Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2007] HCATrans 335 (16 July 2007)

Last Updated: 6 August 2007

[2007] HCATrans 335

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M74 of 2007

B e t w e e n -

AUSSIE VIC PLANT HIRE PTY LTD

Applicant

and

ESANDA FINANCE CORPORATION LIMITED

Respondent

HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON MONDAY, 16 JULY 2007, AT 9.30 AM

Copyright in the High Court of Australia
MR J.M. SELIMI: May it please your Honour, I appear for the applicant in this matter. (instructed by Starnet Legal Pty Ltd)

MR N.A. FRENKEL: If the Court pleases, I appear on behalf of the respondent. (instructed by Gadens Lawyers)

HIS HONOUR: Yes. It is your application, Mr Selimi. I have just been handed an outline of your argument.

MR SELIMI: Thank you, your Honour. This, of course, is an application by the applicant for an injunction seeking to essentially stay the winding-up proceeding filed by the respondent in the court below pending the hearing and determination of an application for special leave which was filed in this Court on 2 July.

HIS HONOUR: The summons is your summons of 3 July and there is the affidavit of Mr Strangio in support. Is that right?

MR SELIMI: That is so, your Honour.

HIS HONOUR: And you read that affidavit. Is there any objection to my receiving the affidavit of Mr Strangio, Mr Frenkel?

MR FRENKEL: No, your Honour.

HIS HONOUR: Yes. Now, you cast it in terms of an application for injunction.

MR SELIMI: Yes.

HIS HONOUR: The injunction would restrain Esanda. It would not, I think, in terms restrain the supporting creditors. There are three supporting creditors, are there not?

MR SELIMI: There are, your Honour.

HIS HONOUR: It would seem to me that it may be that a stay is more accurate description of what is needed if you are to achieve the relief that you want, stay the proceedings in the pending winding-up.

MR SELIMI: Yes, your Honour. That indeed is the very reason why I opened in the way I did.

HIS HONOUR: Yes.

MR SELIMI: An injunction essentially seeking a stay of that wind-up proceeding, your Honour.

HIS HONOUR: Yes.

MR SELIMI: In order to essentially preserve for all practical purposes the subject matter of the application for special leave to appeal.

HIS HONOUR: What terms do you say would be apposite to granting a stay if a stay were to be granted?

MR SELIMI: The usual undertaking as to damages, your Honour.

HIS HONOUR: By whom?

MR SELIMI: I am instructed to give it not simply by the company but also by its director, Mr Bruno Strangio, who is the, if I can put it this way, sole moving force behind the matter.

HIS HONOUR: Yes. What other terms, if any, would be apposite?

MR SELIMI: Secondly, your Honour, your Honour may well have read the respondent’s outline of submissions which apparently were provided to the court last Friday. Much is sought to be made by the respondent in relation to an undertaking which the applicant provided to the Master. It is significant, your Honour, to clarify the circumstances surrounding the provision of that undertaking.

HIS HONOUR: I do not know that that is going to help me.

MR SELIMI: Yes, but it is relevant to your Honour’s question. Perhaps I will answer it. Your Honour, in order to address the element of public interest that the respondent has sought to capitalise upon, vis-a-vis we have a company which supposedly is insolvent and supposedly is wreaking havoc on the commercial community, we offered and we continue to offer an undertaking not to trade such - - -

HIS HONOUR: Can I just understand what that would entail, particularly in connection with the costs of any application for special leave and any consequent appeal? The respondent points to the fact that there is an unsatisfied statutory demand. The respondent points to the fact that there is no positive evidence of solvency which has been filed. Is that right? There is no positive evidence of solvency which has been filed?

MR SELIMI: That is so, your Honour.

HIS HONOUR: We know of three creditors who seek to support the application for winding-up. Who is going to pay the costs of the application for leave and any consequent appeal? If it is the company, the company is incurring debts, the debts go to the detriment of the body of creditors generally. What is the - - -

MR SELIMI: May I seek some instructions on that issue, your Honour?

HIS HONOUR: Yes. Before you do that, it would seem to me that the basis upon which any stay would go would have to be that Mr Strangio as the controller of the applicant would have to undertake to pay the costs of the application and any consequent appeal personally.

MR SELIMI: Yes.

