Re Roberts Construction Group Pty Ltd (No 2)
[2025] VSC 620
•30 September 2025 (revised 6 October 2025)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2024 03505
IN THE MATTER of ROBERTS CONSTRUCTION GROUP PTY LTD (ACN 641 105 580)
BETWEEN:
| DRUMMOND CARPENTRY SERVICES PTY LTD (ACN 618 422 549) AS THE TRUSTEE FOR THE DRUMMOND FAMILY TRUST (ABN 38 730 031 289) | Plaintiff |
| v | |
| ROBERTS CONSTRUCTION GROUP PTY LTD (ACN 641 105 580) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 13 November 2024, 17 June 2025, 15 July 2025, 26 August 2025, 4 September 2025 |
DATE OF JUDGMENT: | 30 September 2025 (revised 6 October 2025) |
CASE MAY BE CITED AS: | Re Roberts Construction Group Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 620 |
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CORPORATIONS – Application for winding up in insolvency – Whether plaintiff had established presumptions of insolvency under s 459C(2)(b) of the Corporations Act 2001 (Cth) arising from alleged wholly unsatisfied warrant of seizure and sale and partly unsatisfied garnishee order – Finding that warrant not returned unsatisfied – Finding that garnishee order was returned partly unsatisfied – Exercise of discretion under s 467(1)(a) of the Corporations Act2001 (Cth) to dismiss the application despite ground having been proved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/substitution applicant | Mr S Rubenstein of counsel on 13 November 2024 Mr A Purton of counsel on 17 June 2025 Mr D Gration of counsel on 15 July 2025, 26 August 2025 and 4 September 2025 | Merton Lawyers |
| For the Defendant | Mr D McAloon of counsel | Eidelweisz Lawyers |
TABLE OF CONTENTS
Introduction
Materials relied upon by the parties
Objection to use of ‘without prejudice’ communication
Legal principles
Drummond’s Submissions
Roberts’ Submissions
Consideration
Background
Two Birds project
Adjudication and judgment debt
Statutory interest on Judgment Debt
Second statutory demand and application to set aside
Garnishee orders
NAB Garnishee Order
Westpac Garnishee Order
The Warrant
Other proceedings at the County Court and VCAT
Standing of Drummond to bring the application
Determination of effect of reinstatement
Drummond’s submissions
Roberts’ submissions
Conclusion on the deregistration and reinstatement issue
Supporting creditors
Beenak
Aspire Stairs
G2K Carpentry
Grounds for the winding up application
The Warrant
Drummond’s Submissions
Roberts’ Submissions
Consideration
The Westpac Garnishee Order
Drummond’s Submissions
Roberts’ Submissions
Consideration
The Court’s discretion under s 467(1)(a)
Drummond’s Submissions
Roberts Submission
Consideration
Conclusion
Annexure A: Field Report on the Warrant
HIS HONOUR:
Introduction
By an originating process filed 8 July 2024, the plaintiff, Drummond Carpentry Services Pty Ltd (‘Drummond’), applies under s 459P of the Corporations Act 2001 (Cth) (‘Act’) for an order that the defendant, Roberts Construction Group Pty Ltd (‘Roberts’), be wound up in insolvency pursuant to s 459A of the Act.
Drummond’s application is grounded on the presumption that Roberts is insolvent by operation of s 459C(2)(b) which provides:
(2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day the application was made:
…
(b)execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied …
Drummond, which contends that it has standing as a creditor, originally identified in its originating process the event giving rise to such presumption as being a wholly unsatisfied return on or about 1 July 2024 of a garnishee order made by the District Court of New South Wales (‘NSW District Court’) on 13 June 2024 directed to National Australia Bank (‘NAB’) attaching debts owed to Roberts (‘NAB Garnishee Order’). That ground is no longer pressed.
Drummond now contends that two other events which have occurred on and after the application was made on 8 July 2024 give rise to presumptions of insolvency under s 459C(2)(b) of the Act:
(a)on 30 August 2024, the Sheriff’s Office of Victoria (‘Sheriff’) returned a field report (‘Field Report’) in respect of a warrant of seizure and sale issued by the County Court of Victoria (‘Warrant’) reporting that the Warrant was wholly unsatisfied; and
(b)on 8 July 2024, a garnishee order for debts issued by the NSW District Court against Westpac Banking Corporation (‘Westpac’) was returned partly unsatisfied (‘Westpac Garnishee Order’).
Drummond has complied with the formal requirements of the Act and the Supreme Court (Corporations) Rules 2023 (Vic) in respect of an application for winding up in insolvency.
The statutory presumption under s 459C(2)(b) of the Act relied upon by Drummond is not often used as a ground by creditors making application for an order that a company be wound up in insolvency. The overwhelming majority of such applications rely upon the presumption under s 459C(2)(a) arising from non-compliance with a statutory demand.
Roberts opposes the application and contends first, that there has been no presumption of insolvency established by Drummond and second, that if there has, the Court should exercise its discretion under s 467(1)(a) of the Act to dismiss the application notwithstanding that there is a finding that a ground has been proved on which the Court may order Roberts be wound up.
Roberts did not present any evidence as to its solvency to rebut a finding that there was a presumption of insolvency under s 459C(2)(b).
It will be seen from the discussion which follows that this application has had many twists and turns.
Drummond commenced this proceeding in its capacity as trustee of the Drummond Family Trust (‘Trust’) and relied on debts owed to it in that capacity to contend it was a creditor of Roberts.
Subsequent to the hearing of the application, Roberts’ solicitors notified the Court by email that Drummond had been deregistered by the Australian Securities and Investments Commission (‘ASIC’) pursuant to s 601AB of the Act on 17 February 2025 by reason of its failure to pay annual company review fees.
Clause 5.2.6 of the trust deed constituting the Trust provided that Drummond was automatically removed as trustee upon its deregistration.
On 5 June 2025, Merton Lawyers, the solicitors on the record for Drummond, advised the Court that one of the creditors who had supported Drummond’s application and for whom it also acted, Beenak Concrete and Formwork Pty Ltd (‘Beenak’), would be making application to be substituted as applicant pursuant to s 465B of the Act.
The application by Beenak for substitution was listed on 17 June 2025. Several days prior to that hearing however, Merton Lawyers sent an email to the Court and to Roberts stating that Mr David Drummond, the director of Drummond (and who is also the appointer of the Trust) had made application to ASIC for the reinstatement of the registration of Drummond under s 601AH of the Act (‘application for reinstatement’) and that ASIC had indicated it would determine that application within 28 days from the date it was filed.
At the directions hearing on 17 June 2025, Mr Purton of counsel, instructed by Merton Lawyers, who were by then acting on behalf of Mr Drummond, stated that the application for Drummond’s reinstatement was not a complex one and it was expected it would be determined administratively by ASIC. Mr Purton accepted that if Mr Drummond’s application was declined by ASIC, then Mr Drummond would need to make application to the Court under s 601AH(2) of the Act to reinstate the registration of Drummond or one of the remaining supporting creditors would need to make application for substitution.
Roberts’ representatives pressed for a formal explanation of the position in respect of Drummond’s deregistration. Directions were made, including an order extending the time in which the application was required to be determined under s 459R(2) of the Act, to enable agitation of the issues arising from Drummond’s deregistration on a proper evidentiary basis.
On 30 June 2025, Mr Drummond appointed Direct Installs Australia Pty Ltd (‘Direct Installs’) as the new trustee of the Trust.
Subsequently, in an affidavit filed on 3 July 2025, the solicitor for Mr Drummond, Mr Bycroft, deposed that Mr Drummond had indicated to him that he had decided not to pursue his application for reinstatement because of concerns he had regarding declarations he was required to make in documentation to be lodged with ASIC as part of the application process. The concerns related to Drummond’s lack of funding to continue trading, which, in a later affidavit filed 10 September 2025, Mr Drummond attributed to Roberts’ failure to pay Drummond’s costs pursuant to a costs order made by Niall J (as his Honour the Chief Justice then was) in a separate but related proceeding.
On 8 July 2025, Merton Lawyers indicated in an email sent to the Court that Beenak would be filing an application for substitution, which it did on 11 July 2025 (‘substitution application’). At that point, it appeared that Mr Drummond’s application for reinstatement of Drummond had been abandoned.
The matter was listed for mention on 15 July 2025 where I made directions for the determination of Beenak’s substitution application. In order for such directions to be accommodated, I made an order further extending the time in which the application must be determined under s 459R(2) which was opposed by Roberts. On 4 August 2025, filed an appeal against the order for the further extension.
On 8 August 2025, M Osborne J made directions in respect of the hearing of the appeal and stayed the directions that I had made on 15 July 2025 for the hearing of Beenak’s substitution application.
Roberts’ appeal was dismissed by M Osborne J on 22 August 2025.[1]
[1]Drummond Carpentry Services Pty Ltd v Roberts Construction Group Pty Ltd (Supporting Creditor, Beenak Concrete and Formwork Pty Ltd) [2025] VSC 509.
The matter returned for further directions on 27 August 2025 when a new timetable was ordered for the determination of Beenak’s substitution application.
Shortly afterwards, on 2 September 2025, Merton Lawyers notified the Court that on 1 September 2025 the registration of Drummond had been reinstated by ASIC under s 601AH(1) of the Act and that Beenak intended to discontinue its substitution application.
The matter was again listed for mention on 4 September 2025. I granted leave to Beenak to discontinue its substitution application and made orders requiring, among other things, Drummond to file affidavit material explaining the circumstances of its reinstatement and for an exchange of submissions concerning Drummond’s standing as a creditor, having regard to s 601AD(1A) of the Act, which provides that upon deregistration all property that the company held on trust immediately before deregistration vests in the Commonwealth, together with submissions as to the effect of s 601AH(5).
There were several orders made pursuant to s 459R(2) of the Act extending the period within which the application for winding up must be determined. The last of those orders was made on 16 September 2025, extending such time until 30 September 2025.
Materials relied upon by the parties
Voluminous evidence has been filed by the parties. A good deal of that evidence relates to the application to wind up Roberts in insolvency but a not insignificant amount of it was directed to the procedural complications which arose from Drummond’s deregistration and the interlocutory process filed by Beenak to be substituted as applicant. The relevance of that latter material has to a large degree fallen away.
