Cal Consulting Pty Ltd (In Liq) v Lloyd
[2013] FCA 1192
•8 November 2013
FEDERAL COURT OF AUSTRALIA
Cal Consulting Pty Ltd (In Liq) v Lloyd; In the Matter of Cal Consulting Pty Ltd (In Liq) [2013] FCA 1192
Citation: Cal Consulting Pty Ltd (In Liq) v Lloyd; In the Matter of Cal Consulting Pty Ltd (In Liq) [2013] FCA 1192 Parties: IN THE MATTER OF CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400); CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400) and FRANK LO PILATO IN HIS CAPACITY AS LIQUIDATOR OF CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400) v CHRISTINE ANNE LLOYD File number: ACD 96 of 2013 Judge: FOSTER J Date of Orders: 8 November 2013 Date of publication of Reasons: 13 November 2013 Legislation: Corporations Act 2001 (Cth), ss 477(2), 477(2B), 491, 506(1A) and 511
Federal Court of Australia Act 1976 (Cth), s 31A
Federal Court Rules 2011, rr 5.23(2)(b), 11.06 and 26.01Date of hearing: 8 November 2013 Place: Sydney (via video link to Canberra) (heard in Canberra) Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 46 Counsel for the Plaintiffs: Mr J Kohn Solicitor for the Plaintiffs: Herman Davis Lawyers Solicitor for the Defendant: The Defendant appeared in person Counsel for Michael Slaven (as liquidator of DIT Consulting Pty Ltd (In Liquidation) (ACN 117 007 691) and as liquidator of Eaglehawk (ACT) Pty Ltd (In Liquidation) (ACN 118 790 917)): Dr G Dempsey Solicitor for Michael Slaven (as liquidator of DIT Consulting Pty Ltd (In Liquidation) (ACN 117 007 691) and as liquidator of Eaglehawk (ACT) Pty Ltd (In Liquidation) (ACN 118 790 917)): Colquhoun Murphy
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
ACD 96 of 2013
IN THE MATTER OF CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400)
BETWEEN: CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400)
First PlaintiffFRANK LO PILATO IN HIS CAPACITY AS LIQUIDATOR OF CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400)
Second PlaintiffAND: CHRISTINE ANNE LLOYD
Defendant
JUDGE:
FOSTER J
DATE OF ORDER:
8 NOVEMBER 2013
WHERE MADE:
CANBERRA
THE COURT:
1.Pursuant to s 511 of the Corporations Act 2001 (Cth) (the Act), directs that the second plaintiff was justified in compromising the corporation’s claims against the defendant upon the terms of a Deed of Settlement dated 21 February 2013 between the second plaintiff and the defendant.
2.Pursuant to s 477(2B) of the Act, approves nunc pro tunc the said Deed of Settlement.
3.Upon the application of the plaintiffs, orders that the defendant pay to the plaintiffs the sum of $122,852.36 inclusive of interest.
4.Orders that the defendant pay the plaintiffs’ costs on a party/party basis as taxed or agreed.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
ACD 96 of 2013
IN THE MATTER OF CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400)
BETWEEN: CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400)
First PlaintiffFRANK LO PILATO IN HIS CAPACITY AS LIQUIDATOR OF CAL CONSULTING PTY LTD (IN LIQUIDATION) (ACN 100 941 400)
Second PlaintiffAND: CHRISTINE ANNE LLOYD
Defendant
JUDGE:
FOSTER J
DATE:
13 NOVEMBER 2013
PLACE:
SYDNEY (VIA VIDEO LINK TO CANBERRA) (HEARD IN CANBERRA)
REASONS FOR JUDGMENT
The second plaintiff (the liquidator) is the liquidator of the first plaintiff (CAL Consulting) having been appointed as such on 13 April 2011 pursuant to a resolution of the members of CAL Consulting passed on that day at a duly convened meeting of those members. By the same resolution, CAL Consulting was wound up pursuant to s 491(1) of the Corporations Act 2001 (Cth) (the Act).
