Badenoch Integrated Logging Pty Ltd v Bryant
[2024] FCAFC 167
•16 December 2024
FEDERAL COURT OF AUSTRALIA
Badenoch Integrated Logging Pty Ltd v Bryant [2024] FCAFC 167
Appeal from: Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Badenoch Integrated Logging Pty Ltd [2024] FCA 97 File number(s): VID 189 of 2024
VID 280 of 2024Judgment of: O'CALLAGHAN, MCEVOY AND NESKOVCIN JJ Date of judgment: 16 December 2024 Catchwords: CORPORATIONS - whether an extension order made under s 459R needs to specify a definite period within which an application to wind up in insolvency must be determined – whether the primary judge erred in refusing to amend the extension order to specify a date by using the slip rule – whether the effect of s 459R(3) was to dismiss the Liquidators’ alternative application to wind up on other grounds pursuant to s 461(1)(c) – whether it is inappropriate for the Liquidators, as creditors, to apply to wind up a company under s 461(1)(c) – whether the winding up proceeding was an abuse of process – whether the winding up proceeding should have been dismissed for want of prosecution Legislation: Corporations Act 2001 (Cth) Pt 5.4, ss 459A, 459C, 459E, 459F, 459G, 459H, 459P, 459R, 461, 462
Federal Court of Australia Act 1976 (Cth) s 24(1A)
Federal Court (Corporations) Rules 2000 (Cth), r 2.2(3)
Federal Court Rules 2011 (Cth). rr 35.13(a), 39.05(h)
Cases cited: Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40
Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR 627; [2008] NSWSC 285
Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314; [2008] HCA 9
Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374; [2007] NSWCA 57
Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd (Receiver and Manager Appointed) [No 2] (2009) 72 ACSR 52; [2009] FCA 493
Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd(Receivers and Managers Appointed) (2011) 244 CLR 1; [2011] HCA 18
Badenoch Integrated Logging Pty Ltd v Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) (No 2) [2021] FCAFC 111
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833
Bryant (Liquidator) v L.V. Dohnt & Co Pty Ltd, in the Matter of Gunns Limited (In Liq) (Receivers and Managers Appointed) [2018] FCA 238
Bryant v Badenoch Integrated Logging Pty Ltd (2023) 275 CLR 463; [2023] HCA 2
Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Badenoch Integrated Logging Pty Ltd [2024] FCA 97
Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423; [2020] FCA 713
David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; [1995] HCA 43
Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397; [1991] FCA 844
Devmin International Pty Ltd v Belconnen Developments Pty Ltd (2022) 12 QR 170; [2022] QSC 186
Donchiod Pty Ltd (in liquidation) v Merrion B Pty Ltd [2024] VSCA 44
Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60
House v R (1936) 55 CLR 499; [1936] HCA 40
Hrycenko v Hrycenko (2022) 164 ACSR 243; [2022] FCAFC 152
Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 3 FCR 344; [1984] FCA 186
In the matter of Wetherill Park Holdings Pty Ltd (No 2) [2021] NSWSC 1397
Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) v Australian Securities and Investments Commission (2010) 78 ACSR 487; [2010] FCAFC 49
Mehmood v Attorney-General of the Commonwealth [2013] FCA 406
Mercury International Investment Pty Ltd v Queensland One Homes Pty Ltd [2016] FCA 701
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28
Re Douglas Aerospace Pty Ltd (2015) 294 FLR 186; [2015] NSWSC 167
Re Statewide Developments Pty Ltd [2011] NSWSC 1537
Sharma v Minister for Immigration and Border Protection (2017) 256 FCR 1; [2017] FCAFC 227
SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34
Victoria International Container Terminal Ltd v Lunt (2021) 271 CLR 132; [2021] HCA 11
Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 106 Date of hearing: 20 August 2024 Counsel for the Applicant: Mr M Gronow KC and Ms R G Morison Solicitor for the Applicant: Scanlan Carroll Lawyers Counsel for the Respondent: Mr B Gibson and Mr M Tennant Solicitor for the Respondent: Johnson Winter Slattery ORDERS
VID 189 of 2024
VID 280 of 2024BETWEEN: BADENOCH INTEGRATED LOGGING PTY LTD (ACN 097 956 995)
Applicant
AND: DANIEL MATTHEW BRYAN & ORS
Respondent
AND BETWEEN: DANIEL MATTHEW BRYANT AND CRAIG DAVID CROSBIE IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF GUNNS LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) (ACN 009 478 148) AND AUSPINE LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) (ACN 004 289 730)
Cross-Appellant
AND: BADENOCH INTEGRATED LOGGING PTY LTD (ACN 097 956 995)
Cross-Defendant
ORDER MADE BY:
O'CALLAGHAN, MCEVOY AND NESKOVCIN JJ
DATE OF ORDER:
16 DECEMBER 2024
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.The cross-appeal and the notice of contention are dismissed.
3.Within seven days of the date of these orders the parties are to provide the Court with any agreed orders as to the costs of the appeal, cross appeal and notice of contention.
4.If the parties are unable to reach agreement as to costs, on or before 4:00pm on 23 December 2024 the parties are to file and serve written submissions not exceeding two pages to be prepared with 1.5 line spacing and 12-point font, on the question of costs.
5.Any question as to the costs of these appeals will be determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
INTRODUCTION
This is an appeal and cross-appeal from orders of the primary judge which dismissed an application by the Liquidators of Gunns Limited (in liquidation) to wind up Badenoch Integrated Logging Pty Ltd in insolvency pursuant to Pt 5.4 of the Corporations Act 2001 (Cth), finding that the application had been dismissed by operation of s 459R(3) of the Act. His Honour did not dismiss the Liquidators’ alternative application to wind up Badenoch on other grounds pursuant to s 461(1)(c). The primary judge published reasons for judgment on 20 February 2024: Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Badenoch Integrated Logging Pty Ltd [2024] FCA 97 (PJ). References in these reasons to statutory provisions are references to the Act, unless stated otherwise.
The grounds of appeal concern six principal issues across the appeal and cross-appeal. First, whether the primary judge erred in finding that an extension order made under s 459R(2) was ineffective to extend the period within which the application to wind up in insolvency must be determined, because the extension order needed to specify a period which was definite and could not be fixed by reference to the occurrence of a future event (Liquidators’ first ground). Secondly, whether the primary judge erred in refusing to amend the extension order to specify a date by which the application to wind up in insolvency was to be determined pursuant to the slip rule (Liquidators’ second ground). Thirdly, whether the primary judge erred in finding that the effect of s 459R(3) was not to dismiss the Liquidators’ alternative application to wind up on other grounds pursuant to s 461(1)(c) (Badenoch’s first ground). Fourthly, whether the primary judge erred in refusing to dismiss the application to wind up on other grounds pursuant to s 461(1)(c) on the basis that it was inappropriate for the Liquidators, as creditors, to apply to wind up a company or obtain other relief on that ground (Badenoch’s first ground/Liquidators’ notice of contention). Fifthly, whether the primary judge erred in failing to dismiss the winding up proceeding as an abuse of process (Badenoch’s second ground). Finally, whether the primary judge erred in failing to dismiss the winding up proceeding for want of prosecution (Badenoch’s third ground).
