Drummond Carpentry Services Pty Ltd v Roberts Construction Group Pty Ltd (Supporting Creditor, Beenak Concrete and Formwork Pty Ltd)
[2025] VSC 509
•22 August 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2024 03505
IN THE MATTER of ROBERTS CONSTRUCTION GROUP PTY LTD (ACN 641 105 580)
BETWEEN:
| DRUMMOND CARPENTRY SERVICES PTY LTD (ACN 618 422 549) (as Trustee for the Drummond Family Trust (ABN 38 730 031 289)) | Plaintiff |
| And | |
| ROBERTS CONSTRUCTION GROUP PTY LTD (ACN 641 105 580) | Defendant |
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JUDGE: | M Osborne J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 August 2025 |
DATE OF JUDGMENT: | 22 August 2025 |
CASE MAY BE CITED AS: | Drummond Carpentry Services Pty Ltd v Roberts Construction Group Pty Ltd (Supporting Creditor, Beenak Concrete and Formwork Pty Ltd) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 509 |
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PRACTICE AND PROCEDURE – Appeal against order made by Associate Justice – Whether order should have been made for a further extension of time for the determination of the plaintiff’s winding up application – Whether further extension order was unreasonable, unjust and failed to take into account or to accord proper weight to material considerations – Whether there has been an unreasonable prolongation of the proceeding – Whether there is prejudice to the company as being a defendant in unresolved winding up proceedings – Irregularity of the proceeding due to deregistered plaintiff – Whether substitution application an abuse of process – Unfilled proposal to reinstate or substitute – Delay in bringing application and lack of prospects – Supreme Court (General Civil Procedure) Rules 2015 r 77.06 – Corporations Act 2001 (Cth) ss 459R, 465B – House v The King (1936) 55 CLR 499 – Appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Not Applicable | Not Applicable |
| For the Defendant (Appellant) | J Barber KC with D McAloon | Eidelweisz Lawyers |
| For the Supporting Creditor Beenak Concrete and Formwork Pty Ltd (Respondent) | D Gration | Merton Lawyers |
HIS HONOUR:
Introduction
By notice of appeal filed 4 August 2025, the defendant, Roberts Construction Group Pty Ltd (‘RCG’), appeals against paragraph 6 of the orders made by the Honourable Associate Justice Gardiner on 16 July 2025. His Honour made an order pursuant to s 459R(2) of the Corporations Act 2001 (Cth) (‘Act’) extending the period within which the application commenced by the plaintiff, Drummond Carpentry Services Pty Ltd (‘DCS’) as trustee for the Drummond Family Trust, for RCG to be wound up in insolvency, be further extended to 18 September 2025.
By originating process filed 8 July 2024, DCS commenced proceedings seeking an order pursuant to s 459P of the Act that RCG be wound up on the ground of its insolvency (‘Winding Up Application’). The ground specified in the originating process was an unsuccessful attempt by DCS to recover debts alleged to be owing by RCG in the sum of $15,699.84. This followed the obtaining by DCS of a garnishee order for debts in the District Court of New South Wales ordering that debts accruing from the National Australia Bank Limited (‘NAB’) to RCG be paid to DCS.
In its originating process, DCS relied upon s 459C(2)(b) of the Act which provides:
The Court must presume that the company is insolvent if, during or after the three months ending on the day when the application was made:
…
(b)execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied.
The hearing came on before a judicial registrar on 14 August 2024 and directions were made, inter alia, adjourning the further hearing of the proceeding to 4 September 2024 and providing for RCG to file and serve any further affidavit on which it wishes to rely in opposing the application to 3 September 2024.
On 2 September 2024, a notice of appearance was filed on behalf of Beenak Concrete and Formwork Pty Ltd (‘Beenak’) as a supporting creditor. Beenak asserted that it was a creditor of RCG in the sum of $270,078.93. The notice of appearance stated that Beenak intended to appear at the further hearing on 4 September 2024.
At the hearing before the judicial registrar held 4 September 2024, DCS and, among others, Beenak were represented by the same counsel. The judicial registrar made orders fixing the Winding Up Application for hearing before Associate Justice Gardiner on 13 November 2024.
