Sebie v Krejci

[2023] NSWCA 187

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Sebie v Krejci [2023] NSWCA 187

Hearing dates:

9 August 2023

Date of orders:

10 August 2023

Decision date:

10 August 2023

Before:

Gleeson JA; Basten AJA

Decision:

(1)   Refuse an extension of time for leave to appeal.

(2)   Dismiss the amended summons seeking leave to appeal filed 15 June 2023.

(3)   Dismiss the amended notice of motion filed 14 June 2023.

(4)   The applicants pay the liquidator’s costs in this Court.

Catchwords:

APPEALS — Leave to appeal — From order for winding up — From orders for possession of property and removal of caveat — From refusal of stay of writ of possession — Where presumption of insolvency based on failure to comply with statutory demand — Where extension of time to appeal required — Where no explanation for delay — Whether proposed appeal raises a fairly arguable case

Legislation Cited:

Corporations Act 2001 (Cth), ss 135, 198G, 201K, 459E, 459P, 465C

Supreme Court Act 1970 (NSW), ss 75A(8), 101

Vexatious Proceedings Act 2008 (NSW), s 8

Uniform Civil Procedure Rules 2005 (NSW), rr 6.3(f), 6.8, 6.8A, 7.1, 7.2, 14.4, 45.4

Cases Cited:

Accordent Pty Ltd v RMVL Investments Ltd [2009] SASC 248; (2009) 74 ACSR 17

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; [1981] HCA 39

Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118

House v The King (1936) 55 CLR 499; [1936] HCA 40

Masri Apartments Pty Ltd (in liq) v Perpetual Nominees Ltd [2004] NSWCA 471; (2004) 52 ACSR 136

One T Development Pty Ltd v Peter Krejci in his capacity as liquidator of ENA Development Pty Ltd [2023] NSWCA 120

In re the Will of Gilbert (1946) 46 SR (NSW) 318

Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369

Category:

Procedural rulings

Parties:

Robert Sebie (First applicant)
Ronald Jemmott (Second applicant)
One T Development Pty Ltd (Third applicant)
Peter Krejci in his capacity as liquidator of ENA Development Pty Ltd (First respondent)
Andy Vuong Duc Pham (Second respondent)
Thi Huong Giang Pham (Third respondent)

Representation:

Counsel:
M L Rose (Respondent)

Solicitors:
Robert Sebie (Self-represented – First applicant)
Ronald Jemmott (Self-represented – Second applicant)
ERA Legal (First respondent)
Andy Vuong Duc Pham (Self-represented - second and third respondents)

File Number(s):

2023/115895

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division / Common Law Division

Citation:

[2022] NSWSC 54 (Black J); [2022] NSWSC 1478 (Black J); [2023] NSWSC 162 (Ierace J)

Date of Decision:

21-22 October 2022; 15 August 2022; 27 January 2022; 6 January 2023; 28 February 2023

Before:

Black J; Ierace J

File Number(s):

2021/303982; 2022/32115

JUDGMENT

1. THE COURT: Before the Court is an application for leave to appeal from decisions of Black J in proceedings for the winding up of ENA Development Pty Ltd (ENA) and decisions of Black J and Ierace J in separate proceedings relating to matters arising in the winding up of ENA, specifically, possession of a strata title property at Homebush known as Unit 36 of which ENA was the registered proprietor (the Trust proceeding). An extension of time is also sought as the summons seeking leave to appeal was filed on 11 April 2023, approximately 15 months after the winding up order on 27 January 2022.

2. The applicants for leave are Mr Robert Sebie, Mr Ronald Jemmott and One T Development Pty Ltd (One T Development). Mr Sebie is not a director or shareholder of ENA. Mr Jermmott claims to be a director and shareholder of ENA. Mr Jemmott is a director of One T Development. Mr Sebie and Mr Jemmott are unrepresented. They both appeared at the hearing via AVL and advanced oral argument.

3. Mr Sebie and Mr Jemmott also seek a variety of interlocutory and final relief in an amended notice of motion filed 14 June 2023, including orders that Mr Jemmott be granted leave pursuant to s 198 (strictly s 198G) of the Corporations Act 2001 (Cth) to appear in these proceedings for ENA, and dispensation from Uniform Civil Procedure Rules 2005 (NSW) (UCPR), rr 7.1 and 7.2 to appear on behalf of One T Development.

