FEDERAL COURT OF AUSTRALIA

Complete Constructions (Aust) Pty Limited v Jeff Manny Pty Limited (In Liquidation), In the matter of Jeff Manny Pty Limited (In Liquidation)

[2014] FCA 293

IN THE MATTER OF JEFF MANNY PTY LIMITED (IN LIQUIDATION)

(ACN 097 755 916)

THE COURT ORDERS THAT:

1.    The Interlocutory Process filed by Jeff Manny on 14 September 2012 be dismissed.

2.    The applicant in that Interlocutory Process (Jeff Manny) pay the costs of the plaintiff (Complete Constructions Pty Limited) and the liquidator of the defendant (Henry Joseph Kazar) of and incidental to the said Interlocutory Process.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF JEFF MANNY PTY LIMITED (IN LIQUIDATION)

(ACN 097 755 916)

REASONS FOR JUDGMENT

1    Mr Jeff Manny, who is a director and the principal of the defendant, has applied to the Court to stay or to set aside a winding up order made against the defendant on 24 August 2012, by a Registrar of this Court. The defendant is one of several corporations which comprise the “Jeff Manny Group” or the “Jeff Manny Group of Companies”.

2    On the same day as she made the winding up order, the Registrar appointed Frank Lo Pilato as liquidator of the defendant. On 7 December 2012, I ordered that Mr Lo Pilato be removed as liquidator of the defendant and that he be replaced by Henry Joseph Kazar. That order was made at the request of Mr Lo Pilato and was not opposed by the plaintiff or by any other person or entity. It is not necessary to discuss the reasons for Mr Lo Pilato’s withdrawal and replacement.

3    The winding up order made by the Registrar was based upon the deemed insolvency of the defendant (as to which see ss 459A, 459C and 459P of the Corporations Act 2001 (Cth) (the Act)).

4    The plaintiff, Complete Constructions (Aust) Pty Limited (Complete), was a creditor of the defendant in the amount of $8,953.22 being the amount of costs assessed and certified by the Supreme Court of the Australian Capital Territory in connection with a proceeding in that Court between Complete, as plaintiff, and the defendant, as defendant, and, for a time, also as counterclaimant (SC 242 of 2010). In that proceeding, Complete had claimed $167,313.56 plus interest and costs from the defendant. Complete alleged that the defendant owed it that sum under a building contract into which the defendant and it had entered for the refurbishment and fit-out of the Oatley Medical Centre at Belconnen, ACT. The contract price was $288,348.59. As at the date of the commencement of proceeding SC 242 of 2010 (6 May 2010), the defendant had paid to Complete sums totalling $121,034.93 on account of its liability under that contract.

5    In June 2010, the defendant filed a Defence and Counterclaim in proceeding SC 242 of 2010. In its Counterclaim, the defendant claimed damages for negligence against Complete based upon a number of generally expressed breaches of duty alleged against it. On 10 June 2011, Master Harper struck out the defendant’s Counterclaim and made an order for costs in favour of Complete against the defendant in respect of Complete’s application to strike out the defendant’s Counterclaim. In the course of giving Reasons in support of those orders (Complete Constructions Australia Pty Ltd v Jeff Manny Pty Ltd [2011] ACTSC 99 (10 June 2011)), at [11], the Master noted that the defendant had no assets other than its cause of action on the Counterclaim.

6    It is the costs order made by Master Harper on 10 June 2011 which, when taxed, was the subject of the Creditor’s Statutory Demand referred to at [7] below.

7    In the present proceeding, Complete claimed that, on 16 January 2012, it had served a Creditor’s Statutory Demand for Payment of Debt (Demand) upon the defendant at its registered office at Unit 1, 64-66 Oatley Court, Belconnen, ACT. In that Demand, Complete claimed payment of the costs debt owed to it by the defendant. The defendant did not pay the amount claimed.

8    Before the Registrar, Mr Manny denied that he had ever received the Demand. He suggested that it had not been served at the registered office of the defendant but had probably been left at other premises. The Registrar permitted him to appear for the defendant and to cross-examine the process server who had sworn that he had served the Demand at the registered office of the defendant on 16 January 2012 by leaving it there. The Registrar made a finding that the Demand had been served effectively. She accepted the evidence of the process server.

9    Mr Manny did not seriously press any point about service of the Demand at the hearing before me. In any event, he did not seek to cross-examine the process server at that hearing. I see no reason to doubt the truth of the process server’s evidence and find that the Demand was duly served upon the defendant on 16 January 2012, as the Registrar found.

10    This proceeding was commenced on 27 February 2012. It was heard by the Registrar on 9, 17 and 24 August 2012.

11    Before the Registrar, and before me, Complete relied upon the deemed insolvency of the defendant which arose by reason of the defendant’s failure to pay the amount claimed in the Demand within the time for payment stipulated therein (as to which see s 459C(2)(a) of the Act). The presumption of insolvency for which s 459C provides operates except so far as the contrary is proved for the purposes of the relevant winding up application (s 459C(3)). Before the Registrar, and before me, Complete proved all other formal matters which it was required to prove under the Act, the Corporations Regulations 2001 (Cth) and the Federal Court (Corporations) Rules 2000.

