Paspalis Hotel Investments Pty Ltd v Ambir Pty Ltd
[2003] NTSC 68
•12 June 2003
Paspalis Hotel Investments Pty Ltd v Ambir Pty Ltd [2003] NTSC 68
PARTIES:PASPALIS HOTEL INVESTMENTS PTY LTD
v
AMBIR PTY LTD
TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION: SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:50 of 2003
DELIVERED: 12 June 2003
HEARING DATES: 27 & 28 May 2003
JUDGMENT OF: MARTIN CJ
CATCHWORDS:
CORPORATIONS
Winding up – insolvency – bona fide dispute as to debt – discretion to make winding up order.
Corporations Act, s 459P(1), s 459A
In re K L Tractors Limited (1954) VLR 505, considered.
Thiess Peabody Mitsui Coal Pty Ltd v A E Goodwin Ltd (1966) Qd R 1; In re Q B S Pty Ltd (1967) Qd R 218; Re Glenbawn Park Pty Ltd (1977) 2 ACLR 288, referred.
ACP Syme Magazines Pty Limited v TRI Automotive Components Pty Limited (1997) 74 FCR 372, applied.REPRESENTATION:
Counsel:
Appellant:J Reeves QC
Respondent: R Bruxner
Solicitors:
Appellant:Cridlands
Respondent: Hunt & Hunt
Judgment category classification: B
Judgment ID Number: mar0329
Number of pages: 9
mar0329
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINPaspalis Hotel Investments Pty Ltd v Ambir Pty Ltd [2003] NTSC 68
No. 50 of 2003
BETWEEN:
PASPALIS HOTEL INVESTMENTS PTY LTD
Plaintiff
AND:
AMBIR PTY LTD
Defendant
CORAM: MARTIN CJ
REASONS FOR JUDGMENT
(Delivered 12 June 2003)
On 27 May last I ordered that the defendant company be wound up pursuant to the Corporations Act upon an application made by the plaintiff. These are my reasons for doing so.
That order brought to an end Ambir’s various attempts to resist the order being made which took different directions and assumed different forms in the course of these and associated proceedings. In the end, however, it was clear to me that Ambir was insolvent and the order was made on that ground, as I announced at the time.
It is necessary to provide some background to the making of the order given Ambir’s strenuous resistance.
The parties first came to court in relation to a wide ranging dispute arising from a building contract between Paspalis as principal and Ambir as builder. The pleadings disclose that the contract came to an end before completion in circumstances which are disputed. Ambir instituted the action, No 11 of 2003, raising various claims against Paspalis. Paspalis pleaded defences and counterclaimed upon various counts. Both claim and counterclaim were put at many hundreds of thousands of dollars plus unspecified damages.
In those proceedings Ambir sought orders enforcing liens under the Workmen’s Liens Act which it had registered on the estate or interests of Paspalis in various parcels of land in Darwin. Ambir was unsuccessful as to most of those claims for reasons contained in my judgment of 18 March 2003. In general terms, most of the liens as registered were technically deficient. One survived.
Later, in the course of those proceedings, Paspalis applied for security for its costs. In the course of that application Ambir relied, in part, upon the evidence of Lioubov Tchouiko, its sole director, a citizen of Russia, who said she resides in Australia for about nine months of the year and in Russia for the remainder. There were but two issued shares in the company, she held one, the other was held by a person who was said to have been the Secretary to the Company, but who it was plain had had nothing to do with it for some months prior to these actions commencing.
Ms Tchouiko had advanced $20,000 to Ambir, but received nothing from it and was dependent for support upon her de facto husband, Brian Reilly. The general thrust of her evidence was that Ambir’s only assets comprised equipment and tools which she valued at $30,000 at the most, and its liabilities far exceeded the value of those assets. There was in addition to the debt due to her, a loan from a bank of some $16,000. She acknowledged that there were debts due to a number of subcontractors amounting to approximately $48,000. Although she was unsure of it, there was undoubted evidence that Paspalis lent Ambir $110,000 at least, in connection with the building contract and that that was unpaid. Ms Tchouiko acknowledged that the company could not pay its debts and that it had no money coming in by way of income from contracts which would meet them. It was plain on her evidence that Ambir was dependent upon recovery of the monies it claimed in the action against Paspalis to pay its creditors. None of those standing behind the company had any means of providing security for Paspalis’ costs.
