Victorian WorkCover Authority v Barroaghan Pty Ltd [2001] VSC 413

5. In summary, the applicant asserted that at the time of the making of the winding up order the company did not owe the sum stipulated in the statutory demand and, further, that the fact was known to the plaintiff. Furthermore, the applicant asserted that at the time of the winding up order and at the time of these applications and, indeed, at all other times it was solvent.

8. The company is involved in the business of wine marketing. As an employer it has employee insurance obligations known as WorkCover including the payment of insurance premiums from time to time to the plaintiff, the Victorian WorkCover Authority.

11. The principal of the company is the applicant, Barry Monaghan, a director and shareholder of the company. In an affidavit in support of the appeal and application Monaghan deposed to certain events that occurred prior to service of the statutory demand and the making of the winding up order. I shall summarise the matters deposed to by Monaghan. Between January and March 2001 Monaghan discussed the premium payable by the company with officers of the plaintiff. Discussion was concerned with initial premiums as assessed by the plaintiff based on estimated remunerations for the company. The plaintiff's officers had asserted that an amount was overdue. Monaghan challenged the correctness of the amount. On 19 March 2001 Monaghan spoke to solicitors for the plaintiff who informed him that they had been engaged to recover the debt relating to outstanding premiums. Monaghan informed the solicitors that the amounts claimed were wrong and that he would arrange for an accountant for the company to contact the plaintiff to determine the correct premium due.

14. Subsequently, a statutory demand for premiums in the sum of $23,328.80 together with penalties of $2,043.65 being a total amount of $25,207.26 was issued. It is unclear whether the company received the statutory demand. However, for the purposes of the application for a winding up order the plaintiff deposed in the usual way by affidavit as to service on the registered office of the company. It seems that around this time Monaghan was ill and not aware that the statutory demand had been served.

17. In the subsequent period Monaghan engaged in a number of discussions with the solicitors for the plaintiff. Other discussions were conducted on behalf of the company by its then accountant, one David Owen with officers of the plaintiff. All these discussions culminated in the company receiving on 10 September 2001 two documents entitled "Confirmed Premium Notifications" both dated 7 September 2001. The documents specified the "confirmed premium" due for each year by the company. As a result of the two documents dated 7 September 2001 the confirmed premium payable by the company to the plaintiff was adjusted from $23,328.80 to the sum of $248.50. Monaghan deposed that on 15 September 2001 he paid a cheque to the plaintiff for the latter amount of $248.50.

20. The "Confirmed Premium Notifications" dated 7 September 2001 were forwarded to the company under cover of notices stating, the following:

"Thank you for returning 1999/00 Certificate of Rateable Remuneration form. .............................................................................................. The reconciliation below shows your latest advised initial premium and your confirmed premium for the 1999/00 policy period ..... As you have now certified your rateable remuneration payable please ignore the previous notification regarding the confirmed premium based on the assessed remuneration. .........................................................................................."

24. Notwithstanding these developments, on 31 August 2001 the plaintiff filed an originating process seeking a winding up of the company based on the statutory demand for the debt of $25,207.26. The usual affidavits and notices were filed with respect to the winding up application. The affidavits filed included an affidavit by one Matthew Salvatore Dinatale sworn on 28 August 2001. In the affidavit Mr Dinatale deposed that he was a senior credit officer of CGU Workers' Compensation (Victoria) Ltd, an agent of the plaintiff. He deposed that on 17 May 2001 the company was indebted to the plaintiff for the sum of $25,207.26. He further deposed that, as at 28 August 2001, the sum remained due and payable to the plaintiff.

27. Monaghan admitted the likelihood that the originating process seeking the winding up of the company was served by post at the registered office of the company on 7 September 2001 (the same date as the notifications and notice) but said he was ignorant of it.

30. The winding up application proceeded on 26 September 2001 notwithstanding the forwarding of the notifications and notice some two weeks before the date of hearing. There was no appearance for the company. I was informed that the plaintiff was represented by counsel. The court was not informed on the application for the winding up of the company of the revision by the plaintiff of the due premium, the fact of the issue of the confirmed premium notifications or the notices dated 7 September 2001, the adjustment of the premium or the payment of a cheque for the amount of $248.50 by the company to the plaintiff. The company was ordered to be wound up by the Senior Master.