12    The Registrar was satisfied that she should make a winding up order and did so. She was not persuaded by the lengthy and convoluted arguments advanced to her by Mr Manny as to why she ought not make the orders sought by Complete.

13    By Interlocutory Process filed on 14 September 2012, Mr Manny (in his individual capacity) sought the following relief:

A.     DETAILS OF APPLICATION

1.    This application is made under Rules 482(1), 482(1A)(b) and 482(3) of Australian Corporate Act 2001 and 36.08(2), 41.11, 39.05(c)(h), 41.66(1)(a)(b)(3)(a)(b)(i)(ii), 34.25 Federal Court Rules

2.    On the facts stated in the supporting affidavits of Jeff Manny of 27 August and 13 September of 2012, sole director, sole share holder and the creditor of the applicant Jeff Manny Pty Ltd, applies for the following relief:

1.    Set aside the orders of 24 August of Registrar Hedge of Australian Federal Court, in the matter of Complete Constructions Pty Ltd VS Jeff Manny Pty Ltd ACD 22 of 2012.

2.    Stay of execution of the orders of 24 August of Registrar Hedge of Australian Federal Court, in the matter of Complete Constructions Pty Ltd VS Jeff Manny Pty Ltd ACD 22 of 2012.

3.    Set aside the Registration of the orders of 24 August of Registrar Hedge of Australian Federal Court, in the matter of Complete Constructions Pty Ltd VS Jeff Manny Pty Ltd ACD 22 of 2012.

4.    Transfer the matter of ACD 22 of 2012, to the ACT Supreme Court, as per rule 27.21 of the Federal Court Rules, since this matter is originating from ACT Supreme Court and still is going in the ACT Supreme Court.

14    I have set out the terms of Mr Manny’s Interlocutory Process verbatim.

15    I understand, both from the terms of that process and from submissions made to me at the hearing before me, that Mr Manny seeks to have the Court set aside the orders made by the Registrar (and, as a consequence, the order made by me substituting Mr Kazar for Mr Lo Pilato as the liquidator of the defendant) or to have those orders stayed. He also wishes to have the whole of the proceedings transferred to the Supreme Court of the ACT upon terms that he be given leave to represent the defendant in certain proceedings in that Court. He sought a similar order from the Registrar. She declined to transfer the proceeding. In support of his application Mr Manny relied upon affidavits affirmed by him on 5 May 2012 and on 14 September 2012. He also relied upon an affidavit affirmed by him on 27 August 2012 and filed by him in the Supreme Court of the ACT in proceeding ACTCA 38 of 2012. Mr Manny’s affidavit of 5 May 2012 was before the Registrar but his two most recent affidavits were not.

16    The current liquidator of the defendant, Mr Kazar, briefed Counsel to appear at the hearing of Mr Manny’s Interlocutory Process and to oppose all of the relief sought by him. The same Counsel also appeared for Complete at that hearing. Complete also opposed Mr Manny’s claims for relief. Mr Manny’s opponents relied upon an affidavit affirmed by Mr Kazar on 5 February 2013 and an affidavit affirmed by him on 4 March 2013. They also relied upon the evidence tendered by Complete before the Registrar.

17    I have carefully read and considered all of these affidavits and the documents exhibited to them. I shall refer to the contents of those affidavits and exhibits only to the extent that I consider it necessary to do so. A great deal of the material relied upon by Mr Manny has no relevance to his application.

18    These Reasons for Judgment determine Mr Manny’s challenges to the Registrar’s orders.

The Court’s Powers

19    In his Interlocutory Process, Mr Manny relies upon s 482 of the Act and certain provisions of the Federal Court Rules 2011 (FCR).

20    Subsections 482(1), (1A) and (2) provide:

(1)    At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.

(1A)    An application may be made by:

(a)    in any case – the liquidator, or a creditor or contributory, of the company; or

(b)    in the case of a company registered under section 21 of the Life Insurance Act 1995 – APRA; or

(c)    in the case of a company subject to a deed of company arrangement – the administrator of the deed.

(2)    On such an application, the Court may, before making an order, direct the liquidator to give a report with respect to a relevant fact or matter.

21    Mr Manny claimed to be a creditor and a contributory of the defendant. Neither Complete nor the liquidator challenged either of these claims.

22    The Court did not direct the liquidator of the defendant to give any report pursuant to subsection 482(2) of the Act.

23    Subsection 482(2A) contains a list of considerations to which the Court must have regard if an application to stay or terminate a winding up is made in relation to a company subject to a deed of company arrangement. The defendant was not such a company. For this reason, s 482(2A) is not relevant to the present application.