HIS HONOUR: But the knife in the napkin of which you have to be aware is then that that would seem to take you off, possibly, into the area of Knight v FP Special Assets (1992) 174 CLR 178 where, in a case concerning particularly the rules of the Supreme Court of Queensland, Chief Justice Mason and Justices Deane and Gaudron are recorded in the headnote as saying:

Where a party to litigation is an insolvent person or man of straw, a non-party -

which would be the position of Mr Strangio, relevantly -

who has played an active part in the conduct of the litigation and who has, or some person on whose behalf he is acting or by whom he has been appointed has, an interest in the subject of the litigation is liable to have an order for costs made against him if the interests of justice require that it be made.

So if Mr Strangio were to give an undertaking to pay the costs and expenses of the applicant, of the application and any consequent appeal, a possible outcome - I do not say an inevitable outcome - is that were he to fail in the appeal and questions of costs, orders against the applicant or appellant emerge, that someone is going to be referring to Knight v FP Special Assets saying that Mr Strangio should pay the costs personally. I am not to be taken as concluding that that order should be made, but if there are going to be undertakings about who pays the costs, let us at least have that above the table so that people know what is possibly about.

MR SELIMI: Yes.

HIS HONOUR: Yes.

MR SELIMI: Thank you for that indication, your Honour. May I seek some instructions?

HIS HONOUR: Yes, of course.

MR SELIMI: I am instructed to give the undertaking by Mr Bruno Strangio personally that he will personally meet any order for costs which may be made in the event that the application for leave to appeal is continued and any appeal thereafter.

HIS HONOUR: But also to pay the costs of the applicant, that is, to pay Aussie Vic Plant Hire’s costs? That is the immediate undertaking which it would seem to me to be necessary would be that Mr Strangio bear Aussie Vic Plant Hire’s costs so that the company is not incurring further debts.

MR SELIMI: Yes.

HIS HONOUR: If later somebody wants to apply for an order that he pay costs personally if the proceedings are unsuccessful separate territory can be argued there.

MR SELIMI: Thank you, your Honour. Your Honour, I am instructed to not only give the undertaking that he will personally pay the costs of the applicant, but he will also, if unsuccessful, pay the costs of the respondent.

HIS HONOUR: Yes.

MR SELIMI: Without any argument being necessary on the Knight Case.

HIS HONOUR: Yes. Do I understand the position to be this, that you have a divided Court of Appeal which sat five members on a point of general application which your opponent says is rightly decided but you would seek to contest? Is that the essence of it?

MR SELIMI: Indeed, your Honour, but I would take it one step further. It is a most unique and exceptional situation where two of those who formed part of the majority expressed the view that the construction upheld by the learned Honourable President Maxwell and Justice Neave in fact was the preferable construction, yet due to previous decisions of single judges and obiter dicta of the Full Federal Court, they felt obliged to follow an erroneous line of authority, if I can put it that way with great respect, rather than applying what they personally believed was a correct construction.

HIS HONOUR: Yes.

MR SELIMI: So we have the most unique, and in my researches, unprecedented situation where a special bench of five judges of the Court of Appeal was convened to consider a question of general importance in terms of the administration of the Corporations Act and four out of five were with the applicant but only two were prepared to give practical effect to it.

HIS HONOUR: Yes. Well, it may perhaps be easier, Mr Selimi, if I hear from Mr Frenkel at this point.

MR SELIMI: If it please, your Honour.

HIS HONOUR: Now, Mr Frenkel, do I understand your position to be this. One, Aussie Vic Plant Hire, at least so far as the material reveals, is not travelling soundly is the least of the ways in which you would put it. Other expressions like “hopelessly insolvent” I see pepper your submissions.

MR FRENKEL: Yes, your Honour, yes.

HIS HONOUR: Two, you say the decision below is plainly right?

MR FRENKEL: We do, but we go further than that and say that there is no uncertainty in relation to the law and the authorities are all one way, except there are two dissenting judges in this proceeding, but all the authorities, Livestock and the other authorities and if one takes a wider view, Buckland, and all the other authorities that relate to the other subsection of 459F, are all effectively unanimous there is no power. So there is no point of special importance that the High Court needs to consider.

