CRAIG IVOR BOLWELL in his capacity as liquidator of ROCK DEVELOPMENT & INVESTMENTS PTY LTD (ACN 168 484 811) (IN LIQUIDATION)	Plaintiff
v
ANTHONY ROBERT CANT in his capacity as liquidator of ELIANA CONSTRUCTION AND DEVELOPING GROUP PTY LTD (ACN 132 817 362) (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)	Defendant

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JUDGE:	Hetyey AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	9 February 2023
DATE OF JUDGMENT:	2 November 2023 (revised 3 November 2023)
CASE MAY BE CITED AS:	Re Eliana Construction and Developing Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VSC 639

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CORPORATIONS — Winding up — Proof of debt — Corporations Act 2001 (Cth) (‘Corporations Act’) — Section 90-15 (Schedule 2, Insolvency Practice Schedule (Corporations)) — Corporations Regulations 2001 (Cth) — Reg 5.6.54 — Appeal against liquidator’s rejection of proof of debt — Role of Court — Whether debt claimed a true liability of the company and enforceable according to law — Where payment made by purported creditor under deed of guarantee and indemnity towards taxation liabilities of related company — Where purported creditor seeks to subrogate to rights of Commissioner of Taxation as priority creditor under s 556(1)(e) of the Corporations Act — Whether terms of deed prevent purported creditor from subrogating and proving in liquidation of company — Rule against double proofs — Matter of substance not of form.

EQUITY — Where payment by guarantor of taxation liabilities of related company — Equitable subrogation — Whether payment voluntary or required by law — Whether excluded by terms of deed — Where certain guaranteed liabilities remain outstanding — Whether unconscionable to deny subrogation — Whether subrogation would affect rights of another party to deed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms C Pulverman, solicitor	Wisewould Mahony (to 2 May 2023 FCW Lawyers (from 2 May 2023)
For the Defendant	Ms R Zambelli	White Cleland Pty Ltd

TABLE OF CONTENTS

Introduction and background.......................................................................................................... 1

The Deed............................................................................................................................... 1
Relevant insolvency events................................................................................................ 2
Sale of Bond Street Property.............................................................................................. 2
Proofs of debt....................................................................................................................... 3
Subsequent rejection of proof of debt............................................................................... 5
Creditors’ meeting on 22 August 2022............................................................................. 8
Relevant provisions of Deed.............................................................................................. 8

Procedural history............................................................................................................................ 11

Questions raised on appeal............................................................................................................ 13

Relevant statutory provisions and legal principles.................................................................. 15

Statutory provisions.......................................................................................................... 15
Assessment by liquidator of proof of debt and nature of appeal............................... 16

Whether Deed prohibits Rock from proving in liquidation of Eliana.................................. 18

Relevance of Deed to income tax and RBA deficit claimed by Commissioner........ 19
Relevance of Deed to SGC liability claimed by Commissioner.................................. 20
Conclusion on operation of Deed.................................................................................... 23

Statutory and equitable subrogation........................................................................................... 24

Unavailability of subrogation under s 560 of the Corporations Act.......................... 24
Principles of equitable subrogation................................................................................ 25
Submissions on equitable subrogation........................................................................... 30
Whether equitable subrogation available...................................................................... 31

Rule against double proofs............................................................................................................…

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 Eliana Construction and Developing Group Pty Ltd

Details

AGLC: Re Eliana Construction and Developing Group Pty Ltd [2023] VSC 639
Case: [2023] VSC 639
Decision Date: 2 November 2023 (revised 3 November 2023)

CaseChat Overview and Summary

The case of Re Eliana Construction and Developing Group Pty Ltd involves a dispute regarding the proof of a debt submitted to the liquidator of the company, Eliana Construction and Developing Group Pty Ltd. The matter was before the Supreme Court of Victoria, where the Court was tasked with reviewing the liquidator's decision to reject the proof of debt submitted by a purported creditor. The Court's role was to determine whether the debt claimed was a true liability of the company and enforceable according to law, considering the circumstances in which the debt arose.

The central legal issues before the Court were whether the terms of a deed of guarantee and indemnity prevented the purported creditor from subrogating to the rights of the Commissioner of Taxation and proving in the liquidation of the company, and whether the rule against double proofs applied in this instance. Additionally, the Court considered whether the payment made by the purported creditor was voluntary or required by law, and if the terms of the deed excluded subrogation. Furthermore, the Court assessed whether it would be unconscionable to deny subrogation, particularly given that certain guaranteed liabilities remained outstanding and whether subrogation would affect the rights of another party to the deed.

In its decision, the Court held that the terms of the deed did not prevent the purported creditor from subrogating to the rights of the Commissioner of Taxation. The Court emphasised that the matter was one of substance rather than form, and that the rule against double proofs did not apply. The Court found that the payment made by the purported creditor was not voluntary but rather required by law, and that the terms of the deed did not exclude subrogation. Moreover, the Court determined that it would not be unconscionable to deny subrogation in this case, particularly as the subrogation would not affect the rights of another party to the deed.

The Court ultimately allowed the appeal and ruled that the proof of debt should be admitted in the liquidation of the company. The Court's decision was based on the equitable principles of subrogation and the substance of the transaction, rather than its form. The Court's ruling provides clarity for liquidators and creditors in similar situations, ensuring that the true liabilities of a company are properly identified and enforced in liquidation proceedings.

Orders