24    Subsections 482(3) to (5) provide for the consequences of the making of an order under subsection 482(1).

25    Mr Manny also relied upon those rules forming part of FCR identified by him in par 1 of his Interlocutory Process. Those rules concern stay of execution, stay of enforcement of judgment and extension of time within which to appeal. They are not relevant to the relief which Mr Manny seeks.

26    Although Mr Manny did not rely upon r 3.11 FCR (review of Registrar’s exercise of power), that rule was raised and discussed during argument. Both r 3.11 FCR and s 35A(5) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) refer to “a party”. It is only a person or entity who was “a party” in the proceeding before the Registrar who is entitled to seek review of a Registrar’s decision. In particular, s 35A(5) provides:

A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power.

27    Subsection 35A(1)(h) relevantly provides that a power of the Court prescribed by Rules of Court may, if the Court or a Judge so directs, be exercised by a Registrar. Rule 16.1(1) of the Federal Court (Corporations) Rules 2000 (Corporations Rules) provides that, for the purposes of s 35A(1)(h) of the Federal Court Act, if the Court or a Judge so directs, a Registrar may exercise a power of the Court under a provision of the Act mentioned in Column 2 of Part 1 of Schedule 2 of those Rules. Sections 459A, 459C and 459P of the Act, are all mentioned in Column 2 at Item 48.

28    In addition, r 16.1(2) provides that a decision, direction or act of a Registrar made, given or done under the Corporations Rules may be reviewed by the Court or a Judge.

29    There is no suggestion in the present case that, within the meaning of s 35A(1) of the Federal Court Act and r 16.1(1) of the Corporations Rules, the Court or a Judge made a specific direction authorising Registrar Hedge to exercise the powers of the Court under ss 459A, 459C and 459P of the Act in relation to the present proceeding. Nonetheless, the decision given by Registrar Hedge on 24 August 2012 and the orders made by her on that day were made under the Corporations Rules.

30    If Mr Manny had been a “party” to the proceeding before the Registrar he might have been able to seek review of her decision and orders. But Mr Manny was not a party to that proceeding and, for that reason, cannot seek a review of the Registrar’s decision and orders.

31    Mr Manny must, therefore, engage the provisions of s 482 of the Act if he is to obtain any of the substantive relief which he seeks. The relief authorised by that section is a stay or termination of the winding up.

32    The jurisdiction to stay or terminate a winding up under s 482 of the Act is discretionary. As Jacobson J pointed out in GFK & Sons Pty Limited; Workers Compensation Nominal Insurer v GFK & Sons (Balmain) Pty Limited [2010] FCA 953 at [3], the criteria which the Court takes into account on such an application were set out by Barrett J in Metledge v Bambakit Pty Limited (2005) NSWSC 160 at [5], where his Honour said (quoting from Master Lee QC in Re Warbler Pty Limited (1982) 6 ACLR 526 at 533):

The jurisdiction to terminate a winding up under s.482 is discretionary. The court may have regard to a range of factors. While not to be rigidly applied (Dubolo Pty Ltd v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723), the list of criteria set out in the judgment of Master Lee QC in Re Warbler Pty Ltd (1982) 6 ACLR 526 provides useful guidance:

“1. The granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: In Re: Calgary and Edmonton Land Co Ltd (In liq) (1975) 1 WLR 355 at pp 358-359 per Megarry J. See also sec. 243 of the Act [i.e, Companies Act 1961].

2. There must be service of notice of the application for a stay on all creditors and contributories, and proof of this; Re South Barrule Slate Quarry Co (1869) 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113.

3. The nature and extent of the creditors must be shown, and whether or not all debts have been or will be discharged: Krextile Holdings Pty Ltd v Widdows (supra) [[1974] VR 689]; Re Data Homes Pty Ltd (supra) [1971] 1 NSWLR 338], Law of Company Liquidation (supra) at p 395.

4. The attitude of creditors, contributories and the liquidator is a relevant consideration: sec. 243(1), Calgary and Edmonton Land Co Ltd (supra).

5. The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: In re a Private Company (1935) NZLR 120; Re Mascot Home Furnishers Pty Ltd [1970] VicRp 78; (1970) VR 593 at p 598.

6. If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd (supra) [[1903] 2 Ch 174].

7. The general background and circumstances which led to the winding-up order should be explained: Krextile Holdings Pty Ltd v Widdows (supra).

8. The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to ‘commercial morality’ or the ‘public interest’: Krextile Holdings Pty Ltd v Widdows (supra).”

33    In El-Fahkri v Elfah Pty Limited (In Liquidation) [2002] FCA 1469, Finkelstein J, at [4]-[9], said:

4    Section 482(1A) gives standing to a contributory of the company in liquidation to make the application. Section 482(2) permits the court to direct the liquidator of the company to give a report. On an earlier occasion, an order required the liquidator to report as to the solvency of the company. That report is now to hand.