33. Monaghan first became aware that the company had been ordered to be wound up on 28 September 2001 when he was contacted by the office of the liquidator appointed by the court. On the same day, 28 September 2001, Monaghan telephoned the offices of the plaintiff and spoke to one Power. Monaghan informed Power that the company had received revised premium notifications and believed that the matter had been resolved. Power told Monaghan that he knew nothing of those matters but would speak to the solicitors for the plaintiff. On 1 October 2001 Monaghan telephoned Power. Monaghan alleged that Power enquired whether the company had received any advice from the solicitors. Monaghan alleged that Power said the plaintiff had considered the matter and found it had made a mistake. Monaghan alleged that Power told him the solicitors for the plaintiff had been instructed to "fix" the matter. In a conversation later the same day of 1 October 2001 Monaghan alleged that Power confirmed that a mistake had been made by the plaintiff and that its solicitors were instructed to resolve the matter. Again, on the same day, Monaghan telephoned the solicitors for the plaintiff. He alleged they informed him that advice had been given by the solicitors to the plaintiff not to withdraw because an amount in excess of $2,000 was still payable (presumably being the penalty imposed on the original assessment) if interest was applied to the amount originally claimed by the plaintiff from the company.

36. In a second affidavit Monaghan deposed to certain matters concerning the statement of affairs of the company. In both affidavits Monaghan deposed that the company was solvent and had sufficient money at hand to pay its debts due and future debts not due as and when they fell due.

39. The present summons and application by the company was first returnable on 12 October 2001. It was adjourned by consent for one week until 19 October 2001. On the return date Mr M. Sanger of Counsel appeared for the plaintiff and Mr M. Crennan SC appeared with Mr R. Wilson for the applicant. When the matter was first called over in the Corporations List this day an inquiry was made by the court as to whether there was any affidavit upon which the plaintiff intended to rely. The court was informed that there was none. The court pointed out to Mr Sanger that there were matters deposed to on behalf of the applicant that had not been rebutted or challenged in any way by the plaintiff. The matter was reached immediately after the luncheon adjournment. After counsel for the applicant had commenced to make the application Mr Sanger rose and sought leave to file an affidavit sworn by one Shaun Patrick Power on 19 October 2001 on behalf of the plaintiff. Notwithstanding the late service and filing of the affidavit there was no objection on behalf of the applicant. Leave was granted to file the affidavit of Power. In the affidavit Power deposed that he was a credit team leader of CGU Workers' Compensation (Victoria) Limited, an agent of the plaintiff. Power deposed to the arrangement of service of the subject statutory demand on the defendant and the filing of the application for the winding up of the company. In particular, Power deposed that on the date of the filing of the application for the winding up of the company and the affidavit in support the debt stated in the statutory demand, namely, the sum of $25,207.26, was due and payable by the defendant. Power asserted in the affidavit that the company had not disputed any part of the debt as stated in the statutory demand. He deposed, further, that the penalty in the statutory demand being the sum of $2,043.65 remained due. He deposed, also, that a cheque in the sum of $248.50 was provided by Monaghan to the solicitors for the plaintiff on 16 October 2001 but that the cheque was returned. Otherwise, Power did not rebut the matters deposed to by Monaghan notwithstanding that the plaintiff had been aware of the contents of the first Monaghan affidavit for at least one week. For present purposes I do not accept the evidence of Power with respect to the debt because it contradicted the plaintiff's own notices and statements to the company as exhibited to the affidavit of Monaghan. Significantly, Power did not rebut the critical circumstances described and documents exhibited in the affidavit of Monaghan with respect to the revision of the premium and the advice by the plaintiff to the company that earlier claims should be disregarded. Furthermore, there was no rebuttal of the description of the conversations between Monaghan and an officer of the plaintiff by the name of Power.

42. Mr Sanger for the plaintiff sought leave to cross-examine Monaghan as to the matters deposed to in his affidavits. Leave was refused on the ground that at the time the application for leave to cross-examine was made no relevant affidavit was filed on behalf of the plaintiff rebutting the matters deposed to by Monaghan. It was inappropriate and unfair to subject a party to cross-examination in such circumstances. For present purposes, I accept the matters deposed to by Monaghan.

45. Well after the completion of submissions on behalf of the applicant and when the submissions on behalf of the plaintiff were well advanced, Mr Sanger on behalf of the plaintiff sought further leave to file an additional affidavit of Power on behalf of the plaintiff. The late filing of the affidavit was objected to by the applicant. Special leave to file the affidavit under Order 77.05(7)(b) was refused as it was served far too late and without warning as to its contents. Furthermore, there was no application on behalf of the plaintiff to adjourn the proceeding to facilitate the late service and filing of the second affidavit of Power. In any event, the second affidavit of Power did not refute the advice conveyed by the plaintiff to the company on 7 September 2001 that the premiums had been revised and previous claims should be disregarded.

