Handberg v MIG Property Services Pty Ltd

[2012] VSCA 126

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0053

GEOFFREY NILS HANDBERG   (IN HIS CAPACITY AS LIQUIDATOR OF S&D INTERNATIONAL PTY LTD (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) (ACN 075 030 447)	First Applicant
	and
S& D INTERNATIONAL PTY LTD (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) (ACN 075 030 447)	Second Applicant
	v
MIG Property Services Pty Ltd (ACN 006 657 174)	Respondent

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JUDGES:	WARREN CJ and MANDIE JA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	15 June 2012
DATE OF JUDGMENT:	15 June 2012
MEDIUM NEUTRAL CITATION:	[2012] VSCA 126
JUDGMENT APPEALED FROM:	Re MIG Property Services Pty Ltd [2012] VSC 122 (Robson J)

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PRACTICE AND PROCEDURE – Application for leave to appeal – Whether substantial injustice demonstrated

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr M Galvin	Mills Oakley
For the Respondent	Mr P Tree SC with Mr D Triaca	Mason Black

WARREN CJ:

1. I invite Mandie JA to deliver his judgment first.

MANDIE JA:

1. The applicants seek leave to appeal from orders of Robson J in the Trial Division made on 23 March 2012.  The substance of those orders was to adjourn a winding up application in respect of the respondent company (‘MIG’) for the reason that the judgment debt, which was the basis of a statutory demand the failure to comply with which was the ground for the winding up, was the subject of an appeal.  Thus, the application for the winding up order would not come on until after the appeal in relation to the judgment debt had been heard and determined.[1]  The winding up order by the Associate Justice was set aside.

   [1]In fact, a winding up order was made by an Associate Justice and in order for the orders now sought to be challenged to be made, that order was set aside. 

1. The background to the application is that MIG was a mortgagee of a property in Footscray of which the second applicant (‘S&D’) was the registered proprietor.  The property was sold by the agent in possession for the mortgagee and, after payment of various other debts, the net proceeds of the mortgagee’s sale were paid by the agent in possession to the mortgagee, MIG  These events occurred in or about October 2007 and shortly thereafter Mr David Mond who controlled MIG paid $410,000 out of the proceeds received by MIG to an overseas bank account for the benefit of Mr Mond and his wife. 

1. The first-named applicant is the liquidator of the second-named applicant S&D. In August 2008, the first applicant in his capacity as liquidator of S&D brought a proceeding in the Supreme Court against MIG and the agent in possession (Mr Vartelas) seeking orders that the monies received from the sale of the Footscray property alleged to be surplus to the amount secured by the mortgage be paid to S&D or into court.  On 26 September 2008, pursuant to an order of the Supreme Court made the previous day, Mr Vartelas paid $628,936.03 into court.  This amount represented the remaining balance of the net proceeds of sale of the Footscray property.

1. On 9 June 2009 Robson J gave judgment for the applicants finding that MIG should not have retained the settlement proceeds but should have paid them into court once it became aware of disputes between a number of claimants to those proceeds or part thereof.  On 19 June 2009 the judge ordered that there be an inquiry into the amounts that should have been paid by MIG to S&D and also to other claimants. 

1. On 3 July 2009 MIG commenced an appeal in respect of the orders made on 9 and 19 June 2009[2] (‘the substantive appeal’). 

   [2]Mr Vartelas also commenced an appeal.

1. Subsequently, flowing from the previous orders, Robson J made an order by consent that MIG pay S&D the sum of $164,994.00 plus interest in the amount of $35,139.52 (‘the judgment debt’). 

1. The judgment debt has never been paid.  The substantive appeal is still pending.  The applicants caused a statutory demand in relation to the judgment debt to be served on MIG.  MIG failed in an application for an order seeking to set aside the statutory demand.  In addition, MIG sought a stay pending appeal of the original order made on 19 June 2009 but that was dismissed by the Court of Appeal on 13 October 2011.

1. In relation to the dismissal of MIG’s application to set aside the statutory demand, MIG apparently did not advance any evidence or argument to show that there was a genuine dispute about the debt or, in other words, that there were genuine arguable grounds for the substantive appeal.[3]

   [3]See MIG Property Services Pty Ltd v S&D International Pty Ltd [2011] VSC 600.