5    In In re Calgary and Edmonton Land Co Ltd (in liq) [1975] 1 WLR 355, Megarry J set out most of the factors that the court must consider before making an order under s 482(1). First, I must consider the interests of the creditors. That presents no difficulty in this case. In the first place there are only two creditors. They do not object to a termination of the winding up. Second, even if those creditors had objected, little weight would be given to the objection because the parties have established that the creditors will, in due course, be paid in full.

6    I should also consider the position of the liquidator. He has a statutory right to receive his costs, charges and expenses in priority to other claims in the liquidation and he has a charge or lien over the assets of the company to secure that priority. Usually it would not be right to stay or terminate a liquidation unless the liquidator’s position is protected.

7    Then there are the members of the company. It is generally accepted that a stay or termination should not be granted unless each member consents (or perhaps does not object) to giving up his right to take the surplus assets on the completion of the liquidation. Here again there is no difficulty as the members are the applicants for the termination order.

8    In addition to Megarry J’s three factors, it is also necessary to consider the public interest. That is, the court must consider not only whether the stay or termination is for the benefit of creditors and members but also whether it is conducive or detrimental to commercial morality and to the interests of the public at large: see Re Telescriptor Syndicate Ltd [1903] 2 Ch 174, 180; Chan v Austgrove Enterprises Pty Ltd [1993] 12 ACSR 427. Clearly this is not one of those cases where the public interest would be injured by making the order sought.

9    The power to make an order under s 482(1) is discretionary. In England it has been held that not only does it lie on those who seek a stay (there being no power to order a termination) to make out a sufficient case for it is also necessary for the applicant to “make out a case that carries conviction”: In re Calgary and Edmonton Land Co Ltd (in liquidation) [1975] 1 WLR at 358-359. The position in Australia is not so strict. In cases such as Alexander v Cambridge Credit Corporation Ltd [1985] 2 NSWLR 685 and Aetna Properties Pty Ltd v G A Listing and Maintenance Pty Ltd (1994) 13 ACSR 422 it has been held that this court does not have to find special reasons for a stay or termination. But there must be some valid reason why it is appropriate to make the order rather than let the liquidation take its normal course.

34    The observations of Master Lee QC in Re Warbler which were approved by Barrett J in Metledge and the observations of Finkelstein J in El-Fahkri provide useful guidelines for the exercise of the discretion given to the Court by s 482 of the Act. The guidelines formulated in earlier cases do not purport to be and could not be an exhaustive statement of all matters that might be relevant in any given case. Nonetheless, they provide a useful collection of matters which the Court would ordinarily take into account when considering exercising its discretion under s 482 of the Act.

35    I should mention one final matter before moving to consider Mr Manny’s contentions. That is this.

36    The defendant did not appear on 24 August 2012 which is the date when the winding up order was made. In particular, Mr Manny did not appear on that day, although he had appeared on a number of occasions before then. For this reason, it may have been open to the defendant and to Mr Manny to move to set aside the winding up order pursuant to r 30.21(2) FCR. I do not consider that Mr Manny’s present application has invoked or could invoke r 30.21(2) FCR without the involvement of the defendant itself.

37    The defendant did not make any application relying upon that rule. Nor did Mr Manny (see GFK & Sons Pty Limited at [6]-[14] and the cases cited therein, per Jacobson J).

38    In the end, as I have said, if Mr Manny is to succeed, he must persuade me to exercise the discretion given to me by s 482 of the Act. For that reason, in the present case, there is no basis upon which the Court can set aside the winding up order. Mr Manny is confined to his claim that the winding up be stayed.

mr manny’s contentions

39    Mr Manny submitted that:

(a)    The defendant was denied procedural fairness before the Registrar in the following respects:

(i)    The Registrar refused to grant an adjournment of the hearings which took place before the Court on 9 and 17 August 2012 in circumstances where Mr Manny, who had been given leave to represent the defendant on both occasions, was ill and sought adjournments on that ground.

(ii)    On 17 August 2012 the Registrar permitted Complete to rely upon two Lists of Authorities sent to the Court on 16 and 17 August 2012. This was after the date permitted by the orders of the Court made on 9 August 2012. By those orders, the parties were to file and serve any Written Submissions and Lists of Authorities by 4.30 pm on 15 August 2012.

(iii)    The Registrar received evidence on 17 August 2012 demonstrating that proceeding SC 259 of 2012 in the Supreme Court of the ACT commenced by the defendant and another corporation associated with the defendant against Complete only a few days before raised the same or substantially the same case as had been sought to be raised by the defendant by way of Counterclaim in proceeding SC 242 of 2010 in that Court.

(iv)    Mr Manny was not permitted to cross-examine the process server who had served the Demand in the manner and to the extent that he wished.

(b)    The defendant was and is solvent.

(c)    The defendant had and continues to have a counterclaim against Complete of equal or greater value than Complete’s claim made in the Demand.