Both parties required extensions of time and leave to appeal. At the hearing of the appeal and cross-appeal the court granted the extensions of time and leave to appeal and indicated that it would deal with those matters in its reasons.
For the reasons given below, the appeal should succeed on the Liquidators’ first ground and the appeal and cross-appeal should otherwise be dismissed, including the Liquidators’ Notice of Contention.
BACKGROUND
The plaintiffs below were appointed joint and several administrators of Gunns and its subsidiaries (jointly, Gunns) on 25 September 2012. They were appointed as Liquidators of Gunns on 5 March 2013: Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423; [2020] FCA 713 at [13] (Davies J).
On 21 September 2015, the Liquidators commenced a proceeding against Badenoch in this court (SAD 341 of 2015) seeking to recover alleged unfair preference payments received by Badenoch in the period between 30 March 2012 and 24 September 2012. The total amount claimed by the Liquidators as unfair preference payments was $3,360,876.16 (Primary Proceeding).
Following a separate trial on the question of insolvency, the court determined that Gunns was insolvent on and from 30 March 2012: Bryant (Liquidator) v L.V. Dohnt & Co Pty Ltd, in the Matter of Gunns Limited (In Liq) (Receivers and Managers Appointed) [2018] FCA 238 (Davies J).
On 27 May 2020, Davies J delivered judgment against Badenoch in the Primary Proceeding and, on 30 July 2020, final orders were made that Badenoch pay the Liquidators $2,072,832.04 in unfair preferences plus pre-judgment interest of $505,848.21: Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423; [2020] FCA 713 (Davies J).
Badenoch appealed to the Full Court and the Liquidators cross-appealed (SAD 121 of 2020) (Appeal Proceeding). The Full Court allowed the appeal in part and determined that, between 8 August 2012 and 24 September 2012, Badenoch received unfair preferences in the amount of $1,200,633.68: Badenoch Integrated Logging Pty Ltd v Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) (No 2) [2021] FCAFC 111 (Middleton, Charlesworth and Jackson JJ).
The Liquidators obtained special leave to appeal from the High Court. Badenoch filed a notice of cross-appeal. On 8 February 2023, the High Court dismissed the appeal and the cross-appeal: Bryant v Badenoch Integrated Logging Pty Ltd (2023) 275 CLR 463; [2023] HCA 2 (Kiefel CJ, Gageler, Gordon, Edelman, Steward, Gleeson and Jagot JJ).
We will return to the events surrounding the appeals to the Full Court and the High Court in due course. At this point we observe that Badenoch has not paid the judgment debt.
Returning then to the events following the determination of the Primary Proceeding and the commencement of the Appeal Proceeding, on 13 November 2020, after judgment in the Primary Proceeding and after the Appeal Proceeding had commenced, the Liquidators issued a further proceeding in this court seeking orders that Badenoch be wound up in insolvency pursuant to s 459A, or alternatively, pursuant to s 461(1)(c) on the grounds that it had ceased trading for more than 12 months (Winding Up Proceeding).
Badenoch resisted the orders sought in the Winding Up Proceeding and, on 16 December 2020, Badenoch filed an interlocutory application seeking to adjourn the Winding Up Proceeding pending the hearing and determination of the Appeal Proceeding. Badenoch did not apply to dismiss or stay the Winding Up Proceeding as an abuse of process at that time, or at any time prior to 5 September 2023.
On 18 December 2020, Judicial Registrar Allaway made orders by consent that “the further hearing of [the Winding Up Proceeding] be adjourned to a date to be fixed, not prior to the hearing and determination of [the Appeal Proceeding]…” (Adjournment Order).
On 10 February 2021, the Full Court heard the Appeal Proceeding and reserved its decision.
At this stage the Liquidators were cognisant that the Winding Up Proceeding had been adjourned to a date to be fixed and that the application to wind up in insolvency was required to be determined by 12 May 2021. On 22 April 2021, the Liquidators’ solicitors sent an email to Badenoch’s solicitors raising the matter and providing a proposed consent order for an extension of the period for the determination of the winding up application, as required by s 459R(1). Badenoch’s solicitor subsequently signed these consent orders.
On 23 April 2021, Judicial Registrar Allaway made orders by consent extending the period within which the winding up application was to be determined (Extension Order) in the following terms:
Pursuant to section 459R(2) of the Corporations Act 2001 (Cth) (the Act), the period within which the plaintiffs’ application in this proceeding be determined (as required by section 459R(1) of the Act) be extended to a date to be fixed, such date to be not prior to 6 months after the determination of the defendant’s appeal (the Appeal) in proceeding number SAD 121 of 2020 against the judgment and orders of her Honour Justice Davies in proceeding number SAD 341 of 2015 delivered on 27 May 2020 and 30 July 2020 respectively.
On 10 May 2021, the Full Court delivered its judgment in the Appeal Proceeding, allowing Badenoch’s appeal in part.
As noted above, on 12 May 2021 the six month period under s 459R(1) by which the application to wind up in insolvency was to be determined, had the period not been extended, expired.
On 24 June 2021, final orders were made by the Full Court which relevantly reduced the judgment debt to $1,200,633.68 and pre-judgment interest to $314,062.90
On 22 July 2021, the Liquidators applied for special leave to the High Court.
On 1 October 2021, the Liquidators’ solicitors wrote to Badenoch’s solicitors regarding the use of documents produced in the Appeal Proceeding in the Winding Up Proceeding.
On 8 October 2021, Badenoch’s solicitors responded stating that it was premature to consider evidentiary issues in the Winding Up Proceeding given the application for special leave to the High Court and enquired whether a date had been “fixed” pursuant to the Extension Order.
On 13 October 2021, the Liquidators’ solicitors demanded payment of the judgment debt from Badenoch.
On 19 October 2021, Badenoch’s solicitors disputed the demand and again asked whether a date had been “fixed” pursuant to the Extension Order.