HIS HONOUR: Now, given that winding-up proceedings involve more than the immediate parties to the proceeding, there are other creditors of whom we know and there may be other creditors beyond those of whom we know, any order intercepting the winding-up of a company in the present circumstances is no doubt attended by some hesitation and difficulty. What do you say about three things: (1) that the relevant form of order to make is stay, not injunction. Stay not injunction because the important step to take is to intercept the winding-up proceedings, not simply to restrain Esanda personally, most especially, is that so, it seems to me when there are other supporting creditors who could simply take over the proceedings as of right. That is one question.

Question (2), if Aussie Vic Plant Hire undertakes to prosecute the application with expedition and not incur any new debt or otherwise trade or carry on any business; and the third but related area, if Mr Strangio undertakes that he will pay the applicant’s costs of and incidental to the application for special leave and any consequent appeal and if either the application or any consequent appeal is unsuccessful, the costs of the respondent, what do you say about a stay being ordered?

MR FRENKEL: Well, in relation to the first matter, your Honour, obviously my learned friend’s application is for an injunction. Almost all of the authorities that seem to relate to these issues seem to relate to applications for a stay. In similar circumstances in all the vast majority of authorities where High Court Judges have considered applications such as this, seem to have considered stay applications, certainly the principle is very similar.

HIS HONOUR: But it seems to me unless stay goes I am just beating the air. I mean if I restrain Esanda what is to prevent a supporting creditor simply saying, “I take over and go”?

MR FRENKEL: Yes, look, I understand that. My instructions are firmly to oppose the application.

HIS HONOUR: I understand that.

MR FRENKEL: And whether it is a stay or injunction Esanda opposes it. In terms of the other two matters that your Honour raised, the undertakings, well my learned friend said something about that, but really this matter has had a long history and an undertaking was given a few weeks ago which was not complied with. There is absolutely no confidence on behalf of Esanda that any undertaking that my learned friend’s client or clients, if it includes Mr Strangio, will be met. The clear undertaking was given a few weeks - - -

HIS HONOUR: Well, what are the consequences if it is not met, Mr Frenkel. What is the consequence of breach of an undertaking?

MR FRENKEL: Well, consequence can be that one can be in contempt of court.

HIS HONOUR: What is the consequence of that?

MR FRENKEL: Well, one can go to gaol.

HIS HONOUR: People go to gaol, do they not, if they fail in their undertakings to courts and if they give undertakings to this Court and fail in their performance the questions of the punishment to be exacted would be severe, would they not?

MR FRENKEL: They would, your Honour. I am not suggesting that that is not correct. All I am saying is we do not have confidence in the undertaking.

HIS HONOUR: I understand that.

MR FRENKEL: Your Honour, what I really want to say about the application and obviously we filed a submission and we rely upon all the matters in the submission, but the real focus of what I want to say today is that the authorities, until October last year, when my learned friend obtained an injunction before two members of the Court of Appeal, the authorities all really suggested that to obtain - because Part 5.4 of the Corporations Act is a code and your Honour is very aware of the authorities relating to that, an applicant for an injunction needs to establish an abuse of process to restrain a winding-up application that relies upon a failure to comply with a statutory demand.

HIS HONOUR: That is why, as I say, I think if we see this in the realm of discourse of injunction we are intruding a number of considerations, not least injunction to restrain presentation of a petition, to use the old language, was a step that was taken only in quite clear and extraordinary cases. I understand that and I understand the force of what you say. The point I think that you have to grapple with is this. It is a point related to this Court’s role. We have a divided Court of Appeal. We have a Court of Appeal that is divided in which two members of the court express doubts about the view of the law to which they feel obliged to come. The only place in which these doubts can finally be put to rest is here. What are we to do, except to consider taking it on and dealing with it? Now, those are perhaps questions for the leave Bench rather than a single Justice, but unless I grant a stay, the leave Bench will have nothing to consider, will it?

MR FRENKEL: With respect, your Honour, no, I do not accept that because my learned friend has the opportunity to prove solvency in the winding-up. It is not the end of the road for the applicant. Part 5.4 is all about solvency. It is not about where there is a genuine dispute, or whether time for complaints can be extended. It is about solvency. It is absolutely clear that that is the case and that is what this Court said in David Grant and that is the key issue. The applicant has flouted the orders of Master Efthim to provide evidence of solvency. The application is back on in two day’s time. They have still provided no evidence.

