Hume v Carey
[2023] WASCA 138
•22 SEPTEMBER 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: HUME -v- CAREY [2023] WASCA 138
CORAM: HALL JA
MULLINS AJA
SEAWARD J
HEARD: 22 SEPTEMBER 2023
DELIVERED : Ex tempore
FILE NO/S: CACV 109 of 2022
BETWEEN: ALISTAIR DAVID HUME
Appellant
AND
NORMAN PHILLIP CAREY
First Respondent
GOLDBLAZE NOMINEES PTY LTD
Second Respondent
HHA ARCHITECTS PTY LTD (IN LIQ)
Third Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: HILL J
Citation: HUME -v- CAREY [No 2] [2022] WASC 377
File Number : COR 68 of 2022
Catchwords:
Corporations - Appeal against order making the termination of the winding up of a company conditional on the sole shareholder paying a fixed amount of the liquidators' fees - Where the applicants for the winding up order had brought negligence proceedings against the company that were disputed by the company - Where primary judge found that winding up order should never have been made - Whether the primary judge erred in making the termination of the winding up dependent on the payment of the liquidators' fees by the party who sought the termination order
Legislation:
Corporations Act 2001 (Cth), s 461(1)(k), s 462(4), s 482, 556(1)(a)
Insolvency Practice Schedule (Corporations) (Cth), s 60-5
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
| Appellant | : | In Person |
| First Respondent | : | No Appearance |
| Second Respondent | : | No Appearance |
| Third Respondent | : | No Appearance |
Solicitors:
| Appellant | : | In Person |
| First Respondent | : | No Appearance |
| Second Respondent | : | No Appearance |
| Third Respondent | : | No Appearance |
Case(s) referred to in decision(s):
Goldblaze Nominees Pty Ltd as Trustee for the Goldblaze Unit Trust v HHA Architects Pty Ltd [2021] WASC 189
Hume v Carey [2022] WASC 256
Hume v Carey [No 2] [2022] WASC 377
HALL JA:
(These reasons were delivered extemporaneously on 22 September 2023 and have been edited from the transcript.)
I agree with Mullins AJA.
MULLINS AJA:
The appellant, Mr Hume, appears in person to appeal against the orders made by the learned primary judge on 1 November 2022 on Mr Hume's application to terminate the winding up of the third respondent HHA Architects Pty Ltd (in liq) (the company): Hume v Carey [No 2] [2022] WASC 377 (the reasons). The orders made on that date were:
1.Subject to the Plaintiff paying or securing the liquidators' fees to the sum of $20,000 (excl GST) by payment of $10,000 (plus GST) by 16 January 2023 and a further payment of $10,000 (plus GST) by 16 March 2023, the winding up of HHA Architects Pty Ltd (In Liq) will be terminated.
2.If the plaintiff is unable to pay or secure the liquidators' fees in terms of order 1, the stay will be lifted and the company will remain in liquidation.
3.There be no order as to the costs of the application.
4.There be liberty to apply on 7 days' written notice.
No respondent has participated in this appeal.
Background
The company was wound up on the application of the first and second respondents pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (Act): Goldblaze Nominees Pty Ltd as Trustee for The Goldblaze Unit Trust v HHA Architects Pty Ltd [2021] WASC 189 (the winding up decision). The basis for the application was that the first and second respondents had brought proceedings against the company for professional negligence and claimed to be a prospective
creditor of the company. It was noted (at [10] of the winding up decision) that the first and second respondents were seeking to have a liquidator appointed to safeguard the company's professional indemnity policy. Mr Trpcevski and Mr Anderson were appointed the liquidators of the company on 17 June 2021.
Mr Hume, as the shareholder of the company, applied for orders pursuant to s 482 of the Act for the termination of the winding up of the company. Mr Hume relied on his affidavit sworn on 25 May 2022 which contained extensive attachments that showed the first and second respondents' claim against the company for professional negligence was strongly disputed. Mr Hume claimed that the company was appointed by the first respondent to prepare development approval documentation for the Shepperton Road Project but there were no further instructions given to the company in March 2015 to proceed with building plans and the first respondent instead appointed another architect, Mr Anthony, for the purpose of obtaining the building permit for the Shepperton Road Project. These allegations by Mr Hume are the subject of the proceedings (CIV 1109 of 2019) brought by the first and second respondents for negligence against the company and Mr Anthony (the negligence proceedings).
The termination application was opposed by the first and second respondents who appeared by counsel at the hearing of that application on 5 August 2022. The liquidators had provided to the court a report on the status of the liquidation, including that the company had no funds to pay the liquidators' fees. The primary judge concluded that the company was wound up in circumstances where it should not have been, that was a relevant discretionary factor in favour of terminating the winding up, and the winding up should be stayed pending further order after the parties had made further submissions on who should be liable for the liquidators' remuneration and expenses: Hume v Carey [2022] WASC 256 at [35] ‑ [38] (the first decision).
In accordance with the directions made on the first decision, the liquidators filed another report on their costs and expenses and the parties filed further submissions as to the payment of the costs of the liquidators and the costs of the application to terminate the liquidation. There was a further hearing of the application on 4 October 2022 before the final hearing before the primary judge on 1 November 2022 that resulted in the orders the subject of the appeal.