On 20 October 2021, the Liquidators’ solicitors responded that “no date has yet been fixed”
On 18 March 2022, the High Court granted special leave to appeal. The Liquidators filed a notice of appeal and Badenoch filed a notice of cross-appeal on 1 and 8 April 2022 respectively.
On 2 May 2022, the Liquidators’ solicitors wrote to Badenoch’s solicitors referring to the Adjournment Order and the Extension Order and said:
We note that Proceeding Number SAD 121 of 2020 (Appeal Proceeding) has been heard and determined. That being said, a date has not been fixed for the further hearing and determination of the Winding Up Proceeding and accordingly a relevant date for the purposes of s 459R of Corporations Act 2001 (Cth) has not been fixed pursuant to Order 1 of the April Orders.
Accordingly, our clients consider that the Winding Up Proceeding remains stayed, as a date has not been fixed as contemplated by the December and April orders. Please confirm whether your client agrees with that position.
On the condition that your client agrees that the Winding Up Proceeding remains stayed on the basis set out above, our clients do not propose to take further action in respect of the Winding Up Proceeding until after High Court Proceeding Number A10 of 2022 has been heard and determined.
On 10 May 2022, Badenoch’s solicitors responded that instructions were being sought and a response would be provided in due course. No response was ever provided.
The appeal and cross-appeal were heard by the High Court on 18 October 2022 and, on 8 February 2023, the High Court delivered judgment dismissing both appeals.
On 15 February 2023, the Liquidators’ solicitors wrote to Badenoch’s solicitors demanding payment within seven days of $1,724,736.12, being the judgment debt plus post-judgment interest. The Liquidators’ solicitors also stated.
We note that the judgment sum arising from the trial at first instance is the subject of the winding up application in Federal Court of Australia Proceeding Number VID 729 of 2020 (Winding Up Proceeding). The parties agreed that no action would be taken in respect of the Winding Up Proceeding until after the determination of the application for special leave to appeal to the High Court of Australia in Proceeding Number A27 of 2021.
Given the High Court Appeal has now been determined and the outcome has not reduced Badenoch’s liability to the Liquidators (rather, that liability has increased), the Liquidators intend to take steps to re-list the Winding Up Proceeding should Badenoch fail to pay the Revised Liquidated Debt in accordance with this letter and any subsequent liability in respect of the Liquidators’ costs.
The demand was not met. On 20 February 2023, Badenoch’s solicitors responded to the above letter stating that the winding up application had been dismissed by operation of s 459R(3) and disputing that they had agreed that no action would be taken in respect of the Winding Up Proceeding until after the application for special leave to the High Court.
On 24 August 2023, the Liquidators served a creditors’ statutory demand for payment of $1,777,586.01 comprising the judgment debt plus post-judgment interest (Statutory Demand).
Badenoch did not pay the amount sought in the Statutory Demand or apply to set it aside.
On 5 September 2023, Badenoch filed an interlocutory application seeking a declaration that the Winding Up Proceeding had been dismissed automatically pursuant to s 459R(3) or, alternatively, an order that the proceeding be dismissed as an abuse of process or for want of prosecution (Dismissal Application).
The primary judge heard the Dismissal Application on 5 February 2024 and made orders on 20 February 2024 dismissing the application to wind up Badenoch on the grounds of insolvency on the basis that the application had been dismissed by operation of s 459R(3). The primary judge did not dismiss the alternative application to wind up on other grounds pursuant to s 461(1)(c).
Both Badenoch and the Liquidators seek leave to appeal the orders of the primary judge. The parties also seek extensions of time as the applications for leave were each filed 45 minutes late.
THE STATUTORY REGIME
The Act was amended by the Corporate Law Reform Bill 1992 (Cth) to incorporate a number of recommendations in the Australian Law Reform Commission’s ‘General Insolvency Inquiry’ (Report No. 45) (Harmer Report) in relation to corporate insolvency. The new Parts 5.4, 5.4A and 5.4B implemented recommendations in the Harmer Report relating to winding up, which were intended to increase the efficiency of the winding up process: Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth), [23]. The provisions dealing with winding up of companies in insolvency were placed in a distinct part of the legislation: the new Pt 5.4, which deals exclusively with winding up by the court in insolvency.
The central provision in Pt 5.4 is s 459A, in Division 1, which provides:
On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency.
Section 459C(2) sets out a number of events which give rise to a rebuttable presumption of insolvency if they occur during or after the 3 months ending on the day the winding up application is made under any of the provisions mentioned in s 459C(1), including s 459P (winding up in insolvency). For instance, a failure to comply with a statutory demand served under s 459E gives rise to a rebuttable presumption of insolvency under s 459C(2)(a). This is the ground that is often relied upon in an application to wind up in insolvency.
Division 4 deals with applications to the court for an order to wind up a company in insolvency and includes s 459R, the period within which an application for an order to wind up a company in insolvency must be determined.
Section 459R provides:
459R Period within which application must be determined
(1)An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.
(2)The Court may by order extend the period within which an application must be determined, but only if:
(a)the Court is satisfied that special circumstances justify the extension; and
(b) the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.
(3)An application is, because of this subsection, dismissed if it is not determined as required by this section.
(4)An order under subsection (2) may be made subject to conditions
Pt 5.4A of the Corporations Act contains the statutory provisions relevant to winding up by the court on other grounds. Section 461 sets out the general grounds on which a company may be wound up by the court. It provides:
461 General grounds on which company may be wound up by Court
(1) The Court may order the winding up of a company if:
(a)the company has by special resolution resolved that it be wound up by the Court; or
(c) the company does not commence business within one year from its incorporation or suspends its business for a whole year; or
(d) the company has no members; or
(e)directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members; or
(f)affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; or
(g) an act or omission, or a proposed act or omission, by or on behalf of the company, or a resolution, or a proposed resolution, of a class of members of the company, was or would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or was or would be contrary to the interests of the members as a whole; or
(h)ASIC has stated in a report prepared under Division 1 of Part 3 of the ASIC Act that, in its opinion:
(i)the company cannot pay its debts and should be wound up; or
(ii)it is in the interests of the public, of the members, or of the creditors, that the company should be wound up; or
(k)the Court is of opinion that it is just and equitable that the company be wound up.
