Gillion Pty Limited (Trustee) v Wet Fix Holdings Pty Limited (No 2)

Gillion Pty Limited (Trustee) brought an application against Wet Fix Holdings Pty Limited for an order to wind up the latter company on the basis of insolvency. Wet Fix Holdings made an application under section 459S of the Corporations Act 2001 (Cth) to dispute the debt on which the winding up application was based, and this application was successful. The present matter concerns an application by Wet Fix Holdings to vary the costs order made in the original proceeding. Wet Fix Holdings argues that it should not be required to pay Gillion's costs of the leave application, and that Gillion should not be compensated for certain costs incurred by Wet Fix Holdings in reconstructing financial records and preparing evidence. The primary legal issue in this case was whether Wet Fix Holdings should be required to pay Gillion's costs of the leave application. The court found that Wet Fix Holdings should not be required to pay these costs, but also that Gillion should not be compensated for certain costs incurred by Wet Fix Holdings in reconstructing financial records and preparing evidence. The court reasoned that the application for leave arose because Gillion had applied to wind up Wet Fix Holdings in insolvency based upon Wet Fix Holdings' non-compliance with a statutory demand. The court found that the costs of the leave application should be treated as part of the costs of the whole litigation. The court also found that Wet Fix Holdings was not at fault in failing to bring a section 459G application, and that there is a strong case that the statutory demand debt is the subject of a genuine dispute. The court found that Gillion persisted in a weak argument that the statutory demand itself amounted to a notice of termination under the relevant loan agreement, and that Gillion eventually conceded that Wet Fix Holdings may be able to establish solvency if the statutory demand debt is not due. The court found that there was no evidence that any person on behalf of Gillion attempted to discuss the statutory demand with Mr Starling, and there was no evidence of any attempt to foreshadow the winding up application once the time for compliance with the statutory demand had expired. The court found that without communications of this kind, it was open to accept Mr Starling's sworn evidence as to his state of knowledge and that matter was relevant to Gillion's decision to oppose the grant of leave. The court found that Gillion contended that the court should make an order to ensure that it is not required to pay costs incurred by Wet Fix Holdings in reconstructing financial records that Wet Fix Holdings was required to keep by law, or the costs associated with Wet Fix Holdings' preparation of evidence concerning that reconstruction. The court found that Gillion referred to Wet Fix Holdings' obligation to keep financial records under section 286 of the Act and submitted that Wet Fix Holdings should have been in a position to produce audited accounts because, in May 2016, Mr Chapman made a shareholder direction pursuant to section 293 of the Act requiring the production of such accounts. The court found that there was no basis for making such an order, and that Gillion should not be compensated for the costs in question.

ORDERS:
1. The application to vary order 2 made on 29 November 2016 be refused.