CONSIDERATION

40    In addition to addressing the particular matters raised by Mr Manny, Counsel for Complete and the liquidator, Mr Kazar, also brought to my attention several other arguments which had been advanced by Mr Manny before the Registrar. It is not necessary to address these additional matters in these Reasons. I propose to confine myself to the matters specifically relied upon by Mr Manny.

Denials of Procedural Fairness

41    I will address Mr Manny’s contentions directed to his allegation that the defendant was denied procedural fairness upon the assumption that, if any of those contentions are made out, there might be a basis for granting the relief which he seeks. I do not propose to consider whether this basal proposition is correct unless I find that one or more of Mr Manny’s contentions have been made out.

Refusals to Grant an Adjournment (9 and 17 August 2012)

42    Neither party tendered before me the transcript of the hearings before the Court on 9 August 2012 and on 17 August 2012.

43    The Court record shows that Complete’s application for an order winding up the defendant was initially fixed for hearing before a Registrar on 5 July 2012. On that occasion, the hearing was adjourned, by consent, to 9 August 2012.

44    On 9 August 2012, the hearing of Complete’s Application was again adjourned, on this occasion to 2.00 pm on 17 August 2012. I am not certain whether that adjournment was also granted by consent. However, it is clear that, although the matter had been fixed for hearing on 9 August 2012, it was, in fact, adjourned on that occasion. Mr Manny submitted that he sought an adjournment of 30 days on 9 August 2012 but was only granted a shorter adjournment of a little over a week.

45    According to Mr Manny, he endeavoured to have the whole of this proceeding transferred to the Supreme Court of the ACT on 17 August 2012. In the alternative, he sought a further adjournment.

46    The Registrar addressed the relevant history of this proceeding in her Reasons for Decision given on 24 August 2012. In the first four paragraphs of that Decision, the Registrar said:

This is an application for winding up of the Defendant company, Jeff Manny Pty Limited (the company) on grounds of deemed insolvency which was filed on 27 February 2012. The director of the company Mr Jeff Manny had been given leave previously to represent the company and had filed a Notice of Grounds of Opposition and an extensive (401 page, well presented) affidavit on 3 May 2012. The matter was listed before Foster J for hearing on 11 May and then remitted to the Registrar for hearing. Mr Manny was sick on the next two scheduled hearing dates and received adjournments on 5 July 2012 and 9 August 2012. The matter was listed for hearing of the grounds of opposition on 17 August by video with a strict further timetable for filing of any written submissions and list of authorities by 15 August.

Mr Manny’s initial application on 17 August, however, was to have the matter transferred to the ACT Supreme Court and further adjourned until the new claim that he has filed in the ACT Supreme Court this week is heard. He tendered MFI 1 and 2 being Forms 2.1 and 2.2 Originating Claim and Statement of Claim against the plaintiff in these proceeding (Complete Constructions Pty Ltd). His submissions included that the real issues between the parties should be heard together in the ACT Supreme Court.

In reply the Plaintiff’s counsel outlined the usual principles on these types of applications such as having a current and related proceeding and considerations such as cost, convenience, time and specialist expertise and that this is a wind up application concerned with the solvency of the company.

This oral application for stay and transfer and further adjournment was not supported by any formal application or evidence apart from the tendering of a recently filed originating claim in the ACT Supreme Court. This winding up application was listed again today for hearing of the grounds of opposition as the six month period for determination of the application referred to in s459R of the Corporations Act 2001 (the Act) expires very soon. In my view it was not sufficiently established that it is appropriate to consider further adjourning, staying or considering a transfer of this application based on a last minute oral application supported by a claim just filed in the ACT Supreme Court which appears to be traversing old ground. Accordingly the hearing of the opposition proceeded.

47    In my judgment, given the history of Mr Manny’s endeavours to forestall the hearing of Complete’s Application to wind up the defendant and having regard to the material before the Registrar on 17 August 2012, the Registrar did not deny procedural fairness to Mr Manny or the defendant when she declined to grant yet a further adjournment. Her Reasons for Decision demonstrate that she permitted Mr Manny to advance such arguments as he chose to put forward in support of that application and indeed in support of his additional application that the proceeding be transferred to the Supreme Court of the ACT. Despite Mr Manny’s efforts, the Registrar declined to accede to either application.

Receipt of Lists of Authorities

48    Mr Manny’s point here is that the Registrar received two Lists of Authorities, one on 16 August 2012 and one on 17 August 2012, both of which were made available to the Court after the deadline fixed for the submission of such lists (4.30 pm on 15 August 2012).

49    The documents supplied were simply Lists of Authorities.

50    The provision of those Lists was of assistance both to the Court and to Mr Manny.

51    The receipt by the Court of those Lists did not constitute a denial of procedural fairness in any respect whatsoever.

52    I reject this submission made by Mr Manny.

53    I should add that the Registrar received and considered a written submission filed by Mr Manny on 16 August 2012, which was also after the deadline for the filing of such a submission previously ordered (15 August 2012).