THE REASONS OF THE PRIMARY JUDGE
Before the primary judge, the Liquidators submitted that s 459R does not state that an extension order under s 459R(2) must specify a specific date, and extending “the period” under s 459R(2) does not require that any extension granted by the court must have a specified pre-determined date or timeframe. The Liquidators submitted that the Extension Order was effective to extend the statutory period in s 459R(1) in that it extended the period for the determination of the winding up application to a date to be fixed, with that date being “not prior to 6 months after the determination of [Badenoch’s] appeal”. Alternatively, the Liquidators submitted that s 459R(3) does not affect that part of the application which relied on s 461(1)(c), for which there is no express time limit within which such an application must be determined. At the hearing before the primary judge, counsel for the Liquidators also made an oral application to amend the Extension Order under the slip rule, submitting that if the primary judge found that the Extension Order was required to specify a time to prevent the winding up application from being dismissed, the failure to frame the order in that manner was an inadvertent slip and the court should correct that error under the slip rule.
Badenoch submitted that the Extension Order failed to specify a “period” with the consequence that the period within which the Winding Up Proceeding was required to be determined was not extended and the proceeding was dismissed by operation of s 459R(3), on 12 May 2021. Furthermore, Badenoch submitted that the Winding Up Proceeding was in substance an application to wind up in insolvency and the Liquidators’ alternative applications, which were not divisible, should both be dismissed. Alternatively, Badenoch submitted that the Winding Up Proceeding should be dismissed as an abuse of process, because it was commenced on the basis of a disputed debt to enable the Liquidators to seek the benefit of an earlier relation-back day, or alternatively, for a want of prosecution. In oral submissions, senior counsel for Badenoch relied upon delay since February 2023 (after the High Court delivered judgment) and the lack of evidence to explain the delay between that date and service of the Statutory Demand on Badenoch, six months later.
The primary judge considered two main issues. First, whether the Winding Up Proceeding had been dismissed pursuant to s 459R(3), and secondly, whether the Winding Up Proceeding should be dismissed as an abuse of process or for want of prosecution. The question as to whether the Winding Up Proceeding had been dismissed was considered on three bases: first, whether the Extension Order was valid; secondly, whether the Winding Up Proceeding was divisible; and, thirdly, whether a creditor could apply to wind up a company under s 461(1)(c). The application in relation to the slip rule was addressed during oral argument and was not dealt with in the primary judgment.
In relation to the first main issue, the primary judge concluded that an effective exercise of the power under s 459R(2) required that “the period” as extended be one that is “definite, measured by a period of time”. His Honour concluded that the period may be fixed by stipulating a date or it may be determined by reference to a number of days or months, but it could not be fixed by reference to the occurrence of an event. His Honour found that the Extension Order was not effective to extend the statutory period for determination of the application to wind up in insolvency as required by s 459R(2) and, as a consequence, the application was taken to have been dismissed by operation of s 459R(3) upon expiry of the six month period on 12 May 2021.
Having found that the application to wind up in insolvency was dismissed by operation of s 459R(3), the primary judge considered whether the alternative application, brought by the Liquidators under s 461(1)(c), was also dismissed. The primary judge found that the statutory text and arrangement of the provisions in s 459R is limited in application to a winding up in insolvency and does not apply to other applications to wind up on one or more grounds under s 461. The primary judge found that where a winding up application is made on the grounds of insolvency and on alternative grounds that are not interwoven (and therefore indivisible), the effect of s 459R(3) was limited to the aspect of the application based on grounds of insolvency. As a result, the primary judge declined to make a declaration that the Winding Up Proceeding was dismissed insofar as it related to the application to wind up under s 461(1)(c).
Furthermore, the primary judge found that Badenoch had failed to establish that the circumstances of the case were exceptional so to justify dismissal for abuse of process. The primary judge also rejected Badenoch’s submission that the Winding Up Proceeding should be dismissed for want of prosecution, finding that Badenoch had not established that the alleged delay since February 2023 was inordinate or inexcusable.
EXTENSIONS OF TIME AND LEAVE TO APPEAL
An application for leave to appeal from an order of a judge of this court to the Full Court must be filed within 14 days from the date on which judgment was pronounced or the order was made: r 35.13(a) of the Federal Court Rules 2011 (Cth). The Liquidators and Badenoch were both 45 minutes late in filing their applications for leave to appeal and cross-appeal and required extensions of time.
The court has a broad discretion whether or not to grant an extension of time. The considerations generally relevant in determining whether an extension of time should be granted are well known and include the length of the delay, whether the applicant has provided an acceptable explanation for the delay, whether there is any prejudice, and the merits of the appeal if an extension is granted: Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 3 FCR 344 at 348-349 ; [1984] FCA 186 (Wilcox J) and Mehmood v Attorney-General of the Commonwealth [2013] FCA 406 at [3]-[6] (Foster J).
The orders of the primary judge are interlocutory such that leave to appeal is necessary pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth). For leave to be granted it must be shown that the decision of the primary judge is attended by sufficient doubt to warrant reconsideration and that substantial injustice would result to the appellants if leave were to be refused: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399; [1991] FCA 844 (Sheppard, Burchett and Heerey JJ).
Having regard to the minimal delay in the overall scheme of the litigation, and that no specific prejudice had been identified, the court granted extensions of time to apply for leave to appeal and cross-appeal. The court was also satisfied that there is sufficient doubt regarding the primary judge’s decision in relation to the power under s 459R(2), and that substantial injustice would arise if the decision is not reconsidered by this court and the Liquidators were prevented from pursuing the application to wind up in insolvency or Badenoch was subjected to an application to wind up under s 461(1)(c). Leave to appeal was therefore granted.
DETERMINATION OF THE APPEAL AND THE CROSS-APPEAL
As has been mentioned, the grounds of appeal concern six principal issues across the appeal and the cross-appeal. It is as well to note that the court’s appellate jurisdiction is concerned with the correction of error: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [20]-[25] (Allsop J, Drummond and Mansfield JJ agreeing). The court will not intervene unless error is found in the decision of the primary judge: see Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40; at [23] (Gaudron, McHugh, Gummow and Hayne JJ); Sharma v Minister for Immigration and Border Protection (2017) 256 FCR 1; [2017] FCAFC 227 at [26] (North, Logan and Charlesworth JJ).
We deal with the six principal issues in the appeal and cross-appeal in turn.
Issue One: Whether an order under s 459R(2) extending the period must specify a date or be determined by reference to time (Liquidator’s first ground)
On appeal the Liquidators submitted that the primary judge erred in finding that the Extension Order, extending the period within which the application to wind up in insolvency must be determined under s 459R(2), was ineffective because it was fixed by reference to an event. Badenoch’s primary submission was that His Honour was correct to find that the power under s 459R(2) required the period to be extended to a specific time that is fixed.