48. In the course of submissions on behalf of the plaintiff, Mr Sanger purported to make assertions from the bar table that at the time of the application for the winding up of the company the court was not informed of the circumstances described by Monaghan because both the counsel and the solicitors for the plaintiff were not aware of those matters. A number of opportunities were given to the plaintiff during the course of submissions to provide an explanation to the court as to why the matters described by Monaghan, in particular, the advice by the plaintiff to the company on 7 September 2001, had not been conveyed to the court. No explanation could be provided save for the ignorance of counsel and solicitors.

51. These are the circumstances that preceded the appeal and the application. I turn to consider the relevant principles.

54. Observations are warranted with respect to the conduct of the plaintiff in the application for the winding up of the company at first instance. The courts have regarded circumstances of failure to disclose significant information or misrepresentation of the facts as a serious matter constituting an abuse of process: see In Re a Company (1973) 1 WLR 1566, 1571-1572; re Gasborne Pty Ltd and Ors [1984] VicRp 70; (1984) VR 801, 859-860.

57. Having considered the affidavits filed on behalf of the applicant, I am satisfied of a number of matters. First, that at the time the statutory demand and the other relevant matters came before the Senior Master on the winding up application there were significant matters that were not disclosed to the court. In my view the assertion of ignorance of the counsel and the solicitors is not sufficient to constitute an explanation as to why matters were not disclosed to the court. It behoved the plaintiff in the circumstances of this matter, given the seriousness of the consequences of the winding up of a corporation, to provide instructions such as to inform the court at the time of the winding up application of the circumstances relating to the revision of the premium that was the subject of the claimed debt. The only explanation forthcoming from the plaintiff was that those representing it on the occasion of the application for the winding up were not aware of the position. The explanation does not absolve the plaintiff of the conduct of the proceeding before the Senior Master. Persons doing certain acts who are employees or agents of a corporation are "an embodiment of the company" and act for the company: see Tesco Supermarkets Limited v Nattrass [1971] UKHL 1; (1972) AC 153, 170-1; Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121. There can be no doubt that at the time the notices relating to the revised premium were sent to the company and at the time the relevant conversations occurred between representatives of the plaintiff and Monaghan persons were acting on behalf of the company and in such a way as to bind the company. It was no satisfactory explanation that the legal representatives of the plaintiff at the time of the winding up application had not been instructed as to the true position. Accepting the matters deposed to by Monaghan, it can be reasonably understood that the plaintiff failed to ensure its appropriate officers and legal representatives were properly informed of matters relevant to the company. In my view, the pursuit of the winding up application in all the circumstances constituted an abuse of process. The appeal should be allowed.

60. In any event, in the circumstances of the communications between Monaghan and officers of the plaintiff and other matters deposed to by Monaghan that stand unrebutted it is clear that the debt that was the subject of the statutory demand and the order for the winding up of the company was disputed bona fide and on substantial grounds. It would not be appropriate on that basis, therefore, for the winding up order to be allowed to stand: see Re Brighton Club and Norfolk Hotel Co Limited [1865] EngR 454; (1865) 35 Beav 204, 205 [1865] EngR 247; (55 ER 875); Mibor Investments Pty Ltd and Ors v Commonwealth Bank of Australia [1994] VicRp 61; (1993) 11 ACLC 1062, 1064.

63. In addition, I was taken by Mr Crennan SC for the applicant to the relevant provisions of the Accident Compensation (WorkCover Insurance) Act 1993. In particular ss.26(4) and 59B. It is apparent from those provisions that the plaintiff was entitled to serve notice in writing on the company to adjust the amount of the premium. Pursuant to s.26(4) of the Accident Compensation (WorkCover Insurance) Act the adjusted amount was the subject premium for the purposes of the legislation. It follows, therefore, that once the adjustment had been advised on 7 September 2001 by the plaintiff to the company the only amount owing was the adjusted premium and I accept that amount, if it was due, in all likelihood was satisfied by the cheque forwarded by Monaghan to the plaintiff.