The substantive hearing of the Winding Up Application took place before his Honour on 13 November 2024. In an outline of submissions filed on behalf of DCS on 8 October 2024, DCS, inter alia, gave notification of an intention to seek leave to file and rely upon a proposed amended originating process so as to clearly articulate the primary event by which RCG was deemed to be insolvent. The proposed amended originating process deleted reference to the garnishee order ordering that all debts accruing from the NAB to RCG be paid to DCS and replaced it with reference to another garnishee order obtained in the District Court of New South Wales ordering that all debts accruing from Westpac Banking Corporation to the RCG be paid to DCS, which further garnishee order was said to have been returned wholly unsatisfied. It is unsurprising that the attempt to execute by way of a garnishee served on the NAB was unsuccessful as RCG did not maintain a bank account with NAB.[1] Unlike in this Court, application for a garnishee order in the District Court of New South Wales is not made on notice to the judgment debtor.
[1]The evidence filed in opposition to the Winding Up Application disclosed that RCG had never in fact maintained a bank account with the NAB.
Section 459R(1) of the Act provides that an application for winding up on the ground of insolvency must be determined within 6 months of its filing. Given the filing of the originating process on 8 July 2024, this meant that the winding up application had to be determined by 8 January 2025. Section 459R(2) provides that the Court may by order extend the period in which the application is to be determined but only if: (a) the Court is satisfied that special circumstances justify the extension; and (b) the order is made within the period specified in subsection (1), or as last extended.
On 29 November 2024, the Associate Justice Gardiner made orders on the Court’s own motion pursuant to s 459R(2) of the Act, extending the period within which DCS’s application must be determined to 31 May 2025. In that part of the order headed ‘Other Matters’, it was noted that the Court was satisfied that there were exceptional circumstances which warrant a further extension pursuant to s 459R(2) of the Act to 31 May 2025.
On 8 April 2025, the Court as constituted by the Associate Justice made further orders on the Court’s own motion pursuant to s 459R(2) of the Act that the period within which the application must be determined is extended to 30 June 2025.
In the ‘Other Matters’ section of the order, it was noted that the Court is presently preparing lengthy reasons for judgment in the matter and is satisfied that there are exceptional circumstances which warrant a further extension pursuant to s 459R(2) of the period within which the application for winding up must be determined.
On 17 June 2025, the matter returned to Court. It appears the reason for the further hearing was that the plaintiff, DCS, was deregistered on 17 February 2025. The solicitors for DCS’s director had notified the Court on 13 June 2025 that they had applied to the Australian Securities and Investment Commission to reinstate DCS’s registration pursuant to s 601AH(1) of the Act. The Court made orders, inter alia, that DCS file and serve any affidavit explaining the circumstances of how DCS came to be deregistered and identifying the special circumstances relied on in support of a further order extending the time by which the application be determined under s 459R(2) of the Act. Orders were also made for RCG to file any affidavit in response and for further orders that the parties file and exchange written submissions limited to three pages by 4pm on 5 July 2025. The further hearing of the proceeding was adjourned to 10 July 2025.
The Court made a further order pursuant to s 459R(2) of the Act extending the period within which the plaintiff’s application would be determined to 31 July 2025. In ‘Other Matters’ it was noted that the Court considered that special circumstances justified the order made in paragraph 5, namely the need for clarification of the status of DCS’s registration before judgment could be given in the proceeding.
Notwithstanding that it was the intention of the director of the now deregistered DCS to apply for reinstation of DCS pursuant to s 601AH(1) of the Act, this step was not implemented.
As a result, on 8 July 2025, in advance of the further hearing scheduled for 10 July 2025, RCG filed an outline of submissions which, inter alia, argued that the Winding Up Application should now be dismissed. The basis for this argument was that it had become clear that the irregular nature of the proceeding would now not be remedied by DCS’s reinstatement. That reinstatement had been the circumstance which was the predicate of the order made on 17 June 2025, inter alia, extending the period within which the application would be further extended to 31 July 2025.
In the result, the hearing could not take place on 10 July 2025 and the further hearing was instead listed for 15 July 2025.
On 11 July 2025, Beenak and Direct Installs Australia Pty Ltd (‘Direct Installs’), as trustee for the Drummond Family Trust, filed an interlocutory process by which they sought orders pursuant to s 465B of the Act (in the case of Beenak), and in the alternative (in the case of Direct Installs) pursuant to r 9.06 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’), that Beenak and, in the alternative, Direct Installs be respectively substituted or added as a plaintiff in the proceeding.
Direct Installs is apparently the successor trustee to the now deregistered DCS of the Drummond Family Trust
In the result, only the application for substitution by Beenak pursuant to s 465B of the Act (‘Substitution Application’) was pressed.