1. On 23 November 2011 the applicants initiated an application to wind up MIG based on its presumed insolvency arising from the failure to comply with the statutory demand.  An Associate Justice refused to adjourn the winding up application and ordered that MIG be wound up.  The reasons of the Associate Justice are set out in ‘Other Matters’ in the order dated 29 February 2012.  It appears from those reasons that the Associate Justice recognised a principle stated in Ahern v Deputy Commissioner of Taxation (‘Ahern’)[4] and Adamopoulos v Olympic Airways SA (‘Adamopoulos’)[5] that a sequestration order should not be made where an appeal is pending against the judgment upon which the bankruptcy proceeding is based if there is a genuine arguable appeal on foot.  The Associate Justice also considered that this principle developed in bankruptcy proceedings had been correctly applied in the context of an application to wind up a company in Shmee Pty Ltd v Bresam Investments Pty Ltd (‘Shmee’).[6]  Notwithstanding his acceptance of these principles, the Associate Justice in his discretion dismissed the application.  The Associate Justice said that there was no suggestion that the substantive appeal was not arguable but that it was not appropriate to express anything other than a superficial assessment of the applicant’s prospects on appeal.      

   [4](1987) 76 ALR 137 (Full Federal Court).

   [5](1990) 95 ALR 525 (Full Federal Court).

   [6][2009] VSC 657.

1. MIG appealed from the decision of the Associate Justice and the appeal was heard by Robson J who ordered[7] that leave to appeal be granted, that Mr Mond be permitted to bring the appeal in the name of MIG, that the winding up order be set aside and that the application for winding up be adjourned pending the hearing and determination of the substantive appeal.  Robson J, of course, was the judge whose original decisions were the subject of the substantive appeal and he was able to find that the substantive appeal did raise genuine and arguable grounds, a proposition that, he said, was not seriously challenged by S&D.  The judge applied the same principles as referred to by the Associate Justice, namely those stated in Adamopoulos, Ahern and Shmee but, as I have said, came to a different conclusion. 

   [7]Re MIG Property Services Pty Ltd [2012] VSC 122.

1. The applicants now contend that the decision below is attended by sufficient doubt as to justify a grant of leave to appeal.  They submit that the judge was wrong to apply principles developed in the bankruptcy jurisdiction to winding up proceedings under the Corporations Act.  The respondent submits that the judge’s exercise of discretion is not attended by sufficient doubt and, further, that the applicants have failed to demonstrate that they will suffer substantial prejudice if the decision below is allowed to stand.

1. In relation to the question of substantial injustice, the applicants’ solicitor in an affidavit sworn 11 April 2012, deposes as follows:

I refer to the affidavit of Geoffrey Niels Handberg, sworn on 26 September 2011 (Handberg Affidavit).  Paragraph 13 of the Handberg Affidavit deposes to the transfer of $410,000 by the appellant to an account in Israel that took place shortly prior to the commencement of proceeding no. 7807 of 2008 (Transfers).

If the Judgment stands, the respondents will be prevented from proceeding with the winding up orders against the appellant until after the hearing and determination of the appeal (which will occur at some indefinite time after 8 August 2012).  On the information available to me, I believe that this will substantially prejudice the respondents in investigating and pursuing the Transfers.  The delay in investigating the Transfers will prejudice the respondents because, inter alia:

(a) evidence supporting any claims made in respect of Transfers or other activities of the appellant will become increasingly difficult to obtain as time goes by; and

(b) given the date that the Transfers took place, the delay in bringing any claims in respect of the Transfers will give rise to the real risk of those claims becoming statute barred before they can be properly formulated.

1. Assuming, without deciding, that the decision below is attended by sufficient doubt as would justify grant of leave to appeal, I consider that the applicants have failed to show that they will suffer substantial injustice if the orders below are allowed to stand.  I do not think that the applicants have shown why a delay in investigating ‘the Transfers’ will create any real risk of prejudice or have established what real risk there is that any claim in relation to the Transfers may become statute barred.  In any event, any risk of prejudice can be minimised if not eliminated by obtaining an order for a speedy trial of the substantive appeal and as yet no attempt has been made to do so. 

1. All that has happened is that the winding up application has been adjourned and if the substantive appeal can be expedited and decided, the applicants will in due course be able to proceed with their winding up application (assuming that the substantive appeal is dismissed).

1. I would refuse leave to appeal for those reasons. 

WARREN CJ

1. I agree.

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