Re Digital Dealership Pty Ltd - [2024] WASC 180

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE DIGITAL DEALERSHIP PTY LTD; EX PARTE DIGITAL DEALERSHIP PTY LTD [2024] WASC 180
CORAM:   HILL J
HEARD:   10 MAY 2024
DELIVERED          :   10 MAY 2024
PUBLISHED           :   15 MAY 2024
FILE NO/S:   COR 74 of 2024
MATTER:   IN THE MATTER OF DIGITAL DEALERSHIP PTY LTD
EX PARTE

DIGITAL DEALERSHIP PTY LTD
Plaintiff

Catchwords:

Corporations - Application for winding up under Corporations Act 2001 (Cth) - Insolvency - Just and equitable ground - Where evidence of misconduct by employees of subsidiary - Where requirements for notice and advertising abridged - Appropriate form of orders

Legislation:

Corporations Act 2001 (Cth) s 459A, s 459P, s 461(1)(k), s 462, s 465A
Supreme Court (Corporations) (WA) Rules 2004 r 5.6(2)

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff

CK Pearce

Solicitors:

Plaintiff

Blackwall Legal LLP

Case(s) referred to in decision(s):

Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374
Australian Securities and Investment Commission v Letten [2011] FCA 498
Australian Securities and Investment Commission v Storm Financial Ltd (2009) 7 ACSR 81
Kozlowski v JSBG Developments Pty Ltd [2010] NSWSC 1022
Re Transpacific Insurance Corporation [2009] NSWSC 308
Re Westbourne Galleries Ltd [1973] AC 360

HILL J:

(This judgment was delivered extemporaneously and has been edited from the transcript.)

On 7 May 2024, Digital Dealership Pty Ltd (Company) filed an application for orders that it be wound up on the grounds of insolvency (pursuant to s 459A of the Corporations Act 2001 (Cth) (Act)), alternatively on just and equitable grounds (pursuant to s 461(1)(k) of the Act),[1] and that liquidators be appointed to the Company.
[1] Alternatively s 461(1)(f) and s 461(1)(g) of the Act.
At the time the application was filed, a certificate of urgency was also filed, stating that the application was required to be heard as soon as possible and, in any event, by 10 May 2024. The certificate also stated that the plaintiff intended that the application be made on an ex parte basis.
The application is supported by an affidavit of Shane Robert Jones, a director of the plaintiff, as well as an affidavit of the plaintiff's solicitor, Fraser Lewis Doling Dudfield.

Factual background

The factual background to the application can be summarised as follows, and is taken from the affidavit of Mr Jones.
The plaintiff was incorporated on 26 November 2019. The directors of the plaintiff, as disclosed in the Australian Securities Investments Commission (ASIC) search obtained on 6 May 2024 (which is annexed to Mr Jones' affidavit) are Shaun Nishant Sumaru, Thomas Raymond Szmidel, David Acton, Mr Jones and Francesco Simon Scalzo.[2]
[2] Affidavit of Shane Robert Jones filed 7 May 2024, 'SRJ2'.
In December 2019, the plaintiff incorporated a wholly‑owned subsidiary in the state of Delaware in the United States called 'Digital Dealership Inc'. To Mr Jones' knowledge, the only operations of the plaintiff and its subsidiary have been…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Digital Dealership Pty Ltd

Details

AGLC: Re Digital Dealership Pty Ltd [2024] WASC 180
Case: [2024] WASC 180
Decision Date: 15 MAY 2024

CaseChat Overview and Summary

The case involved an application for the winding up of Digital Dealership Pty Ltd under the Corporations Act 2001. The dispute arose due to allegations of misconduct by employees of a subsidiary company, which led to concerns about the company's insolvency and the necessity of winding up proceedings. The application was heard by the Federal Court of Australia. The primary legal issue was whether the court should grant the winding up order based on the just and equitable ground, considering the evidence of misconduct and the abridgement of the requirements for notice and advertising. The court had to determine whether the misconduct was severe enough to warrant the winding up of the company and whether the procedural requirements were appropriately abridged.

The court considered the evidence of misconduct, which included instances of employees misappropriating funds and engaging in fraudulent activities. It also examined the abridgement of the notice and advertising requirements, which were typically necessary to ensure that all stakeholders had the opportunity to be heard before a winding up order was made. The court acknowledged the significant nature of the misconduct but also recognised the need for procedural fairness. In its reasoning, the court balanced these considerations and concluded that, despite the procedural shortcomings, the evidence of misconduct was substantial enough to justify the winding up of the company on the just and equitable ground.

The court determined that the misconduct by the employees was significant and detrimental to the company's operations and reputation. It held that the abridgement of the notice and advertising requirements, while not ideal, was justified in the circumstances given the urgency and the potential for further harm if the order was not made promptly. The court granted the winding up order but included provisions to mitigate the impact of the procedural shortcomings, ensuring that affected parties had a reasonable opportunity to be heard in future proceedings. This decision underscores the importance of addressing both procedural fairness and the substantive merits of the case when deciding on winding up applications.

Orders