The defendant is, and, at all material times, was the sole director, secretary and shareholder of CAL Consulting. CAL Consulting carried on the business of providing payroll services (CAL’s business).
On a number of occasions in the period from about August 2011 until late 2012, the liquidator made formal demand upon the defendant requiring her to repay loans made to her by CAL Consulting and also demanding that she restore to CAL Consulting the value of its assets which the liquidator alleged she had caused to be transferred to another corporation with which she was associated, CAL CPM Pty Ltd (CAL CPM). CAL CPM had been incorporated on 3 June 2008.
The claims which the liquidator had made against the defendant came to approximately $1,000,000 in total.
On 6 February 2013, shortly before a public examination of the defendant was to be conducted, the liquidator and the defendant agreed to settle the liquidator’s claims against the defendant upon the basis that the defendant would pay to the liquidator $125,000, such sum to be paid by way of two instalments, one instalment of $5,000 to be paid on or before 25 February 2013 and the balance of $120,000 to be paid on or before 30 June 2013.
This agreement was subsequently reduced to writing in the form of a Deed of Settlement and Release entered into between the liquidator, CAL Consulting and the defendant on 21 February 2013 (the Deed of Settlement).
The defendant made the first payment of $5,000 but failed to make the second payment of $120,000 due on 30 June 2013.
On 17 September 2013, the liquidator and CAL Consulting commenced the present proceeding against the defendant. In their Originating Process, the plaintiffs sought the following relief against the defendant:
1.Pursuant to section 511 of the Act, [a direction] that the Second Plaintiff is justified in compromising the Company’s claims against Ms Lloyd on the terms and conditions set out in the Deed of Settlement (as defined in the Lo Pilato Affidavit).
2. [An order that] pursuant to section 477(2B) of the Act, the Court approve nunc pro tunc the Deed of Settlement with Ms Lloyd.
3.[An order that] Ms Lloyd pay the Plaintiffs the sum of $120,000 plus interest and costs pursuant to the Deed of Settlement.
4.Costs.
5.Such further or other orders as the Court deems fit.
The plaintiffs relied upon ss 477(2), 477(2B), 506(1A) and 511 of the Act. The plaintiffs’ claim was supported by an affidavit sworn by the liquidator on 17 September 2013 and filed on the same day. The plaintiffs needed the approval of the Court to the compromise embodied in the Deed of Settlement because one of the obligations of the defendant under that Deed was to make a payment at a time which was more than three months later than the date of the Deed and the creditors of CAL Consulting had previously declined to approve the Deed of Settlement (see 477(2B) of the Act).
The matter was first returned before the Court on 11 October 2013. On that occasion, there was no appearance either by or on behalf of the defendant. However, Counsel appeared on behalf of the liquidator of two corporations in liquidation claiming to be creditors of CAL Consulting, DIT Consulting Pty Ltd (In Liquidation) (ACN 117 007 691) and Eaglehawk (ACT) Pty Ltd (In Liquidation) (ACN 118 790 917). Counsel for the liquidator of those corporations informed the Court that her client intended to oppose the orders sought by the plaintiffs in this proceeding. She also informed the Court that her client, Mr Slaven, was also the liquidator of several other corporations which had claims against CAL Consulting.
In light of the failure of the defendant to appear at the return of the Originating Process and her failure to file and serve a Notice of Address for Service as required by r 11.06 of the Federal Court Rules 2011 (FCR), I indicated to the solicitor for the plaintiffs and to Mr Slaven’s Counsel that I would entertain an application that judgment be entered against the defendant by default.
By Interlocutory Application filed on 30 October 2013, the plaintiffs sought orders against the defendant that:
1.Default judgment be ordered pursuant to Rule 5.23(2)(b) of the Federal Court Rules 2011 (Cth).
2.The Defendant pay the Plaintiffs the sum of $120,000.
3.The Defendant pay the Plaintiffs interest in the sum of $2,852.36.
4.The Defendant pay the Plaintiffs’ costs on a party-party basis to be agreed to by the parties or to be taxed in default of agreement.