Receipt of Evidence on 17 August 2012

54    Mr Manny contended that the Registrar admitted into evidence an email which contained assertions in the nature of submissions to the effect that the case which the defendant was endeavouring to propound in the proceeding which it and its associated corporation had commenced in the Supreme Court of the ACT on 15 August 2012 (proceeding No SC 259 of 2012) was the same case as the defendant had endeavoured to assert in the Counterclaim brought by it against Complete in proceeding SC 242 of 2010 in the same Court which had been struck out by Master Harper on 10 June 2011.

55    The receipt of this material did not constitute a denial of procedural fairness or any other error.

56    It was open to the Registrar to receive by way of submission the email to which Mr Manny referred, particularly in light of the fact that the fresh proceeding which he had commenced in the Supreme Court of the ACT (SC 259 of 2012) had only been commenced two days prior to the hearing before the Registrar. A copy of the initiating process and Statement of Claim filed in that proceeding was received by the Registrar and marked as MFI-1.

57    I reject this ground of complaint brought forward by Mr Manny.

Undue Interference in Cross-Examination

58    In order to make good this contention, Mr Manny would need to have tendered before me a transcript of the hearing before the Registrar so that I could assess whether the submission which he sought to make had any substance. He did not bring forward that transcript.

59    Doing the best I can with the material available to me, it seems that Mr Manny was operating under the impression that, in order that it be served effectively, the Demand had to be brought to his attention or had to be handed to him personally. This is not the law, as the Registrar pointed out in her Reasons for Decision.

60    Mr Manny has failed to make out this ground. I reject it.

The s 482 Discretion

61    The authorities to which I have referred at [32] and [33] above make clear that the onus is on the applicant to make out a positive case for a stay or termination of the winding up.

62    Mr Manny did not approach his application with an eye to the criteria or guidelines referred to in those authorities. However, he endeavoured to place before the Court a detailed account of events which had over the years between about 2009 and 2012 had a significant impact on his life and the affairs of the several companies which comprise the Jeff Manny Group of Companies. Much of this material had no or only very marginal relevance to Mr Manny’s application. Nonetheless, in his mind, the circumstances which led to Complete’s application to wind up the defendant included the breakdown of his marriage and the ongoing dispute with Australia and New Zealand Banking Group Limited (ANZ), the principal secured creditor of the Jeff Manny Group of Companies. It is not necessary to traverse in detail the evidence led by Mr Manny which was directed to giving some insight into the breakdown of his marriage and his dispute with ANZ. As to the first matter, it is sufficient for present purposes merely to note that his marriage appears to have broken down in 2007, or perhaps a year or two earlier, and that the inevitable property settlement required to be effected as a result of that breakdown was still under discussion in 2009 and 2010. As far as the dispute which the Jeff Manny Group of Companies and Mr Manny has with ANZ, it is enough to note the following matters:

(a)    ANZ was the principal secured creditor of the Jeff Manny Group of Companies.

(b)    On 22 December 2010, ANZ appointed Messrs Sims and Parberry of PPB Advisory as Receivers of all of the real property owned by the companies in the group. ANZ contended that the companies were in default in their arrangements with it. Mr Manny suggested otherwise.

(c)    On 21 January 2011 ANZ appointed Messrs Sims and Parberry as Receivers and Managers of most of the companies in the group. They were not appointed to the defendant.

(d)    Mr Manny, and through him, some of the companies in the group, have been litigating in the Supreme Court of the ACT against ANZ in an endeavour to take back control of the group and its assets. Several pieces of litigation were commenced in that Court. The present status of that litigation is not precisely known.

63    In addition, at some stage after the appointment of the Receivers, liquidators were appointed to most of the companies in the Jeff Manny Group of Companies.

64    The picture painted by the evidence led by Mr Manny is that he has lost control of all of the companies which comprise the Jeff Manny Group of Companies and has also lost control of the assets of those companies. In substance, those companies and their assets are in the hands of the Receivers and Managers appointed by ANZ. All of the companies in the group have now ceased trading. In addition, Mr Manny had said on a number of occasions both in this Court and in the Supreme Court of the ACT that he himself has no assets. He went so far as to demonstrate this fact before me by proving that he was now a claimant for welfare payments from Centrelink.

65    As I mentioned at [4] above, the defendant was wound up on the application of Complete. The foundation of Complete’s application was the unpaid costs order made against the defendant in favour of Complete by Master Harper on 10 June 2011. That costs order was made in proceeding SC 242 of 2010 in the Supreme Court of the ACT in which Complete sued the defendant for the balance of the contract sum due under the building contract to which I have referred. While it is true that Mr Manny contends that Complete was never entitled to receive the money which it claimed in proceeding SC 242 of 2010, the basis for this contention has never risen above mere assertion on the part of Mr Manny. In particular, he focussed on an issue concerning automatic front doors to the premises which were being refurbished under the relevant building contract. He said that those doors had to be installed before work under the contract could be regarded as complete. Complete, on the other hand, argued that it was entitled to receive the balance of the contract sum. The issues raised by Mr Manny as reasons for non-payment of the contract sum have never been determined either by this Court or the Supreme Court of the ACT.

