Re Kallawar Holdings Pty Ltd (No. 2)

[2010] VSC 362

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST E
No. 10812 of 2009

IN THE MATTER of KALLAWAR HOLDINGS PTY LTD (ACN 103 071 549)

KALLAWAR HOLDINGS PTY LTD (ACN 103 071 549)	Plaintiff
v
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)	Defendant

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	20 July 2010
DATE OF RULING:	20 July 2010 (delivered ex tempore, revised 19 August 2010)
CASE MAY BE CITED AS:	Re Kallawar Holdings Pty Ltd (No. 2)
MEDIUM NEUTRAL CITATION:	[2010] VSC 362

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CORPORATIONS – Statutory Demand – Application for order setting aside statutory demand dismissed – Application for extension of time for compliance with demand – Where appeal proposed – Relevant considerations for extension of time.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P.G. Cawthorn SC	B2B Lawyers
For the Defendant	Dr A.P. Trichardt	Commonwealth Bank of Australia Legal Services Victoria

HER HONOUR:

1. The plaintiff made application under s 459F(2) of the Corporations Act 2001 (Cth) for an order extending the period for compliance of a statutory demand. The extension for compliance is sought until 10 September 2010, being the return date of the plaintiff's application for leave to appeal against the decision of this Court handed down on 24 June 2010 in which the Court dismissed an appeal from a decision of an Associate Justice refusing to set aside the statutory demand. The time for compliance with the demand will expire on 23 July 2010 unless extended. Ordinarily, an application for extension of time to enable the plaintiff to seek leave to appeal would be heard by the Court of Appeal. However, the plaintiff has not been able to secure a hearing date before the Court of Appeal before 10 September 2010. Accordingly, the application has proceeded before me.

1. There are three matters that are to be addressed on the application.  First, the question of the prospects of success in the application for leave to appeal, and whether an arguable case has been demonstrated.  Secondly, whether the appeal will be rendered nugatory unless the extension is granted and thirdly, the prejudice that the respective parties will suffer in the event that the time for compliance is or is not extended. 

1. As to the first matter, it was submitted that an arguable case can be demonstrated that the Court impermissibly weighed into the merits of the dispute in determining whether a genuine dispute exists.  That proposition was contested by counsel for the defendant who sought to uphold the decision.  I am satisfied that the application for leave to appeal is not totally without merit.  That is to say, without expressing any view on the prospects of the application itself, I am satisfied that a substantial ground has been advanced for leave to appeal that is not spurious or one that is bound to fail.

1. As to the second matter, it was submitted by counsel for the plaintiff that any appeal would be rendered nugatory unless the time for compliance with the statutory demand is extended.  I was referred to a number of authorities in which Courts have considered this question.  In light of those authorities, I am satisfied that the plaintiff has established that the appeal would be rendered nugatory without an extension of time for compliance.  In so stating I have taken into consideration the decision of the High Court in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd,[1] in particular paragraph 26.  I do not read paragraph 26 as the Court expressing its view, albeit obiter, that an order extending the time for compliance, is not needed in order to preserve the subject matter of the appeal.

   [1](2008) 232 CLR 314.

1. In Aussie Vic Plant Hire the question was whether the Court had the power to extend the time for compliance after the time had expired.  The High Court held that the Court does not have the power to extend the time for compliance after its expiry. 

1. It was in that context that the High Court observed:

[C]ontrary to much of the argument advanced in this case on the appellant's behalf, denying the power to extend time after its expiry does not cut down utility or impede the exercise, of rights of appeal.  The principles governing orders preserving the utility of the exercise of rights are well established.  If there is a right of appeal and those principles are engaged orders will be made to preserve the subject matter of the appeal.  Thus, if as in the present case, the appellant had an appeal as of right from the orders of the Master who heard the matter at first instance, it was open to the appellant to seek orders preserving utility of that right.[2] (references omitted) 

The ability of a party to seek an order preserving the utility of the right, is one which exists during the period of compliance by making application to the Court for an extension, as is sought here.  The consequence of a failure to comply within the relevant time is a presumption of insolvency, which may found an application to wind up the company. 

[2]Ibid [26].

1. Recently, in NA Investments Holdings Pty Ltd v Perpetual Nominees Limited,[3] Justice Barrett heard an application for leave to extend time for compliance to enable the plaintiff to seek leave to appeal against a decision in which an application to set aside a statutory demand was dismissed.  Amongst other things, His Honour concluded that the appeal would be rendered nugatory unless the time for compliance with the statutory demand was extended.  In so finding, His Honour referred to Aussie Vic Plant Hire Pty Ltdv Esanda Finance Corporation Ltd.[4]  I am not persuaded that I should not follow Justice Barrett’s conclusion.

   [3][2010] NSWSC 373.

   [4](2008) 232 CLR 314.

1. As to the third matter, counsel for the defendant submitted that an extension of time for compliance with the demand will have the effect of postponing the relation-back day, in the event that the appeal is unsuccessful and an application for winding up is made.  That may be accepted.  However, no specific prejudice was identified by the defendant other than a later relation – back date, if it becomes relevant.  Equally so, it was submitted for the defendant, that the plaintiff has not demonstrated specific prejudice, other than by virtue of the loss of the protection which the statutory scheme affords the plaintiff, with respect to compliance with a demand that still has effect. 

1. The proposed extension of time is not contemplated to be for a lengthy period but, rather, to the first available date on which the Court of Appeal may hear the application for leave to appeal.  That is some seven weeks hence.  The plaintiff has offered undertakings to the Court in the following terms:

(a) that it will not during the period for which time for compliance with the demand is extended dispose of or deal with its assets other than in the ordinary course of its business, charge any of its assets or provide security on behalf of any person or entity,

(b) that it will prosecute its application for leave to appeal with diligence and expedition. 

1. In my view those undertakings are appropriate in the circumstances and push the balance in favour of extending the time for compliance.

1. Accordingly upon the plaintiff, through its counsel, giving to the Court the undertakings in the terms in which I have identified, I will make an order pursuant to s 459(F)(2)(a) of the Corporations Act 2001 (Cth) that the time for compliance with the statutory demand be extended to the 10 September 2010.

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