The evidence in those proceedings was taken on 20 March 2003 and it was plain at that time that Ambir was insolvent, it relied upon that fact.
On 21 March 2003 Ambir instituted action against Paspalis and fourteen other named defendants in action No 48 of 2003. The writ asserted that the second to fourteenth defendants had served upon it statutory demands pursuant to the Corporations Act in respect of debts claimed to be owing by Ambir to them, amongst them, Perfect Touch Painting Services Pty Ltd in the sum of $10,950. Allegations were also put to found an alleged cause of action based upon Paspalis’ unlawful maintenance of the other defendants and for which it claimed damages. It also sought interlocutory relief by way of an injunction restraining Paspalis from in any way maintaining any of the other defendants in or in connection with the taking of actions calculated to facilitate the obtaining of a winding up order against the plaintiff. An interim injunction in those terms was made late on 25 March 2003.
At midnight on that date the period for payment under the statutory demand made by Perfect Touch Painting Pty Ltd expired and the court, in those circumstances, must presume that the company is insolvent (s 459C). (I had earlier refused Ambir’s application that the statutory demand be set aside). As of 26 March it had been clearly established upon the evidence in the case and concessions by counsel for Ambir (rightly made) that it was insolvent. All of that was directed to the exercise of the court’s discretion in relation to Paspalis’ application for security for costs.
Ambir’s apprehension that it was threatened by a winding up application was realised on the morning of 27 March when Paspalis filed its application. The ground originally advanced was the insolvency of Ambir arising from its failure to pay the demand of Perfect Touch Painting Pty Limited, and the evidence of Ms Tchouiko. Consequently, the application by Paspalis for security for costs was adjourned. It was then disclosed that Ambir had tried to pay the debt claimed by Perfect Touch Paining Pty Ltd at the last opportunity if the statutory presumption as to insolvency was to be avoided. The tender was unsuccessful, and the amount claimed was not paid into court (Australian Mid-Eastern Club Limited v Yassim (1989) 1 ASCR 399).
Since Paspalis was the party applying for the winding up order, it could not be suggested that it was being maintained, unlawfully or otherwise. The relief which Ambir sought against Paspalis in the maintenance proceedings fell away and the interim injunction was discharged. The proceedings, however, remain on foot.
In that situation Ambir foreshadowed that it would oppose the winding up application on the grounds that Paspalis had no standing to make it, and that it may seek to rely upon the material available in the maintenance proceedings in opposition to the application on other grounds.
When the application for winding up came on for hearing, the originating process was amended to plead the insolvency and to claim that Paspalis was a creditor. The reference to the failure of Ambir to comply with the statutory demand of Perfect Touch Painting Pty Ltd was deleted. The ground of opposition advanced was, as foreshadowed, that Paspalis lacked standing under s 459P of the Corporations Act to seek the order and that if that was successful, then the court would not exercise any discretion it may have to make the order upon the admitted insolvency.
The Corporations Act provides that a creditor may apply to the court for a company to be wound up in insolvency (s 459P(1)) and upon such an application, the court may order that an insolvent company be wound up in insolvency (s 459A).
There is no statutory definition of “insolvency”, but it is not a technical word. It has a well accepted meaning, that is, the inability to pay debts as they become due. That is not in dispute.
The question of whether the court may make a winding up order upon application of a creditor whose claim is disputed, in the circumstances of this case, depends upon the answer to two questions. The first is whether the claim by the creditor is bona fide disputed so that the court can see that it is based on substantial grounds. Second, assuming that the debtor can make out such a dispute, does the court retain a discretion to make a winding up order when insolvency is proved?