66    The costs order made by Master Harper remained unpaid for approximately nine months before the commencement of the present proceeding.

67    The defendant never sought leave to appeal from the costs order or from the other orders made by Master Harper on 10 June 2011. In those circumstances, notwithstanding Mr Manny’s persistent assertions that Complete was not entitled to the balance of the contract sum under its building contract with the defendant, there was no doubt whatsoever that the defendant was liable to pay the costs ordered against it by Master Harper on 10 June 2011.

68    It is a fair inference that the real reason why the amount of those costs was not paid is that the defendant was unable to find sufficient funds to make the necessary payment.

69    On 18 February 2013, the previous liquidator of the defendant (Mr Lo Pilato) filed a Report as to Affairs in respect of the defendant dated 30 January 2013. In that Report, there is no information whatsoever as to the assets of the defendant. The nature and value of those assets are described in that document as “unknown”. The only information concerning the defendant’s liabilities was to the effect that the defendant was indebted to Complete in the amount of $190,749.04. The paucity of information in that Report as to Affairs is a direct result of Mr Manny’s failure to co-operate with either of the liquidators appointed to the defendant. In this regard, in August 2011, he was prosecuted in the Local Court of NSW for a number of offences the substance of which was that he had failed to co-operate with the liquidator by providing information as to the affairs of the defendant and by delivering up the books and records of the defendant.

70    In his affidavits, Mr Manny made repeated assertions to the effect that the defendant was not insolvent. As was submitted by Counsel for Complete and the liquidator, there is no evidence which has any probative value which supports Mr Manny’s bald assertions in this regard.

71    In applications of the kind with which I am presently dealing, it is essential that the applicant establish that the company in respect of which the winding up order has been made is solvent. In Ace Contractors and Staff Pty Limited v Westgarth Development Pty Limited [1999] FCA 728, Weinberg J said, in a slightly different context, at [43]-[44]:

43    Westgarth, having failed pursuant to s 459G to set aside the statutory demand served upon it by the applicant, is presumed to be insolvent. In order to avoid an order that it be wound up in insolvency it must either rebut that presumption, and prove that it is solvent, or rely upon the exercise of the discretion of the Court pursuant to s 459A of the Corporations Law to decline to order that it be wound up.

44    The authorities which govern the operation of s 459G of the Corporations Law seem to me to establish the following propositions:

•    The respondent is presumed to be insolvent and as such bears the onus of proving its solvency: s 459C(2) and (3); Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 22 ACSR 235 per Spender J; Commissioner of Taxation v Simionato Holdings Pty Ltd. (1997) 15 ACLC 477 per Mansfield J.

•    In order to discharge that onus the Court should ordinarily be presented with the “fullest and best” evidence of the financial position of the respondent: Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075 at 1081 per Hayne J.

•    Unaudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency. Nor are bald assertions of solvency arising from a general review of the accounts, even if made by qualified accountants who have detailed knowledge of how those accounts were prepared: Simionato Holdings Pty Ltd (supra); Re Citic Commodity Trading Pty Ltd v JBL Enterprises (WA) Pty Ltd [1998] FCA 232 per Heerey J; Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459 at 463 per Sackville J.

•    There is a distinction between solvency and a surplus of assets. A company may be at the same time insolvent and wealthy. The nature of a company’s assets, and its ability to convert those assets into cash within a relatively short time, at least to the extent of meeting all its debts as and when they fall due, must be considered in determining solvency: Rees v Bank of New South Wales (1964) 111 CLR 210; Re Tweeds Garages Ltd [1962] Ch 406 at 410 per Plowman J; Simionato Holdings Pty Ltd (supra); Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 13 ACLC 823 at 832 per Lindgren J; Leslie v Howship Holdings Pty Ltd (supra) at 465-466.

•    The adoption of a cash flow test for solvency does not mean that the extent of the company’s assets is irrelevant to the inquiry. The credit resources available to the company must also be taken into account: Sandell v Porter (1966) 115 CLR 666 at 671 per Barwick CJ (with whom McTiernan and Windeyer JJ agreed); Leslie v Howship Holdings Pty Ltd (supra) at 466; Taylor v ANZ Banking Group Ltd (1988) 6 ACLC 808 at 812 per McGarvie J.

•    The question of solvency must be assessed at the date of the hearing. However, this does not mean that future events are to be ignored: Leslie v Howship Holdings Pty Ltd (supra) at 466-467.

•    It is no abuse of process for an applicant to seek to wind up a company presumed to be insolvent by reason of its failure to comply with a statutory demand merely because that company contends that it is solvent, or because there may be alternative means available to the applicant to vindicate its rights: Elite Motor Campers Australia v Leisureport Pty Ltd (supra).