On 14 July 2025, on the eve of the hearing of the interlocutory process, an affidavit was filed on behalf of Beenak, and on the day of hearing an outline of submissions was filed on behalf of Beenak and Direct Installs.
Following argument which took place at the hearing on 15 July 2025, Associate Justice Gardiner made the following orders:
1.By 4pm on 22 July 2025, the defendant file and serve any further affidavits on which it intends to rely directed to the issue of whether Beenak Pty Ltd is a creditor of the defendant in the context of Beenak Pty Ltd’s application under s 465B of the Corporations Act 2001 (Cth) (‘Act’) made by interlocutory process filed on 11 July 2025.
2.By 4pm on 29 July 2025, Beenak Pty Ltd file and serve any affidavit in response.
3.By 4pm on 5 August 2025, the defendant file and serve any submissions in response to Beenak Pty Ltd’s submissions filed on 15 July 2025.
4.By 4pm on 8 August 2025, Beenak Pty Ltd file and serve any submissions in reply.
5.The further hearing of the proceeding and Beenak Pty Ltd’s interlocutory application be adjourned to 20 August 2025 at 10:30am.
6.Pursuant to s 459R(2) of the Act, the period within which the plaintiff’s application is to be determined be further extended to 18 September 2025.
7. Liberty to apply.
8. Costs reserved.
The following is recorded in ‘Other Matters’:
A.The plaintiff to this proceeding, Drummond Carpentry Services Pty Ltd was deregistered on 17 February 2025. After embarking on an application to ASIC to reinstate that company which was abandoned, an interlocutory application was filed on 11 July 2025 seeking to substitute Beenak Pty Ltd as the plaintiff or, in the alternative, to add Direct Installs Pty Ltd as a plaintiff in this proceeding.
B.Counsel for Beenak Pty Ltd and Direct Installs Pty Ltd elected to press Beenak Pty Ltd’s interlocutory application and stated that Direct Installs Pty Ltd’s would not be pressed.
C.The Court is satisfied that special circumstances justify the extension ordered in order 6 namely the need to accommodate the timetable ordered below to determine Beenak Pty Ltd’s interlocutory application.
As noted above, RCG now appeals against paragraph 6 of the orders pursuant to r 77.06 of the Rules. The appeal is by way of rehearing, not de novo, which means that the RCG must show error on the part of the Associate Justice. It is also common ground that paragraph 6 of the orders involved the exercise of a discretion and as such the applicable principles are those outlined in House v The King (‘House’).[2]
[2](1936) 55 CLR 499.
The hearing below and the reasons of the Associate Justice
The Associate Justice did not publish reasons, which in the circumstances was understandable. In any case, the exchanges with counsel and the transcript more broadly reveal his Honour’s path of reasoning.
The matter before his Honour was the Substitution Application. That application had been filed two days prior to its return, with the main supporting affidavit filed the night before and the applicant’s outline of argument filed on the day of the hearing. The Substitution Application was made against the background of a reserved judgment following the hearing of the Winding Up Application in November 2024. The reserved judgment could not be handed down because there was no plaintiff, given DCS’s deregistration.
The transcript reveals clearly enough the rationale behind his Honour’s decision to make procedural orders so as to allow for a substantive hearing of the Substitution Application. Necessarily, if the hearing and determination of this application could not occur before 31 July 2025, it was necessary for further orders to be made pursuant to s 459R(2) of the Act extending the time in which the Winding Up Application would be determined. It was not in dispute that there had to be a plaintiff prior to his Honour handing down reasons for judgment in the Winding Up Application.
RCG’s primary submission at the 15 July 2025 hearing was that the Substitution Application should be dismissed then and there. But when pressed by the Associate Justice, it articulated a fallback position in the event that the application was not dismissed, that it wished to file further material in opposition.
In support of the primary submission, counsel for RCG made reference to the history of the proceeding including, relevantly, the various orders for extensions of time pursuant to s 459R(2) and in so doing, made reference to his written submissions filed on 8 July 2025.
It is convenient to set out aspects of that written submission because it serves to illuminate the matters raised in argument before the Associate Justice.
First, RCG emphasised the irregular nature of the proceeding which arose by reason of DCS now being deregistered, and that this was something that ‘will not be rectified’ because, contrary to what the Court had been told on 17 June 2025, no reinstatement would occur. RCG emphasised that substitution of a new applicant as opposed to reinstatement of the existing application would not regularise the proceeding.