In support of its application, Drummond relies on:
(a)the affidavits of its solicitor Daniel Peter Bycroft of Merton Lawyers affirmed:
(i)8 July 2024 (‘First Bycroft affidavit’);
(ii)24 July 2024;
(iii)12 August 2024;
(iv)8 October 2024; and
(v)12 November 2024;
(b)the affidavit of Ayla Jane Briscoe of Merton Lawyers affirmed 29 July 2024;
(c)the affidavits of Riley Phillip Bouveng of Merton Lawyers affirmed:
(i)29 July 2024;
(ii)1 August 2024; and
(iii)23 September 2024;
(d)several affidavits of supporting creditors, being the affidavits of:
(i)Chang Anson, director of Ability Plaster Pty Ltd, affirmed 26 September 2024;
(ii)Kevin Bihannic, director of G2K Carpentry Pty Ltd (‘G2K Carpentry’), affirmed 26 September 2024;
(iii)Stuart Revell, director of Beenak, affirmed 30 September 2024;
(iv)Kent Mac, the director of Earthwood Villa Pty Ltd, affirmed 3 October 2024; and
(v)Mathew Rowe, trustee of the Rowe Family Trust which operates the business name Aspire Stairs, affirmed 7 October 2024; and
(e)the affidavit of David Drummond affirmed 3 October 2024.
In opposition to the application, Roberts relies on:
(a)the affidavit of its solicitor, Annette Weisz, affirmed 7 August 2024;
(b)the affidavits of Theodore Kerlidis, the sole director of Roberts, affirmed:
(i)3 September 2024 (‘First Kerlidis affidavit’);
(ii)4 November 2024; and
(iii)12 November 2024.
Each party relied upon detailed written submissions, including written submissions in reply filed by Drummond.
Drummond has filed two further affidavits of Mr Drummond, affirmed 3 July 2025 and 9 September 2025, directed to explaining the circumstances of Drummond’s deregistration and its later reinstatement.
Ms Webb, director of a Direct Installs Australia Pty Ltd, which was appointed as the trustee of the Trust after Drummond’s deregistration, and Mr Revell filed affidavits both affirmed 14 July 2025 on behalf of Beenak in relation to the substitution application.
In response to these developments, Roberts filed:
(a)an affidavit of its solicitor Ms Weisz affirmed 7 July 2025; and
(b)an affidavit of Mr Kerlidis affirmed 25 July 2025.
Further submissions in relation to the procedural developments have also been filed by the parties:
(a)Beenak and Direct Installs filed submissions on 15 July 2025 in support of the substitution application;
(b)Roberts filed submissions on 8 July 2025 criticising the procedural irregularity of the proceeding;
(c)Roberts filed further submissions on 3 September in opposition to the substitution application;
(d)Drummond filed submissions after its reinstatement on 10 September 2025 explaining the effect of its deregistration; and
(e)Roberts filed submissions on 12 September 2025 in response.
Objection to use of ‘without prejudice’ communication
The First Kerlidis affidavit exhibits an email Roberts’ solicitors received from Mr Bycroft of Merton Lawyers on 2 July 2024 headed ‘Without Prejudice’ (‘2 July email’). Drummond raised an objection to Roberts’ reliance on the 2 July email, claiming privilege under s 131 of the Evidence Act 1995 (Cth) and the Evidence Act 2008 (Vic).
The 2 July email which was sent at 10:45am by Mr Bycroft to Ms Evans, an employed solicitor at Eidelweisz, the solicitors for Roberts, was also circulated to a number of others including Ms Weisz. It states:
We are instructed our clients have become aware of evidence, which may be presented to the Court to assert a presumption of insolvency has arisen, in the way that term is defined in the Corporations Act 2001 (Cth). It is therefore open to our clients to now file a winding up application against RCG.
If a winding up application is filed upon a presumption of insolvency, RCG would be required to:
a. spend many thousands of dollars to file and serve expert evidence to rebut the presumption of insolvency;
b. explain to the Court how it has its own source of funds to pay the liquidated damages claim it admits it owes to LHG4 which, in the attached correspondence from 9 months ago, was already $240,000.00. In accordance with the head contract, that claim must now be greater than $500,000.00;
c. would have to explain to the Court why it will not pay the debts of approximately $1 million worth of further creditors, who we are instructed would file notices of appearance to support the application;
d. would have to present its books and records in open Court as evidence; and
e. would be at risk of being wound up in insolvency with a liquidator appointed.
Further to the above, upon the filing of a winding up application, the credit record of RCG would be impacted and it is likely all present proceedings between our clients in the County Court and Supreme Court of Victoria would be stayed and yield to the winding up application.
This email correspondence is not written for the purpose of costs. It is written to give your client a final opportunity to resolve the debts of our 3 clients prior to a winding up application being filed.
If an acceptable offer is not made by 9am on 3 July 2024, we will immediately take our clients final instructions to file the winding up application and will commence steps in the other proceedings seeking they be stayed.
It seems clear from the context that the statement ‘we are instructed our clients have become aware of evidence, which may be presented to the Court to assert a presumption of insolvency has arisen…’ is a reference to the presumption of insolvency originally pleaded by Drummond, the allegedly unsatisfied return of the NAB Garnishee Order, when it filed the Originating Process several days later.
Legal principles
Section 131(1)(a) of the Evidence Act 1995 (Cth) and Evidence Act 2008 (Vic) provides:[2]
(1) Evidence is not to be adduced of:
(a)a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute;
(emphasis added)
…
[2]Emphasis added
Counsel referred to a number of authorities in respect of the construction and application of s 131(1)(a). What follows is a selection of excerpts from the authorities referred to.
In Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2),[3] Bromberg J of the Federal Court stated that s 131(1) operated so that evidence of a communication made in connection with ‘arrang[ing] or bring[ing] about a settlement’ attracts privilege and cannot be adduced.[4] It does not require the finding of a middle ground or even a willingness to compromise by every party.
[3](2011) 193 FCR 479 (Bromberg J).
[4]Ibid 485.
Bromberg J also observed that the words ‘without prejudice’, whilst not conclusive, make the communication prima facie privileged which must be dispelled by other evidence.[5]
[5]Ibid 486.
In Bhagat v Global Custodians Ltd,[6] Spiegelman CJ observed a demand for surrender can constitute an attempt to negotiate a settlement but the letter in that case was not so characterised.[7]
[6][2002] NSWCA 160.
[7]Ibid [29] (Ipp AJA agreeing at [53] and Brownie AJA agreeing at [56]).
In Korean Airlines Co Ltd v Australian Competition and Consumer Commission (No 3) (‘Korean Airlines’),[8] Jacobson J emphasised that, under the Evidence Act 1995 (Cth), it is not necessary that an offer to negotiate include an offer capable of acceptance.[9] Following the High Court’s reasoning,[10] privilege extends to communications ‘reasonably incidental to negotiations’ and to ‘expressions of willingness to do so’.10F[11] It is sufficient if a communication is an ‘opening shot’ in negotiations.[12]
[8](2008) 247 ALR 781 (Jacobson J) (‘Korean Airlines’).
[9]Ibid 789.
[10]Ibid, citing Field v Commissioner for Railways (NSW) (1957) 99 CLR 285, 293 (Dixon CJ, Webb, Kitto and Taylor).
[11]Ibid.
[12]Ibid.
In South Shropshire District Council v Amos,[13] the Court of Appeal in the United Kingdom held that the common law privilege was not limited to documents which are offers.[14]
[13][1986] 1 WLR 1271 (Parker LJ).
[14]Ibid 1277–1278.
In Chandler v Water Corporation,[15] Hasluck J stated:[16]
It is true that the Veersma letter does not contain a specific proposal for compromise. However, the letter contains assertions bearing upon the strength of the plaintiffs' case and is clearly directed to the plaintiffs' wish to settle along the lines adopted in settlement discussions with other plaintiffs. This gives a degree of specificity to the letter which is sufficient to attract the protection of the without prejudice rule.
[15][2004] WASC 95 (Hasluck J).
[16]Ibid [56].
In McCarthy v Camil Holdings Pty Ltd (‘McCarthy’),[17] the Victorian Court of Appeal overturned a determination that a communication did not attract privilege because their Honours considered that the Associate Judge at the first instance, from whom this proceeding is an appeal, had ‘unchallenged and credible evidence’ of an intention to resolve the dispute by the maker of the communication, which was sufficient, given the broad language of s 131(1)(a) when speaking of ‘an attempt to negotiate a settlement’ of a dispute known by the parties.[18]
[17][2016] VSCA 235 (‘McCarthy’) (Tate and Ferguson JJA).
[18]Ibid [40] (emphasis in the original).
In Volunteer Fire Brigades Vic Inc v CFA (No 3) (‘Victorian Fire Brigades’),[19] this Court considered that s 131(1)(a) requires a ‘bona fide attempt to negotiate a settlement’.[20]
[19][2016] VSC 621 (Ierodiaconou AsJ) (‘Victorian Fire Brigades’).
[20]Ibid [36].
Drummond’s Submissions
Drummond contends that the email is self-evidently an invitation to negotiate a settlement of a dispute.[21] Citing Korean Airlines, Drummond notes that offers to negotiate, attempts to negotiate and expressions of willingness to negotiate are sufficient to attract ‘without prejudice’ privilege.[22]
[21]Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2) (2011) 193 FCR 479 at [34]–[38]; and see McCarthy v Camil Holdings Pty Ltd [2016] VSCA 235 [40].
[22]Korean Airlines 789.
Drummond submitted the 2 July email is privileged pursuant to s 131(1) as it clearly sets out the dispute and Drummond’s rights to litigate and invites Roberts to make an offer to resolve the dispute. While accepting it did not contain an offer itself, Drummond submitted that an invitation for the other party to make an offer is sufficient to protect the communication with the privilege.
In reference to the observation of Judd J in Biovision v CGU Insurance Ltd (‘Biovision’)[23] referred to by Roberts in the course of argument that evidence was required to be filed by the claimant for privilege to establish the connection between the material claiming protection and an attempt to negotiate a settlement, Drummond sought to distinguish the present circumstances from the facts of that case. It was contended that, in Biovision, the documents sought to be adduced were not explicitly referred to in the affidavit material and Judd J was thereby required to determine whether the documents, considered on their face, were sufficiently connected to the context presented by the affidavits, whereas the 2 July email is amply contextualised against affidavit material supplied by both parties.
[23][2010] VSC 589 (Judd J) (‘Biovision’).
Drummond submitted further that Mr Bycroft is not required to set out the nature of the $300,000 claim made by the three creditors because they were existing claims in which Roberts and Eidelweisz Lawyers were already acting on Roberts behalf.
Roberts’ Submissions
Roberts seeks to adduce the 2 July email in support of a contention that the court in exercising its discretion under s 467(1) should not make a winding up order; Roberts contends that the contents of the email reveal an abuse of process when read in the broader context of Drummond’s conduct in the lead up to the application.
In support of this contention, referring to Biovision and Victorian Fire Brigades, Roberts contended that Drummond has not satisfied the evidentiary burden of establishing the 2 July email was either:
(a)made ‘in connection with an attempt to negotiate a settlement’ of the dispute; or
(b)a ‘bona fide attempt to negotiate a settlement’.
