Federal Court of Australia

Vardy as liquidator of NPC Advisory (TC) Pty Ltd (in Liquidation) v Armstrong Scalisi Holdings Pty Ltd (in Provisional Liquidation) t/as CAP Accounting [2026] FCA 941

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application filed on 15 July 2026 by Mr Teddy John Panella be dismissed.

2.    Mr Panella pay the costs of the plaintiffs and the defendant of that application.

3.    The amount of those costs be fixed as a lump sum pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth) in an amount to be assessed by a Registrar of the Court unless otherwise agreed.

4.    The plaintiffs and the defendant file and serve a costs summary in accordance with paragraphs 4.10 to 4.12 of the Costs Practice Note (GPN-COSTS) within 21 days.

5.    Mr Panella, if so advised, file and serve any costs response in accordance with paragraphs 4.13 to 4.14 of the Costs Practice Note (GPN-COSTS) within 21 days of receipt of a costs summary pursuant to order 4.

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

REASONS FOR JUDGMENT

GOODMAN J:

A.    Introduction

1    Mr Teddy John Panella seeks leave pursuant to s 198G(3)(b) of the Corporations Act 2001 (Cth) to use his powers as the sole director of the defendant to cause the defendant to: (1) apply to set aside the default judgment obtained by the plaintiffs in this proceeding on 2 March 2026 (set aside application); and (2) commence a separate proceeding to set aside a statutory demand served upon the defendant based upon the default judgment (proposed proceeding).

B.    Background

2    The first plaintiff is the liquidator of the second plaintiff. The plaintiffs commenced this proceeding for the recovery of $275,000 alleged to have been advanced by the second plaintiff to the defendant. The defendant has throughout this proceeding been in provisional liquidation. Mr Panella is the sole director of the defendant.

3    On 2 March 2026, Justice Markovic made an order for the entry of default judgment for $275,000.

4    Subsequently, a statutory demand was served upon the defendant based upon the judgment debt.

5    On 15 July 2026, on the eve of the expiry of the period available to set aside the statutory demand, Mr Panella filed the present application.

6    The application is opposed by both the plaintiffs and the provisional liquidators of the defendant.

7    The evidence establishes the following salient matters.

8    As at 29 November 2024, Mr Panella had total assets of the order of $100,000 and total liabilities in the order of $5,100,000.

9    On 10 December 2024, Mr Panella was publicly examined. He had been summonsed to appear for examination on the previous day but did not attend, following which Justice Perry issued a bench warrant. During that examination, Mr Panella gave evidence to the effect that he had no role or association with the defendant and could not recall if he was a director of the defendant. He also said that he was a director of the defendant “in name only”.

10    On 18 March 2025, Justice Perry made an order that Mr Panella pay, on an indemnity basis, the costs thrown away by reason of his failure to appear at the examination of 9 December 2024. Those costs were fixed at $15,000. Those costs have not been paid and the provisional liquidators have caused a bankruptcy notice to be issued against Mr Panella based upon that costs order.

11    Mr Panella has not been cooperative in responding to requests from the provisional liquidators for assistance and for books and records of the defendant.

C.     Consideration

12    The effect of s 198G of the Act is to prohibit Mr Panella from performing or exercising a function or power of his office as director of the defendant save to the extent that, relevantly, Mr Panella does so with the approval of the Court.

C.1    Strength of the case sought to be advanced on behalf of the defendant

13    Counsel for Mr Panella provided a draft defence to the Court. The essence of that defence is that although the defendant received the $275,000 on 15 August 2023, that amount was received into a trust account of the defendant and for the benefit of Sydney Exotic Aquariums Casula Pty Ltd (SEAC); and that on 17 August 2023 the $275,000 was transferred from the trust account to SEAC. The draft defence also contains an averment that an unidentified person by or on behalf of the second plaintiff that informed the defendant that the $275,000 was an investment made by the second plaintiff in the business of SEAC.

14    Counsel for Mr Panella also relied upon a report to creditors by the liquidator of SEAC dated 28 June 2024, which records that the second plaintiff had lodged a proof of debt “in the amount of $275,000 relating to funds loaned to [SEAC] in August 2023”. I accept that this statement in the report to creditors does provide some support for the proposed defence, however this falls well short of establishing a sufficiently arguable case to set aside the default judgment. The proposed defence is otherwise unsupported by evidence, documentary or otherwise, capable of establishing the defence as pleaded.

15    Further, as set out above, Mr Panella has previously stated on oath that he had no role or association with the defendant, he could not recall if he was a director of the defendant, and he was a director of the defendant “in name only”. If there were evidence available to make good the defence, it might be expected that such evidence would have been made available by Mr Panella to the provisional liquidators well in advance of this application.

16    Thus, I am not satisfied that the proposed defence is sufficiently arguable.

C.2    Protection of the interests of creditors of the defendant

17    As noted above, Mr Panella seeks leave to use his powers as the director of the defendant to cause the defendant to pursue the set aside application and the proposed proceeding. The pursuit of those cases will expose the defendant to adverse costs orders if either fails.

18    Counsel for Mr Panella proffered on behalf of Mr Panella an undertaking to meet any costs order.

19    However, as counsel for Mr Panella candidly and fairly conceded, Mr Panella is not a person of financial substance. That concession was appropriate in the face of evidence described above as to his financial position. Mr Panella’s impecuniosity has the result that the undertaking is worthless and the defendant is exposed to adverse costs orders.

20    Counsel for Mr Panella submitted that it is within the power of the Court to grant the leave sought subject to conditions. A condition was suggested to the effect that Mr Panella provide security for such costs. This suggestion was couched in the most general terms – there was no indication of the source of such security and the Court is not in a position to make any assessment as to the utility of making an order of the kind suggested. I do not regard the granting of leave subject to such a condition as a satisfactory course of action.

21    The potential prejudice to creditors of the defendant is a consideration weighing heavily against the grant of leave.

C.3    Other relevant factors

22    The considerations discussed at C.1 and C.2 above were the principal considerations the subject of submissions on this application. My conclusion with respect to each of them provides a sufficient basis to dispose of the application.

23    It is thus unnecessary to deal with other arguments raised, including the argument advanced by counsel for the defendant that relief of the kind sought by Mr Panella would be contrary to the principles of insolvency law because leave under s 198G(3)(b) has only been granted to directors of companies in liquidation seeking leave to appear on behalf of the company for the purpose of contesting the making of the winding up order: cf Stone (Liquidator), in the matter of RIC Admin Pty Ltd (in liq) v Mandalanic [2022] FCA 1346 at [156] to [157] (Halley J).

D.     Conclusion

24    For the foregoing reasons, the application is dismissed with costs.

Associate:

Dated:    17 July 2026