In support of that submission, RCG referred to s 465B(1) of the Act which provides that:
The Court may by order substitute, as applicant or applicants in an application under section 459P, 462 or 464 for a company to be wound up, a person or persons who might otherwise have so applied for the company to be wound up.
RCG argued that the ordinary meaning of ‘substitution’ is ‘to put (one person or thing) in the place of another’ and that no substitution could occur.
Secondly, RCG argued that the debt asserted by Beenak was disputed and submitted that where the debt of a prospective substitute applicant is genuinely disputed, the Court will usually not entertain the application for substitution. Relevantly, however, counsel stated that in the event that the Substitution Application was to proceed, RCG would wish to consider Beenak’s recently filed affidavit and determine what, if any, further affidavit evidence it intended to put on disputing the debt asserted by Beenak. Further, the transcript reveals that counsel for RCG accepted that the question of whether any offsetting claims of RCG against Beenak could be taken into account in determining whether Beenak was or was not a creditor, was a question not free of complexity and involved analysis of authorities including, relevantly, the decision of Matthews J in Re Sneakerboy Pty Ltd (‘Sneakerboy’).[3]
[3][2020] VSC 348.
Thirdly, RCG submitted that substitution was discretionary, but that the circumstances prevailing in the present case are so highly prejudicial to RCG so as to weigh heavily against any further prolongation of the proceeding for the purposes of a contested Substitution Application. RCG relied upon South East Water Ltd v Kitoria Pty Ltd:[4]
… the proper exercise of the discretion conferred by s 465B of the Law requires the Court to weigh in the balance two competing policies. The first is that the insolvent company should not be permitted to continue to trade to the detriment of its existing and future creditors but should be wound up as expeditiously as possible. If the achievement of that objective is jeopardised by the inaction or lack of diligence of the petitioning creditor, another creditor should be substituted as contemplated by s 465B(1)(a) to allow the winding up proceedings to continue in the interests of the generality of creditors, some of whom may have refrained from initiating their own proceedings in the knowledge that the original petition had been instituted. On the other hand, the court should not allow winding up proceedings to be used as a debt-collecting mechanism or an instrument of oppression to be held over the head of a company otherwise trading satisfactorily by a creditor whose debt is the subject of a genuine dispute.
[4](1996) 21 ACSR 465, 472.
Finally, RCG adverted to the ongoing prejudice suffered by it, which had been confronting a Winding Up Application since 8 July 2024. In so doing, it referred to the public interest in ensuring that winding up proceedings are speedily disposed of, pointing to the observations made by Hamilton J in Expile Pty Ltd v Jabb’s Excavations Pty Ltd (‘Expile’):[5]
There are various good reasons for this policy and I do not purport to be exhaustive. They include winding up applications not being dealt with on material which is stale. They include situations where a company may be trading or engaging in transactions whilst it is insolvent, which should not be protracted. And they include companies, which are not insolvent, not having the commercial cloud caused by the existence of winding up proceedings hanging over their heads for a long time.
[5](2002) 194 ALR 138, 141 [9] (‘Expile’).
The transcript reveals submissions made by Beenak, and exchanges between his Honour and both counsel, to the effect that, on the basis of Beenak’s affidavit material filed to that point, Beenak was a creditor of RCG. Its debt was said to exist at the time of commencement of the Winding Up Application, and Beenak had appeared in the proceeding at a comparatively early stage as a supporting creditor.
Whilst his Honour expressed understanding of RCG’s frustration with the position in which RCG had been placed, it is clear from a consideration of the transcript that his Honour did not consider that it was appropriate for him in the circumstances to in effect dismiss the Substitution Application without a full hearing on its merits. That being so, and given that RCG challenged the debt asserted by Beenak, the application could not proceed on the day and there was a need to timetable further affidavits and submissions.
As noted above, RCG’s fallback position was that it wished to file further affidavit material if the Substitution Application was not dismissed that day.
When asked as to how long would be required for that further evidence to be put on, the matter was stood down so that counsel could take instructions. When the matter resumed, there was discussion about timing, the last date of which was for submissions to be filed on 8 August 2025. Discussion then ensued as to the hearing date which resulted in the fixing of the Substitution Application for 20 August 2025. During the course of the discussion as to timing, counsel for Beenak noted that it would be necessary to make an order pursuant to s 459R(2) of the Act extending the time for the determination of the Winding Up Application, a matter which his Honour noted as being something of which he was very mindful. This was understandable, given that the current extension was to 31 July 2025.