In accordance with Biovision, Roberts submitted the claimant for privilege (i.e. Drummond) must establish the connection by evidence, which ordinarily requires evidence of the circumstances in which the communication was prepared and the relevant context.[24] Drummond has not filed any affidavit in support of its claim.
[24]Biovision [52].
Citing McCarthy and Victorian Fire Brigades, Roberts submitted the Court did not have ‘unchallenged and credible evidence’ of a ‘bona fide’ intention by Drummond to resolve the dispute, since it had not filed any evidence of its intention behind the sending of the 2 July email. In absence of evidence, Roberts submitted the Court must look at the email itself, noting that it:
(a)did not provide a breakdown of the approximate indebtedness/Roberts’ liability;
(b)did not engage with the merits of the alleged claims;
(c)rather raised a collateral issue of Roberts’ presumed insolvency (notably, without mentioning the return of the NAB garnishee order as the ground, nor s 459C(2)(b) as the relevant provision grounding the presumption); and
(d)gave a period of less than 24 hours, expiring at 9:00 am the next day, for Roberts to make an offer.
Consideration
I consider that Drummond has not established that the 2 July email was:
(a)made in connection with an attempt to negotiate settlement of the contingent claim; and/or
(b)a bona fide attempt to negotiate a settlement of the contingent claim.
In my opinion, the 2 July email bears all the features of a conventional letter of demand coupled with observations of the dire consequences that will follow if it is not met including the filing of a winding up application, the expenses of defending that application and the likelihood that all present proceedings between Drummond and Roberts in the Supreme Court and County Court would be stayed and ‘yield to the winding up application’. I agree with Mr McAloon’s submission that is cast in terms of a threat rather than an invitation to commence negotiations or a bona fide attempt to negotiate a settlement. If it is remembered that the underlying policy of s 131 is to prevent communications of parties seeking to resolve disputes by bona fide negotiations from being disclosed in court, there is no feature of the email which I consider requires such protection. I refuse Drummond’s objection.
Background
Two Birds project
Roberts was incorporated in May 2020. Mr Kerlidis is its sole director and secretary.
Mr Kerlidis is also the sole director and shareholder of Longboat Holdings Group No 4 Pty Ltd ACN 623 924 523 (‘Longboat’). Longboat is the owner-builder of the Two Birds residential development project being constructed in Lillimur Road, Ormond (‘Two Birds project’).
Longboat engaged Roberts as the head contractor to manage the building works at the Two Birds project. Roberts then engaged several subcontractors to undertake works, including concreters, plasterers, stair manufacturers and carpenters. Drummond and the present and former supporting creditors in this proceeding are among the subcontractors engaged by Roberts on the project.
Mr Kerlidis is also a director of Timberworks (Vic) Pty Ltd (‘Timberworks’), which is involved in the manufacture and installation of prefabricated timber laminate products. Timberworks subcontracted Roberts to construct the timber structure at the Two Birds project. Roberts then subcontracted Drummond to perform the carpentry works.
Mr David Drummond is the sole director and secretary of Drummond, a family-run labour hire and carpentry business that he started in 2017. It has two employees and subcontracts approximately 20 tradespeople. Drummond provides labour hire staff to small to medium-sized commercial building projects in Victoria.
By May 2023, Timberworks and Drummond had fallen into dispute about the quality and cost of the works performed by Drummond at the Two Birds project.
Adjudication and judgment debt
On 8 June 2023, Drummond served a payment claim on Roberts under the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘SOPA’) for $199,905.75 for works done on the Two Birds project. Section 14 of the SOPA provides for a contractor’s right to seek progress payments for works completed under the contract by serving ‘payment claims’ on a head contractor. Section 15 provides for the reciprocal right of the head contractor to issue responsive ‘payment schedules’, whereby the head contractor could propose to make payment of an amount less than that of the contractor’s payment claims. No payment schedule was served by Roberts in respect of this payment claim. Roberts did not pay this claim and on 2 August 2023 Drummond made an application for adjudication under the SOPA.
On 16 August 2023, the adjudicator, Adjudicate Today Pty Ltd (‘Adjudicate Today’), determined that Roberts was liable to Drummond in the amount of $199,905.75 (including GST) (‘adjudicated amount’).
On 25 August 2023, Adjudicate Today issued an adjudication certificate in favour of Drummond against Roberts for a total of $207,754.93, which comprised the adjudicated amount, interest of $3,505.20 which had accrued from the date the adjudicated amount was payable, together with $4,343.98 for Roberts’ unpaid share of the adjudication application fees (‘adjudication certificate’).
Roberts did not pay Drummond the amount certified in the adjudication certificate. On 28 August 2023, Drummond filed an ex parte application in the County Court of Victoria seeking judgment.
Also on 28 August 2023, Roberts filed an originating motion for judicial review in this Court seeking to set aside or quash the adjudication determination (‘judicial review proceeding’).
On 4 September 2023, Judge Burchell of the County Court made orders entering judgment against Roberts for the sum detailed in the adjudication certificate, plus additional interest of $1,040.61 that had accrued from the date of the adjudication certificate to 1 September 2023 and Drummond’s costs of its application of $2,000, a total of $210,795.54 (‘Judgment Debt’).
On 13 September 2023, Drummond served a statutory demand on Roberts demanding payment of the Judgment Debt and annexing a copy of the order of Judge Burchell (‘first statutory demand’).
On 27 September 2023, on Drummond’s application under s 33 of the SOPA, Judge Kirton of the County Court issued a certificate of debt which stated the amount of $208,795.54 — being the sum that was then payable by Roberts for the adjudicated amount only (i.e. not including Drummond’s costs of obtaining the Judgment Debt) — was a debt owed by Roberts under the SOPA (‘debt certificate’).
On 6 October 2023, Drummond withdrew the first statutory demand on an undertaking given by Roberts to pay the amount of the Judgment Debt into the court fund of this Court. The undertaking is recorded in an order made by Stynes J in the judicial review proceeding on 3 November 2023. On the same day, Roberts paid the amount of the Judgment Debt, $210,795.54 (‘court held funds’), into the court fund (‘Funds in Court’).
On 16 May 2024, Niall J dismissed the judicial review proceeding and made orders releasing the court held funds to Drummond. The following day, Roberts filed an application to stay Niall J’s orders (‘stay application’) which was granted until 23 May 2024, pending the hearing of the stay application.
On 23 May 2024, the stay application was dismissed. On 28 May 2024, the court held funds were paid to Drummond, together with statutory interest of $59.61 that had accrued on the court held funds to 28 May 2024.
On 29 May 2024, Roberts’ solicitors sent an email to Drummond’s solicitor, Mr Bycroft, requesting a discharge notice pursuant to s 40 of the SOPA in relation to the debt certificate issued on 27 September 2023 and seeking confirmation of the amount paid from Funds in Court. Roberts deposed that neither it nor its solicitors have received a s 40 notice in response.
Statutory interest on Judgment Debt
Between 4 September 2023 and 28 May 2024,[25] further statutory interest accrued on the Judgment Debt pursuant to s 73(4) of the County Court Act 1958 (Vic) (‘County Court Act’) and s 2 of the Penalty Interest Rates Act 1983 (Vic) (‘Penalty Interest Rates Act’). This interest was post-judgment interest and did not form part of the original Judgment Debt ordered by Judge Burchell on 4 September 2023.
[25]Being the date of the judgment debt as ordered by Judge Burchell and the date the Funds in Court were released.
By 28 May 2024, statutory interest of $15,363.02 had accrued on the Judgment Debt (‘Statutory Interest Debt’).[26] This amount remained unpaid after the court held funds were released.
[26]Calculated by applying the prescribed rate applying at the time of 10% per annum over 267 days, or $57.66 per day.
The Statutory Interest Debt is the subject of the Westpac Garnishee Order and the Warrant — mentioned at the start of these reasons — which form the bases of the presumptions relied upon by Drummond in its application for the winding up of Roberts.
Second statutory demand and application to set aside
On 17 May 2024, Drummond served a second statutory demand on Roberts claiming $225,558.33 (‘second statutory demand’).
The schedule to the second statutory demand included a claim of $14,762.79, said to comprise the Statutory Interest Debt at that time:
Description of the debt
Amount of the debt
Orders of the County Court of Victoria dated 4 September 2023(as attached) and made up as follows:
Interest on the sum of $210,795.54 pursuant to the attached orders of Her Honour Judge Burchell in County Court of Victoria proceeding number CI-23-04771 dated 4 September 2023 at the rate of 10% per annum for 256 days pursuant to section 2 of the Penalty Interest Rate Act 1983 (Vic):
$210,795.54
$14,762.79Total:
$225,558.33
On 7 June 2024, Roberts filed an application in this Court to set aside the second statutory demand (‘set aside application’). In the affidavit in support of the set aside application sworn by Mr Kerlidis on 7 June 2024, he stated that the court held funds had largely satisfied the claim made in the demand and that there was an offsetting claim for any balance. The affidavit asserted that there was ‘an offsetting claim between the parties with respect to the costs [Roberts] had incurred as a result of [Drummond’s] breach of contract, negligence or misrepresentations’ and that such dispute and offsetting claims are ‘set out in the September 2023 correspondence’.[27]
[27]First Kerlidis Affidavit, [26c].
Drummond withdrew the second statutory demand on 30 July 2024. Consent orders were made on 5 August 2024 dismissing the set aside application with Drummond to pay Roberts’ costs.
In the First Kerlidis affidavit, Mr Kerlidis states that the second statutory demand was the first time that Roberts was put on notice that Drummond was attempting to collect interest in respect of the Judgment Debt. He states that neither Roberts nor its solicitors has ever been informed of how much Drummond received from Funds in Court, nor did Drummond provide a calculation of the interest said to be owed to it or make a claim for it.
Garnishee orders
On 11 June 2024, whilst the set aside application remained on foot, Drummond registered the Statutory Interest Debt in the NSW District Court at Murwillumbah, for the purpose of obtaining garnishee orders against Roberts.
The documentation filed with the NSW District Court to obtain registration of the Statutory Interest Debt is not in evidence. The registration of the Judgment Debt in the NSW District Court was done without notice to Roberts.
In the period following registration, Drummond applied for and obtained several garnishee orders directed to the four major Australian trading banks to recover the Statutory Interest Debt from any funds held by Roberts in those banks. The garnishee orders were directed to NAB, Australian New Zealand Banking Group Limited (‘ANZ’), Commonwealth Bank of Australia (‘CBA’) and Westpac. As Roberts did not hold any accounts with ANZ or CBA, the garnishee orders directed to those banks could not be executed.
I note that the relevant provision of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’) in respect of applications for garnishee orders, r 39.34, provides that notice of the application for a garnishee order was not required to be served on the debtor. The rule provides:
39.34 Application for garnishee order
(1)An application for a garnishee order in respect of a judgment is to be made by way of notice of motion.