The first decision
There was no appeal on the merits in respect of the winding up decision. For the purpose of the application to terminate the winding up, the primary judge undertook an analysis of the application that resulted in the winding up decision. The primary judge noted (at [17] ‑ [19] of the first decision) that the limitations on a contingent or prospective creditor bringing an application to wind up a company set out in s 462(4) of the Act were not expressly considered in the winding up decision. The primary judge noted (at [25] of the first decision) that the first and second respondents had commenced the negligence proceedings against the company and the claim was disputed. Consistent with the authorities set out at [23] ‑ [24] of the first decision, the primary judge concluded (at [26] of the reasons) that the first and second respondents were neither a creditor, prospective creditor or contingent creditor of the company and, on that basis, did not have standing to bring the application to wind up the company and the order to wind up the company should not have been made.
The primary judge noted (at [29] of the first decision) that there had been two material changes since the winding up decision. The first was that it was apparent from the report of the liquidators that a deed had been entered into between the liquidators and the first and second respondents in respect of the professional indemnity insurance policy and that the first and second respondents had joined the professional indemnity insurers of the company as a defendant in the negligence proceedings in order to pursue a claim directly against the insurers.
The reasons
The primary judge noted (at [5] of the reasons) that the liquidators agreed to limit their claim for remuneration to $31,800.50 (plus GST) which was an amount that had previously been approved by creditors. The primary judge also noted (at [8] of the reasons) that the deed of assignment of rights under the insurance policy that had been entered into between the liquidators and the first and second respondents on 22 September 2021 provided for the reasonable costs incurred by the liquidators in dealing with the assignment and the policy to be paid by the first and second respondents within seven days of the assignee obtaining payment of any benefit under the policy.
The primary judge noted (at [10] of the reasons) s 60‑5 of the Insolvency Practice Schedule (Corporations) (Cth) to the effect that an external administrator is entitled to receive remuneration for the necessary work that was properly performed by them in relation to the external administration of a company and observed that was a statutory right not dependent on the continued existence of an order appointing them as liquidators. The primary judge also observed (at [11] of the reasons) that under s 556(1)(a) of the Act, a liquidator has a statutory right to be paid their costs, charges, and expenses in priority to other claims in the liquidation.
The primary judge estimated that the amount that would be recoverable by the liquidators from the first and second respondents under clause 6 of the deed would be in the order of $12,000. That is why the primary judge selected the sum of $20,000 (excluding GST) to be paid or secured within a reasonable time by Mr Hume as a condition for the order to terminate the winding up. The primary judge explained (at [13] ‑ [14] of the reasons) that the liquidators of the company were statutorily entitled to remuneration for the work that was recoverable from the assets of the company and that, if Mr Hume wished to have the winding up of the company terminated, it was necessary for him to pay or secure the liquidators' fees.
Grounds of appeal
Mr Hume identified that he was appealing against paragraphs [3], [7], [8] and [14] of the reasons. Paragraph [7] of the reasons merely recites the arguments that the first and second respondents put before the primary judge. Paragraph [8] of the reasons sets out the content of the deed between the liquidators and the first and second respondents and merely recites factual matters.
Mr Hume asserts that his affidavit filed on 25 May 2022 sets out 'irrefutable evidence' of what he alleges is 'the respondents' fraudulent claim to be a creditor of [the company]'. The primary judge was entitled to rely on the company's defence of the negligence proceedings to conclude that the winding up order should never have been made. It was not necessary for the primary judge to decide whether the company would successfully defend the negligence proceedings and that was not an issue determined by the primary judge. To the extent that Mr Hume's appeal grounds are based on his 'irrefutable evidence', they are not relevant to this appeal.
The grounds of appeal that raise issues that are capable of being determined on the appeal can be summarised as:
1.The primary judge's order that made Mr Hume liable to pay $22,000 of the liquidators' fees was inconsistent with the finding in the first decision (at [26]) that the first and second respondents did not have standing to bring the application to wind up the company and the order to wind up the company should not have been made.
2.The primary judge erred in concluding (at [14] of the reasons) that if Mr Hume wished to have the winding up of the company terminated in circumstances where the liquidators' remuneration was recoverable from the assets of the company, it was necessary for Mr Hume to pay or secure the liquidators' fees to the sum of $22,000.
Does the appellant show error by the primary judge?
The problem for Mr Hume is that his application before the primary judge was not an appeal against the winding up decision but a subsequent application to terminate the winding up. A termination is prospective in effect and not retrospective. The liquidators had done their work pursuant to a court ordered appointment and were entitled to payment. There were no assets in the company from which they could be paid. As it was Mr Hume who wanted the order to terminate the winding up, it was not unreasonable for the primary judge to order that Mr Hume pay the liquidators' fees fixed at $22,000 that were not otherwise recoverable from the company. Even though it was part of the primary judge's reasoning process that the winding up order should never have been made, the primary judge had to deal with the position of the company at the time of determining the termination application.
To succeed on the appeal, Mr Hume must show error in the primary judge's exercise of discretion. It was an appropriate exercise of the discretion not to make the termination order without making provision for the payment of the liquidators' fees. In those circumstances, it was also not unreasonable for the primary judge to make the termination dependent on the payment of the liquidators' fees fixed in the sum of $22,000 by Mr Hume as the party who sought the termination order.
This disposes of both reformulated grounds of appeal which I have set out.
Disposition of the appeal
The order which should be made is: Appeal dismissed.
SEAWARD J:
I agree with Mullins AJA.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SG
Research Associate to the Honourable President Buss
22 SEPTEMBER 2023
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