The further extension order, pursuant to s 459R(2) of the Act, to 18 September 2025 arose in the context of the time needed to determine the Substitution Application following a full hearing and for his Honour to write a judgment. That is clear from the transcript where his Honour stated that he was satisfied that ‘special circumstances justify the extension [pursuant to s 459R(2)] to enable the accommodation of the program which I‘ve just pronounced [being the timetable to facilitate the substantive hearing of the Substitution Application] to enable the conclusion of this proceeding’.
Unless the Substitution Application was dismissed that day, a further extension was required pursuant to s 459R(2) of the Act to a date after the hearing of the application. If no extension order was granted, the Substitution Application would be rendered nugatory because the reserved Winding Up Application would not be determined by 31 July 2025 which was the then extended date. In those circumstances, it is apparent that his Honour considered that it was necessary to make a further extension order pursuant to s 459R(2) of the Act.
Grounds of appeal
RCG submits that the further extension order was unreasonable, unjust and failed to take into account or to accord proper weight to material considerations. In its written outline of argument dated 13 August 2025 (‘written argument’) it identified seven principal matters which are outlined below.
Unreasonable prolongation
RCG notes that over 13 months had elapsed since the proceeding was issued and the named plaintiff has not existed since mid-February 2025. It draws attention to the public interest in ensuring that winding up proceedings are speedily disposed of.[6]
[6]See the statements made by Hamilton J in Expile (n 5) 141 [9], cited with approval in ReDoughkyo Leasing Pty Ltd [2025] NSWSC 676, [68].
It otherwise relies upon the observation of the Court of Appeal in Western Australia in Low v Joondalup Golf Management (Aust) Pty Ltd:[7]
The period of six months specified in s 459R(1), to be extended only in the limited way provided for in s 459R(2) ‘in special circumstances’, suggests a tight timetable for the final disposition of the winding up application with a high level of sustained curial supervision and (if necessary) intervention.
[7][2023] WASCA 33, [106].
RCG argues that the circumstances are not sufficiently ‘special’, or ‘special’ at all, such as could justify a further prolongation of the unresolved Winding Up Application to 18 September 2025.
Prejudice to RCG
RCG referred to the prejudice to a company of being a defendant in unresolved winding up proceedings for an extended period which has been recognised in the authorities including Expile. Whilst RCG recognises that the Associate Justice noted at the hearing that RCG had ‘a right to be generally exasperated by what’s happened here in terms of the deregistration of your client, the further delays et cetera. It’s had a winding up application against it for a long period of time’, it submits that the observation understates the prejudice caused by the proceeding remaining unresolved and the consequences of the shifting positions adopted by the various entities represented by Merton Lawyers; DCS, its director, Beenak and various other supporting creditors. It emphasises that RCG has been required since the 17 February 2025 deregistration of DCS came to light, to incur significant and continuing legal costs for court appearances and the preparation of affidavit evidence and written submissions.
Irregularity of the proceeding
RCG relies upon the fact that DCS has not existed since 17 February 2025 by reason of its deregistration, and that in those circumstances the question of whether the proceeding is properly regarded as a nullity is ‘a large and difficult legal issue’.[8] Whilst RCG noted that a deregistered corporate plaintiff could be remedied by its reinstatement pursuant to s 601AH of the Act, it submitted that course was no longer open to DCS and further that Beenak has identified no authority that suggests that substitution of DCS would have the same remedial effect as a reinstatement of DCS. RCG submits that this fact, together with the ongoing and incurable irregularity of the proceeding, weighed heavily against the proceeding being further prolonged which was a matter which the Associate Justice did not attribute proper weight to.
[8]PCCEF Pty Ltd v Geelong Football Club Ltd [No 2] [2019] VSCA 148, [46].
Purpose of the proceeding – abuse of the winding up process
RCG argues that the winding up application was not issued for a proper purpose and instead was issued to exert commercial pressure upon RCG and that the same objective is evident from Beenak’s wish to pursue the Substitution Application. It emphasises the second paragraph of Beenak’s outline of submissions dated 15 July 2025 (‘Beenak Submissions’) which reads as follows:
For the reasons that follow, it is in the interest of justice and the most efficient use of the court’s time, as an important public resource, for an alternative plaintiff to be substituted or added. This will allow judgment to be handed down and for the true issues in dispute to be disposed of. The defendant, [RCG], and the remaining parties can then contest (or resolve between themselves) the question of costs and bring the proceeding to an end.