(2)Unless the court orders otherwise, a notice of motion under this rule—
(a) may be dealt with in the absence of the parties, and
(b)need not be served on the judgment debtor or the proposed garnishee.
(3)The application must indicate the extent (if any) to which the judgment debt has been satisfied under any writ of execution, garnishee order or charging order issued by the court.
Drummond does not explain why it pursued the garnishee and warrant processes to recover the Statutory Interest Debt while at the same time maintaining the second statutory demand, but I surmise that it was pursuing this path because it became aware it would have to confront a claim by Roberts in the set aside application that Roberts had offsetting claims which would result in the second statutory demand being set aside.
NAB Garnishee Order
On 12 June 2024, the day after it registered the Statutory Interest Debt, Drummond filed a notice of motion in the NSW District Court at Murwillumbah for a garnishee order, naming NAB as the proposed garnishee.
The notice of motion, in the segment of the form prescribed by r 39.34 of the UCPR, Form 69, headed ‘Judgment Details’ states ‘Date of judgment to be enforced - 11 June 2024’, the date that the Statutory Interest debt was registered in the District Court of NSW. The affidavit of Mr Drummond affirmed 12 June 2024 in support of the notice of motion states ‘[t]he amount payable under the judgment (including any prior enforcement costs but excluding interest after judgment under s 101 of the Civil Procedure Act 2005) as at the date of this affidavit is $15,699.84’.
The NAB Garnishee Order was made the next day, on 13 June 2024, attaching all debts due or accruing by NAB, the garnishee to Roberts to the extent of $15,699.84. Mr Kerlidis states in the First Kerlidis affidavit that the first time he ever saw the NAB Garnishee Order was when he saw a copy exhibited to the First Bycroft affidavit. Mr Kerlidis states that Roberts does not hold any accounts with NAB and did not hold accounts with NAB as at June 2024.
On 26 June 2024, NAB responded to the garnishee order by a letter addressed to Drummond’s solicitors, Merton Lawyers, stating that ‘no steps are required to be taken by NAB as a result of the [garnishee order]’.
In a telephone call with Drummond’s solicitor the following day, a representative of NAB stated its records indicated that Roberts was a customer of NAB but did not have any accounts in which a debt was due or accruing from NAB to Roberts. The NAB representative indicated that Roberts’ accounts were either credit cards, loans, joint accounts or trust accounts and, given Roberts had no accounts that were available to garnish, ‘NAB could not comply with the [garnishee order]’ which ‘could not be satisfied’.
In an email of 27 June 2024, NAB’s representative stated to Mr Bouveng, a solicitor at Merton Lawyers, that NAB could not ‘locate any eligible accounts with funds’ in response to the NAB garnishee order NAB attached a document headed ‘Garnishee’s Statement Stating That No Debt Due or Accruing’ in Form 7227F[28] which states ‘no debt was due or accruing from NAB to Roberts on 26 June 2024’ and that ‘there [were] no accounts to be garnisheed’.
[28]Pursuant to UCPR r 39.40.
It seems clear that Drummond and its solicitors would be made aware by the email of 27 June 2024 Drummond that they could not establish that a presumption of insolvency arose from execution of the NAB Garnishee Order being unsatisfied; it was incapable of execution as NAB held no funds of Roberts.
Westpac Garnishee Order
On 2 July 2024, on Drummond’s application, the NSW District Court at Murwillumbah issued the Westpac Garnishee Order attaching to all debts due or accruing from Westpac (i.e. the ‘garnishee’) to Roberts (i.e. the ‘judgment debtor’) to the extent of $15,699.84. The notice of motion and supporting affidavit filed to obtain that order are not in evidence but are presumably in the same form as that used to obtain the NAB Garnishee Order.
Merton Lawyers sent the Westpac Garnishee Order to Westpac on 3 July 2024 with a covering letter enclosing details of its statutory trust account for payment of any funds to which the order attached.
On 8 July 2024, Westpac responded to Merton Lawyers with the following letter, on which Drummond relies as evidence that the Westpac Garnishee Order was returned partly unsatisfied:
Dear Sir/Madam,
GARNISHEE NOTICE
Drummond Carpentry Services Pty Ltd - vs - ROBERTS CONSTRUCTION
GROUP PTY LTD
Your reference: 2024/00213290
Please be advised, we have electronic funds transferred the amount of $108.28 representing the attachable funds under the Garnishee notice dated 02/07/2024. If you have any further questions, please contact our Compulsory Notice & Insolvencies team on [number provided] and quote the reference number [reference number].
Yours sincerely,
Compulsory Notices & Insolvencies Team
On or about 11 July 2024, $108.28 was paid into the Merton Lawyers trust account with the notation, ‘Received from: Garnishee Robert [sic] Construction’.
In the First Kerlidis Affidavit, Mr Kerlidis states that he was not aware of the issue of the Westpac Garnishee Order, nor that any money had been garnished from Roberts’ accounts held with Westpac. He also states that no notice was provided by Drummond about the issue of the other garnishee notices issued to ANZ and CBA.
Drummond contends the Westpac Garnishee Order was thereby returned partly unsatisfied to the extent of $15,591.56, and gives rise to a presumption of insolvency under s 459C(2) of the Act.
The Warrant
On 14 June 2024, prior to the Westpac Garnishee Order and whilst the second statutory demand remained the subject of the set aside application filed by Roberts a week earlier, Drummond applied for the issue of the Warrant to recover the Statutory Interest Debt. In his affidavit filed in the County Court supporting the application for the issue of the Warrant, Mr Bycroft stated that statutory interest in the sum of $15,396.33 had accrued on the judgment debt and remained unpaid by Roberts.
On 17 June 2024, the County Court issued the Warrant for the seizure and sale of Roberts’ assets up to the value of the Statutory Interest Debt of $15,363.02, together with $1,195.30 for the costs of issuing the Warrant and the Sheriff’s fees and expenses.[29]Mr Kerlidis states that he was not served with a copy of the Warrant and saw it for the first time when it was exhibited to the First Bycroft affidavit.
[29]By 14 August 2024, the fees amounted to $218.
On 6 September 2024, the Sheriff sent the Field Report (Annexure A of this judgment) to Merton Lawyers indicating that an officer from the Sheriff’s office had attended Roberts’ principal place of business on four separate dates in an attempt to execute the Warrant.[30] The Field Report recorded that no contact could be made and nor were any seizable goods located.
[30]Being 24 July 2024, 2 August 2024, 14 August 2024 and 30 August 2024.
Other proceedings at the County Court and VCAT
On 19 June 2024, Roberts commenced a proceeding in the County Court[31] seeking orders that the court held funds — which had been released to Drummond as a consequence of Niall J dismissing Roberts’ judicial review proceeding — be repaid to Roberts on the basis that Drummond had failed to provide a discharge notice within the time stipulated by s 40 of the SOPA (‘Roberts’County Court proceeding’).
[31]Proceeding number CI-24-03536.
Roberts’ solicitors served the sealed writ in the Roberts’ County Court proceeding on Drummond by post on 21 June 2024. On the same day, Roberts’ solicitors sent a letter of demand to Drummond’s solicitors, together with a copy of the writ and enquired if the solicitors had instructions to accept service.
On 2 July 2024, Drummond filed a notice of appearance in the Roberts’ County Court proceeding. On the same day, Drummond’s solicitors sent Roberts’ solicitors the email which was the subject of the claim for privilege referred to above.
Section 40 of the SOPA provides that when recovering an adjudicated amount the subject of a debt certificate issued under s 33 of the SOPA of the type issued to Drummond on 27 September 2023 by order of Judge Kirton of the County Court, the ‘claimant’ (here, Drummond) must, on the request of the ‘person making the payment’ in discharge of the certified debt (here, Roberts), provide a discharge notice in respect of the payment,[32] failing which, after seven days, the claimant is to forfeit and repay to the person a sum equal to the amount paid.[33]
[32]SOPA s 40(1).
[33]SOPA s 40(3).
In a letter dated 21 June 2024 from Eidelweisz Lawyers to Merton Lawyers, Ms Weisz stated the certified debt was discharged in full by the release of the court held funds on 28 May 2024 and that Roberts had requested a discharge notice the following day. Ms Weisz contends that given a discharge notice was not provided within seven days pursuant to the SOPA, Drummond had forfeited the amount of $210,828.25 to Roberts which was now a debt that is due and payable by Drummond.
On 15 August 2024, the County Court stayed the Roberts’ County Court proceeding until further order to allow for the resolution of this application. The Court made further orders listing the proceeding for an administrative mention on 3 October 2024, by which time the parties were to advise in writing of the status of this application, failing which the proceeding could be dismissed without further notice.
In Mr Drummond’s affidavit filed 3 October 2024, he deposes that he had been informed by Merton Lawyers that neither Roberts nor Drummond had provided the County Court with an update as to this application as required, such that the Roberts’ County Court proceeding is liable to be dismissed. In the First Kerlidis affidavit, Mr Kerlidis details Roberts’ position in respect to the County Court proceeding, including reference to a security for costs application by Drummond, but the present status of the Roberts’ County Court proceeding remains unclear in the material filed by the parties.
On 29 July 2024, Roberts filed an application in the Victorian Civil and Administrative Tribunal (‘VCAT’), claiming Drummond had engaged in (among other things) unconscionable conduct and had misled Roberts and/or Adjudicate Today as to Roberts’ liability for the adjudicated amount (‘VCAT application’). Roberts sought orders that Drummond pay it $560,000,[34] said to be comprised of Roberts’ costs of $260,000 for the judicial review proceeding, its costs of $90,000 for defending the adjudication application and the adjudicated amount the subject of the judgment debt entered by Judge Burchell, and $210,000 the rounded sum of the amount of the Funds in Court which were paid by Roberts and released to Drummond.
[34]Comprised of $260,000 being costs of the judicial review proceeding, $90,000 being the costs of defending the adjudication application, and $210,000 being the adjudicated amount, interest and others.
Immediately prior to the hearing of this matter, directions were yet to be made in the VCAT proceeding and the status of the VCAT application is unclear in the materials filed by the parties. Roberts raises the VCAT application and the County Court proceeding as a basis for contending that it has genuine disputes and offsetting claims against the outstanding indebtedness alleged by Drummond and, on that basis, the Court should not wind up Roberts under s 467 of the Act.
Standing of Drummond to bring the application
At the time of filing this application on 8 July 2024, Drummond contends that it was a creditor of Roberts for the amount of the Statutory Interest Debt.
On 2 August 2024, Mr Bycroft served a copy of his second affidavit which included exhibits of the applications for the garnishee orders directed to ANZ, Westpac and CBA.
