FEDERAL COURT OF AUSTRALIA
Simpson v CT Partners Australia Pty Ltd [2015] FCA 1191
Citation: Simpson v CT Partners Australia Pty Ltd [2015] FCA 1191 Parties: COLIN JOHN BOYD SIMPSON and TOPSIM PTY LTD (ACN 075 083 886) v CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837) File number: WAD 324 of 2015 Judge: GILMOUR J Date of judgment: 6 November 2015 Catchwords: CORPORATIONS LAW – application for winding up - relevant principles of presumption of insolvency under the Corporations Act 2001 (Cth) s 459C - where the application relies upon two events under s 459C(2) - where the failure to comply with a statutory demand under s 459C(2)(a) occurs after the application is made - application allowed. Legislation: Corporations Act 2001 (Cth) ss 459C(2), (3), 459P(1)(b), 461(k), 462(2)(b), 466(2) Cases cited: Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 22 ACSR 235
Equititrust Ltd v Willarire Pty Ltd [2012] QSC 206Date of hearing: 30 July 2015 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 41 Counsel for the Plaintiffs: Mr H West Solicitor for the Plaintiffs: Gadens Lawyers Counsel for the Defendant: The defendant did not appear
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 324 of 2015
BETWEEN: COLIN JOHN BOYD SIMPSON
First PlaintiffTOPSIM PTY LTD (ACN 075 083 886)
Second PlaintiffAND: CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837)
Defendant
JUDGE:
GILMOUR J
DATE OF ORDER:
30 JULY 2015
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.The defendant, CT Partners Australia Pty Ltd ACN 167 523 886, be wound up.
2.Robert Michael Kirman of McGrath Nicol, 17/37 St Georges Terrace, Perth, WA 6000 and Jason Preston of McGrath Nicol, Level 31, 60 Margaret Street, Sydney, NSW 2000 be appointed as liquidator to the defendant.
3.The plaintiffs’ costs of this application be agreed or taxed and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 324 of 2015
BETWEEN: COLIN JOHN BOYD SIMPSON
First PlaintiffTOPSIM PTY LTD (ACN 075 083 886)
Second PlaintiffAND: CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837)
Defendant
JUDGE:
GILMOUR J
DATE:
6 NOVEMBER 2015
PLACE:
PERTH
REASONS FOR JUDGMENT
I made orders on 30 July 2015 winding up the defendant CT Partners Australia Pty Ltd (CTP Australia). These are my reasons for doing so.
This is an application for the winding up of CTP Australia on the grounds that it is insolvent, or alternatively, that it is just and equitable to do so: Corporations Act 2001 (Cth) (the Act) s 461(k). CTP Australia has not entered an appearance.
The plaintiffs read the following affidavits:
(a)affidavit of Colin John Boyd Simpson sworn 30 June 2015 (First Simpson Affidavit);
(b)affidavit of Colin John Boyd Simpson also sworn 30 June 2015 (Second Simpson Affidavit);
(c)affidavit of service…
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Details
- Case
- [2015] FCA 1191
- Decision Date
CaseChat Overview and Summary
In the matter of Simpson v CT Partners Australia Pty Ltd, the applicant sought an order for the winding up of the defendant company, CT Partners Australia Pty Ltd, on the basis of the presumption of insolvency under section 459C of the Corporations Act 2001 (Cth). The key legal issues before the court were whether the presumption of insolvency could be triggered by events occurring after the winding up application was made and whether the failure to comply with a statutory demand that occurred post-application could be considered in determining insolvency. The court found that the failure to comply with a statutory demand that occurred after the application was made could indeed be relied upon to presume insolvency, aligning with the view that such recent events should be given weight in insolvency determinations.
The court reasoned that the language of section 459C(2) of the Corporations Act 2001 (Cth) allowed for events occurring after the three months ending on the day when the winding up application was made to trigger the presumption of insolvency. This interpretation was supported by judicial precedents such as Equititrust Limited v Willaire Pty Ltd and others, which held that the failure to comply with a statutory demand post-application could still be relevant. The court also noted that section 459Q, which required particulars of the statutory demand and its non-compliance to be included in the application, did not preclude the use of such events if the application was based on other insolvency indicators at the time of filing. The court held that the defendant, CT Partners Australia Pty Ltd, was presumed to be insolvent based on the events that occurred post-application, including the failure to satisfy the statutory demand and the enforcement of security by JP Morgan.
