Re Vangory Holdings Pty Ltd - [2015] NSWSC 1809

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Vangory Holdings Pty Limited [2015] NSWSC 1809
Hearing dates: 1, 2, 9 September 2015
Date of orders: 18 September 2015
Decision date: 18 September 2015
Jurisdiction: Equity - Corporations List
Before: Brereton J
Decision:
Originating process dismissed; first defendant’s interlocutory process dismissed.

Catchwords:
CORPORATIONS – winding up – winding up in insolvency – failure to comply with creditor’s statutory demand – presumption of insolvency – whether plaintiff entitled to rely on presumption of insolvency – (CTH) Corporations Act 2001, s 459Q – requirement that affidavit verifies debt and complies with rules – specificity of affidavit – whether s 459E affidavit cures defect in s 459Q affidavit – whether defect occasions substantial injustice – role of s 459Q(3) – where doubt as to existence of debt – where s 459Q(3) affidavit could not have reasonably and properly been made – standing of plaintiff to bring proceedings – whether plaintiff is creditor of defendant – where plaintiff is judgment creditor of defendant – where judgment debt arose after filing of originating process – requirement that leave be given for contingent creditors to bring proceedings – no proof of actual insolvency.

CORPORATIONS – winding up – just and equitable ground – standing as contingent creditor – where standing arose after originating process filed – where evidence of corporate governance delinquencies – where company not presently trading – where party seeking winding up has no real interest in internal management.
CORPORATIONS – winding up – failure to comply with creditor’s statutory demand – Court’s discretion to dismiss proceedings – abuse of process – no evidence of impropriety or collateral purpose in bringing proceedings – deliberate misuse of statutory demand procedure where no debt could conceivably be owing – RH Mortgage Corporation Ltd v Kerry Ann Properties Pty Ltd [2011] NSWSC 298 – inapplicability of principle to mistaken belief in existence of debt.
Legislation Cited: (CTH) Corporations Act 2001, s 459A, s 459C, s 459E, s 459E(3), s 459G, s 459J(1), s 459P, s 459P(1), s459P(2), s 459Q, s 459Q(3), s 459S, s 462(2), s 462(4), s 465C, s 467A
Cases Cited: Australian Securities and Investments Commission v ABC Funds Managers Ltd [2001] VSC 383; (2001) 39 ACSR 443
Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) [2013] FCA 234
Bibby Financial Services v Wolf Industries [2004] NSWSC 134; (2004) 49 ACSR 45
Braams Group Pty Ltd v Miric [2002] NSWCA 417; (2002) 44 ACSR 124
Cedars Concrete Services v Maatouk [2006] NSWSC 884
Deputy Commissioner of Taxation v National Skin Institute (Aust) Pty Limited [2012] FCAFC 2; (2012) 200 FCR 146, 285 ALR 102
In the matter of DJG Securities Pty Ltd [2013] NSWSC 588
In the matter of Vangory Holdings Pty Ltd [2015] NSWSC 546
Leveraged Capital Pty Limited v Modena Imports Pty Ltd [2009] NSWSC 509
Main Camp v Australian Rural [2002] NSWSC 219; (2002) 20 ACLC 726
Radiancy (Sales) Pty…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2015] NSWSC 1809
Decision Date: 18 September 2015

CaseChat Overview and Summary

In the matter of Re Vangory Holdings Pty Ltd, the respondent sought to wind up the company on the grounds of insolvency and on the just and equitable ground. The case was heard in the Federal Court of Australia. The primary dispute revolved around the validity of the statutory demand issued by the applicant, the sufficiency of the affidavits provided, and the standing of the applicant to bring the winding-up proceedings.

The court was required to determine whether the applicant was entitled to rely on the presumption of insolvency following the respondent's failure to comply with the statutory demand. This hinged on the adequacy of the affidavits provided under sections 459Q and 459E of the Corporations Act 2001. The court also needed to consider the applicant's standing to bring the proceedings, particularly given that the applicant became a creditor of the respondent after the winding-up proceedings had been initiated. Furthermore, the court had to evaluate whether the proceedings constituted an abuse of process, despite the absence of evidence of impropriety or a collateral purpose.

The court held that the applicant was not entitled to rely on the presumption of insolvency as the affidavit under section 459Q did not sufficiently verify the debt. Although the affidavit under section 459E cured the defect in the section 459Q affidavit, the defect did not occasion substantial injustice. The court found that the applicant, as a judgment creditor, had standing to bring the winding-up proceedings despite the debt arising post the filing of the originating process. The court further determined that the proceedings were not an abuse of process, as there was no evidence of deliberate misuse of the statutory demand procedure, even if there was a mistaken belief in the existence of the debt.

The final orders of the court dismissed the application for winding up on the ground of insolvency but allowed the application to proceed on the just and equitable ground. The court also noted that the applicant should be granted leave to amend the pleadings to reflect the updated status of the creditor relationship.

Orders