Mr Kerlidis states that on 6 August 2024, prior to the first return in this proceeding, he instructed Roberts’ solicitors to make an offer to Drummond for Roberts to tender payment in the amount of $15,363.02, which was the sum of the Statutory Interest Debt less $108.28 which had been garnisheed under the Westpac Garnishee Order. Drummond accepted this offer and that amount was paid into Merton Lawyers’ trust account on 7 August 2024. Drummond says that this did not however completely discharge the debt and that it remains a creditor of Roberts for the amounts of:
(a)$1,195.30, being the court costs of issuing the Warrant; and
(b)$218, being the amount paid to the Sheriff as the fees and expenses set out in sub-para [c] of the Warrant (‘residual debt’).
Drummond also contends that it remains a contingent or prospective creditor of Roberts for the two costs orders handed down by Niall J which it estimates amount to $125,000. There was no evidence presented by Drummond which would enable quantification of those costs. In any event, Drummond relies only on the residual debt to contend it has standing; no formal application was made by Drummond for leave under s 459P(2) of the Act to bring this application in the capacity of a contingent or prospective creditor. Drummond asserts that the existence of this contingent debt is relevant in the exercise of the court’s discretion under s 467(1).
Determination of effect of reinstatement
I now turn to the issue of Drummond’s deregistration and its subsequent reinstatement.
The relevant sections of pt 5A.1 of the Act provide as follows:
601AD Effect of deregistration
Company ceases to exist
(1) A company ceases to exist on deregistration.
Trust property vests in the Commonwealth
(1A)On deregistration, all property that the company held on trust immediately before deregistration vests in the Commonwealth. If property is vested in a liquidator on trust immediately before deregistration, that property vests in the Commonwealth. This subsection extends to property situated outside this jurisdiction.
…
(3A)The Commonwealth has, subject to its obligations as trustee of the trust, all the powers of an owner over property vested in it under subsection (1A).
…
601AH Reinstatement
Reinstatement by ASIC
(1)ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered.
(1A)ASIC may reinstate the registration of a company deregistered under subsection 601AB(1B) if:
(a)ASIC receives an application in relation to the reinstatement of the company’s registration; and
(b)the levy imposed on the company by the ASIC Supervisory Cost Recovery Levy Act 2017 is paid in full; and
(c)the amount of any late payment penalty payable in relation to the levy is paid in full; and
(d)the amount of any shortfall penalty payable in relation to the levy is paid in full.
…
Effect of reinstatement
(5)If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.
…
In his affidavit filed on 9 September 2025, Mr Drummond deposes that his concerns regarding the required declarations and lack of funding, which had given rise to his misgivings about making an application to reinstate Drummond, were resolved following discussions he had with his accountant about alternative financing options, including loans from his other trading entities, and that he then decided to continue with the application for reinstatement. He states that on 12 August 2025, that he paid the ASIC fees required to reinstate Drummond and on the following day completed and lodged the requisite documentation with ASIC.
Mr Drummond received confirmation from ASIC on 1 September 2025 that the registration of Drummond had been reinstated. On 9 September 2025, Mr Drummond removed Direct Installs as trustee of the Trust and reappointed Drummond as the trustee.
Drummond’s submissions
In its written submissions in respect of this issue, Drummond states that the effect of s 601AD(1A) of the Act is that all property that Drummond held on trust at the time of its deregistration are vested in the Commonwealth. This included the debts owed by Roberts by reason of which Drummond, in its capacity as trustee, was a creditor of Roberts.
Drummond referred to the evidence that on 30 June 2025, Direct Installs was appointed as trustee of the Trust in place of Drummond. Reference was made to a decision of Mullins J of the Supreme Court of Queensland in Thorne Developments Pty Ltd v Thorne (‘Thorne Developments’)[35] as support for the proposition that in such circumstances the effect of the appointment of a new trustee in place of a deregistered trustee is that the trust property previously vested in the Commonwealth vests in the new trustee.[36]
[35](2015) 296 FLR 334 (Mullins J) (‘Thorne Developments’).
[36]Ibid 345.
In Thorne Developments, Mullins J, in considering quite similar circumstances to the present, held that there was nothing in pt 5.A(1) of ch 5A of the Act which required the consent of or notice to the Commonwealth before an appointment of a new trustee such as has occurred here can take effect.[37]
[37]Ibid.
The submissions, after outlining the process by which ASIC reinstated the registration of Drummond under s 601AH of the Act, noted that on 9 September 2025, Drummond was appointed as replacement trustee of the Trust and that any property, right or chose in action that had vested in Direct Installs was assigned to Drummond as trustee. Drummond’s submissions contend that through the service of Mr Drummond’s affidavit, affirmed 9 September 2025, Roberts was given express written notice of the assignment pursuant to s 134 of the Property Law Act 1958 (Vic).
Drummond submits that in its capacity as trustee, it was a creditor of Roberts at the time it filed the winding up application, and at the time the application was heard. In addition, Drummond’s reappointment as trustee of the Trust and any consequent assignment means that it has been a creditor since that reappointment. It says that Drummond’s deregistration, the vesting of trust property in the Commonwealth, the revesting of trust property in Direct Installs, the reinstatement of Drummond, and the revesting in Drummond of trust property upon its reappointment as trustee means there is no bar to the Court handing down judgment on the winding up application.
Roberts’ submissions
Roberts, in its submissions of 12 September 2025 dealing with this issue, contended that Mr Drummond’s affidavit of 9 September 2025 was not only filed and served late, but was unsatisfactory in a number of respects. Roberts contends that the purported explanation for the reinstatement of Drummond is perfunctory and invites scepticism, not least as it discloses no relevant change in the circumstances of Drummond between 2 July 2025 — when it was said that reinstatement was not possible — and 13 August 2025, when an application for reinstatement was said to have been lodged.
Roberts’ submissions also contend that Mr Drummond’s affidavit of 9 September 2025 provides no explanation as to why Roberts and the Court were not informed that Mr Drummond’s position regarding Drummond’s future had dramatically changed such that a reinstatement application was being pursued. Further, Mr Drummond does not address whether his solicitors, who also acted for Beenak throughout August 2025 in connection with the substitution application by Beenak, were told about the application for reinstatement having been made.
The submissions also renew Roberts’ opposition to a further extension of the period within which the application is to be determined.
The submissions conclude with observations in respect of the adverse consequences for Roberts which are described in Mr Kerlidis’ affidavit of 25 July 2025, including reputational damage and difficulties in obtaining normal creditor terms and timely supply of goods and services. In addition, parties other than Roberts would be adversely affected if Roberts were to be wound up now, where due to the needlessly prolonged period that this application has been on foot, Roberts has continued to trade, has incurred debts and has engaged in commercial relations with various third parties.
Roberts’ submissions culminate with an observation about the extraordinary manner in which this proceeding has been prolonged by Drummond and related parties. It submitted that the residual discretion of the Court under s 467 of the Act should be exercised to dismiss the application notwithstanding a finding that there is a presumption of insolvency. Roberts concluded its submissions by contending the Court should not make an order for the winding up of Roberts and the application should be dismissed.
Conclusion on the deregistration and reinstatement issue
While the circumstances of Drummond’s deregistration and the events which followed it clearly suggest its affairs are being conducted in a less than satisfactory manner, I accept Drummond’s submission that an application of the reasoning of Mullins J in Thorne Developments results in a conclusion that Drummond again has standing in this application. Direct Installs, by its appointment as trustee, became the holder of the chose in action upon which Drummond originally relied for its standing. On 9 September 2025, by its replacement of Direct Installs as trustee, Drummond has been returned to its status as a creditor and, for the purposes of this application, was a creditor at all relevant times. As such, Drummond has regained its standing as creditor in this application.
Supporting creditors
In the course of this proceeding, Roberts resolved disputes it had with several supporting creditors: D Squared Electrical Pty Ltd, Ability Plaster Pty Ltd and Earthwood Villa Pty Ltd.37F[38] All three have since withdrawn their support for this application.
[38]In the submissions made by Drummond filed on 8 October 2024, a third ground of a garnishee order filed by Earthwood Villa Pty Ltd, a supporting creditor at the time of the above submission, at the Local Court of New South Wales, was relied upon by Drummond. Since Earthwood Villa Pty Ltd is no longer a supporting creditor in this application, that ground is no longer relevant.
Other creditors who initially, but no longer, support this application are C&N McNamara Enterprises Pty Ltd (in liq), which was wound up on 30 May 2025, and Formcode Pty Ltd, which was deregistered on 3 February 2025.
The remaining supporting creditors in this proceeding are:
(a)Beenak (claiming the sum of $270,078.93);
(b)the Trustee for the Rowe Family Trust trading as Aspire Stairs (‘Aspire Stairs’) (claiming the sum of $10,468.82); and
(c)G2K Carpentry (claiming the sum of $23,862.64).
Beenak
On 2 December 2021, Beenak was engaged by Roberts and entered a written subcontract to complete foundational excavation and concrete works at the Two Birds project (‘Beenak contract’). Beenak commenced works under the contract on or around 14 December 2021 and continued until April 2022. The Beenak contract was subject to the SOPA.
On 2 September 2024, Beenak filed an appearance in support of this application, claiming a debt in the sum of $270,078.93, said to arise from several unpaid payment claims. Roberts contends it has genuine disputes and/or offsetting claims as indicated in its responsive payment schedules, said to arise from Beenak’s alleged breaches of the Beenak contract. Roberts contends the total sum of $225,633.38 (excl. GST) is owing by Beenak.
Following Drummond’s deregistration, on 11 July 2025 Beenak made application by interlocutory process seeking orders pursuant to s 465B of the Act and r 9.06 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Supreme Court Rules’) that Beenak be substituted or added as a plaintiff in the proceeding. However, in light of Drummond’s reinstatement on or around 1 September 2025, Beenak was ultimately granted leave on 4 September 2025 under r 25.03 of the Supreme Court Rules to discontinue its substitution application.
There is a controversy about the state of account between the two parties which cannot presently be resolved. In the context of Beenak’s substitution application, additional material was filed by Beenak and Roberts in respect of whether Beenak had standing, material which has appeared conflicting and at times inexplicable. The following is unclear on the material filed:
(a)the precise number of payment claims made by Beenak; the precise sums claimed by Beenak in each of the payment claims;
(b)whether Roberts’ payment schedules were made in response to some or all of Beenak’s payment claims; and
(c)if the payment schedules were made in time; and whether the payment schedules were made in response to the amounts Beenak purported to then claim.
I do not consider it possible to come to a conclusion whether Beenak is a net creditor of Roberts.