In conclusion, the court allowed the application for winding up and ordered the defendant, CT Partners Australia Pty Ltd, to be wound up. Robert Michael Kirman and Jason Preston of McGrath Nicol were appointed as liquidators, and the plaintiffs' costs were to be reimbursed in accordance with the relevant section of the Corporations Act. The decision underscored the importance of recent events in insolvency proceedings and the applicability of post-application statutory demand failures in presumption of insolvency determinations.
The court reasoned that the language of section 459C(2) of the Corporations Act 2001 (Cth) allowed for events occurring after the three months ending on the day when the winding up application was made to trigger the presumption of insolvency. This interpretation was supported by judicial precedents such as Equititrust Limited v Willaire Pty Ltd and others, which held that the failure to comply with a statutory demand post-application could still be relevant. The court also noted that section 459Q, which required particulars of the statutory demand and its non-compliance to be included in the application, did not preclude the use of such events if the application was based on other insolvency indicators at the time of filing. The court held that the defendant, CT Partners Australia Pty Ltd, was presumed to be insolvent based on the events that occurred post-application, including the failure to satisfy the statutory demand and the enforcement of security by JP Morgan.
In conclusion, the court allowed the application for winding up and ordered the defendant, CT Partners Australia Pty Ltd, to be wound up. Robert Michael Kirman and Jason Preston of McGrath Nicol were appointed as liquidators, and the plaintiffs' costs were to be reimbursed in accordance with the relevant section of the Corporations Act. The decision underscored the importance of recent events in insolvency proceedings and the applicability of post-application statutory demand failures in presumption of insolvency determinations.
Orders
Orders of the court
1. The defendant, CT Partners Australia Pty Ltd ACN 167 523 886, be wound up.
2. Robert Michael Kirman of McGrath Nicol, 17/37 St Georges Terrace, Perth, WA 6000 and Jason Preston of McGrath Nicol, Level 31, 60 Margaret Street, Sydney, NSW 2000 be appointed as liquidator to the defendant.
3. The plaintiffs’ costs of this application be agreed or taxed and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Upon a presumption of insolvency arising, the defendant is presumed to be insolvent and bears the onus of proving its solvency: s 459C(3); Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 22 ACSR 235 at 237.The facts This winding up application was filed on 30 June 2015. On or about 2 July 2015, JP Morgan Chase Bank N.A (JP Morgan) as a secured creditor pursuant to a general security deed dated 25 June 2015 (GSD), issued a notice of default and enforcement to CTP Australia at its registered address (Notice). In the letter attaching the Notice, JP Morgan advised that it had “exercised its power under the GSD to purchase and sell the Collateral (as defined in the GSD)” and had entered into an "Asset Purchase Agreement" with CTLiquidation LLC in respect of the “Collateral”. On 1 July 2015, in a letter to the "Former clients of CTPartners Executive Search, Inc." signed jointly by:(a)Mr Keneally as the CFO of CTPartners Executive Search, Inc; (b)Mr Glenn Pollack as the president of CTLiquidation LLC; and (c)Mr Geoffrey Hoffmann as the CEO of DHR Worldwide, Inc (DHR);the clients of CTP Australia were advised that on 1 July 2015, the secured lender of CTPartners Executive Search, Inc (and its subsidiaries) had sold the collateral (including the open and unpaid accounts receivable) to CTLiquidation LLC on 1 July 2015, and DHR is collecting the unpaid accounts receivable on behalf of CTLiquidation LLC. On 8 July 2015, Johnson Executive Search Pty Ltd served a statutory demand for a debt of $1,973,695.20 (Statutory Demand) on CTP Australia at its registered address. The 21 day period expired on 29 July 2015. Presumption of Insolvency Two events have occurred which trigger, independently, the presumption of insolvency under s 459C(2). First, JP Morgan as the secured creditor has enforced its security interest pursuant to the GSD and entered into possession of CTP Australia's assets on 1 July 2015 as evidenced by:(a)the issue of the Notice;(b)the sale of CTP Australia's assets (which include at least unpaid accounts receivable) by JP Morgan to CTLiquidation LLC;(c)the redirecting of unpaid accounts receivable to DHR, Second, CTP Australia failed to satisfy the Statutory Demand by 29 July 2015. CTP Australia is therefore presumed to be insolvent pursuant to s 459C(2)(e) or (f) as from 1 July 2015, being the date when JP Morgan entered into possession of CTP Australia's assets and sold them to CTLiquidation LLC. It is also presumed to be insolvent by its failure to comply with the Statutory Demand by 29 July 2015: s 459C(2)(a). That this is so is, relevantly, because each of those events fell for the purposes of s 459C(2) "after the 3 months ending on the day when the application (for winding up) was made." Differing judicial views