Re VFS Group Pty Ltd (No. 2); (No. 2) - [2010] VSC 593

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST E
No. 0079 of 2010

IN THE MATTER of VFS GROUP PTY LTD (ACN 121 880 751)

VFS GROUP PTY LTD (ACN 121 880 751)	Plaintiff
v
BM2008 PTY LTD (IN LIQUIDATION)(ACN 005 762 685)	Defendant

LIST E
No. 0080 of 2010

IN THE MATTER of PERTH FREIGHT LINES PTY LTD (ACN 129 516 990)

PERTH FREIGHT LINES PTY LTD (ACN 129 516 990)	Plaintiff
v
BM2008 PTY LTD (IN LIQUIDATION)(ACN 005 762 685)	Defendant

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	29-30 November 2010
DATE OF JUDGMENT:	16 December 2010
CASE MAY BE CITED AS:	Re VFS Group Pty Ltd (No. 2); Re Perth Freight Lines Pty Ltd (No. 2)
MEDIUM NEUTRAL CITATION:	[2010] VSC 593

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CORPORATIONS – Application to set aside a statutory demand –– Whether offsetting claim – Whether “some other reason” - Alleged cross-claim arising by virtue of an entitlement to share in a distribution of company surplus upon completion of a voluntary winding up – Entitlement accruing under a transfer of shares - Whether transfer of shares void under s 493A of the Corporations Act 2001 (Cth) – Whether equitable interest in distributable surplus– Assets of company said to include causes of action against former directors and related company – Corporations Act 2001 (Cth) ss 459G, 459J, 493A – Supreme Court (Corporations) Rules 2003 r 16.5(1) – Supreme Court (General Civil Procedure) Rules 2005 r 77.06(7) – Corporations Regulations 2001 (Cth) 5.6.70

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. D H Denton SC with Ms. P Djohan	Belleli King & Associates
For the Defendant	Mr. G T Bigmore QC with Mr. D C Harrisson	Cooper Mills Lawyers

HER HONOUR:

A. Introduction

On 12 July 2010 Efthim J dismissed the plaintiffs’ applications under s 459G of the Corporations Act2001 (Cth) (“the Act”) for orders setting aside statutory demands served on them by the liquidator of the defendant company (“BM”).[1] The plaintiffs have appealed the orders of Efthim AsJ. The appeals have been heard together as they arise out of the same facts and the issues are the same.
[1]Perth Freightlines Pty Ltd v BM2008 Pty Ltd (Unreported, Supreme Court of Victoria, Efthim AsJ, 12 July 2010).

The statutory demands were for payment of an amount of $2,577,072.49 that the plaintiffs were ordered by the Supreme Court of Victoria to pay BM. The order was made in enforcement of a final award given in an arbitration between the parties. BM had sold its business to Perth Freight Lines Pty Ltd (“PFL”)[2] pursuant to a Business Acquisition Agreement signed on 25 June 2008. PFL’s performance of the agreement was guaranteed by VFS Group Pty Ltd (“VFS”)[3] and PFL’s director, Steve Iliopoulos (“SI”). Although the sale of business settled in August 2008, PFL disputed its obligation to pay some of the monies due under the agreement, which remained outstanding because of the dispute. The dispute…

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: [2010] VSC 593
Decision Date: 16 December 2010

CaseChat Overview and Summary

VFS Group Pty Ltd was the subject of a statutory demand under section 459D of the Corporations Act 2001 (Cth). The applicant, VFS, sought to set aside the statutory demand on the basis of an offsetting claim, an alternative reason, or both. The dispute was heard by the Supreme Court of Victoria. The applicant contended that the demand was invalid due to an entitlement to share in the company's distributable surplus upon a voluntary winding up. This entitlement arose from a transfer of shares that the applicant argued was not void under section 493A of the Corporations Act 2001 (Cth). Additionally, VFS claimed that its assets included causes of action against former directors and a related company, which it argued should be considered in determining whether the statutory demand could be set aside.

The primary legal issues before the court were whether the applicant's claim constituted an offsetting claim or some other reason under section 459G(1) of the Corporations Act 2001 (Cth), and if so, whether these grounds were sufficient to set aside the statutory demand. The court had to determine if the applicant had an equitable interest in the distributable surplus, and if the transfer of shares was valid. Furthermore, the court needed to consider whether the assets claimed by VFS could be considered in the determination of the statutory demand's validity.

The court found that the applicant's claim did not constitute an offsetting claim under section 459J of the Corporations Act 2001 (Cth) because it did not arise from a debt or liability that could be set against the statutory demand. However, the court did consider whether the applicant had some other reason to set aside the demand. The court held that the applicant's entitlement to share in the distributable surplus was an equitable interest that could be taken into account under section 459G(1) of the Corporations Act 2001 (Cth). The transfer of shares was not void, and the applicant had an equitable interest in the surplus. Additionally, the court determined that the assets claimed by VFS could be considered in the determination of the statutory demand's validity. On these grounds, the court set aside the statutory demand.

The court ordered that the statutory demand issued against VFS Group Pty Ltd be set aside. The applicant was granted leave to appeal the decision to the Court of Appeal.

Orders