Aspire Stairs
Aspire Stairs was subcontracted to construct and install stairs in the Two Birds project. On 9 August 2024, it filed an appearance in support of this application, claiming a debt in the sum of $10,468.82. The debt arises from a fourth payment claim dated 19 March 2024 and issued to Roberts pursuant to s 14 of the SOPA. Roberts disputes the debt claimed on the basis that it ‘stepped into’ the subcontract with Aspire Stairs and completed the contracted works itself by 23 July 2024, past the practical completion date of 31 March 2024. In an email from Roberts dated 24 July 2024, Roberts sent to Aspire Stairs a letter of demand and a notice of termination pursuant to the subcontract, setting out its dispute to the debt claimed.
G2K Carpentry
On 2 September 2024, G2K Carpentry filed an appearance in support of Drummond’s application, claiming a debt of $23,862.64.38F[39]
[39]The figure of $23,862.64 is deposed in Mr Bihannic’s affidavit which differs from the figure of $17,809.23 as proposed initially in G2K Carpentry’s notice of appearance.
Roberts disputes the alleged debt on the basis that it has terminated the contracts and issued notices for liquidated and general damages.
Grounds for the winding up application
Section 459C of the Act relevantly provides:
459C Presumptions to be made in certain proceedings
(1) This section has effect for the purposes of:
(a) an application under section 234, 459P, 462 or 464; or
…
(2)The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:
…
(b)execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied …
In this application Drummond now seeks to rely on:
(a)the Warrant which has been allegedly returned unsatisfied on 6 September 2024; and
(b)the Westpac Garnishee Order, which has been allegedly returned partly unsatisfied on 8 July 2024.
The winding up application was filed on 8 July 2024 the same day as the filing of the Westpac Garnishee Order and each of the alleged events arose within the timeframe prescribed by the introductory segment of s 459C(2), i.e. ‘during or after the 3 months ending on the day when the application was made’.
This expression was the subject of consideration and explanation in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd39F[40] where the High Court held s 459C(2) applied to events which occurred any time after the day on which an application under s 459P of the Act is filed:40F[41]
The temporal focus of s 459C is upon a period which commences three months before the date of the application for winding up, but the period does not terminate upon the date on which the winding up application commences. The question for a Court is whether any of the identified events has occurred at any time after the commencement of the relevant period. The Act does not require any further consideration of whether the event persists at the date of the application for winding up.
If one of any of the specified events has occurred at any time during the identified period, the Court must presume that the Company is insolvent.
[40](2008) 232 CLR 314 (Gleeson CJ, Kirby, Hayne, Crennan and Kiefel JJ).
[41]Ibid 326 (Gleeson CJ, Hayne, Crennan and Kiefel JJ).
I note that, in its written submissions, Drummond expressed the intention to seek leave from this Court at the final hearing to amend the originating process. The amendments appended to those written submissions foreshadowed that only the Westpac Garnishee Order would be relied on, instead of the NAB Garnishee Order. The Warrant was not mentioned in those proposed amendments.
At the final hearing of the application however, Drummond did not expressly seek leave to amend the originating process. Nevertheless, it became apparent that both parties assumed in their submissions and the arguments addressed to the Court that Drummond would be relying on the unsatisfied return of both the Warrant and the Westpac Garnishee Order. There was also mention in passing in submissions to a garnishee order issued on behalf of Earthwood Villa, formerly a supporting creditor.
Both the Warrant and the Westpac Garnishee Order rely upon the Statutory Interest Debt arising from the interest accruing on the Judgment Debt obtained in the County Court.
Section 73(4) of the County Court Act provides:
(4) Every judgment debt shall carry interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the time the judgment is entered or the order made or, in the case of costs to be assessed, from the assessment of those costs or such other day as the court orders, and the amount of the interest shall be stated in the body of and may be seized under a warrant of execution on such judgment.
The application to the County Court for the Warrant sought recovery of the Statutory Interest Debt and the Warrant was issued on that basis. The Westpac Garnishee Order also sought recovery of the Statutory Interest Debt.
The Warrant
Roberts accepts that the Warrant is execution on a judgment within the meaning of s 459C(2)(b) of the Act and also concedes that a warrant of seizure and sale is plainly a warrant of execution contemplated by r 68.01 of the County Court Civil Procedure Rules 2018 (Vic) (‘County Court Rules’), to which statutory interest applies by virtue of s 73(4) of the County Court Act.
The second element of the legislative language in s 459C(2)(b) of the Act, however, being ‘returned wholly or partly unsatisfied’, is contested.
Drummond’s Submissions
Drummond contended that the evidence demonstrated that the Warrant had been returned unsatisfied.
Drummond focused on the specific wording of Form 68A, the form prescribed by r 68.08 of the County Court Rules for a warrant of seizure and sale. Drummond submitted that there was no requirement in the form for the Sheriff to ‘return’ the warrant to the court of issue. Form 68A states as follows:
TO THE SHERIFF:
In respect of the judgment
…
Pay the amount so levied … And Indorse on this warrant immediately after you have performed all your obligations under it a statement of date, time and place at which you have executed or attempted to execute the warrant and the results of the execution and send a copy of the statement to [judgment creditor].41F[42]
[42](Emphasis added).
Drummond submitted that the Field Report (Annexure A of these reasons), which was sent to Merton Lawyers, satisfied all the requirements prescribed by the County Court Rules and Form 68A. The Warrant therefore, must be said to have been ‘returned’ within the meaning of s 459C(2)(b).
Drummond’s submissions made reference to the distinction between ‘unexecuted’ and ‘unsatisfied’, contending that the language used in the Field Report extracted below does not preclude a conclusion that the Warrant has been returned unsatisfied:
Numerous calls have been made to the warrant address and no contact could be made with the judgment debtor [i.e. Roberts] or seizable goods located. No further action will be taken pending your further instructions for continued execution and payment of fees.
Roberts’ Submissions
While accepting the Warrant is an execution or other process, Roberts disputes that the Warrant has been ‘returned’ and was ‘unsatisfied’.
Roberts contended that the meaning of ‘return’ in the present context means the return to the court of issue, citing Guss v Deputy Commissioner of Taxation (‘Guss’)42F[43] in support of such proposition:43F[44]
Further, that warrant and the endorsement (or associated report) are to be returned to the court of issue, in this case the Magistrates’ Court. That is what is envisaged by the concept of return.
[43][2015] FCA 841 (‘Guss’).
[44]Ibid [133] (citations omitted).
Roberts observed that the Field Report was returned to the office of Merton Lawyers, the solicitors of Drummond, and not to the County Court which issued the Warrant.
Roberts submitted even if there was a ‘return’, it was not returned ‘unsatisfied’ as distinct from ‘unexecuted’. In this regard, the Field Report contains no statement that the Warrant was returned unsatisfied; provides no specific details of the attempts to levy execution against Roberts (as distinct from the contents of a standard form ‘Field Report’); and makes express reference to the prospect of the Warrant’s ‘continued execution’.
In its submissions, Roberts referred to the distinction between ‘unsatisfied’ and ‘unexecuted’ in the context of s 459C(2)(b) of the Act, discussed by Farrell J of the Federal Court in Haridemos v ACT Builders Pty Ltd (‘Haridemos’):44F[45]
[45](2017) 250 FCR 254, 266 (Farrell J) (‘Haridemos’).
[43] ACT Builders submitted that the attempts to execute the writ in Lewis v Lamb are relevantly the same as in this case and the Court should find that the attempts to execute the writ were insufficient to satisfy the notion of a “genuine attempt”. Further, the writ was returned “unexecuted” because:
(a) The attempts to execute the writ were perfunctory …
…
[44] Had the proceedings concerned whether an act of bankruptcy had occurred under s 40(1)(d)(ii) of the Bankruptcy Act, the circumstances of this case would be the same in all relevant respects as those in Lewis v Lamb. I would find that the writ was not returned “unsatisfied” but, rather, the writ was returned “unexecuted”. This is because:
(a) There is no statement in Sergeant Riley’s letter of 31 October 2016 or in the Notice of Non-Levy that the writ was returned unsatisfied. The Notice of Non-Levy refers to an “execution attempted” at the Queanbeyan address and of an attempt to contact the judgment debtor. It states that the property appears to be vacant and a named person responded to a card left at the premises stating that she bought the property and is the only occupant. The document invites further information so that additional attempts at execution might be undertaken. Sergeant Riley states specifically that the Notice does not imply that the judgment cannot be satisfied. While the Court is not bound by the Sheriff’s view as to whether or not a writ is “unsatisfied”, these factors are all indicative that the writ has not been executed, and the Court is entitled to take them into account.
(b) These circumstances are far removed from those in Guss v DCT, in which the extrinsic evidence demonstrated contact by the Sheriff with the debtor who denied having any property which would respond to the writ so that the Court found that the writ had been returned unsatisfied. They are also removed from the circumstances in Re Ousley, in which the Sheriff’s report referred to an unsuccessful payment demand made by the Sheriff on the debtor, where the Sheriff was refused peaceful entry and was unable to locate “external assets of value (including vehicle)” capable of being seized. The debtor also denied owning a vehicle. The endorsement on the writ was that the bailiffs “were unable to find any real or personal estate upon which to make a levy”, leading to the conclusion that the writ was unsatisfied. In saying this, I am not importing the requirement which applied under prior enactments of s 40(1)(d)(ii) of the Bankruptcy Act (referred to by Knox CJ in King’s Case at 153) to the effect that the Sheriff has called upon the debtor to satisfy the judgment which the Sheriff is executing and for the debtor to have failed to do so. Rather, these cases indicate the existence of evidence obtained before the writ was returned which established that there were no assets available on which to levy execution.
(c)The Sheriff did not comply with r 39.18 of the UCPR and I respectfully adopt the opinion expressed in Lewis v Lamb at [58] that this is significant, although I do not consider that that fact need be determinative in a different factual context. It is also significant, though not determinative, that the Sheriff advised that the Notice of Non-Levy could not be used as the basis of an affidavit required by r 39.21(1)(b).
(d)Ms Haridemos did not direct the Sheriff to any other address in New South Wales at which to execute the writ and no further attempt at levy was made by the Sheriff. Before Sergeant Riley was requested to return the writ, the only enquiry Ms Haridemos’ lawyers made which might have yielded information to found a further attempt at levying execution was a letter from Ms Bridgewater to Lillas & Loel dated 17 August 2016. However, Mr Loel, as ACT Builders’ solicitor, had no obligation to respond to that enquiry unless instructed to do so by his client. Mr Loel’s failure to respond to Ms Bridgewater’s request does not have the same character as the information obtained by the Sheriff from the debtor in the circumstances considered by Beach J in Guss v DCT or by Heerey J in Re Ousley.
Roberts referred to the Field Report where the Sheriff’s representative checked an option under the segment headed ‘No Contact/Further Information Required’. It was submitted that this indicates that the Warrant was unexecuted as opposed to unsatisfied. Roberts submitted that these circumstances were analogous to those the subject of discussion in Haridemos, where the Sheriff’s representative in that case was unable to contact the debtor and invited further information. Roberts contended that had the Sheriff’s representative chosen to complete the segment headed ‘Debtor contact’, that might constitute the Warrant being returned ‘unsatisfied’.