4. This motion was filed without the leave of the Court, contrary to the order made by Williams J on 15 May 2023 in separate proceedings (2023/107422) against, amongst others, Mr Sebie, Mr Jemmott and One T Development, pursuant to s 8 of the Vexatious Proceedings Act 2008 (NSW) prohibiting them from instituting any proceedings in New South Wales against Mr Krejci in his capacity as liquidator of ENA, any current or former director, employee, agent or consultant of the liquidator’s firm, BRI Ferrier, and any current or former director, employee, agent or consultant of the plaintiff’s solicitors, ERA Legal:

… relating to or in any way connected with the winding up of ENA … without first obtaining leave of this Court, save that this order does not prohibit the first, second and third defendants, as the applicants for leave to appeal in Court of Appeal proceedings 2023/115895, from filing a notice of appeal in those proceedings strictly in accordance with the terms of any grant of leave to appeal that may be made by the Court of Appeal in those proceedings.

5. On 21 July 2023, the Registrar (i) made an order striking out from the amended summons seeking leave to appeal challenges to the decision of Williams J of 15 May 2023 and (ii) fixed for hearing on 9 August 2023 the application for leave to appeal, the question of an extension of time and the question of the corporate applicant being represented by a director.

6. The liquidator opposed the application for an extension of time, the grant of leave to appeal and the interlocutory and final relief sought in the amended notice of motion filed 14 June 2023. The second and third respondents are Mr and Mrs Pham, the plaintiffs in the winding up proceedings. Mr Pham appeared at the hearing via the AVL but did not seek to advance any oral argument.

7. It is convenient first to consider the merits of the application for leave to appeal before addressing the question of an extension of time.

Challenge to the winding up order

8. On 27 January 2022 Black J refused an application to adjourn the hearing of the winding up application and, after a contested hearing at which ENA appeared by counsel, made orders that ENA be wound up in insolvency and appointed Mr Peter Krejci as liquidator of the company: In the matter of ENA Development Pty Ltd [2022] NSWSC 54. Leave to appeal is required to challenge the order of the Court for the winding up of a corporation: Supreme Court Act 1970 (NSW), s 101(2)(n).

9. The winding up order was made on the ground that ENA was insolvent, based on the presumption of insolvency arising from non-compliance with a creditor’s statutory demand dated 28 September 2001 issued by Mr and Mrs Pham in the amount of $46,164, being a debt arising from orders of the Supreme Court made on 24 December 2020 in proceedings 2015/325044.

10. The applicants seek to submit that Black J erred in refusing ENA the adjournment it sought on 27 January 2023; erred in making a winding up order; and erred in appointing Mr Krejci as liquidator.

11. Aside from the difficulties that (i) none of the applicants was a party to the winding up proceedings, (ii) Mr Sebie is not a director or shareholder of ENA and (iii) One T Development is not a shareholder of ENA, leave to appeal should be refused for the following reasons.

12. First, the challenge to the refusal of the adjournment application made at the commencement of the hearing by Mr Dobbs, counsel for ENA, faces the difficulty that the Court exercises great restraint in interfering with an interlocutory decision on a matter of practice and procedure: In re the Will of Gilbert (1946) 46 SR (NSW) 318; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; [1981] HCA 39.

13. Insofar as that application was based on the earlier illness of Mr Jemmott and Mr Sebie, that did not prevent ENA briefing counsel to appear at the hearing and oppose the winding up application on several bases. Black J carefully considered and weighed the competing arguments for and against an adjournment in his ex tempore judgment given on 27 January 2022. The applicants did not identify any House v The King error in this discretionary decision: House v The King (1936) 55 CLR 499; [1936] HCA 40. No injustice has been identified.

14. Second, there is no merit in the contention that the creditor’s statutory demand should never have been issued as Mr and Mrs Pham were secured creditors. The premise of this contention is that the court order made on 1 April 2021 in proceedings No 2015/325044 that the debt of $46,164 be paid to Mr and Mrs Pham from funds that had been paid into court in those proceedings, had the effect of giving security to Mr and Mrs Pham over the funds held in court to the extent of that debt. That premise is doubtful, but it is not necessary to resolve that issue.