Axiomatically, the starting point for the ascertainment of the meaning of a statutory provision is the text of the statute; at the same time regard must be had to the legislative context and purpose: SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 at [14] (Kiefel CJ, Nettle and Gordon JJ); [35]-[40] (Gageler J); Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69] (McHugh, Gummow, Kirby and Hayne JJ)
Section 459R(1) requires that applications for a company to be wound up in insolvency must be determined within 6 months after the application is made. However, s 459R(2) empowers the court to extend “the period” within which the application must be determined, provided the statutory prerequisites under s 459R(2)(a) and (b) are satisfied. That is, the court must be satisfied that special circumstances justify the extension and the extension order must be made “within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires”: David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 273; [1995] HCA 43 (Gummow J, with whom Brennan CJ, Dawson, Gaudron and McHugh JJ agreed); Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR 627; [2008] NSWSC 285 at [17]-[18] (Hammerschlag J).
Turning to the legislative context and purpose, s 459R is a component of Pt 5.4 which is concerned with the speedy resolution of applications to wind up in insolvency: Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314; [2008] HCA 9 at [17]-[19] (Gleeson CJ, Hayne, Crennan and Kiefel JJ). The provisions benefit the public in general and creditors who deal with companies that are unable to pay their debts, by requiring such companies to be wound up.
Part 5.4 contains a number of provisions that are directed to ensuring the speedy resolution of applications to wind up in insolvency. First, s 459E(2)(c) fixes the time for compliance with a statutory demand to the statutory period of 21 days after the demand is served on the company. Secondly, s 459C(2) creates a rebuttable presumption of insolvency in the three month period after the application is made, including if the company has failed to comply with a statutory demand. Thirdly, a company has 21 days after a statutory demand is served to apply to set it aside: s 459G. Fourthly, s 459F(2) specifies the period for compliance with a statutory demand according to whether or not an application is made to set it aside. However, the period for compliance with a statutory demand can be extended if “the Court makes an order that extends the period for compliance with the demand” on the hearing of an application under ss 459G or 459F(2). If, on hearing an application under ss 459F(2)(a) or 459G, the court makes an order that extends the period for compliance with the demand, the period for compliance with a statutory demand is the period specified in the order. Fifthly, s 459R requires that an application for a company to be wound up in insolvency must be determined within six months after it is made. However, s 459R(2) provides that the period in which an application to wind up is to be determined may be extended by order of the court if the statutory prerequisites under ss 459R(2)(a) and (b) are satisfied. The similarities in the language in ss 459F(2) and 459R(2) should be noted.
The Liquidators identified the following cases where the court exercised the discretion under s 459R(2) to extend the period for determination of the application to wind up in insolvency by reference to a future event:
(a)a proceeding in which Gilmour J made orders extending the period “to 48 hours after the Court delivers judgment in these applications” (the proceeding in which the orders were made is the subject of a subsequent decision: see Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd (Receiver and Manager Appointed) [No 2] (2009) 72 ACSR 52; [2009] FCA 493 (Gilmour J));
(b)in Re Statewide Developments Pty Ltd [2011] NSWSC 1537 at [4], Barrett J extended the period to enable the reserved judgment to be delivered, however, the form of the order is not apparent from the reasons;
(c)in Mercury International Investment Pty Ltd v Queensland One Homes Pty Ltd [2016] FCA 701, Reeves J ordered that the period be extended until such time as the originating application “is finally determined by the Court”; and
(d)in In the matter of Wetherill Park Holdings Pty Ltd (No 2) [2021] NSWSC 1397 at [55], Rees J made an order “extending the time in which the application had to be determined until [the] judgement was handed down”.
In Lanepoint, the application to wind up the company was determined just under 13 months after the date of the extension order. In that matter there was an appeal to the Full Court (Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) v Australian Securities and Investments Commission (2010) 78 ACSR 487; [2010] FCAFC 49 (North, Siopis and Buchanan JJ)) and then to the High Court. The Liquidators submitted that the High Court noted, without criticism or comment, that orders extending the time for determination pursuant to s 459R(2) had been made: Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd(Receivers and Managers Appointed) (2011) 244 CLR 1; [2011] HCA 18 at [23] (Gummow, Heydon, Crennan, Kiefel and Bell JJ). It is not clear, however, whether the High Court was aware of the form of the extension order.
It may be observed that the authorities referred to above were not brought to the attention of the primary judge.
The Liquidators also referred to Donchiod Pty Ltd (in liquidation) v Merrion B Pty Ltd [2024] VSCA 44 (Kennedy, Macaulay and Lyons JJA), where the Victorian Court of Appeal expressed doubt as to the appropriateness of the approach adopted by the primary judge in the present matter, noting that the course adopted by his Honour was not universal: see [115] where the Court of Appeal also referred to Mercury by way of example. However, beyond a passing reference to the decision of the primary judge in the present matter, the Court of Appeal did not consider the issue further and the meaning of “the period” did not arise in Donchiod.
The authorities referred to above did not expressly consider the meaning of “the period” in s 459R(2). It may be that the hearing before the primary judge was the first occasion on which a court has been asked to determine the meaning of “the period” in s 459R(2).
As a matter of first impression, the discretion given to the court under s 459R(2) to extend “the period” is unqualified as to the form of the extension order – the only prerequisites to the exercise of the discretion being that the court is satisfied that special circumstances justify the extension and that the extension order is made within the 6 month period, or within the period as last extended. The language of the section does not suggest that “the period” means a period “of time” or which must be fixed to a specified date or by reference to time. The Macquarie Dictionary defines “period” as “n. 1. An indefinite portion of time, or of history, life, etc, characterised by certain features or conditions 2. any specified division or portion of time.” A “period” can mean a length of time, but it can also mean an interval between things during which something happens.
Although the point was not specifically addressed in the Harmer Report, there is nothing in that report or the Explanatory Memorandum that suggests “the period” must be a date or measured by time. We agree with the primary judge that “the period” in 459R(2) as extended must be one that is definite. However, in our view, “the period” as extended is definite if it is fixed to a specific date, if it is measured by reference to time (ie a number of weeks), or if it is an interval that is able to be identified when the extension order is made, such as by reference to an identifiable event. It may be observed that the court was not taken to anything in the Harmer Report or the Explanatory Memorandum to suggest this construction was not open.
