In the matter of LML Repairs Pty Limited (No 2)

[2020] NSWSC 310

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of LML Repairs Pty Limited (No 2) [2020] NSWSC 310
Hearing dates:	26 March 2020
Date of orders:	26 March 2020
Decision date:	26 March 2020
Jurisdiction:	Equity - Corporations List
Before:	Rees J
Decision:	Directions made to permit defendant further time to serve solvency report
Catchwords:	Misleading affidavits by solicitor – unhappy judge – lengthy adjournment sought by reason of COVID-19 pandemic – looking past the solicitor to the client and giving one more chance
Category:	Procedural and other rulings
Parties:	Andrew Wray and Darryl Smith as trustees for Vac Unit Trust (Plaintiffs) LML Repairs Pty Limited (Defendant)
Representation:	Counsel: Mr J Pokoney (Solicitor) (Plaintiffs) Mr A Hopkins (Defendant)   Solicitors: Nikolovski Lawyers (Plaintiffs) Celtic Legal (Defendant)
File Number(s):	2019/320440

EX TEMPORE Judgment

1. HER HONOUR: This matter is listed today for further directions following the vacation of the hearing on 18 March 2020 to enable the defendant to file a solvency report. The matter had been listed for hearing of the plaintiffs’ application to appoint a liquidator to the defendant by reason of its insolvency, such insolvency being presumed from the defendant’s failure to comply with a statutory demand served some time ago, on 8 July 2019.

2. On 18 March 2020, I made orders for the defendant to the pay the plaintiffs' costs thrown away by reason of the vacation of the hearing in an amount which was agreed between the parties and within 7 days. Those costs have been paid and the question now is how to take the matter forward promptly to determine this aged application to appoint a liquidator to the defendant.

3. The defendant’s solicitor, Brendan Long, has today sought a substantial adjournment until 15 June 2020, on the basis that he has yet to commence work on a solvency report. This is a troubling revelation in circumstances where directions were first made on 5 February 2020 for the defendant to file a solvency report by 28 February 2020. No report was filed. On 2 March 2020, Mr Long swore an affidavit in support of an extension of time in which to serve a solvency report. Mr Long deposed:

I am today advised by Vincents Accountants, that they require a further period of 2 weeks to provide the Court with its expert report on the Respondent.

Unfortunately, there was a delay by our firm in providing instructions to the expert which has resulted in a delay in the expert report being provided to the Court.

The inference to be drawn from Mr Long's affidavit was that the defendant had retained Vincents Accountants to prepare a report and they had begun that task, albeit more time was needed.

4. Gleeson JA acceded to Mr Long's request for further time and, on 2 March 2020, directed that any solvency report be filed by 13 March 2020. It was not so filed. On 16 March 2020, Gleeson JA made a guillotine order that neither party may rely upon any evidence not already served except with leave of the Court and listed the matter for hearing before me on 18 March 2020. On that occasion, Mr Long swore a further affidavit which was read in support of the defendant’s application to vacate the hearing. Mr Long deposed that he had obtained various financial records from the defendant’s accountant and director and further:

I have been advised by Louisa Sijabat of Vincents Accountants, that a solvency report will take 2 weeks to complete and provide to the Court.

5. Today, however, Mr Long has sworn a further affidavit stating:

I have previously confirmed that a solvency report will take 2 weeks to complete and provide to the Court.

As a 2 week adjournment was not obtained at that stage, the solvency report has not been commenced.

…

A 4 week timeframe would allow me time to instruct on the solvency report and to finalise the Defendant’s evidence.

6. This is very troubling information. The clear impression gained from reading Mr Long’s earlier affidavits is that the defendant had retained an accountant to prepare an expert report and the task was underway, albeit delayed by the defendant’s failure to provide instructions and the necessary documents. Read more closely, Mr Long’s affidavits are also consistent with the delay in question being a delay in instructing the accountants to prepare the report at all. No one likes to be misled, and I am no exception. I now doubt whether the defendant has retained a solvency expert at all and suspect that it has not.

7. Mr Long calls in aid of a further lengthy adjournment the recent COVID-19 pandemic and the fact that Queensland has closed its borders. These are, of course, very unusual circumstances in which the administration of justice continues to operate.

8. Given that the defendant has paid the costs thrown away which I ordered on the last occasion and the current pandemic, I will look beyond Mr Long’s affidavits towards his client and give the defendant a further period slightly in excess of two weeks to complete the solvency report which it was first ordered on 5 February 2020 to prepare. The preparation of a solvency report by an expert accountant is a task which involves reviewing accounting records which I apprehend does not require a large social gathering and, likely, can be done by reviewing records made available electronically or by emailing scanned images of relevant hard copy documents.

9. To be clear, I am not minded to grant any further adjournments in this matter. Should, perchance, the defendant seek a further adjournment, it should be supported by an affidavit from the expert accountant or a director of the defendant company.

10. For these reasons I make the following orders:

1. Pursuant to section 459R(2) of the Corporations Act 2001 (Cth) the time in which the plaintiff's application to wind up the defendant is to be determined, is extended up to and including 17 April 2020.

2. Defendant to file and serve any evidence upon which it relies in opposition to the orders sought (including any expert report as to solvency) by 4.00 pm on 14 April 2020.

3. Plaintiff to file and serve any evidence in reply by 5.00 pm on 16 April 2020.

4. List the matter for final hearing before Rees J on 17 April 2020 at 11.00 am by telephone link.

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Decision last updated: 01 April 2020