There was an affidavit of Barry Lipp, my instructor filed in which he said the Master made it very clear three weeks ago that notwithstanding the special leave application they needed to provide evidence of solvency. Now, we might get it tomorrow, if your Honour does not grant an injunction today, but the fact is that they are clearly insolvent. They have made no effort to prove solvency and that is what Part 5.4 is all about. The point is that they can resist the winding-up. They can seek to rely upon grounds that they have relied upon before, or grounds they have not relied upon before, on the winding-up application, providing they go to solvency. So this is not the end of the road, in my submission, for the applicant. They need to do what the whole regime is about.

HIS HONOUR: But would the point which is at the heart of the Court of Appeal’s decision be a point that would remain open for debate? If I refuse stay today, is not that point concluded?

MR FRENKEL: It is not concluded if they prove solvency. If they do not prove solvency - - -

HIS HONOUR: If they prove solvency, then the winding-up fails.

MR FRENKEL: Winding-up fails.

HIS HONOUR: Yes.

MR FRENKEL: And they can proceed with their application. I mean, that is the fundamental point to which Parliament was directing Part 5.4 and this Court in David Grant said - - -

HIS HONOUR: I should tell you I was the trial judge in David Grant. David Grant’s Case is very familiar to me. Yes.

MR FRENKEL: The Court said at page 270:

The provisions of the new Pt 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.

Now, your Honour, while I am reading from David Grant, just very briefly if I could also read at page 279, and it is tab 18 of the folder of authorities:

No doubt, in some circumstances, the new Pt 5.4 may appear to operate harshly. But that is a consequence of the legislative scheme which has been adopted to deal with perceived defects in the pre-existing procedure in relation to notices of demand.

Now crucially, your Honour –

It also may transpire that a winding up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz. However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction.

Now, that passage of Justice Gummow which was followed by all the other members of the Court, is the basis for all of the injunction applications that have been made subsequently in numerous other cases and numerous other reported decisions in which various courts, including – and it is at paragraph 9 of our outline, your Honour - Mann v Goldstein, although that was an English decision, but it is the same principle; Justice Barrett in Shakespeare’s Pies in New South Wales, the Court in Braams, the Court in Bryanston - and I can take your Honour to each of the passages – in each of those cases, in effect, that passage from David Grant is followed to the effect that Part 5.4 is a code.

There is a legislative intention for time limits within it to be followed and obviously it can be a harsh regime and it can be difficult for companies that are the subject of a statutory demand that the jurisdiction of the court to restrain a winding-up application is the jurisdiction that has only been exercised, in my submission, up to October last year when the Court of Appeal granted an injunction. The jurisdiction to restrain the winding-up is only exercised when there is an abuse of process.

Now, an abuse of process, as your Honour knows, means, in effect, an improper purpose. There is nothing about this proceeding in which Esanda could be said to have an improper purpose. Esanda is seeking to wind up an insolvent company. The company, your Honour, is clearly insolvent because they do not even want to trade. They gave an undertaking a few weeks ago to Master Efthim that they would not trade. So they have not traded for a few weeks apparently. Now, my learned friend’s client has offered an undertaking in his affidavit that they will not trade, presumably for months if not a year or more until a special leave application and perhaps an appeal is heard. That is extraordinary, your Honour. It raises incredible suspicions about what this company, what Mr Strangio are doing.

The point is - and if I could read again from paragraph 9 of the outline, your Honour, Justice Barrett said in Shakespeare’s Pies:

The David Grant case makes it clear, in my opinion, that a creditor who has served a statutory demand which remains unsatisfied such that the presumption of insolvency has arisen (whether or not there was an attempt to have the statutory demand set aside) is entitled to initiate and prosecute a winding up application unless that application is within the narrow abuse of process possibility adverted to in the judgment at p 279 -

which is the passage of David Grant I have just read, your Honour.

HIS HONOUR: Now, as things presently stand, following the decision of the Court of Appeal, what is the consequence for the construction of 459F? Can the time for compliance be extended after its expiry?

MR FRENKEL: No, your Honour, it cannot and I accept - - -

HIS HONOUR: Two members of the court expressed the view that that was not the preferable construction of the section.