15. Contrary to the applicants’ submissions, a secured creditor is entitled to serve a statutory demand under s 459E of the Corporations Act (Accordent Pty Ltd v RMVL Investments Ltd [2009] SASC 248; (2009) 74 ACSR 17 at [48] (Doyle CJ)) and has standing under s 459P(1)(b) to apply for an order to wind up a company in insolvency: Masri Apartments Pty Ltd (in liq) v Perpetual Nominees Ltd [2004] NSWCA 471; (2004) 52 ACSR 136 at [47] (Beazley JA, Spigelman CJ and Mason P agreeing).

16. Contrary to the submission of Mr Jemmott in oral address characterising the order of 1 April 2021 as “mandatory” and having the effect of constituting payment of the debt owing to Mr and Mrs Pham, the order of 1 April 2021 did not have the effect of discharging the debt owing to Mr and Mrs Pham.

17. Third, the contention that ENA was not served with the creditor’s statutory demand was immaterial. The affidavit evidence before Black J established service of the statutory demand at the registered office of ENA as shown in a search of the records of the Australian Securities and Investments Commission (ASIC), being an address at the Entrance North. It is not to the point that the applicants say in their submissions that the registered office of ENA recorded in the records of ASIC was not up-to-date and not accurate. In any event, as Black J observed at [3], Mr Dobbs, who appeared for ENA, did not rely on any issue as to the service of the statutory demand in closing submissions.

18. Fourth, after noting at [14] that the directors of ENA believed that ENA was not insolvent (which can be taken to be a reference to Mr Jemmott who had given an affidavit that he was an alternate director of ENA), Black J also noted at [19] that ENA did not file grounds of opposition to give any indication that it sought to establish solvency: Corporations Act, s 465C. Black J found that there was no evidence that was capable of establishing ENA’s solvency, notwithstanding the time which had been allowed by the Court for the filing of that evidence. Insofar as the applicants seek to rely on additional evidence on the issue of solvency, that evidence relates to matters occurring before the hearing below which was available to the applicants by the exercise of reasonable diligence, and the applicants have not identified any special grounds for the receipt of that evidence on the proposed appeal: Supreme Court Act, s 75A(8).

19. Fifth, the contention that Mr Krejci should not have been appointed as liquidator because he had a conflict of interest is based on the asserted failure to disclose Mr Krejci’s alleged association with Mr and Mrs Pham, given they are close neighbours, residing in the same street in Chiswick, as was Mr Sebie a close neighbour of Mr Krecji from October 2010 to December 2018 when Mr Sebie moved out of the Chiswick property. It is not necessary to make any findings with respect to the asserted conflict of interest. This is a new point which should not be permitted if there was a grant of leave, as it could possibly have been met by evidence adduced by Mr and Mrs Pham.

20. The appeal against the winding up order does not raise any issue of principle or question of general importance. Nor has it been demonstrated that ENA suffered an injustice which is reasonably clear, in the sense of going beyond what is merely arguable: Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118 at [15].

Challenge to discontinuance of interlocutory process filed 14 August 2022

21. Although not referred to in the proposed appeal grounds, the relief sought in the draft notice of appeal, includes an order “to dispense with orders made on … 15 August 2022”. This is a reference to an order of 15 August 2022 made by Black J by consent, on the application of Mr Jemmott and others through their senior counsel, Mr M Robinson SC. By that order, One T Development and six named applicants, including Mr Jemmott, were given leave to discontinue the interlocutory process filed on 14 August 2022 on terms that the order be treated as constituting the discontinuance such that a separate notice of discontinuance need not be filed, on the undertaking given by each of One T Development and the six applicants by their counsel, not to bring a further application, interlocutory process or notice of motion in or substantially in the form of paragraphs 2-4 and 6-11 of the interlocutory process filed 14 August 2022. The relief sought in the interlocutory process relevantly included in par [2] an order that Mr Krejci’s appointment as liquidator and court-appointed receiver of ENA be terminated and that Mr Domenic Calabretta be appointed as liquidator and receiver of that company.

22. In oral address, Mr Sebie, who was not a named applicant on the interlocutory process, said that the solicitor acting for One T Development and the other named applicants discontinued the interlocutory process filed 14 August 2022 without instructions. Mr Sebie acknowledged that he was not present in court on 15 August 2022.

