Shakespeares Pie Co Australia Pty Ltd v Multipye Pty Ltd [2006] NSWSC 100 | Case summary

1 I have before me in these unresolved winding up proceedings an interlocutory process styled "Notice of Motion" filed in court on 13 February. By that interlocutory process, the defendant seeks leave to amend its Notice of Appearance and Grounds of Opposition to the winding-up application. It also seeks leave to use, in these winding up proceedings, certain documents produced under subpoena in proceedings in the Commercial List in which the present defendant sues the present plaintiff and others upon various causes of action. 2 I can deal briefly with the second matter. The plaintiff ultimately did not oppose the grant of leave to use the subpoenaed documents. Indeed, I understood the plaintiff to consent to their use, albeit on a basis predicated upon refusal of the first item of relief sought by the defendant. 3 Because of the apparently wide-ranging nature of the dispute between the parties and related entities in the other proceedings, I have decided that access to the subpoenaed documents should be permitted. In a sense, the winding-up proceedings before me are only part of the overall course of litigation between the parties and it would be somewhat artificial to compartmentalise things in the way that would result if the leave sought were to be refused. 4 That leaves for consideration the application for leave to amend the Notice of Appearance and Grounds of Opposition. There are really two aspects to that. The first involves addition of a ground of defence or, in a real sense, a supplementing of the basic proposition that the defendant is not insolvent. 5 The existing statement of grounds makes it clear that the defendant will rely heavily on the proposition that it is not insolvent, although the current expression of that ground contains a reference to the plaintiff's alleged debt because it says that: "the defendant is not insolvent in that but for that debt it is able to meet all its debts as and when they fall due". 6 The amendment in this area seeks to expand that a little by adding a ground of solvency generally, that is to say, without taking into account the aspect of the particular debt and by adding a reference to an intention to rely upon the discretion of the Court and the way it should exercise the discretion if it is satisfied that creditors are not prejudiced, even though there might be insolvency. 7 I do not see these matters as really new. They are refinements. I therefore intend to allow the defendant to amend by adding grounds 14 and 15 in the form of Notice of Appearance annexed to the interlocutory process filed on 13 February. 8 More difficult is the other aspect of the application to amend. The defendant seeks to add the following ground of defence: "The defendant has a substantial offsetting claim against the plaintiff company based upon a conspiracy to defraud in relation to an alleged license fee sought and obtained from the defendant by Shakespeares Systems Pty Ltd and in respect of which the defendant obtained no benefit whatever". 9 That ground of defence is stated in strong terms. Mr Newell, who has appeared for the defendant, has produced quite a number of documents which he says come from the subpoenaed materials with which I have already dealt. Without taking me to the documents one by one, Mr Newell has given me an assurance that both the documents produced on subpoena and the absence of certain documents one might expect in a transactional sense from those produced on subpoena support the existence of an arguable case to the effect stated in the proposed additional ground of defence. 10 The matter complained of is, in essence, that certain money paid by the defendant to the plaintiff was applied in ways which involved, to use Mr Newell's words, "sham transactions" being, as he described them, transactions which really involved the payment of key money precluded by the Retail Leases Act 1994 and, therefore, recoverable. 11 Such an offsetting claim is, on the face of things, of course, precluded upon the hearing of the winding-up application by s.459S, these being proceedings in which the plaintiff proceeds on the basis of presumed insolvency following failure to satisfy a statutory demand. 12 Section 459S says that the company may not, without the leave of the court, oppose the winding-up application on a ground relied on for the purposes of the application for an order setting aside the statutory demand, or a ground upon which the company could have so relied on but did not so rely on. The section is as follows: " Company may not oppose application on certain grounds (1) In so far as 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 company may not, without the leave of the Court, oppose the application on a ground: (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). (2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent." 13 It is submitted on behalf of the defendant that the ground it now wishes to add does not come within either of the specifications in s.459S. Certainly it does not come within the first. There was in this case an application to set aside a statutory demand. The demand was not set aside but the amount of it was reduced. The matters going to the so-called "sham transactions" and key money were not raised in those proceedings. 14 That leaves the question whether this new ground comes within s.459S(1)(b), that is to say, whether it is a ground that the defendant company could have relied on in the s.459G application but did not. Emphasis must be placed on the word "could". 15 As I pointed out in one of my earlier judgments in these proceedings (see Shakespeares Pie Co Australia Pty Ltd v Multipye Pty Ltd [2005] NSWSC 1338), referring to Biron Capital Ltd v Velowing Pty Ltd [2003] NSWSC 1881, Perpetual Nominees Ltd v Masri Apartments Pty Ltd (2004) 49 ACSR 719 and Goman v Scope Data Systems Pty Ltd [2004] NSWSC 314, s.459S(1)(b), in speaking of a ground "that the company could have so relied on", is concerned not with a ground of a particular kind or description in a generic sense but rather with a ground that was actually available to be asserted according to the facts and circumstances existing at the time when it was open to the company to resort to the s.459G procedure. 16 The present case shows, in my view, that that formulation requires some slight adjustment and that s.459S should not be regarded as precluding reliance on a ground depending upon and derived from facts and circumstances which, although existing at the time when it was open to the company to resort to s.459G, were not then known to the company and could not have been ascertained by it so as to be capable of becoming the subject of an assertion of offsetting claim advanced within the time envisaged by s.459G. 17 It will be, I think, an unusual situation in which the defendant company in a winding up application becomes aware after the s.459G challenge period has ended of new matters previously not only unknown but also unascertainable which are of such a kind to ground an offsetting claim. But if that should happen, then I do not read s.459S(1)(b) as ruling out reliance on the unknown and previously unascertainable but now discovered offsetting claim when the winding-up application comes on for hearing. That, it seems to me, is the force of the word "could" in s.459S(1)(b). 18 On the assumption that what Mr Newell has told me about "sham transactions" and key money can be shown to emerge from the subpoenaed documents to which the company previously had no means of access, I am therefore of the opinion that s.459S will not rule out reliance by the defendant on the proposed ground 13 which I have quoted in full. Particularly in view of the relationship between these winding-up proceedings and the related disputes between the parties arising from various aspects of their business relationships, I think it appropriate that the grounds of opposition be amended by adding ground 13 - but with the qualification that the assumption to which I have referred must in due course be made good. **********

Shakespeares Pie Co Australia Pty Ltd v Multipye Pty Ltd

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