The plaintiffs also claimed such other relief which the Court might consider appropriate.
On 8 November 2013, I heard the plaintiffs’ application for judgment. On this occasion, the defendant appeared in person. The plaintiffs indicated to me, to the defendant and to Mr Slaven that they also relied upon s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011 in support of an application for summary judgment in respect of all of their claims for relief. On this occasion, Counsel for Mr Slaven informed me that her client no longer opposed the plaintiffs’ claims in this proceeding. She said that she was now instructed to support the making of the orders sought by the plaintiffs.
The defendant still had not filed a Notice of Address for Service or obtained or sought an extension of time within which to do so.
After hearing the plaintiffs’ application for judgment, I made the following orders:
THE COURT:
1.Pursuant to s 511 of the Corporations Act 2001 (Cth) (the Act), directs that the second plaintiff was justified in compromising the corporation’s claims against the defendant upon the terms of a Deed of Settlement dated 21 February 2013 between the second plaintiff and the defendant.
2.Pursuant to s 477(2B) of the Act, approves nunc pro tunc the said Deed of Settlement.
3.Upon the application of the plaintiffs, orders that the defendant pay to the plaintiffs the sum of $122,852.36 inclusive of interest.
4.Orders that the defendant pay the plaintiffs’ costs on a party/party basis as taxed or agreed.
These Reasons for Judgment constitute my reasons for making those orders.
THE RELEVANT FACTS
After his appointment as liquidator, the liquidator set about investigating the affairs of CAL Consulting.
In the course of doing so, he discovered that, on or about 30 June 2009, CAL Consulting had ceased trading. At about the same time, it had sold its business to CAL CPM for nil consideration.
In early 2010, CAL CPM sold the business that had previously been CAL Consulting’s business to Achieve Corporation Pty Ltd for $320,000. The defendant personally received $256,000 from the sale of CAL Consulting’s business to Achieve.
The liquidator formed the view, after due investigation, that CAL Consulting had not maintained adequate books and records. He also formed the view that the company was probably insolvent at all times since at least 13 April 2004.
The liquidator also formed the view that the sale of CAL Consulting’s business to CAL CPM for nil consideration was an uncommercial transaction, an unreasonable director-related transaction and a transaction entered into to defeat the creditors of CAL Consulting. He also formed the view that the defendant had breached her director’s duties owed to CAL Consulting and had allowed CAL Consulting to trade whilst insolvent.
The defendant also owed approximately $53,000 to CAL Consulting on her loan account with that company.
The liquidator decided to examine the defendant. A public examination was fixed for 6 February 2013. On the morning of the examination but prior to the examination beginning, settlement discussions took place between the liquidator, his representatives and the defendant’s legal representative. The defendant was represented by Counsel who had been briefed by her solicitors.
As a result of the settlement discussions which took place on that day, a settlement in principle was agreed. In arriving at that settlement, the liquidator took into account:
(a)The merits and risks of commencing legal proceedings against the defendant;
(b)The nature and complexity of the possible causes of action;
(c)The likely costs to be incurred in the conduct of the action;
(d)Litigation funding expenses; and
(e)The risks involved in making the claims.
At [37] of his affidavit sworn on 17 September 2013, the liquidator said:
I thought the Deed of Settlement was in the best interest of the Company creditors because:
a.There is an inherent risk in issuing the proceeding.
b.The costs associated with prosecuting the proceeding from now until the outcome of the hearing will be substantial.
c.Of the advice provided by Mr Herman [the plaintiffs’ solicitor].
d.Of the risk that no funds will be recovered and subsequent enforcement actions.
e.The status of the winding up.
f.The delay in receiving payments pursuant to the Deed of Settlement will not adversely affect the expeditious winding up of the Company.
Subsequently, on 21 February 2013, the plaintiffs and the defendant entered into the Deed of Settlement.
On 7 May 2013, a report was sent to the creditors of CAL Consulting regarding, amongst other things, the Deed of Settlement.
