Solicitors:
Kekatos Lawyers (Plaintiff/Respondent)
Keypoint Law (Defendant/First and Second Applicants)
Matthews Folbigg Lawyers (Supporting Creditor)
File Number(s): 2017/46918
[2]
Judgment - ex tempore (revised 17 july 2019)
Over two years ago, on 13 July 2017, Brereton J made an order in these proceedings for the winding up of the Defendant, Wyse & Young International Pty Ltd ("Company") in insolvency and that Mr Lo Pilato be appointed as its liquidator. His Honour stayed that order, in the first instance, until 13 August 2017 or further order. Although there was some argument about this in the course of submissions, it seems to me that the effect of the stay was that the order did not take effect, and the Company did not pass into liquidation at that point and Mr Lo Pilato was not then appointed as its liquidator. On 8 March 2018, Brereton J ordered that the stay previously granted of the operation of the order for the winding up of the Company be further extended until further order, leaving it to operate indefinitely, subject to further order of the Court.
It is common ground between the parties that the winding up order was made on the basis of a judgment in favour of the Plaintiff, Ms Huybers, of an amount in excess of $500,000. There is something of a dispute, as to which there is no evidence by either party, as to the present status of that judgment. Little may turn on that, where the question involved in this application is not whether Ms Huybers remains a creditor of the Company today. There is also evidence that a third party, the Commissioner of Fines Administration, at least now claims to be a creditor of the Company today in the order of $51,737.
The question of the further continuance of the stay of the winding up order was addressed by Brereton J in his judgment in Wyse & Young International Pty Ltd v Sanna (No 2) [2019] NSWSC 868 which was delivered, inter alia, in respect of these proceedings. His Honour noted (at [32]) that, on 13 July 2017, he had ordered that the Company be wound up and a liquidator appointed, but stayed the operation of that order until 13 August 2017 or further order. His Honour observed, consistent with my reading of the order, that the stay was of the operation of the order, as distinct from being a stay under s 420 of the Corporations Act 2001 (Cth) of the winding up. His Honour noted the stay was extended from time to time and extended when judgment was reserved, until further order, and remained on foot. His Honour also noted the initial purpose for which the stay was granted was in respect of an appeal which was brought and failed and (at [33]) that the:
"fundamental basis for the continuation of [the] stay, once the application to reinstate the appeal had failed, was that it would be disruptive and disadvantageous to the prosecution and determination of the [Sanna] proceedings if it became necessary for a liquidator of [the Company] to decide whether or not to adopt them."
Brereton J there referred to an application for termination of the winding up filed by the Company and its director, Mr Dimitriou, on 3 July 2019, although his Honour did not address the question how the Company could terminate a winding up that had never commenced. His Honour also referred to a statement by Mr Dimitriou that he intended to obtain a solvency report. Mr Marshall, who appears for the Company today, has now sought directions which would provide for the Company to serve its evidence on the termination application by 8 August 2019, including such a report. His Honour also referred to a suggestion, which he noted could not be dignified with the description of evidence, that some arrangement had been made that had resulted in Ms Huybers' claim being substantially satisfied. No evidence of that matter was led before me. His Honour then noted, in an important paragraph (at [37]):
"Because of my repeated indications that it is necessary to have some appropriate evidence to support the continuation of the stay in the circumstances that its previous rationale no longer applies, I have serious misgivings about indulging the company in this respect any longer. However, as I have said, the application for termination is returnable on 15 July. Despite my misgivings, I do not propose to terminate the stay, but to leave it on foot until at least 15 July, when the application for termination will be before the Corporations List judge. It will be a matter for the Corporations' List judge whether the stay should then be terminated. The company would be ill advised to assume that the stay would continue thereafter simply to enable a solvency report to be obtained, and ought to approach 15 July on the basis that it will need to have available on that day, and served in advance of it, the best evidence to show at least that there are reasonable prospects of proving that it is solvent. That may include showing, by admissible evidence, that Ms Huybers' claim has been substantially satisfied."
Notwithstanding that observation, the Company has not today been in a position to proceed with its stay application, or lead expert evidence to establish its solvency, or lead admissible evidence to show that Mr Huybers' claim has been satisfied. Mr Marshall made an attempt, from the bar table, to refer to events since Friday 12 July 2019, which he suggested may have affected the extent of the evidence today, but it seems to me that, quite apart from the fact that that was no more than a submission from the bar table, it is highly unlikely that the position as between Friday and today will have had any substantial impact on the extent of evidence available today. It is notable that the Company does not now propose to serve its solvency evidence until some weeks in the future, on 8 August 2019.
It seems to me that the position here is relatively clear. I accept that the appointment of a liquidator will expose the Company to additional costs, of the steps taken by the liquidator to obtain control of the Company's property and to undertake independent investigations. However, it seems to me that those steps, and the costs of them, are properly justified, for several reasons. The first, and most fundamental, is that to which Brereton J already referred, in his judgment of 3 July 2019, that a stay of a winding up order is not available by simply requesting it, and depends on an evidentiary basis for it being established. No such basis was established today, in circumstances that his Honour had made clear that the previous rationale for continuation of the stay no longer applied.
Second, Mr Marshall also referred to the procedural complexities involved in a termination of a winding up, where a winding up had not commenced. There will, in fact, be a proper basis for the termination application, once the winding up order takes effect, and that matter can properly be approached on that basis. Third, Mr Marshall referred to the complexity of the Company's affairs, including the existence of intercompany loans, and that seems to me to emphasise the desirability of the Court having access to the views of an independent liquidator, in dealing with any application to terminate the winding up. Fourth, Mr Allen, who appeared for Ms Huybers, referred to the unfair position in which she would be placed if, rather than the winding up order that was made on her application taking effect, when the basis for a stay for it had lapsed, she was forced to in effect defend the original basis for the winding up application, at a rehearing two years later, or was left as the opponent to an application to terminate the winding up, where the winding up had not taken effect and a liquidator had not been appointed. As Mr Allen rightly pointed out, the original applicant for a winding up ordinarily is not required to take an active role in an application for termination of a winding up, of the kind that the Company and Mr Dimitriou have brought, where the liquidator will lead independent evidence to assist the Court in an assessment of the Company's solvency.
Here, it seems to me that the winding up order should be left to take effect, and it is sufficient reason to allow it to do so that the original basis for the stay has lapsed and no further basis for a stay has been established. Each of the other matters to which I have referred are not necessary to that finding, but they lead to a result which is consistent with that finding, in the sense that the application to terminate the winding up will be able to proceed on a more straightforward basis, and the Court will more readily be able to determine it, when a liquidator has been appointed and has had the opportunity to undertake an independent investigation of the Company's affairs. Mr Marshall points to the possibility that the liquidator will not have completed that investigation by the time the Company serves its evidence on the termination application on 8 August 2019. If that is the case, it may be that the termination application will need to be further deferred in order to allow the liquidator a fair opportunity to assess the Company's position, and to indicate his views to the Court, before that application is determined. That, however, is a question that can be addressed in the future, when the need to determine it arises.
For these reasons, I order:
That the stay of the winding up order made by Brereton J on 13 July 2017, as further extended from time to time, cease to have effect, this order to have immediate effect.
Note that the Defendant, Wyse & Young International Pty Ltd, is wound up in insolvency and Mr Lo Pilato be appointed as its liquidator, pursuant to the orders made by Brereton J on 13 July 2017, with effect from today.
The Plaintiff's costs of today be costs in the winding up of the Defendant.
[3]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 25 July 2019