have been expressed as to the effect of s 459C(2) so far as concerns events that occur “after the 3 months”. I respectfully agree with the analysis of Philip McMurdo J in Equititrust Limited v Willaire Pty Ltd [2012] QSC 206 at [83] and [90]:[83]Within paragraphs (a) through (f), several events are described as giving rise to the presumption. Those paragraphs are preceded within the subsection by the words which require the Court to presume the insolvency of the company if the relevant event occurred “during or after the 3 months ending on the day when the application was made”. On the face of this provision, that same qualification as to timing of the event applies to each of the events specified within paragraphs (a) through (f). The event must occur during the three months ending on the day when the application is made or after that period. The words “or after” would seem to unambiguously permit an applicant to rely upon an event although it occurs after the application is made. In at least four decisions, it has been said that an applicant may rely upon a failure to comply with a statutory demand which postdated the commencement of the winding up proceedings. They are Pinn v Barroleg Pty Ltd; Sim v Ravenswood Resort Pty Ltd (receivers and managers appointed); Missing Link Network Integration Pty Ltd v Keene Consulting International Pty Ltd and Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd, although in that last decision, a qualification was added by Barrett J to which I will return.[84]The first three of those cases were not followed by Palmer J in his judgment in Woodgate v Garard Pty Ltd. The fourth case, Golden Plantation v TQM Design and Construct, was decided after his judgment. In obiter dicta, Palmer J interpreted s 459C(2) as meaning that although any of the events in paragraphs (b) through (f) might be relied upon if they occurred after the making of the application to wind up, but the event within (a), that is to say a failure to comply with a statutory demand, would not be relevant if it occurred after the winding up application was filed. He reached that conclusion effectively because of the requirements of s 459Q. It provides that if an application for a company to be wound up in insolvency relies upon a failure to comply with the statutory demand, the application must set out particulars of service of the demand and of the failure to comply with it, and have attached to it a copy of the demand, any order varying the demand and an affidavit which verifies the relevant debt. As he observed, it would be impossible to comply with s 459Q if the application when filed relied upon a failure to comply with the statutory demand, which was then an anticipated but not yet an actual failure. He observed that in those three cases, the relevance of s 459Q seemed to have been overlooked.[85]In Golden Plantation v TQM Design, Barrett J agreed with that analysis by Palmer J but added this:“As Palmer J also observed, a presumption of insolvency arising under s 459C(2)(a) from failure to comply with the statutory demand after filing of the winding up application is, however, available to the plaintiff in cases where the winding up application, when filed, is based otherwise than on such a failure.”With respect, I am unable to identify that observation in the judgment of Palmer J. Still, Golden Plantation v TQM Design is an authority supporting this application by Equititrust, because when filed this application relied upon other events as giving rise to the presumption of insolvency.[86]In a recent decision in the Supreme Court of Victoria, Surdex Steel Pty Ltd v GB Manufacturing Pty Ltd, Gardiner AsJ preferred the analysis of Palmer J in Woodgate (which was said to be supported by Golden Plantation Pty Ltd v TQM Design) to that in Pinn v Barrowleg and Missing Link Network Integration Pty Ltd. But that judgment did not deal with the circumstance here, where there were other events which were relied upon within the application as filed.[87]In my opinion, the failure to comply with this statutory demand is within s 459C(2)(a) and requires a presumption of Willaire's insolvency. The first reason is that there is no authority for the proposition that in a case such as this, where the application is filed originally upon other events giving rise to the presumption, a subsequent failure to comply with the statutory demand must be disregarded. I agree with Barrett J that the effect of s 459Q is to make it “impermissible to file an originating process on (the basis of non-compliance with a statutory demand) until the failure has occurred and particulars of it can be stated”, but that s 459Q does not preclude a reliance upon a failure to comply with a demand which occurs after an application is duly commenced.. . .[90]In a case such as the present, the result is thereby one which accords with the evident object of Part 5.4, which is that insolvent companies ought to be wound up. A failure to comply with a statutory demand should be more telling for being more recent at the time of the hearing. To exclude such an event would be anomalous. (Footnotes omitted.)
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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