66. The second matter about which I am satisfied is that there was no debt owing by the company at the time of the service of the statutory demand, or at very least, at the time of the application for the winding up of the company made on 26 September 2001. I am so satisfied on the affidavits of Monaghan. I observe, further, that the liquidator appointed by the court has not come forward to challenge the matters deposed to by Monaghan. I was informed during the course of submissions that the liquidator had been present in court but did not wish to participate or be heard.

69. I am satisfied, furthermore, that in the circumstances of this proceeding it was a relevant premium were not disclosed to the Senior Master. It can be reasonably assumed, in my view, that if these matters had been disclosed to the court a different view may well have been taken with respect to the application for the winding up of the company. In any event, I need not contemplate such at this stage. Pursuant to Order 77.05(7) the application for the winding up of the company proceeds before me as a hearing de novo. For the reasons stated I am not satisfied that a debt was owed as claimed in the statutory demand by the company to the plaintiff. Furthermore, for the reasons already stated I am satisfied that the company is solvent.

72. Given that I am concerned with an appeal under Order 77.05 of Chapter 1 of the Rules it is appropriate to give consideration to the fact that the appeal was served outside the period stipulated by Order 77.05(3), although only a few days outside the period. I am satisfied that in the circumstances of this matter it is appropriate that an extension of time be granted to the applicant to file and serve the summons constituting the appeal against the orders made by the Senior Master on 26 September 2001. It can be readily understood that it took the applicant a few days to collate the relevant material and evidence deposed to in the affidavits. I am so satisfied to extend time because, at the very least, it would be contrary to the due administration of justice if an extension of time to bring the appeal was refused. Furthermore, I am satisfied in all the circumstances of this matter that it is appropriate to grant special leave to the applicant to file the further affidavits of Monaghan and Anthony Peterson and, also, to grant special leave to the plaintiff to file the first affidavit of Power in accordance with Order 77.05(7)(b) for the purposes of the appeal. I observe that the applicant would, in any event, have been entitled to rely upon those affidavits for the purposes of the interlocutory process seeking to terminate the winding up of the company.

75. I indicate, also, that if it was necessary to do so I would be satisfied that it was appropriate to grant the relief sought in the interlocutory process, namely, the termination of the winding up pursuant to s.482 of the Corporations Act.

78. Furthermore, in so far as the application has effectively been made by Monaghan on behalf of the company and given that the company is the subject of an order for its winding up it is appropriate to grant leave pursuant to s.471A of the Corporations Act to the applicant to appeal against the winding up order and to apply to terminate the winding up of the company: see Rock Bottom Fashion Market Pty Ltd v HR & CE Griffiths Pty Ltd (1997) 15 ACLC 1,744, 1,745 (Qld CA); also, Object Design Inc v Object Design Australia Pty Ltd (1997) 15 ACLC 1,356, 1,358.

81. It follows, therefore, that I am satisfied that the appeal should be allowed.

84. The remaining matter to be considered is the question of the costs of the liquidator and the costs of the parties of the appeal and the application.

87. Having considered the evidence relied upon by the applicant and the submissions made on his behalf and the general circumstances of this matter I am satisfied it is appropriate to give special consideration to the issue of costs. I have considered very carefully the submissions made on behalf of the plaintiff, both orally and in writing, and the affidavit of Power. I observe, in particular, the late filing of the affidavit of Power and the attempted filing of his second affidavit. I observe, also, that every opportunity was given to the plaintiff during the course of the hearing of the appeal and the application to place before the court an explanation for the conduct of its application at first instance before the Senior Master. I am satisfied that there was a serious non-disclosure by the plaintiff of relevant matters at the time of the application for the winding up of the company. I am satisfied, also, particularly having considered the matters deposed to by Monaghan and which were substantially unrebutted by the plaintiff that the conduct and opposition of the plaintiff towards the appeal and the application could be characterised in no terms other than high handed as described by Tadgell JA in Australian Guarantee Corporation Limited v De Jager and Anor [1984] VicRp 40; (1984) VR 483, 502.

90. The relevant principles in relation to costs orders in circumstances such as the present were considered by Sheppard J in Colgate Palmolive v Cussens [1993] FCA 536; (1993) 46 FCR 225, 232-234. It seems to me that on all bases the plaintiff should be subject to the penalty of paying the costs of both the liquidation and the summons and interlocutory process. I am satisfied in view of the conduct of the plaintiff on the application for the winding up on 26 September 2001 and on the appeal and the interlocutory process that it should pay the costs of the applicant on an indemnity basis. Orders will be made accordingly.