23. In an affidavit by Mr Jemmott of 6 July 2023 in separate proceedings in the Real Property List (No 2023/33566), which was relied upon by the applicants on the present application, Mr Jemmott annexed an email from himself to Mr Mark Robinson of senior counsel of 15 August 2022, copied to Karzai & Associates, confirming “On Rocco’s advice, I withdraw the notice of motion which was filed yesterday and was going to be heard today”. Mr Jemmott acknowledged in his affidavit that he gave instructions to Mr Ardino of Karzai & Associates to withdraw the interlocutory process. To the extent that Mr Jemmott disputes giving instructions for counsel to give an undertaking to the Court in the terms referred to above, it is not necessary on this application to say anything in relation to that matter. It is sufficient to observe that Mr Jemmott accepts that he gave instructions for the discontinuance of the interlocutory process and that is a sufficient basis to refuse leave to appeal against the consent order made on 15 August 2022.

Order for possession of the Homebush property and removal of caveat

24. The applicants seek leave to appeal against orders made by Black J on 21 October 2022 in the Trust proceeding commenced by the liquidator (No 2022/32115), granting the liquidator of ENA possession of the Homebush property, including orders dispensing with compliance with UCPR, rr 6.3(f), 6.8, 6.8A, 14.4 and 45.4 and that One T Development, as second defendant, and Mr Sebie, as an interested party, jointly and severally pay the costs of the application for possession: In the matter of ENA Development Pty Ltd (in liq) [2022] NSWSC 1478. Leave is required to challenge the possession order, either as an interlocutory order, or, in any event, it was not shown that the claim by any of the applicants meets the monetary threshold: Supreme Court Act, s 101(2)(r). Leave to challenge the costs order is required by s 101(2)(c).

25. The applicants, or at least Mr Sebie, also seek leave to appeal against orders made by Black J on 24 October 2022 that a caveat lodged by Mr Sebie on the title of the Homebush property be removed, and that Mr Sebie pay the costs of and incidental to the determination of pars [14A] and [14B] of the liquidator’s further amended interlocutory process filed 19 October 2022, as agreed or as assessed. Leave to appeal is required to challenge the order of removal of the caveat and the costs order: Supreme Court Act, s 101(2)(m) and (c).

26. As indicated, ENA is the registered proprietor of the Homebush property. Insofar as this property may have been held by ENA on trust for the ENA Development Trust, the liquidator had been appointed, without security, receiver of the assets of that Trust by order of Black J on 3 February 2022. The liquidator had also obtained directions from the Court given by Stevenson J on 11 July 2022 that the liquidator was justified in treating certain assets as beneficially owned by ENA, including the Homebush property. An appeal against those directions was dismissed: One T Development Pty Ltd v Peter Krejci in his capacity as liquidator of ENA Development Pty Ltd [2023] NSWCA 120.

27. One T Development, as second defendant in the Trust proceeding, and Mr Sebie as an interested party, opposed the order for possession sought by Mr Krejci. The issue before Black J was whether One T Development or Mr Sebie or companies that he was associated with had a better right to possession than ENA.

28. Insofar as Black J dispensed with the requirements of certain rules of the UCPR relating to the commencement of the possession proceedings in the Common Law Division, the dispensation granted was entirely appropriate given the possession order was sought in the Trust proceeding which had been commenced in the Equity Division.

29. In concluding that ENA as the registered owner of the property was entitled to possession of the Homebush property, Black J made factual findings by reference to the terms of the relevant leases relied upon by One T Development and Enterprise INT Pty Ltd (INT) that the provisions of those leases had been breached because of non-compliance with the permitted use provision in the leases (office storage), and the failure to pay rent. His Honour found that this provided a proper basis upon which ENA could, without more, terminate the relevant leases, if they are authentic and were properly executed in a manner that was binding upon ENA, without the need to take further steps, and then re-enter the premises: at [39].

30. His Honour also considered and rejected several discretionary arguments advanced by counsel for One T Developments to the effect that the application for possession was premature, would be inconsistent with the transfer of the balance of the Trust proceedings to the Family Court, or there may have been some form of postponing conduct by ENA which would defeat indefeasibility.

31. No reasonably clear error has been identified.

32. The finding that One T Developments and Mr Sebie must jointly and severally pay the costs of and incidental to the application for possession, followed from the outcome of the application for possession of the Homebush property. No House v The King error has been identified with respect to this discretionary decision as to costs.