Senior counsel for Badenoch submitted that, even if the court were to take the view that “the period” under s 459R(2) can be fixed by reference to an event, or a period of time after an event such as in Lanepoint, the Extension Order was ineffective because it was an indefinite or indeterminate extension to “a date to be fixed”. We reject that submission. In circumstances where the only prerequisites for the exercise of the court’s discretion under s 459R(2) are that the court is satisfied that special circumstances justify the extension and the extension order is made within the 6 month period, or within the period as last extended, the discretion should not be fettered by requiring that an extension order be made to a specified time or measure of time after an event. In our view, the court has the discretion to fix the period according to the circumstances of the case. An extension order that fixes the period by which the application is to be determined to “a date to be fixed” after an identifiable event is not an indeterminate extension because a proceeding of this kind is subject to the court’s supervisory jurisdiction which would prevent an indeterminate extension from occurring. Furthermore, an extension order that really is indeterminate would likely fail at the threshold because the court would in all probability refuse to exercise the discretion under s 459R(2) to grant a truly indeterminate extension of the period in s 459R(1). For completeness, we note that our view in relation to the proper construction of s 459R(2) would also apply to s 459F(2), having regard to the similarity in language and purpose of that provision within Pt 5.4.
The Extension Order made by Registrar Allaway on 23 April 2021 extended the period within which the Liquidators application was to be determined to “a date to be fixed, such date to be not prior to 6 months after the determination” of the appeal in the Appeal Proceeding.
At the time of the Extension Order, an appeal to the High Court was not in contemplation. However, no issue was taken in relation to the meaning of the Extension Order and although Badenoch did not expressly address the point in correspondence, the parties appeared to proceed on the basis that the “Appeal” meant all appeals from the decision in the Primary Proceeding. In the circumstances we proceed on this basis.
The Extension Order did not specify a definite date or time within which the Liquidators’ application to wind up in insolvency was to be determined. Rather, it specified that the period within which the application was to be determined “be extended to a date to be fixed, such date to be not prior to 6 months after the determination of [Badenoch’s] appeal”. In our view, the Extension Order was effective to extend the period under s 459R(2) by which the application to wind up in insolvency was to be determined because it extended the period to a date to be fixed by the court after the occurrence of an event that was certain and identifiable at the time the Extension Order was made. The Liquidators therefore succeed on their first ground of appeal.
Issue Two: whether the primary judge erred in refusing to amend the Extension Order under the slip rule (Liquidators’ second ground)
The Liquidator’s second ground raised the issue of whether the primary judge erred in refusing to amend the Extension Order to specify a date by which the application must be determined pursuant to the ‘slip rule’ in rule 39.05(h) of the Rules. This issue does not arise in light of our finding in relation to the Liquidators’ first ground of appeal. However, in deference to the parties’ submissions, we deal with the Liquidators’ second ground of appeal below.
As has been mentioned, during the hearing before the primary judge, counsel for the Liquidators made an oral application to rely on the slip rule, submitting that if the primary judge found that the Extension Order needed to specify a date to prevent it from being dismissed, the failure to frame the order in that manner was an inadvertent slip and the court should correct that error under the slip rule. During oral submissions, his Honour referred the parties to Hrycenko v Hrycenko (2022) 164 ACSR 243; [2022] FCAFC 152 (Bromberg, Moshinsky, McElwaine JJ), where Moshinsky J explained that the slip rule only applies if it is used to correct the actual intent of the court. The primary judge queried how, on the evidence, he was to find that the intent of the Registrar was to specify a date.
In response, the Liquidators submitted that the intention of the court and the parties was that the Winding Up Proceeding was to remain on foot and be dealt with after the appeals relating to the underlying judgment debt. Counsel for the Liquidators pointed to the fact that the Extension Order said that the period within which the application was to be determined was to be extended “to a date” and suggested that the court should select a date later in the year. When pressed by the primary judge, counsel for the Liquidators nominated “30 June”.
The primary judgment does not address the Liquidators’ application to amend the Extension Order under the slip rule. However, during oral submissions, the primary judge indicated that he was struggling with the Liquidators’ submissions. We infer that his Honour rejected the application to amend the Extension Order pursuant to the slip rule.
On the appeal, the Liquidators submitted that the focus of the slip rule is to reflect the court’s true intentions. The Liquidators submitted that there was no room for debate that the court intended to exercise its discretion to extend the period under s 459R(2) and, if the order was ineffective, it ought to be corrected to a specific date which would allow the primary judge sufficient time to hear and determine the Winding Up Proceeding.
The difficulty with the Liquidators’ submission in this regard is that there is simply no evidence as to the Registrar’s intent at the time the Extension Order was made. Furthermore, we infer from the fact that the Extension Order did not include a specific date that the Registrar did not intend to extend the period to a specific date. In our view, the primary judge was correct in not acceding to the Liquidators’ application to amend the Extension Order pursuant to the slip rule.
Issue Three: whether the primary judge erred in finding that the effect of s 459R(3) was not to dismiss the application to wind up under s 461(1)(c) (Badenoch’s first ground)
Badenoch’s first ground raised the issue whether the primary judge erred in finding that the effect of s 459R(3) was not to dismiss the Liquidators’ application to wind up under s 461(1)(c). This issue does not arise in light of our finding in relation to the Liquidators’ first ground of appeal. However, in deference to the parties’ submissions once again, we deal with this issue below.
The primary judge concluded that the Winding Up Proceeding was divisible into two separate applications, one to wind up ‘in insolvency’ and another to wind up ‘on other grounds’, and the effect of s 459R(3) was not to dismiss the Liquidator’s application to wind up under s 461(1)(c). Badenoch submitted that the primary judge erred in finding that the Winding Up Proceeding could be bifurcated, such that the Liquidators could proceed with the application to wind up under s 461(1)(c). Badenoch further submitted that the Winding Up Proceeding was in substance and form an application to wind up in insolvency, and the primary judge’s finding that the winding up grounds were divisible was untenable.
The Liquidators commenced the Winding Up Proceeding by way of an originating process that was substantially in accordance with the prescribed form: Federal Court (Corporations) Rules 2000 (Cth), r 2.2(3), Form 2. Part C of Form 2 is headed “APPLICATION FOR WINDING UP ON GROUND OF INSOLVENCY” and contains various notes on how to complete the form if the application is made on the grounds of a failure to comply with a statutory demand. The prescribed form does not provide any notes or guidance on how to complete the form if an application to wind up is made on alternative grounds. However, Part A of Form 2 clearly contemplates that a winding up application may be commenced on alternative grounds.
The Liquidators adapted the prescribed form in completing the originating application, the material parts of which were as set out below:
A DETAILS OF APPLICATION
This application is made under sections 459A, 459P, 461(1)(c) and 462(2)(b) of the Corporations Act 2001 (Cth) (‘the Act’).
On the facts stated in the supporting affidavit(s), the Plaintiffs seek the following:
1.An order that the Defendant be wound up in insolvency pursuant to section 459A of the Act.
2.Further or in the alternative to the order sought in paragraph 1 above, an order that the Defendant be wound up pursuant to section 461(1)(c) of the Act.
