process of obtaining garnishee orders it comes across an account of the debtor with a minimal balance not sufficient to satisfy a judgment in full. This may be perhaps because the account is no longer used by the debtor. Upon the garnishee order being returned partly unsatisfied, the creditor could potentially rely on that as a basis for contending that the debtor should be presumed insolvent. This, to my mind, in the context of establishing a presumption of insolvency, is unsatisfactory. Contrast this with the statutory demand regime, which enables agitation of disputes and offsetting claims before the presumption of insolvency can be arrived at.

1. In my opinion, the application should be dismissed and I will hear the parties on the question of costs.

[1] Drummond Carpentry Services Pty Ltd v Roberts Construction Group Pty Ltd (Supporting Creditor, Beenak Concrete and Formwork Pty Ltd) [2025] VSC 509.

[3] [2011] FCA 276; (2011) 193 FCR 479 (Bromberg J).

[6] [2002] NSWCA 160.

[7] Ibid [29] (Ipp AJA agreeing at [53] and Brownie AJA agreeing at [56]).

[8] [2008] FCA 701; (2008) 247 ALR 781 (Jacobson J) ('Korean Airlines').

[10] Ibid, citing Field v Commissioner for Railways (NSW) [1957] HCA 92; (1957) 99 CLR 285, 293 (Dixon CJ, Webb, Kitto and Taylor).

[13] [1986] 1 WLR 1271 (Parker LJ).

[15] [2004] WASC 95 (Hasluck J).

[17] [2016] VSCA 235 ('McCarthy') (Tate and Ferguson JJA).

[18] Ibid [40] (emphasis in the original).

[19] [2016] VSC 621 (Ierodiaconou AsJ) ('Victorian Fire Brigades').

[21] Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2) [2011] FCA 276; (2011) 193 FCR 479 at [34]-[38]; and see McCarthy v Camil Holdings Pty Ltd [2016] VSCA 235 [40].

[23] [2010] VSC 589 (Judd J) ('Biovision').

[25] Being the date of the judgment debt as ordered by Judge Burchell and the date the Funds in Court were released.

[26] Calculated by applying the prescribed rate applying at the time of 10% per annum over 267 days, or $57.66 per day.

[27] First Kerlidis Affidavit, [26c].

[29] By 14 August 2024, the fees amounted to $218.

[30] Being 24 July 2024, 2 August 2024, 14 August 2024 and 30 August 2024.

[34] Comprised of $260,000 being costs of the judicial review proceeding, $90,000 being the costs of defending the adjudication application, and $210,000 being the adjudicated amount, interest and others.

[35] [2015] QSC 156; (2015) 296 FLR 334 (Mullins J) ('Thorne Developments').

[38] In the submissions made by Drummond filed on 8 October 2024, a third ground of a garnishee order filed by Earthwood Villa Pty Ltd, a supporting creditor at the time of the above submission, at the Local Court of New South Wales, was relied upon by Drummond. Since Earthwood Villa Pty Ltd is no longer a supporting creditor in this application, that ground is no longer relevant.

[39] The figure of $23,862.64 is deposed in Mr Bihannic's affidavit which differs from the figure of $17,809.23 as proposed initially in G2K Carpentry's notice of appearance.

[40] [2008] HCA 9; (2008) 232 CLR 314 (Gleeson CJ, Kirby, Hayne, Crennan and Kiefel JJ).

[41] Ibid 326 (Gleeson CJ, Hayne, Crennan and Kiefel JJ).

[43] [2015] FCA 841 ('Guss').

[45] [2017] FCA 25; (2017) 250 FCR 254, 266 (Farrell J) ('Haridemos').

[46] F Assaf_, Assaf's Winding Up in Insolvency_ (LexisNexis, 3rd ed, 2021) 71-2.

[47] (1967) 11 FLR 335 (Gibbs J) ('Re Johnson').

[49] [2013] FMCA 392 (Smith FM).

[50] Ibid [58]-[59] (emphasis added).

[52] [2021] ACTSC 81 ('Bloc').

[53] Division 2.18.6 sets out particulars in relation to debt redirection orders, not div 2.18.7 as was contended in the oral submissions of Drummond.

[57] See paragraph 173 above with extract of Re Johnson at 339.

[59] [2015] FCA 841; (2015) 238 FCR 509, 529 (Beach J) ('Guss').

[61] [2015] FCA 841; (2015) 238 FCR 509 (Beach J) (Citations omitted).

[63] Deputy Commissioner of Taxation v Guy Holdings Pty Ltd [1994] TASSC 126; (1994) 116 FLR 314, applied in Penrith CC v Owston Nominees No 2 Pty Ltd [2001] WASC 249.

[64] Khoury v Rosemist Holdings Pty Ltd [1999] FCA 458; (1999) 17 ACLC 1013, [65] (Bond J).

[65] Duc Vinh Truong v HT Design and Construction Pty Ltd [2007] NSWSC 102.

[66] ASIC v Lanepoint Enterprises Pty Ltd [2011] HCA 18; (2011) 244 CLR 1, [29]-[30].

[67] With reference to the criterion in Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509.

[68] David Grant & Co Pty Ltd (receivers appointed) v Westpac Banking Corporation (1995) 184 CLR 265, 279 (Gummow J); see also O_wen-pearse v Lander Land Co Pty Ltd_ [2018] FCA 2077, [71]-[77].

[69] [2009] WASCA 85; (2009) 71 ACSR 602, 611 (Martin CJ).

[70] ([1992] HCA 34; 1992) 174 CLR 509.

[71] [2018] NSWSC 390.

[74] (1988) 14 NSWLR 643, 660.

[75] (2006) NSWSC 734.