In the matter of Gym and Tonic Healthclubs Pty Limited (ACN 135011853) (No 2)

[2017] NSWSC 50

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	In the matter of Gym & Tonic Healthclubs Pty Limited (ACN 135011853) (No 2) [2017] NSWSC 50
Hearing dates:	6 February 2017
Decision date:	06 February 2017
Before:	Barrett AJA
Decision:	1.   Order that Gym & Tonic Health Clubs Pty Limited ACN 135 011 853 be wound up in insolvency. 2.   Order that Shumit Banerjee and Ian James Purchas of SV Partners Insolvency (NSW) Pty Ltd, Level 7, 151 Castlereagh Street Sydney be appointed joint and several liquidators of Gym & Tonic Healthclubs Pty Limited. 3.   Order that Gym & Tonic Healthclubs Pty Limited pay the costs of GoGetta Equipment Funding Pty Limited of the interlocutory process for substitution and the winding up application determined by me today.
Catchwords:	CORPORATIONS – winding up in insolvency – no matter of principle
Legislation Cited:	Corporations Act 2001 (Cth)
Category:	Principal judgment
Parties:	GoGetta Equipment Funding Pty Ltd (Applicant) Gym & Tonic Healthclubs Pty Ltd (Defendant/Respondent 1) Jacob Robert Henley (Interested Party) Hong Jie Huang (Interested Party 1 in 2016/263106)
Representation:	Counsel: GoGetta – Mr PR Gaffney Gym & Tonic – No appearance Hong Jie Huang (Interested Party) – Mr MJ Dawson   Solicitors: GoGetta – RBG Lawyers Jacob Robert Henley (Interested Party) – Mr GW Prichard of Prichard Lawyers Gym & Tonic (2016/361435) – Ms Hillman Hong Jie Huang (Interested Party) – Moissin Lawyers
File Number(s):	2016/263106

Judgment – Winding Up Application

1. BARRETT AJA: After making earlier today an order substituting GoGetta Equipment Funding Pty Limited (“GoGetta”) as the applicant in the s 459P winding up proceedings brought against Gym & Tonic Healthclubs Pty Ltd (“Gym & Tonic”), I proceeded to hear the winding up application. I did so in circumstances where there was no appearance by or on behalf of the defendant company. I was informed from the bar table that there is a substantial dispute about the internal affairs of Gym & Tonic and the identity of its directors and shareholders or persons otherwise entitled to represent it. The protagonists are said to be Mr Henley and Mr Huang.

2. Lawyers representing each of these persons were in court. Mr Pritchard, the solicitor for Mr Henley, had no instructions in the particular matter. Mr Dawson of counsel appeared for Mr Huang. He submitted that a winding up order should be made. I should add that Mr Huang has filed a notice of appearance in which he says that he is a creditor and supports the winding up application.

3. Having decided to proceed with the hearing in the absence of any form representation of the defendant company, I received evidence tendered by GoGetta alone. A measure of unease about proceeding in a way that did not include an opportunity for the defendant company to present evidence of insolvency was resolved when it was pointed out to me that directions had been made on 4 October, 31 October and 14 November 2016 regarding filing and service of grounds of defence and evidence in opposition to the making of a winding up order. On the last of those occasions, Registrar Walton noted that Gym & Tonic had failed to serve any evidence by 11 November 2016 as required by earlier directions and that it was not entitled to put on any evidence. Gym & Tonic has not sought to bring forward any such evidence either within the directed timetable or at all.

4. It may be noted that the directions on evidence were made before GoGetta had filed its application to be substituted as the applicant for the winding up order and that the settlement with the original plaintiff, Xton, may have played a part in Gym & Tonic’s failure to put on any evidence of solvency. The fact remains, however, that Gym & Tonic was under pressure from GoGetta to pay at that point and that GoGetta had served a statutory demand of its own by means of a letter posted on 4 November 2016. The possibility that the winding up application initiated by Xton might survive settlement between Xton and Gym & Tonic and be pursued by GoGetta was, therefore, a very real possibility at the time at which Gym & Tonic failed to come forward with evidence.

5. In any event, the fact that a company is in some state of internal paralysis or deadlock cannot of itself constitute grounds for deferring or declining to hear an application for it to be wound up in insolvency. As counsel for GoGetta pointed out, any of the insiders with standing under s 236 of the Corporations Act 2001 (Cth) could have sought leave under s 237 to act for Gym & Tonic in defending the winding up application. None of them did so and there was no suggestion that any intended doing so.

6. The winding up application was initiated by Xton following Gym & Tonic’s failure to comply with a statutory demand served by Xton. The position, in a nutshell, is that there exists a statutory presumption of insolvency by reason of the failure of Gym & Tonic to comply with the statutory demand served by Xton, that a creditor to which a substantial sum is due and payable has been substituted as the applicant for winding up, that that creditor presses for a winding up order, that the company has had ample opportunity to marshal a case in favour of the proposition that it is solvent, that the company has not done so, that the company seems to be incapable of functioning in a way that would enable it to mount any defence and that no one with a relevant interest in the company has sought to overcome through ss 236 and 237 the internal paralysis that may prevent it from doing so. It was in those circumstances that I deemed it appropriate to hear the winding up application.

7. On that hearing, counsel for GoGetta placed before the court through the affidavits of David Hanley of 31 August 2016, Clive Waters of the same date and Patrick Spelman of 2 and 3 February 2017, evidence of all matters to be proved in support of the winding up application. These included service of and non-compliance with the Xton statutory demand, service of the Xton originating process (in relation to which, in any event, Gym & Tonic filed a notice of appearance) and satisfaction of all lodgement, notification and advertising requirements. All matters necessary to activate the discretion to making a winding up order have been proved and there is no reason why the court should not proceed to make an order.

8. The orders of the court are:

9. 1.   Order that Gym & Tonic Health Clubs Pty Limited ACN 135 011 853 be wound up in insolvency.

10. 2.   Order that Shumit Banerjee and Ian James Purchas of SV Partners Insolvency (NSW) Pty Ltd, Level 7, 151 Castlereagh Street Sydney be appointed joint and several liquidators of Gym & Tonic Healthclubs Pty Limited.

11. 3.   Order that Gym & Tonic Healthclubs Pty Limited pay the costs of GoGetta Equipment Funding Pty Limited of the interlocutory process for substitution and the winding up application determined by me today.

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Amendments

10 February 2017 - Representation fields - "Pritchard" misspelt; and, incorrect law firm amended. Fields changed to read: "Mr GW Prichard of Prichard Lawyers"

Decision last updated: 10 February 2017