It argues that this shows that Beenak’s Substitution Application is not so much motivated by a desire to pursue the Winding Up Application but rather so as to enable a vehicle to remain on foot for the purposes of resolving outstanding costs questions.
Unfulfilled proposals to reinstate or substitute
RCG emphasises that Beenak, which had appeared as a supporting creditor since September 2024, had only at the last minute elected to make an application for substitution. It otherwise notes that the Beenak Submissions state that if the Substitution Application is unsuccessful, another equivalent application may be made by an alternative creditor raising the prospect of a further prolongation of an irregular proceeding and presumably an application for a fifth extension of time.
Belated substitution application and lack of prospects
RCG does not accept that substitution of an alternative applicant can regularise the proceeding. As set out above, it argues that ‘substitution’ in s 465B, on its ordinary meaning, is ‘to put (one person or thing) in the place of another’. RCG submits that this cannot occur here because DCS has been deregistered.
Further, RCG emphasises that the case law is clear that where the debt of a prospective substitute applicant is generally disputed, the Court will usually not entertain the application for winding up.[9] RCG relies upon the affidavit of its director filed on 4 November 2024 that Beenak has no standing as a creditor of RCG but is a debtor of RCG.
[9]Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) (2004) 185 FLR 130, 146 [68].
Further, it emphasises that an order for substitution is discretionary and the circumstances prevailing in the present case are so highly prejudicial to RCG as to weigh heavily against the further prolongation of the proceeding.
Apparent desire to deliver reasons on the Substantive Application
RCG submits that Associate Justice statements, that a ’60 page draft judgment’ had been prepared ‘which would require a bit of finessing depending on what happens here today or in the very near future’, and that he had to get ‘this judgment out by the end of the month’, evinced reliance on the wish to deliver reasons on the Winding Up Application as constituting ‘special circumstances’ justifying a further extension of time under s 459R of the Act.
It submits that such observations took no proper account of the fact that the proceeding was irregular and that publication of a judgment could only occur if the Substitution Application was permitted to be heard and was granted and further was treated as having rectified the irregularity of the proceeding.
It further relies on the Associate Justice’s statement that ‘come hell or high water, this judgment’s going to be out by the time of the present extension. There’s no question about that’, submitting that it reflects an irrelevant consideration and may suggest to a reasonable observer that the outcome of the Substitution Application was predetermined.
Further submissions at the hearing of the appeal
At the hearing of the appeal on 20 August 2025, RCG adopted its written argument and expanded or amplified the matters raised.
It emphasised that the Associate Justice should have determined that the Winding Up Application was an abuse of process and initiated to exert commercial pressure on RCG and that the Substitution Application suffered from the same vice. Accordingly, his Honour should not have allowed the proceeding to remain on foot past 31 July 2025.
In support of the submission that the making of the Winding Up Application was an abuse of process, RCG referred to the communications between RCG and DCS before the Winding Up Application was commenced which included a withdrawn statutory demand relating to a different sum, the fact that the Winding Up Application was based on a sum which had not been the subject of a claim for payment by DCS and when filed was sent not to RCG but first to RCG’s financier.
In further support of the submission that the Substitution Application was an abuse of process, it drew attention to the fact that Merton Lawyers also acted for Beenak, as well as DCS and other supporting creditors. It additionally sought to rely on an affidavit of its director Theodore Kerlidis sworn 20 August 2025 (‘20 August 2025 Affidavit’). The 20 August 2025 Affidavit deposed to a purported assignment of debt of $12,226 from Grimley Sales Pty Ltd (‘Grimley’), an alleged creditor of RCG to Beenak, to Abattoir Waste Solutions Pty Ltd (‘Abattoir Waste’), who were also represented by Merton Lawyers. On 19 August 2025, Abattoir Waste had purported to appoint a controller over certain assets of RCG in respect of which Grimley had an interest by reason of a retention of title clause. RCG disputed all of this but these matters were said to constitute further evidence of the abuse of process which Senior Counsel submitted was being orchestrated by Merton Lawyers who were acting for DCS before its deregistration, its director and various supporting creditors.
Beenak’s submission
Beenak agreed with RCS that the decision involved an exercise of discretion with the relevant principles being those outlined in House.