There is no dispute concerning that part of the Paspalis claim for $110,000 loaned by it to Ambir. There is evidence to support the making of the loan and the failure of Ambir to repay it. Ambir says, however, that there is a dispute about the Paspalis claim in regard to issues arising from the building contract such that Paspalis is not a creditor. The amount Ambir has claimed in the action between it and Paspalis in regard to the building contract is greater than $110,000, and it denies liability to Paspalis on its counterclaim. In that regard, Ambir directs attention to the pleadings in that action. Apart from an affidavit by an employee, Mr Bamber, sworn on dubious authority on its behalf, it produces no evidence to support its case against Paspalis as pleaded nor in denial of the Paspalis counterclaim. Mr Bamber, who says he was involved as the contract manager on behalf of Ambir, goes no further than to refer to Ambir’s pleadings and to say that he verifies and adopts their contents. His source of knowledge as to all the matters raised in the pleadings is not disclosed. No verified statements were put forward going to the issues raised on the pleadings. Neither the contract or contracts or any other relevant documentary evidence was produced.
In my opinion a simple purported verification of a claim by reference to pleadings does not amount to evidence of a dispute on substantial grounds. Although Mr Bamber has gone so far as to verify and adopt the assertions made in the statement of claim relied upon by Ambir, he does not venture upon any denial of the counterclaim mounted by Paspalis. To accept that there is a requisite dispute upon nothing more than a pleading, complex and in detail as it may be, is to invite the defeat of a creditor’s claim by a debtor which puts up a superficially attractive defence or counterclaim.
As O’Bryan J pointed out in In re K L Tractors Limited (1954) VLR 505, with reference to authority, it is not sufficient for Ambir to say that it disputes the claim. It must bring forward a prima facie case which satisfies the court that there is something which ought to be tried. Reference is made to the court going into the evidence before it to consider whether or not there was a bona fide dispute (p 510) and at p 511 his Honour said that the company in that case had not brought forward material to satisfy him that the counterclaim for substantial damages ought to be tried:
“I think it is significant that the company has put forward the minimum of evidence in support of its claim and has not put forward anyone who is conversant with the matter and whose testimony might be tested before me.”
(The matter is discussed in McPherson, The Law of Company Liquidation, 4th ed, commencing at p 99). See also Thiess Peabody Mitsui Coal Pty Ltd v A E Goodwin Ltd (1966) Qd R 1, particularly the reference to the evidence available as to the dispute at p 8 and the positive sworn statement before the court as to the ability of the debtor to pay its debts; see also the discussion on the subject by Gibbs J in In re Q B S Pty Ltd (1967) Qd R 218 at 225 and Re Glenbawn Park Pty Ltd (1977) 2 ACLR 288 commencing at p 292, where Yeldham J said that the critical question was whether or not the debtor had adduced evidence to satisfy the court that there was a bona fide dispute as to its indebtedness based upon reasonable grounds.)
Ambir has failed to satisfy me as to the existence of a bona fide dispute with Paspalis, not only as to the $110,000 loan, which is incontrovertible, but as to the remainder of the Paspalis claim as well.
In any event, even if I was satisfied that there was such a dispute, that is not determinative of the matter. In my opinion there is still a discretion in the court to order that a company be wound up where the evidence establishes that it is insolvent. That was the conclusion reached by Spender J in ACP Syme Magazines Pty Ltd v TRI Automotive Components Pty Limited (1997) 74 FCR 372. His Honour there reviewed the various authorities on the subject, some of which have been referred to by me. With respect, I agree with his Honour’s conclusions and, if necessary, would apply them to the circumstances of this case. The public interest demands that Ambir not be permitted to continue to trade. The liquidators have power to pursue the claim against Paspalis. Whether they decide to do so, is a matter to be determined by them. The claims of Ambir against Paspalis are not irrevocably lost by the winding up order.
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