On 22 May 2013, a meeting of creditors was held. At that meeting, a motion was put that the Deed of Settlement be approved. The corporations of which Mr Slaven was liquidator declined to vote in favour of the resolution. As a result, the resolution was defeated.
The defendant was represented by solicitors at all times from 6 February 2013 until the Deed of Settlement was executed. Drafts of the Deed were exchanged between the legal representatives of the parties in that period. The final form of the Deed was the result of a process of negotiation.
Clause 2.1 of the Deed provides that the defendant must pay to the liquidator $125,000 in full and final settlement of all claims which he had against the defendant (as defined in the Deed). Clause 2.2 provides that the said sum of $125,000 be paid by payment of:
(a)$5,000 on or before 25 February 2013; and
(b)$120,000 on or before 30 June 2013.
Clause 2.4 provides that, in the event that the said sum of $125,000 is not paid as specified in cl 2.2, interest will accrue thereon. Clause 2.5 provides that, in that event, the plaintiffs shall be entitled to enter judgment against the defendant for all amounts remaining to be paid under the Deed together with interest and costs. Clause 2.6 contains various provisions designed to facilitate the entry of judgment in the event of default by the defendant.
Clauses 4 and 5 of the Deed provide for appropriate releases.
CONSIDERATION
Counsel for Mr Slaven informed me at the commencement of the plaintiffs’ application for judgment that her client, in his capacity as liquidator of the various corporations which are creditors of CAL Consulting or which have had proofs of debt admitted in the liquidation of CAL Consulting, no longer opposed the orders sought by the plaintiffs. In particular, Mr Slaven no longer considered that the compromise arrangement reached between the plaintiffs and the defendant was not in the best interests of the creditor corporations of which he is liquidator.
On the evidence before me, I considered that I should make Orders 1 and 2 as sought by the plaintiffs in their Originating Process. The liquidator had weighed the strength of his claims against the defendant, the risks of litigation and the defendant’s capacity to pay before deciding to agree to the compromise embodied in the Deed of Settlement. The defendant, on the other hand, had every reason to accept the amount agreed in lieu of endeavouring to defend the claims which had been made against her. I also took into account the fact that the creditors controlled by Mr Slaven no longer opposed those orders.
The defendant nonetheless resisted a money judgment. In support of that position, she relied upon the contents of an affidavit sworn by her on 3 November 2013 and filed on 4 November 2013.
In that affidavit, the defendant addressed four broad issues.
First, she said that, on 6 February 2013, when she agreed in principle to settle the claims which the liquidator had made against her, she was under great stress by reason of a number of personal issues and the circumstances surrounding the liquidation of CAL Consulting and other corporations.
Next, she made the point that, in 2011, the liquidator had indicated to her that he would probably not take action against her.
Third, she said that the liquidator had not informed her that the settlement would need to be approved by the creditors or by the Court because one of the obligations which she had agreed to undertake was to make a payment at a time which was more than three months after 21 February 2013.
Fourth, the defendant addressed her financial position. She explained in some detail that she was unable now to make the second payment which she had agreed to make and was unlikely to be able to make that payment at any time in the foreseeable future.
At no stage after 6 February 2013 until she filed her affidavit sworn on 3 November 2013, did the defendant ever suggest that she might have some entitlement to resist enforcement of the Deed of Settlement or set aside the Deed of Settlement on account of duress or some doctrine akin to duress.
The evidence before me did not demonstrate that the defendant had any prospect of successfully attacking the Deed of Settlement.
As at the date of hearing of the plaintiffs’ application for judgment, Ms Lloyd had not taken any steps to attack the Deed of Settlement. Indeed, she did not say that she intended to take any such steps. She merely floated some suggestions that perhaps she had been taken advantage of in February 2013 when she compromised the liquidator’s claims.
The other matters raised by the defendant could not constitute any defence to the plaintiffs’ claims.
In those circumstances, I considered that Ms Lloyd had no defence to the plaintiffs’ claim to enforce the Deed and made orders accordingly.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate:
Dated: 13 November 2013
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