Consideration
The evidence in respect of the Warrant is brief and is extracted above. The document reporting the outcome of the Sheriff’s attempts to execute it, the Field Report, is annexed to these reasons. It seems clear that the Warrant came within the definition of ‘execution or other process’ issued on a decree or order of an Australian Court and so much is accepted by Roberts. The provisions of s 73(4) of the County Court Act contemplates a ‘warrant of execution’ being deployed to recover ‘such judgment’ including interest running on the judgment.
The question that then arises is whether the events that have occurred with respect to the execution of the Warrant are such as to constitute the Warrant being ‘returned wholly or partly unsatisfied’.
The County Court Rules themselves do not prescribe what the Sheriff’s responsibilities are when going about the execution and return of a warrant of execution, however, Form 68A, the form prescribed by r 68.08 of those rules for a warrant of seizure and sale, extracted above, does not require the Sheriff to ‘return’ the Warrant to the court of issue as required by some jurisdictions for some types of execution. Rather, Form 68A requires a copy the statement to be sent to the judgment creditor. I do not accept Mr McAloon’s submission that the Warrant was required to be returned to the court by which it was issued.
The Field Report contains a statement of the several dates, times and place on which the Sheriff’s representative ‘executed or attempted to execute the warrant’ and also reports the results of the attendances at the subject premises. As required, Drummond, as the judgment creditor, was provided with a copy of the ‘statement’, i.e. the Field Report. The Field Report met the requirement in respect of stating details of the execution or attempted execution of the Warrant as r 68.04 requires.
Assaf observed in his work Assaf’s Winding Up in Insolvency in relation to the presumption under s 459C(2)(b):45F[46]
There is no definition of ‘execution’ or ‘other process’ in the Corporations Act. That said, the two expressions are well understood in the context of the law relating to the enforcement of judgments and in bankruptcy law.
[46]F Assaf, Assaf’s Winding Up in Insolvency (LexisNexis, 3rd ed, 2021) 71-2.
The equivalent provision in the Bankruptcy Act1966 (Cth), s 40(1)(d)(ii), provides that a debtor commits an act of bankruptcy if ‘execution has been issued against [the debtor] under process of a court and has been returned unsatisfied’.
In this regard, in Re Johnson; Ex parte Greendale Engineering and Cables Pty Ltd (‘Re Johnson’),46F[47] Gibbs J with reference to the legislative precursor to s 40(1)(d)(ii), s 52(e) of the Bankruptcy Act 1924-1952 stated:47F[48]
In the context of s. 52 (e) the word ‘returned’ is not used simply in the sense of ‘sent back’. The word ‘return’ has of course a special and well-known sense in relation to a writ of execution. A return to a writ in the legal sense is the written report of the sheriff or his officer as to how far he has been able to carry out his instructions, and there have been a number of cases in which it has been recognized that ‘returned’ in s 52(e) refers to the written return of the sheriff or his officer --- King v. Commercial Bank of Australia Ltd; Re Huntington; Ex parte Warringah Shire Council; Re Worsley; Ex parte Gill. In the present case the writ in effect directed the bailiff to seize and sell the goods and lands of the debtors, and the writ would have been returned unsatisfied if the bailiff had reported that there were no goods or lands of the debtors within the bailiwick the proceeds of which were available to satisfy the writ. It was not a proper return to say that the premises to which the bailiff went were shut and that the bailiff had no response, for that did not mean that there were no goods in those premises available for execution. As long ago as 1841 it was held that a return to the effect that the premises of the defendant were so barricaded that the sheriff was unable to ascertain whether the defendant had goods within the bailiwick on which a levy might be made was a bad return and that the sheriff should have stated either that the defendant had goods or that he had none (Munk v. Cass). An act of bankruptcy within s 52 (e) is only committed if there has been a proper return, and there has been no proper return in the present case.
[47](1967) 11 FLR 335 (Gibbs J) (‘Re Johnson’).
[48]Ibid 339 (citations omitted).
Drummond contends that the general principle, that a court will not order a winding up where a debt is bona fide disputed on some substantial ground, does not apply to an insolvent company, and it cannot apply in the context of the current Part 5.4 of the Act where the statutory presumption of insolvency operates.65F[66]
[66]ASIC v Lanepoint Enterprises Pty Ltd (2011) 244 CLR 1, [29]–[30].
Drummond submits that Roberts has put no evidence before the Court which could logically be said to provide a compelling reason why the Court should exercise its discretion. To the contrary, the existence of the supporting creditors and the failure of Roberts to show any revenue, let alone evidence of assets it owns in Victoria or Australia, should provide the Court with comfort in making a winding up order.
In relation to the issue of ‘abuse of process’, Drummond submits that:
(a)The winding up proceeding is predicated on the admitted failure of Roberts to pay the interest component of the County Court Judgment. Roberts only paid that debt once the winding up proceeding was on foot. Further, the Judgment Debt at all times ‘carried’ interest and Roberts was aware of the claim for the interest component, as this was expressly identified in the schedule to creditors’ statutory demand.
(b)Roberts engaged in tactics and stratagems to obfuscate, delay and or avoid payment of debts due to its subcontractors. It is uncontested that Roberts did not make payment of the interest component of the Judgment Debt until after the winding up proceeding was issued. Supporting creditors to this application are also owed at least $810,755.62 for judgment debts, adjudicated amounts, statutory debts and tax invoices. Roberts purports to use contractual liquidated damages to refuse to pay those debts.
(c)Roberts’ submissions that Drummond ‘eschewed conventional recovery’ in attempting to recover the accrued interest on the County Court Judgment is baseless. The steps undertaken by Drummond have singularly been directed at recovering the debts owed to it by Roberts including the Judgment Debt, the Statutory Interest Debt and the associated costs of executing judgment. Drummond employed straightforward and direct recovery methods prescribed under the relevant court rules and acts. The lawful recovery methods employed by Drummond all find a basis in statute. This is not a case where the actions of Drummond were designed to obtain a collateral advantage beyond what the law offers.66F[67]
(d)Roberts has intentionally made no effort to positively prove solvency. In light of this strategy, the Court ought to infer that the decision not to adduce evidence to positively prove solvency supports a finding that Roberts cannot do so. In the circumstances, the Court should not exercise its discretion to allow an insolvent company to continue to trade. Further, this is a case in which there is a preponderance of supporting creditors that are subcontractors that are clearly not being paid by Roberts for their work in the construction of the Two Birds project. The Court should ensure that the continuing risk that Roberts poses to current and potential future creditors comes to an end.
(e)The Court’s discretion should be directed to the public interest, which normally requires that an insolvent company be wound up to prevent it from incurring further debts. The presumption of insolvency has arisen and has not been rebutted. The matters submitted by Roberts, even if they are taken at their highest, cannot outweigh the public policy considerations in ensuring further harm from insolvent trading is not inflicted on the Victorian economy.
[67]With reference to the criterion in Williams v Spautz (1992) 174 CLR 509.
Drummond also submits other relevant matters including:
(a)Roberts owns no known property in Australia and has no known income. It admits it may owe its own principal approximately $1.68m in contractual liquidated damages.
(b)Roberts remains liable to Drummond for untaxed costs orders in the approximate sum of $125,000.00 arising from the judicial review proceeding, which is a contingent or prospective liability of Roberts. A proper quantification of that estimate and demand for payment has been provided to Roberts, but no response has been received.
(c)Roberts owes the supporting creditors to this application and that amount is increasing week by week as Roberts continues to refuse to pay debts. The evidence filed in support of those creditors establishes a pattern of behaviour on the part of Roberts in which it seeks to use contractual liquidated damages to exert commercial pressure on its subcontractors at the Two Birds project so that they do not pursue debts properly owed to them.
(d)Drummond filed an application seeking security for its costs in the County Court proceeding on the basis that it considered there was a real risk that Roberts would not be able to meet an adverse costs order should it be unsuccessful in the proceeding.
Roberts Submission
In its submissions Roberts emphasises the unconventional manner in which Drummond conducted the proceedings and highlights that Drummond eschewed conventional recovery of a relatively modest, quantified debt (the Statutory Interest Debt), which was paid on 7 August 2024, prior to the first return of the application, in favour of:
(a)taking steps designed to trigger a statutory presumption of insolvency (namely, registering a Judgment Debt in the NSW District Court and then obtaining garnishee orders to be issued to four banks, including banks with which the debtor kept no accounts capable of being garnished), all without providing notice to the debtor and a time when the claimed liability was specified in a statutory demand that was the subject of an extant proceeding in this Court;
(b)upon believing that a statutory presumption may have arisen, threatening Roberts with the prospect of making a winding up application while obscuring the premise of the foreshadowed application and demanding payment of a much larger sum on behalf of multiple parties claiming to be creditors; and
(c)delaying service of the application, once filed, on the defendant while it provided a copy to a non-party.
Roberts urges the Court to exercise its powers under pt 5.4 of the Act to control and prevent conduct that is an abuse of process.67F[68] Roberts further invokes the observations made by the Court of Appeal of Western Australia in Createc Pty Ltd v Design Signs Pty Ltd:68F[69]
Adopting the criterion from Williams v Spautz (1992) 174 CLR 509; 107 ALR 635; [1992] HCA 34 (Williams), suggested by Gummow J in David Grant, there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers — such as the application of pressure to compel payment of the disputed debt.
[68]David Grant & Co Pty Ltd (receivers appointed) v Westpac Banking Corporation (1995) 184 CLR 265, 279 (Gummow J); see also Owen-pearse v Lander Land Co Pty Ltd [2018] FCA 2077, [71]–[77].
[69](2009) 71 ACSR 602, 611 (Martin CJ).
Roberts contends that Drummond took steps to issue and serve the NAB Garnishee Notice (and subsequent garnishee notices to other banks) for an improper and collateral purpose of the kind described in Williams v Spautz.69F[70] Roberts contends that the purpose of Drummond and its solicitors was not to secure payment of the Statutory Interest Debt, which was never demanded from Roberts, but, rather, to contrive a premise to threaten and then, if the demands were not met to the satisfaction of alleged creditors (represented by the same solicitor and with which Roberts has disputes), commence a winding application against Roberts (apparently in anticipation that multiple parties claiming to be creditors would support the application, once filed).
[70](1992) 174 CLR 509.