As such, Beenak emphasised that in order for the appeal to succeed the appellant must establish that the judge acted upon a wrong principle or was guided or affected by extraneous or irrelevant matters or is mistaken as to the facts or did not take into account some material consideration. Otherwise, the appellant must establish that although it is unclear how the judge reached the result embodied in the order, the appellate court may interfere if the outcome is unreasonable or plainly unjust.
Beenak highlighted that the Associate Justice’s conclusion was that he was satisfied ‘that special circumstances justify the extension to enable the accommodation of the program I’ve just pronounced to enable the conclusion of the proceeding’.
Beenak submitted that the matters raised in the grounds of appeal are matters that are open to be raised with the Associate Justice on the hearing of the Substitution Application and or were raised and are part of the matrix of facts which may determine the fate of the reserved Winding Up Application.
It submits that there is nothing sinister in Beenak being represented by Merton Lawyers and that it is not appropriate to aggregate the positions of all those for whom Merton Lawyers acts. It denies any abuse of process and argues that its debt was disclosed as one existing at the commencement of the Winding Up Application. It submits its willingness to step in as the substitute was motivated solely by its interest as a supporting creditor there now being no plaintiff due to DCS’s deregistration.
Beenak submits that none of the arguments advanced by RCG show that the Associate Justice erred in exercising his discretion under s 459R of the Act to accommodate the timetable, which Beenak emphasises was requested by RCG.
Analysis and conclusion
I do not accept that his Honour’s decision was unreasonable, unjust or infected by error by failing to accord appropriate weight to relevant matters. Nor do I consider that his Honour had regard to any irrelevant considerations.
Before expanding on that conclusion, it is necessary to reiterate that the order the subject of appeal involves the exercise of discretion. Appellate restraint is called for in relation to such decisions; there is a strong presumption in favour of the correctness of the decision below. It is not enough that the court hearing the appeal might have decided the matter differently. The need for appellate restraint is heightened where the order under appeal does not affect substantive rights.[10] Although RCG accepted that the appeal was to be determined in light of these considerations, the overall tenor of both of its written argument and oral submissions was to rehearse the matters raised before the Associate Justice, sometimes with different or expanded emphasis, and press for an alternative conclusion. No clear issue of error of principle was identified.
[10]Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170, 176-178.
His Honour did not determine the Substitution Application. Nor was his Honour determining the Winding Up Application. The matters about which RCG complains are all matters which either have been raised in the reserved Winding Up Application or can be raised in response to the Substitution Application when it is heard.
Unless his Honour considered that the Substitution Application was an obvious abuse of process or so devoid of merit that it could be dismissed there and then, he had to make directions for its determination. If the effect of those directions was that the Substitution Application could not be determined by 31 July 2025, then both the Winding Up Application and the Substitution Application would lapse by operation of s 459R(1) of the Act absent a further extension. That is the context and reason for his Honour’s determination that special circumstances existed and that a further extension was appropriate pursuant to s 459R(2) of the Act.
Further, a review of the transcript shows that his Honour was well aware of the detriment to RCG of the prolongation of the unresolved Winding Up Application and clearly took this into account. However this had to be balanced against the need to determine the Substitution Application which was not free of complexity on a proper basis once all the necessary evidence had been filed and submissions joined.
Turning to the specific grounds raised, the transcript shows that his Honour had regard to the further prolongation of the pending winding up proceeding by reason of the extension. His Honour was specifically directed to the observations made by Hamilton J in Expile. However, the prolongation became inevitable unless the Substitution Application was sufficiently untenable so that it could be dismissed on the day.
I do not accept that his Honour erred in failing to have regard to the shifting positions adopted by the various entities represented by Merton Lawyers. I have some difficulty understanding the relevance of the submission based on the fact that Merton Lawyers act for various creditors. The fact that Merton Lawyers represents both DCS, its director and Beenak does not mean that it is appropriate to somehow visit upon Beenak acts or omissions on the part of the others for whom Merton Lawyers acted. In any case, it is obvious that the prolongation of the proceeding at large would come with the consequence that RCG would incur further legal costs, and it cannot be reasonably disputed that his Honour took those matters into account in determining the appropriate course.
In relation to the irregularity of the proceeding, this was accepted as giving rise to ‘a large and difficult legal issue’. It can be raised at the hearing of the Substitution Application, and it was entirely understandable for his Honour to have implicitly deferred consideration of this issue until then, rather than dealing with it on 15 July 2025 when RCG’s submission was not fully developed and Beenak’s submission did not address it.