3.An order that David Mutton be appointed as liquidator of the Defendant.
4.An order that the Plaintiffs’ costs of and incidental to this application be costs in the winding up of the Defendant.
5. Such further or other orders as the Court considers appropriate.
….
C. APPLICATION FOR WINDING UP ON GROUND OF INSOLVENCY
1.The Plaintiffs rely on the failure by the Defendant to satisfy the judgment made in favour of the Plaintiffs in Federal Court of Australia Proceeding No. SAD 341 of 2015 for the purposes of section 459A of the Act.
2.The Plaintiffs also rely on the fact that the Defendant has suspended its business activities for a period of more than one year for the purposes of section 461(1)(c) of the Act.
3.A copy of a supporting affidavit is annexed to this Originating Process and marked with the letter “A”. The supporting affidavit was served upon the Defendant at its registered office by mail on 13 November 2020.
Paragraphs 1 and 2 of Part A of the originating process sought relief under s 459A, alternatively s 461(1)(c), and paragraphs 1 and 2 of Part C specified the alternative grounds on which the winding up application was made, as noted by the primary judge (PJ at [35]).
There were clearly two grounds on which the Liquidators sought a winding up order. The first ground was based on the insolvency of Badenoch, under s 459A, and the second ground was the suspension of Badenoch’s business activities for a period of more than one year, under s 461(1)(c). The winding up grounds and the relief sought were clearly expressed in the alternative.
In our view, his Honour was correct to conclude that where a winding up order is sought on alternative grounds that are not interwoven, and therefore indivisible, the effect of s 459R(3) is limited to the winding up in insolvency component brought in reliance on s 459P for an order pursuant to s 459A. The primary judge rejected Badenoch’s submission that the Winding Up Proceeding was in substance and form an application to wind up in insolvency, and that the grounds for winding up were indivisible. It was open to his Honour to do so, having regard to the grounds on which the winding up was sought and the supporting material. For those reasons, there was no error on the part of the primary judge in refusing to grant a declaration that the Winding Up Proceeding was dismissed insofar as it related to the application to wind up under s 461(1)(c).
Issue Four: whether the primary judge erred in refusing to dismiss the application under s 461(1)(c) on the basis that it was inappropriate for a creditor to apply to wind up the company (Badenoch’s first ground/Liquidators’ Notice of Contention)
Badenoch’s first ground and the Liquidators’ Notice of Contention raised the issue of whether the primary judge erred in refusing to dismiss the application under s 461(1)(c), in any event, on the basis that it was inappropriate for a creditor (as distinct from a shareholder) to apply to wind up a company or to obtain relief on that ground.
Badenoch submitted that if, contrary to its contention that the grounds of the winding up application were indivisible, it was inappropriate to allow the Liquidators to proceed with an application to wind up under ss 461(1)(c) and 462(2)(b) because those provisions are designed to provide shareholders, not creditors, with a means of recovering their investment.
On the appeal, senior counsel for Badenoch conceded that a creditor has standing to bring an application to wind up under ss 461(1)(c) and 462(2)(b), however, he relied on Devmin International Pty Ltd v Belconnen Developments Pty Ltd (2022) 12 QR 170; [2022] QSC 186 (Cooper J) as authority for the proposition that it is “inappropriate” for creditors, such as the Liquidators, to bring an application under ss 461(1)(c) and 462(2)(b), and creditors should not be permitted to do so. It was conceded, however, that the question was one on which the primary judge had a discretion and that this court would not interfere with the primary judge’s decision in this regard unless there is a House v R error ((1936) 55 CLR 499; [1936] HCA 40 at 505 (Dixon J)).
In our view, Badenoch’s primary submission overstates the effect of Devmin. In Devmin, Cooper J determined the winding up application pursuant to s 461(1)(c) in that case and dismissed it. His Honour noted authorities to the effect that the winding up ground under s 461(1)(c) is primarily designed to provide shareholders with a means of recovering their investment from a company which ceases to engage in its intended business (at [34]-[39]). Justice Cooper was satisfied that the discretion to make an order under s 461(1)(c) arose on the facts of that case (at [44]). However, his Honour was not persuaded that it was appropriate to exercise the discretion to make a winding up order under s 461(1)(c) and he declined to do so: see Devmin at [49].
The question of whether or not to proceed to determine the Liquidators’ winding up application under s 461(1)(c) was a matter for the primary judge’s discretion. The primary judge concluded that Devmin provided no support for the dismissal of the Winding Up Proceeding without determining the merits (PJ at [36]). His Honour decided that he would not determine the question of the appropriateness of the Liquidators, as creditors, proceeding with a winding up application under s 461(1)(c) without a determination on the merits. No error has been demonstrated in relation to the exercise of the primary judge’s discretion in this regard.
Issue Five: Whether the primary judge erred in failing to dismiss the Winding Up Proceeding as an abuse of process (Badenoch’s second ground)
Badenoch’s second ground raised the issue of whether the primary judge erred in failing to dismiss the Winding Up Proceeding as an abuse of process.
The primary judge dealt with Badenoch’s submission that the Winding Up Proceeding was an abuse of process on the basis that it involved three interrelated contentions: first, that the proceeding was being prosecuted for an improper purpose; secondly, that delay, coupled with a failure to take steps to conclude the winding up applications, meant that prosecuting the proceeding would be an abuse of process; and, thirdly, the need to protect the administration of justice and integrity of the processes of the court. Before the primary judge Badenoch also submitted that the Winding Up Proceeding was an abuse of process because it was commenced on the basis of a disputed debt. That aspect of Badenoch’s submission was not dealt with expressly in the primary judgment. Having regard to the focus on the delays when this argument was presented before the primary judge and on the appeal, no criticism is, or was, made in relation the way in which his Honour dealt with this ground in the primary judgment.
On the appeal, Badenoch submitted that commencing the Winding Up Proceeding on the basis of a disputed debt which enabled the Liquidators to seek the benefit of an earlier relation-back day than if the application was commenced after the debt became undisputed, was an improper purpose. Badenoch further submitted that it would bring the administration of justice into disrepute because it would allow the Liquidators to disrupt the normal statutory timetable in circumstances where they could not have issued a statutory demand in relation to the same (disputed) debt due to a ‘genuine dispute’ in relation to the debt, because of the appeals.