72    The observations made by Weinberg J in Ace Contractors and Staff Pty Limited provide a useful guide as to the considerations which ought to be taken into account when the Court is called upon to assess the solvency of a corporation. In particular, the Court will commonly be looking for the “fullest and best evidence” of the financial position of the company concerned.

73    Mr Manny did not present in evidence before me a comprehensive statement of the financial position of the defendant. He did submit that the only unsecured creditor of the defendant was Complete. The Report as to Affairs to which I have referred at [69] above lends some support to this assertion. However, Mr Manny did not tender any primary books of account of the defendant nor did he tender any financial statements or reports, any management accounts or any other secondary financial documents. He did tender several spreadsheets which identified and listed as at various times well before the commencement of the proceeding the assets of the Jeff Manny Group of Companies as a whole, the cash flow of that group as a whole and some of its liabilities. But these spreadsheets did not attribute particular assets to particular legal entities nor did they do so with the liabilities which were listed therein. Furthermore, the spreadsheets were not current by the time the present proceeding was commenced and certainly not current by the time Mr Manny’s application was heard. As was submitted on behalf of Complete and the current liquidator of the defendant, there was simply no evidence of the financial position of the defendant and thus no evidence whatsoever which could be regarded as relevant to establishing that the defendant was and is solvent. As was submitted on behalf of those parties, the material going to the question of solvency did not rise above mere assertions made by Mr Manny unsupported by any evidence.

74    Mr Kazar submitted that:

(a)    Mr Manny’s application could not proceed without Mr Kazar’s consent or without the leave of the Court. Mr Kazar had not provided and would not provide his consent and no leave of the Court had been obtained; and

(b)    the evidence led by Mr Manny did not justify the making of any order. In particular, there was no evidence which proved or even suggested that the company was solvent.

75    As to the submission recorded at [74(a)] above, I understood that the liquidator intended to advance the proposition that, while a company is being wound up in insolvency or by the Court, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company (see s 471A(1) of the Act). There are exceptions to this general position. The exceptions are specified in s 471A(1A) of the Act. Relevantly, s 471A(1A)(c) provides that the prohibition specified in s 471A(1) of the Act does not apply to actions taken with the liquidator’s written approval. Section 471A(1A)(d) provides that the prohibition does not apply if the relevant action is taken with the approval of the Court. I do not think that s 471A of the Act is relevant to the circumstances of the present case. Mr Manny is not seeking to take action as an officer of the defendant. Rather, he has endeavoured to invoke the discretion provided for in s 482 of the Act in his capacity as a creditor and contributory of the defendant.

76    I agree with the liquidator’s submission to the effect that Mr Manny has failed to establish that the defendant is solvent.

77    Mr Kazar also established that the defendant has no prospect of recovering any monies from any other members of the Jeff Manny Group of Companies on inter-company loans. His evidence was that the secured creditor, ANZ, will get the benefit of all of the assets of all of the companies in the group and still suffer a loss because it is likely to be repaid only part of its debt.

78    It is fairly obvious that the net position of the Jeff Manny Group of Companies is one of deficit. There was evidence to suggest that that deficit was at least $816,000. There was other evidence which suggested that it was considerably more.

79    Mr Manny contended that the defendant had offsetting claims against Complete. The first of these offsetting claims was the claim for damages in negligence which it had sought to propound in the Supreme Court of the ACT but which was struck out by Master Harper. That claim was re-agitated in the subsequent proceeding commenced at the instigation of Mr Manny in the Supreme Court of the ACT on 15 August 2012 (SC 259 of 2012). That claim was not supported before me by any evidence. The second offsetting claim concerned an order for costs which he says was made in favour of the defendant in the Supreme Court of the ACT. There was no direct evidence of the making of such an order although I am prepared to accept for present purposes that such an order was made at some time. That order for costs has not yet been quantified.

80    The two offsetting claims to which I have referred, even if they had some value, do not assist Mr Manny in his quest to have the winding up of the defendant stayed or terminated.

81    As I have already held, one of the critical issues for present purposes is whether Mr Manny has established that the defendant is solvent. He has failed to do so. Looking at contingent assets in the form of the two claims to which I have referred at [79] above and nothing else does not advance Mr Manny’s case at all. Selectively evaluating two potential assets without looking at the financial position of the defendant in a comprehensive way takes the matter nowhere.

Conclusions

82    In all the circumstances, I do not think that Mr Manny has established any reason why the Court should exercise its discretion in his favour pursuant to s 482(1) of the Act. Indeed, the evidence before me establishes beyond any real doubt that the winding up order was properly made and should stand.

83    For these reasons, Mr Manny’s application must be dismissed with costs. There will be orders accordingly.

84    Further, given the conclusions to which I have come in respect of Mr Manny’s application under s 482 of the Act, even if I had power to do so, there is no basis upon which I could or would transfer this proceeding to the Supreme Court of the ACT.

Associate:

Dated:    27 March 2014