MR FRENKEL: I think four members of the court expressed that view, but the majority held that there was no power. Now, Justice Chernov held there was no power and that was right, that was his Honour’s view. Justice Nettle held there was no power because of all of the unanimous authorities that had said there was no power. His Honour would follow that although that was not his Honour’s view, his Honour’s personal view, and Justice Ashley agreed with Justice Nettle in effect and said that although it was not his Honour’s personal view that there was no power, his Honour would follow the other unanimous authorities, beginning with Justice Jenkinson’s decision in Livestock.

Can I say, your Honour, Justice Ashley critically - in this proceeding Justice Ashley is the only judge in the Court of Appeal who addressed the underlying issue. In other words, is there any point to this proceeding because whether or not the threshold point is right, is there a genuine dispute? The five-page affidavit of Mr Strangio, which was the only affidavit before Master Efthim, in my submission, the only conclusion from that is there is obviously no genuine dispute and that was what Justice Ashley concluded. So Justice Ashley would not have granted leave to appeal from the interlocutory decision because there was no substantial injustice.

In terms of the question your Honour has asked, of the three majority judges, two expressed doubts as to whether it was correct but the clear majority decision is that there is no power. The law is not in a state of uncertainty. There has been - for the first time, your Honour, in this proceeding there are now some judges who have expressed the view that that is not preferable construction for section 459F. Prior to that we had four judges who had held that there was no power, beginning in Livestock, and two differently-constituted Full Federal Courts, in Vista and in Equuscorp.

Both sets of three judges had held in obiter that the Livestock decision and the decision that followed were correct. Those decisions were cited with approval in Vista and Equuscorp. So there is no uncertainty. Certainly my learned friend has an argument. Certainly the argument was accepted by two of the judges in this proceeding and, your Honour, the other thing is that my learned friend said in his submission they took the point, the threshold point about power, Esanda, so they should not be able to resile from that. But the point is, as at last year when we took the point before Justice Whelan, Justice Whelan accepted he had no jurisdiction. We had no choice. We had a duty to the court. All of the authorities, the unanimous authorities were the court had no power after the time had expired.

Now, my learned friend’s client’s proceeding has proceeded and that decision has been upheld by the majority in the Court of Appeal. So nothing has changed. There is no uncertainty. There is no power to extend time after the time for compliance has expired and that decision is perfectly consistent with the other decisions relating to similar matters such as Buckland and all the decisions as to whether you can extend time after the seven days.

HIS HONOUR: Well, the argument against you is that 459G(2):

An application may only be made within 21 days after the demand is so served -

is an explicit contrary indication to the application of section 70, whereas 459F(2), with its provisions about extension of time for compliance, contains no such contrary indication. Now there is the area for debate and only this Court can resolve it, can it not?

MR FRENKEL: Certainly, this is the highest Court in the land and obviously this is the only Court that could conclusively resolve it, your Honour, but the fact is when four judges of intermediate courts have a unanimous view, and two differently constituted Full Federal Courts approve that view in obiter and then a majority of five judges in the Victorian Supreme Court approve that view, all of the decisions, putting aside the dissenting views, all of the decisions are one way. So there is no uncertainty. Certainly there is argument and some of the judges in this proceeding would disturb what the law has, since Justice Jenkinson’s decision in Livestock, been that the law remains that. So it is not in disarray.

Your Honour, the real focus from Esanda’s point of view today, your Honour, is that what the Court of Appeal did by granting an injunction in October last year was, in my submission, unprecedented in the absence and abuse of process. Their Honours, the learned President and Justice Neave in the decision - and it is referred to in the folder of authorities - in tab 15, their Honours did not deal with David Grant and the Shakespeare’s Pie and the line of authorities to say that - again, your Honour, without repeating myself, it is a code - the jurisdiction to restrain a winding-up proceeding based upon failure to comply with a statutory demand is limited to abuse of process and their Honours did not deal with that - - -

HIS HONOUR: Well, I understand what you say about injunctions to restrain winding-up. As I say, I think that the more relevant realm of discourse is not injunction but is the power of this Court to stay which is the power given, is it not, in Part 42 of the Rules of this Court, a power to stay proceedings in the court below – 42.09.

MR FRENKEL: Well, yes, your Honour, I am not suggesting that your Honour does not have the power to make the order, but - - -

HIS HONOUR: No, but the principles about injunction that you refer to are principles that apply, if at all, only indirectly in considering stay of proceedings in the courts below where the proceedings in the court below have not proceeded - as is here the case, have not proceeded to conclusion. Anyway, go on.