Roberts refers to Re Huizhong Investment Group Pty Ltd,70F[71] where Black J stated: ‘it may constitute an abuse of process to serve a creditor’s statutory demand in respect of a debt that is plainly known to be disputed’.71F[72] It is argued that by extension, it is an abuse of process to procure, on an ex parte basis, and then seek to rely upon, the issue of garnishee notices in respect of an alleged debt where:
(a)the debtor has not been afforded a proper opportunity to pay the debt (including where the quantum of the debt has not been disclosed);
(b)the subject debt (in a different amount) is the subject of statutory demand that is the subject of an extant court proceeding filed by the debtor;
(c)the debtor does not hold accounts with some of the garnishees, such as would enable an amount to be garnished (despite the creditor’s director having given sworn evidence to the contrary in order to obtain the garnishee notices); and
(d)there is a genuine prospect that, upon details of the debt being provided, the debtor will satisfy the debt (as occurred in the present case, when payment of the unsatisfied portion of the Statutory Interest Debt was made by Roberts in advance of the first return of this application).
[71][2018] NSWSC 390.
[72]Ibid [30].
Roberts asserts that to the extent that a debt of Roberts to Drummond has been quantified and was properly incurred, it was paid in full on 7 August 2024. The amounts which remain comprise of the costs of issuing the Warrant of $1,195.30 and the fees of the Sheriff being $218. Roberts emphasises the modesty of these figures. It was submitted that in Bloc where Mossop J decided to wind up the defendant, there was a judgment debt of $2.35 million which was the basis of the plaintiff’s standing.
Roberts also maintains offsetting claims against Drummond, including the entitlement to be paid the costs of the set aside application and the sum claimed in the Roberts’ County Court proceeding.
Roberts submits that even if the court is not satisfied that Drummond’s conduct constituted an abuse of process, given the circumstances detailed above, the court should nevertheless exercise its discretion to decline to make an order for the winding up of Roberts.
Finally, Roberts submits there are obvious policy reasons that weigh heavily against the Court accepting Drummond’s submission as to the existence of a statutory presumption of insolvency. The outcome advocated by Drummond would mean that any creditor capable of securing a garnishee order addressed to any bank that, once served on the bank, does not result in payment of the subject sum would, regardless of a demand for payment of that sum not having been made to the debtor, be entitled to rely upon a resulting presumption in a winding up proceeding that the debtor is insolvent. Similarly, if insolvency could be established through the Sheriff having obtained a warrant attempting but failing to contact the debtor, that outcome would confer significant and unwarranted commercial leverage on the creditor. The debtor would be confronted with the cost, inconvenience and reputational risk associated with needing to establish its solvency.
Consideration
Section 467(1) of the Act provides for the Court’s power on hearing an application for winding up. It provides:
467 Court’s powers on hearing application
(1) Subject to subsection (2) and section 467A, on hearing a winding up application the Court may:
(a)dismiss the application with or without costs, even if a ground has been proved on which the Court may order the company to be wound up on the application; or
(b) adjourn the hearing conditionally or unconditionally; or
(c) make any interim or other order that it thinks fit.
Assaf observes:72F[73]
that the authorities establish that as a general rule of a creditor who cannot obtain payment is, as between itself and the company that owes the debt, entitled to a winding-up order as a matter of right (ex debito justitiae).
[73]Assaf [10.72].
However, the author observes that this is only a ‘prima facie right’ and it is necessary to accommodate the undoubted discretion explicitly provided for in s 467(1)(a). Reference was made to the observations of McHugh JA in FAI Insurances Ltd v Goldleaf Interior Decorators Pty Ltd (No 2)73F[74] as to the width of that discretion.
[74](1988) 14 NSWLR 643, 660.
In Bungey v Magnate Projects, 74F[75] Austin J observed: 75F[76]
Under s 467(1) of the Corporations Act, on the hearing of a winding up application (including an application for winding up in insolvency) the court has a discretion. It may dismiss the application with or without costs, even if the ground has been proved, or adjourn the hearing conditionally or unconditionally, or make any interim or other order that it thinks fit. The terms of the subsection make it clear that the applicant for winding up is not entitled to an order once the grounds are made out, and the court always has a discretion: Expile Pty Ltd v Jabb’s Excavations Pty Ltd [2003] NSWSC 699 at [57] per Campbell J. The court's attention will be directed to the public interest, which normally requires that an insolvent company be wound up to prevent it from incurring further debts. Counsel for Magnate referred me to two decisions where a winding up order was refused partly on the basis that the order would not achieve anything for the creditors, as there were insufficient funds even to pay for the costs of liquidation, although there were valuable income-producing assets (Re St Thomas’ Dock Company (1876) 2 ChD 115 and Re Chapel House Colliery Company (1883) 24 ChD 259). But the circumstances of those cases were unusual. Normally the court exercises its discretion to wind up a company in insolvency once insolvency is proved or a presumption of insolvency is established and not rebutted - but nevertheless, the discretion remains and is available to be exercised in an appropriate case.
[75](2006) NSWSC 734.
[76]Ibid [44].
There are a number of features of this matter which, to my mind, result in a conclusion that I should exercise my discretion under s 467(1)(a) not to make a winding up order, despite the finding I have made in respect of the presumption of insolvency arising from the Westpac Garnishee Order.
The evidence demonstrates that Drummond and Roberts are obviously locked in a most acrimonious and protracted dispute in respect of the project. Over the course of time, Drummond has sought to recover amounts owed to it by resort to the statutory demand mechanism. It has had no success in pursuing that means of establishing a presumption that Roberts is insolvent in order to ground a winding up application. Indeed, the second statutory demand was set aside by consent and an order made that Drummond pay Roberts’ costs.
It seems clear that the second statutory demand was withdrawn and Drummond consented to an order that it pay Roberts’ costs because its prospects of upholding the second statutory demand were forlorn by reason that Roberts would be able to establish offsetting claims which would extinguish the claim remaining owing on the demand for the Statutory Interest Debt. After the payment of the court held funds it was only the claim for the Statutory Interest Debt which remained and there did not appear to be any evidence that Drummond made a claim for it after the withdrawal of the demand.
During the period that the second statutory demand was on foot, and when compliance with a second statutory demand had been extended by operation of the statute pending the determination of the application to set it aside, Drummond went about the process of establishing a presumption of insolvency by operation of s 459C(1)(b). It commenced that exercise by obtaining the Warrant in the County Court of Victoria and by obtaining garnishee orders against all of the major trading banks, attaching any funds standing to Roberts credit. Two of the banks, CBA and ANZ, held no accounts for Roberts at all.
Although Roberts had credit cards, loans, joint accounts or trust accounts with NAB, it had no accounts which were susceptible of attachment by a garnishee order. Despite Drummond’s solicitors being informed by NAB of the facts which would result in a conclusion that there was no possibility of execution on the NAB Garnishee orders and therefore the establishment of a presumption on that basis. The solicitors proceeded a week later to issue this winding up application, relying on a presumption of insolvency arising from the NAB Garnishee Order.
The process of obtaining the Warrant and the garnishee orders was conducted without notice to Roberts and Roberts’ evidence is that no specific demand was made for the amount of the Statutory Interest Debt after the withdrawal of the second statutory demand in order that Roberts could avoid such presumption arising by payment of that debt.
Drummond does not explain why it made no demands for the Statutory Interest Debt before embarking on the process of obtaining the Warrant and the garnishee orders.
While the County Court Rules and the UCPR did not require Drummond to have given Roberts notice that it was in the process of obtaining the warrant and the garnishee orders, it seems clear that Drummond adopted this process in order that it could embark on the process of establishing a presumption of insolvency under s 459C(1)(b) without giving Roberts the opportunity to discharge the debt and avoid the establishment of a presumption. The Statutory Interest Debt was a relatively modest one and Roberts paid it before the first return of the winding up application.
I consider Drummond went about the process obtaining the warrant the garnishee orders, in order to obtain presumptions of insolvency under the s 459C(1)(b) because it knew it could not do so by maintaining a statutory demand by reason that the demand would be set aside because of Roberts offsetting claims.
Of course a presumption of insolvency has in a technical sense been established, but I think it is relevant in the exercise of the Court’s discretion under s 467(1)(a) to have regard to the circumstances of how that presumption arose. As has been perhaps laboured, the presumption in respect of the Westpac Garnishee Order was established without notice to Drummond. It was a comparatively modest claim and met before the first return of the winding up application. That does not of course prevent the Westpac Order presumption from being the basis of the winding up application but, by itself, having regard to the circumstances it was established, it could not be regarded as a reliable indicator of insolvency. I also note that while Drummond contends that it has a contingent claim for costs of the order of $150,000, it did not bring this application in that capacity. Rather, it relied for its standing on very modest debts totalling $1,413.30.
My view concerning Drummond’s approach to this matter is I think supported by the 2 July email. In my opinion, the statement by Drummond’s solicitors ‘that they were instructed that their client had become aware of the presumptions’ when it was those solicitors themselves that had set in train the process of setting up the establishment of such presumptions is disingenuous. That email was cast in threatening terms and made after the events Drummond’s solicitors considered had given rise to the presumptions and were designed to threaten Roberts with the winding up application which, indeed, followed shortly thereafter. The 2 July email also observed that the other proceedings in court would ‘yield to the winding up application’, it seems a reference to the Roberts’ County Court Proceeding. Roberts was given less than 24 hours by the 2 July email to come to terms with Drummond.
I note that in Haridemos, Farrell J, after concluding that a presumption of insolvency of the same type being considered here had not been established, decided that if she was wrong on that issue that she would, nonetheless, exercise the discretion not to make a winding up if it was considered that a presumption did exist. She observed:76F[77]
If I am wrong in that conclusion, as a matter of discretion I would not make the order that ACT Builders be wound up in the circumstances of this case, even though ACT Builders conceded that it has not submitted evidence on the basis of which the presumption of insolvency would be rebutted. The writ which Ms Haridemos seeks to enforce is for an amount approximately 10 times the amount of the known net indebtedness of ACT Builders to Ms Haridemos based on the awards made by NCAT. It is not clear what the true position will be when the respective costs orders made by NCAT are assessed and judgment entered for the assessed amount. Until that time, Ms Haridemos’ attempts to have ACT Builders wound up are misconceived.
[77]Haridemos 268 (Farrell J).
I observe that a feature of the use of s 459C(2)(b) may enable a creditor to contend that a presumption of insolvency arises if, by chance, in the process of obtaining garnishee orders it comes across an account of the debtor with a minimal balance not sufficient to satisfy a judgment in full. This may be perhaps because the account is no longer used by the debtor. Upon the garnishee order being returned partly unsatisfied, the creditor could potentially rely on that as a basis for contending that the debtor should be presumed insolvent. This, to my mind, in the context of establishing a presumption of insolvency, is unsatisfactory. Contrast this with the statutory demand regime, which enables agitation of disputes and offsetting claims before the presumption of insolvency can be arrived at.
Conclusion
In my opinion, the application should be dismissed and I will hear the parties on the question of costs.
Annexure A: Field Report on the Warrant
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