The Liquidators submitted that the commencement of a winding up proceeding on the basis of a disputed debt is not an abuse of process. They relied on authorities to the effect that the existence of an appeal in relation to a judgment debt does not give rise a ‘genuine dispute’ within the meaning of s 459H: Re Douglas Aerospace Pty Ltd (2015) 294 FLR 186; [2015] NSWSC 167 at [53] (Brereton J), cited with approval in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60 at [5]-[6], [47] (Bell P) and [84] (White JA). The Liquidators also relied on Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374; [2007] NSWCA 57 at [26]-[41], where Beazley JA (Hodgson and Santow JJA agreeing) held that filing a winding up application when there is a pending application for a stay of execution of judgment would not, of itself, amount to an abuse of process.
In Australian Beverage Distributors, Beazley JA stated (at [83]):
… while it would be open for a court to find an abuse of process in some cases where litigation is in progress concerning a cross-claim exceeding the debt, it would not do so unless it was (at least) satisfied that the bringing of winding-up proceedings was unreasonable and inappropriate in the circumstances.
On the appeal, senior counsel for Badenoch conceded that there is not a “blanket rule” that it is an abuse of process to commence a winding up application on the basis of a disputed debt. However, it was submitted that the primary judge erred in failing to find that it was an abuse of process in this case because of the delays and the statutory imperative to ensure winding up applications are determined speedily.
The court’s power to stay or summarily dismiss a proceeding as an abuse of process is exercised only in exceptional circumstances. It is an ultimate decision to refuse to exercise the court’s jurisdiction to hear and decide the case and is made as a last resort where it is necessary to do so in order to protect the integrity of the court’s processes and the administration of justice: GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore (2023) 414 ALR 635; [2023] HCA 32 at [3] (Kiefel CJ, Gageler and Jagot JJ); Victoria International Container Terminal Ltd v Lunt (2021) 271 CLR 132; [2021] HCA 11 at [18]-[22] (Kiefel CJ, Gageler, Keane and Gordon JJ).
The primary judge found that Badenoch had not established that the circumstances of this case were so exceptional as to justify dismissal for abuse of process. His Honour rejected the submission that the Winding Up Proceeding was prosecuted for an improper purpose, observing that Badenoch’s submission rose no higher than an assertion that taking advantage of an earlier relation-back day was an abuse of process. The primary judge considered that the delay had to be viewed in context. Further, his Honour rejected the generalised submission that a dismissal was necessary to protect the administration of justice and the integrity of the court’s processes, observing that no specific matter was put beyond the matters that Badenoch had relied upon regarding improper purpose and delay.
The Winding Up Proceeding was commenced on 13 November 2020. At that time, Badenoch had commenced an appeal in relation to the judgment in the Primary Proceeding and the Liquidators had cross-appealed. Badenoch had also sought a stay of execution in relation to the judgment debt, and stay orders were made on 28 January 2021 (we note the stay orders were inadvertently not included in the materials that were before the primary judge, however we accept that the primary judge would have been aware of the application for a stay of execution).
On 16 December 2020, Badenoch filed an application to adjourn the Winding Up Proceeding, following which the Adjournment Order was made by Judicial Registrar Allaway on 18 December 2020. Nonetheless, Badenoch did not apply to dismiss or stay the Winding Up Proceeding as an abuse of process at that time, or at any time prior to 5 September 2023.
The applicable standard of review in relation to this ground is the correctness standard identified in Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9: GLJ at [15] (Kiefel CJ, Gageler and Jagot JJ), [95] (Steward J) and [161] (Gleeson J). In our view, the primary judge was correct to find that the evidence and submissions failed to establish that the circumstances of this case were so exceptional as to justify dismissal for abuse of process. By the time the primary judge heard Badenoch’s application to dismiss the Winding Up Proceeding as an abuse of process, more than three years had passed since the proceeding was commenced. The Liquidators, as they had indicated they would, had taken no further action in respect of the Winding Up Proceeding until after the High Court appeals had been heard and determined. Badenoch had not objected to that course until its solicitors sent a letter on 5 February 2023 indicating that Badenoch took the view that the Winding Up Proceeding had been dismissed by operation of s 459R(3). Badenoch waited until 5 September 2023 to file an application seeking that the Winding Up Proceeding be dismissed as an abuse of process.
The fact that the Liquidators would obtain an earlier relation back day than if they had waited until the appeals were heard would undoubtedly have conferred an advantage on the Liquidators. However, Badenoch was unable to refer to any authority to the effect that that matter, of itself, constituted an abuse of process. Rather, it was merely asserted that it constituted an abuse of process. Similarly, Badenoch simply asserted that it would disrupt the statutory timetable by commencing the proceeding on the basis of a disputed debt, rather than if the Liquidators had waited until the appeals were determined. Beyond raising those matters Badenoch did not point to a specific matter to explain why the dismissal of the Winding Up Proceeding was necessary to protect the integrity of the court’s processes and the administration of justice. In our view, no error was demonstrated in relation to the primary judge’s finding that Badenoch had failed to establish that the circumstances of this case were exceptional and justified the dismissal of the Winding Up Proceeding.
Issue Six: whether the primary judge erred in refusing to dismiss the Winding Up Proceeding for want of prosecution (Badenoch’s third ground)
Badenoch’s third ground raised the issue whether the primary judge erred in refusing to dismiss the Winding Up Proceeding for want of prosecution.
At the hearing before the primary judge, senior counsel for Badenoch confirmed that Badenoch relied upon delay since February 2023 (after the High Court delivered judgment dismissing the appeal and cross-appeal) and the lack of evidence to explain the delay between that date and service of the Statutory Demand on Badenoch, some six months later.
For the purpose of the cross-appeal Badenoch submitted that in the context of an application to wind up in insolvency, which is usually to be determined in six months, the primary judge erred in failing to find that the delay in this case was not inordinate and inexcusable.
The litigation between the parties has a long history. The decision of Davies J in the Primary Proceeding was published in May 2020. It was the subject of an appeal to the Full Court, an application for special leave and an appeal to the High Court, all of which were concluded by February 2023. A six month delay in the Winding Up Proceeding, in the overall context of the history of these proceedings, is hardly inordinate. In our view, there was no error in the primary judge’s refusal to dismiss the Winding Up Proceeding for want of prosecution.
CONCLUSION
For these reasons, we would allow the Liquidators’ appeal on the first ground and would otherwise dismiss the appeal and the cross-appeal, including the Liquidators’ Notice of Contention. There is no apparent reason why costs should not follow the event. We are therefore inclined to think that the Liquidators ought to have their costs of and incidental to the appeal. However, should any party seek an alternative order as to costs, they may make short written submissions on that question. Our orders will make provision for this accordingly.
I certify that the preceding one hundred and six (106) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices O'Callaghan, McEvoy and Neskovcin. Associate:
Dated: 16 December 2024
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