Everthen Nominees Pty Ltd v Ly Pty Ltd - [2023] WASC 378

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   EVERTHEN NOMINEES PTY LTD -v- LY PTY LTD [2023] WASC 378
CORAM:   HOWARD J
HEARD:   27 SEPTEMBER 2023
DELIVERED          :   2 OCTOBER 2023
FILE NO/S:   COR 76 of 2023
BETWEEN:   EVERTHEN NOMINEES PTY LTD
Plaintiff
AND
LY PTY LTD
Defendant

Catchwords:

Practice and procedure - Defendant opposes winding up application - Application for plaintiff to give security for costs in the event the defendant is successful - Whether defendant has an arguable case - whether there is reason to believe the plaintiff would be unable to pay costs of defendant - Application allowed

Legislation:

Corporations Act 2001 (Cth)

Result:

Application allowed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr C S Williams
Defendant	:	Mr P G Donovan & Ms C D Radenti

Solicitors:

Plaintiff	:	Solomon Brothers
Defendant	:	MDS Legal

Cases referred to in decision:

Re Kitay (in his capacity as liquidator of Computer Accounting and Tax Pty Ltd (in liq)) [2022] WASC 350
Sugarloaf Hill Nominees v Rewards Projects Ltd [2011] WASC 19

HOWARD J:

The plaintiff has applied to wind up the defendant in insolvency relying on a failure by the defendant to comply with a statutory demand.
The defendant opposes the winding up application on the grounds that:
1.it is solvent; and
2.the winding up application is an abuse of process in that it was being used for an improper purpose of compelling a solvent company to pay a disputed debt.
The matter is listed to be heard by me on 15 November 2023.
On 15 August 2023 the defendant made an application for the plaintiff to give security for costs in the amount of $126,952 up to and including the 'trial of the action' (Security Application).
After the conclusion of the hearing of the Security Application on 27 September 2023, I made the following Orders:
1.Pursuant to section 1335 of the Corporations Act 2001 (Cth), the plaintiff, within 14 days of the date of this order, give security for the defendant's costs up to and including the trial of this action in the sum of $74,000, such security to be in the form of payment into Court.
2.If the plaintiff fails to comply with the order to give security within the time limited in the order, the action shall be stayed.
3.The parties have liberty to apply to the Court within 48 hours notice.
The Security Application was supported by numerous affidavits, including one of its solicitor which annexed a draft bill of costs.
The plaintiff did not put on any evidence specific to the Security Application.
These are my reasons for making those Orders.

Court's power

I have been unable to find a case in which a defendant to a winding up application has sought and been awarded security for its costs. The defendant cited Assaf's Winding Up in Insolvency (3rd ed) Assaf [10.52] to support the proposition that a respondent to a winding up application may seek security under s…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] WASC 378
Decision Date: 2 OCTOBER 2023

CaseChat Overview and Summary

In the case of Everthen Nominees Pty Ltd v Ly Pty Ltd, Everthen, the applicant, sought to wind up Ly Pty Ltd, the defendant, based on an unpaid statutory demand. Ly Pty Ltd opposed the winding up application and sought an order for Everthen to provide security for costs in the event that Ly Pty Ltd was successful in its opposition. The legal issues the court had to decide included whether Ly Pty Ltd had an arguable case and whether there was reason to believe that Everthen would be unable to pay Ly Pty Ltd's costs if successful in its opposition to the winding up application. The court found that Ly Pty Ltd had an arguable case based on its solvency, supported by financial statements and property valuations provided to Everthen. The court also found that there was reason to believe that Everthen would be unable to pay Ly Pty Ltd's costs if successful in its opposition to the winding up application, as Everthen had not provided security for costs and had discontinued its winding up application. The court allowed Ly Pty Ltd's application for security for costs and ordered Everthen to pay Ly Pty Ltd's costs of the winding up application on an indemnity basis or without regard to the maximum hourly rates and/or maximum allowances fixed by the relevant determination.

The court's reasoning was based on the relationship between the sole director of Everthen and Ly Pty Ltd, as well as the evidence provided by Everthen's sole director regarding his involvement in asset management services for Ly Pty Ltd. The court also considered the evidence of independent valuations of Ly Pty Ltd's properties and the financial statements provided to Everthen. The court found that Everthen's winding up application was more of an attempt to have a solvent company pay a disputed debt rather than an application to wind up an insolvent company. The court further found that Everthen's discontinuance of its winding up application was not due to new information received but rather the requirement to provide security for costs. The court's outcome was that Everthen should pay Ly Pty Ltd's costs of the winding up application. Ly Pty Ltd sought for those costs to be paid on an indemnity basis or without regard to the maximum hourly rates and/or maximum allowances fixed by the relevant determination.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Ly Pty Ltd relies, particularly, on a decision of Colvin J in Simatis v Walgenup Aboriginal Corporation (No 2) [2023] FCA 607 [3], [11] and [13]. Everthen, rather, contends that its discontinuance of its winding up application occurred in circumstances where it says it only received information after commencing the application which indicated that Ly Pty Ltd was solvent. In that regard, it relies on the decision of Cheeseman J in Future Invented Pty Ltd v Gebaut Environment Pty Ltd [2021] FCA 1034 [23]. The relationship between the sole director of Everthen and Ly Pty Ltd is, in my view, important for the resolution of the costs here. As deposed to by Everthen's sole director, Mr Agapitos, he was involved in the asset management services which (it was said) Everthen provided to Ly Pty Ltd. Further, I infer that Mr Agapitos was familiar at all times with at least some of the very significant real property holdings of Ly Pty Ltd. Six properties were the subject of valuation reports by independent valuers; which were prepared in opposition to the plaintiff's application. These were supplied to Everthen by no later than 26 September 2023; that was before I had heard the security for costs application. At the same time, up to date relevant financial statements were provided by affidavit to Everthen. Mr Agapitos’ evidence was that he provided asset management services to Ly Pty Ltd for 217 and 221 Willmott Drive, Waikiki in this State. They were independently valued respectively at $4.5 million and $8.6 million. I infer he was aware in that role of income received or receivable in respect of the properties. Everthen's application relied on an unpaid statutory demand. Other than that, there appeared to be no real, available suggestion to the effect that Ly Pty Ltd was not solvent. Further, relevant financial statements for the year ended July 2022 were provided to Everthen in July 2023; again well before I heard the security for costs application. By an affidavit dated 26 September 2023, the relevant financial statements for the year ended 30 June 2023 were provided. They relevantly showed a profit before tax of $884,598.00 and current assets of more than $1.1 million. In all of the circumstances, I consider that the bringing of the winding up application and its maintenance on the unsatisfied statutory demand was more of an attempt to have a solvent company pay a disputed debt than an application to wind up an insolvent company. Further, despite giving no indication at the hearing before me on 27 September 2023 that Everthen would not provide security if ordered, it did not do so. I do not accept at face value the assertions made in Everthen's written submissions to the effect that it was new information it received, rather than the requirement to provide security, which led to it discontinuing its winding up application. In all of the circumstances, I consider that Everthen should pay Ly Pty Ltd's costs of the winding up application. Ly Pty Ltd seeks for those to be paid on an indemnity basis or that they should be paid without regard to the maximum hourly rates and/or maximum allowances fixed by the relevant determination as identified in the affidavit of Ms Radenti made 14 November 2023.