33. Turning to the proposed challenge to the order for removal of the caveat, Mr Sebie had claimed in his caveat that he had contributed to the purchase price of the Homebush land in 2013 and therefore held a beneficial interest pursuant to a constructive trust, and also held a lease over the land until January 2026.

34. Black J appropriately considered whether there was a serious question to be tried in respect of the caveatable interest, and the balance of convenience. His Honour concluded that the balance of convenience did not support the continuance of the caveat taking into account, among other things, the absence of any explanation for the delay in lodgement of the caveat, why the interest claimed by Mr Sebie had not been raised earlier in the Trust proceedings, that Mr Sebie indicated that the caveat would need to be amended, and that he wished to file a summons supporting the interest claimed in it by way of separate proceedings. No reasonably clear error has been identified.

24. The finding that Mr Sebie should pay the costs of the application for the removal of the caveat followed upon the outcome of that application. Again, no House v The King error has been identified in his Honour’s discretionary decision as to costs.

Refusal of stay of writ of possession

36. The applicants seek leave to appeal against the decisions of Ierace J (i) on 6 January 2023, refusing a stay of execution of a writ of possession issued on 11 November 2022 in respect of the Homebush property, and (ii) making a gross sum costs order on 28 February 2023 against Mr Jemmott and Mr Sebie in the amount of $27,899: In the matter of ENA Development Pty Ltd (in liq) (Costs) [2023] NSWSC 162. Leave to appeal is required as the refusal of the stay is an interlocutory decision. Leave is also required to challenge the costs order.

37. In his ex tempore judgment given on 6 January 2023, Ierace J carefully considered the competing considerations as to whether a stay should be ordered in respect of the writ of possession issued on 11 November 2022 in relation to the Homebush property. No arguable House v The King error has been identified in this discretionary decision.

38. Moreover, as the liquidator submitted, any grant of leave would be inutile because of the relief sought – a stay of the 6 January 2023 order refusing a stay. It does not follow that if leave was granted and an appeal against the refusal of the stay upheld, that the applicants would obtain a stay of the writ of possession. The liquidator is now in possession of the Homebush property and there is no utility in granting a stay of the writ of possession.

39. The gross sum costs order made on 28 February 2023 followed upon the failure of the stay application. Again, no arguable error has been identified in his Honour’s discretionary decision as to costs. Moreover, given the amount in issue is small, it would not warrant a grant of leave to appeal.

Extension of time

40. The factors of general relevance to the exercise of the discretion to extend time are the length of the delay, the reason for the delay, whether the applicant has a fairly arguable case, and the extent of any prejudice suffered by the respondent: Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55] (Basten JA).

41. Here, the delay is significant: approximately 15 months in respect of the winding up order on 27 January 2022, eight months in respect of the order made on 15 August 2022, six months in relation to the orders for possession and removal of the caveat on 21 and 24 October 2022, and four months in respect of refusal of the stay application on 6 January 2023. No adequate reasons have been advanced by the applicants for the delay. Nor do the applicants have a fairly arguable case for a grant of leave to appeal.

42. In these circumstances, the application for an extension of time for leave to appeal should be refused. Even if an extension of time had been granted, leave to appeal should be refused for the reasons given above.

Amended notice of motion

43. Given the above conclusion, it is not necessary to consider Mr Jemmott’s separate applications (i) to dispense with compliance with UCPR r 7.1 and 7.2 to permit him to appear on behalf of One T Development without that company appointing a solicitor and Mr Jemmott giving an affidavit containing statements to the effect set out in r 7.2(2), or (ii) for leave under s 198G of the Corporations Act to exercise the powers of an alternative director of ENA to bring proceedings in the name of ENA challenging the winding up order.

44. The other interlocutory and final relief sought in the amended notice of motion falls away, given the refusal of an extension of time for leave to appeal. Further, the amended notice of motion was filed without the leave of the Court, contrary to the orders of Williams J on 15 May 2023. If leave had been sought it would have been refused for the reasons noted above. The motion should be dismissed.

Orders

45. The orders of the Court are:

1. Refuse an extension of time for leave to appeal.

2. Dismiss the amended summons seeking leave to appeal filed 15 June 2023.

3. Dismiss the amended notice of motion filed 14 June 2023.

4. The applicants pay the liquidator’s costs in this Court.

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Amendments

10 August 2023 - Amendment to Title

Decision last updated: 10 August 2023