The asserted belated Substitution Application and its lack of prospects were raised in in argument before his Honour. There is no reason to consider that his Honour did not take them into account. Noting that one aspect of the enquiry concerns Beenak’s status as a creditor, a matter rightly described as not being free of controversy, it was understandable for his Honour to defer resolution of that controversy until the full hearing of the Substitution Application could take place. In oral submissions, Senior Counsel submitted that her Honour’s decision in Sneakerboy was distinguishable. This was not the subject of a submission made on 15 July 2025. In any case, it can be argued when the Substitution Application proper is heard. His Honour did not err in failing to have regard to the alleged distinguishing feature nor in any case did he err by failing to conclude that the prospects were so low that the application need not be considered further.
The abuse of process argument had two elements; the first is that his Honour should have had regard to or given more weight to the fact that the Winding Up Application was an abuse of process. This was a matter squarely raised in November 2024 at the now reserved Winding Up Application, but it was not squarely raised on 15 July 2025 except in the sense that it overlapped with the unreasonable prolongation and on-going prejudice submission. Given that his Honour was not asked to dismiss the Substitution Application on 15 July 2025 based on the same matters that had been raised with him in November 2024 and which were the subject of his reserved decision, the submission now made on appeal that his Honour should have had recourse back to those submissions, accepted them and dismissed the Substitution Application accordingly is without merit. His Honour’s failure to consider it or failing to give it sufficient weight on 15 July 2025 involved no error. If the argument is as powerful as submitted, it will no doubt be dispositive of the reserved Winding Up Application.
The second element is the alleged abuse of process occasioned by the Substitution Application. This is said to encompass various elements including that it was brought not for the purpose of seeking a winding up order but rather so costs issues can be determined (paragraph 2 of the Beenak Submissions) or as part of an overriding strategy of oppression orchestrated by RCG’s creditors to commence a rolling series of substitution (paragraphs 38-40 of the Beenak Submissions).
To the extent to which RCG relies upon paragraph 2 of the Beenak Submissions as giving rise to that submission, that statement has to be construed in the context of the other parts of the submission such as paragraph 31 which contemplated judgment being handed down and the proceeding being brought to an end. One of the possible outcomes when judgment is handed down is that the Winding Up Application succeeds. Given this possibility, which is obvious, it is difficult to see how the Substitution Application could be seen as an abuse of process or at least one so sufficiently clear as to justify the dismissal of the application without a full hearing on the merits.
As to the prospect of endless substitution applications, paragraphs 38-40 of the Beenak Submissions were in response to the part of RCG’s submission that on 15 July 2025 the Court should make an order dismissing the Winding Up Application. The point raised in rebuttal was that the period in which the Winding Up Application had to be determined was 31 July 2025 and that this date had not yet been reached, and that there may be other creditors who may bring substitution applications if that brought by Beenak was unsuccessful. I do not accept that this establishes abuse of process on the part of Beenak, or anyone else, and his Honour did not err by failing to reach that conclusion.
Turning finally to the ground that alleges the Associate Justice took into account an irrelevant consideration, namely his apparent desire to publish his ‘60 page draft judgment’, I do not accept that on any fair reading of the transcript, this constituted part of his Honour’s reasons. The extracts raised in submission occurred very early on in the hearing and were plainly raised in the context of his Honour’s awareness of the pending 31 July 2025 date and the need for the substantive reasons to be published by that date, absent further extension. The complaint is without substance.
Overall, the Associate Justice weighed the relevant matters and reached a conclusion that was open and not unjust. The further extension order did not determine substantive rights. The matters raised by RCG have already been raised in part at the hearing of the Winding Up Application and otherwise can be raised at the hearing of the Substitution Application.
Finally, and as noted above, RCG sought to rely on the 20 August 2025 Affidavit. This relates to evidence of events that had arisen after the making of the orders by the Associate Justice. As such and as accepted by Senior Counsel for RCG, leave is required to rely on such evidence. Beenak objected to the evidence as irrelevant. Receipt of the evidence was pressed on the basis of it being a further instance of abuse of process. I do not propose to receive the evidence; it relates to a purported assignment of a debt by Grimley to Abattoir Waste. Neither of those entities were party to the application the subject of the orders below. The proposed evidence is not relevant to the matters considered or required to be considered by the Associate Justice.
The appeal will be dismissed. I shall hear the parties as to costs.
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