MR FRENKEL: Your Honour, the principles, in my submission, are really the same, which is that the regime under Part 5.4 is a an unusual regime, that there are specific intentions and it was not the intention of Parliament that a statutory demand such as this could be delayed by a year and a half, perhaps two and a half years. It is completely contrary to the regime. The order that was made in October last year, in my submission, is contrary to the pre-existing authorities.

As to the other matters, your Honour, I do not know if your Honour has had a chance to read the affidavit in support of Mr Strangio of the statutory demand, but Master Efthim referred to it as one of the thinnest he had ever seen. If there is no genuine dispute and, in my submission, there is no genuine dispute - and certainly Justice Ashley is the only of the five judges who addressed that in his decision – there is no utility whatsoever in this appeal, aside from an academic exercise of interest to lawyers about whether section 459F, whether the law in relation to that should be changed.

HIS HONOUR: If, as you would contend, the company is insolvent, do you point to any particular consequence for Esanda that would follow from the interruption of the winding-up process?

MR FRENKEL: Look, I cannot specifically, your Honour. We do not know why the applicant keeps on - well, the applicant gave an undertaking to Master Efthim a few weeks ago it would not trade. It is now giving the same undertaking. It has obviously traded since the beginning because of all the supporting creditors and the other debt proceedings in various courts involving nine entities in total, but there are trucks that were bought with the money lent by my client. Now, my client has charges, has sought to recover them, has not been able to recover the trucks. We do not know where the trucks are.

HIS HONOUR: Sorry, has not physically got the secured property?

MR FRENKEL: Yes. This is in evidence, but we do not believe the trucks are on the applicant’s land any more. We do not know where they are, but I cannot say there is any evidence about any of those matters. We do not know what is going on with the applicant. We cannot understand how any company that is a trading company could say, “Well, we're not going to trade for a year or two, no problem”. It is just extraordinary. I mean, obviously, the concern will be the trucks and whatever other assets that Aussie Vic has will be dissipated. We do not know if they have been already. That would be the ordinary concern - - -

HIS HONOUR: Well, any stay of proceedings would not preclude Esanda from realising on its security, would it? If it can find the trucks and realise them, the interception for winding-up is not going to affect any process against the secured property, is it?

MR FRENKEL: Well, if we can find it and - - -

HIS HONOUR: I understand. There is a certain minor practical problem that - - -

MR FRENKEL: There is. Well, there is also a charge - - -

HIS HONOUR: - - - the creditor is confronting. It is not that but interception of the winding-up does not preclude you from realising your securities if you can find them and if you can realise them to any advantage.

MR FRENKEL: Well, it may. There is a pre-existing chargor over the assets of Aussie Vic and that is a company which Mr Strangio’s family controls. So the shareholder of Aussie Vic is a company. Ilford something or other, your Honour, and that company is the first chargor. So it may well be that through the arrangements that we will not be able to have recourse to the assets, we just do not know. Look, I certainly would not want to be seen to be accepting that any further delay will not harm my client’s chances.

Obviously, your Honour, it goes without saying that the further there is a delay, the less likely it is that my client will be able to successfully execute and, in particular, your Honour, of course, the whole regime of Part 5.4 is that you get a liquidator in quickly so the liquidator can make appropriate inquiries and, for instance, if the company has traded while insolvent, then directors are liable for that sort of conduct.

Now, in this case there would be a strong suspicion, to put it mildly, that the company has traded while insolvent given the amount of creditors that are pursuing this company and the regime - your Honour, the intention of Parliament, in my submission, is that a liquidator should be appointed to make appropriate inquiries and that Aussie Vic should not be given another year or two to dissipate its assets.

HIS HONOUR: Yes.

MR FRENKEL: I can take your Honour through the outline.

HIS HONOUR: Yes, I have, in fact, read the outline, Mr Frenkel. Yes.

MR FRENKEL: I do not know that I can take, aside from - would your Honour be assisted if I took your Honour through the.....Mr Strangio alleging genuine dispute?

HIS HONOUR: No, I understand that you would say that that is, as Master Efthim said, very thin.

MR FRENKEL: And as Justice Ashley said, and Justice Ashley - - -

HIS HONOUR: Yes, I understand that.

MR FRENKEL: Your Honour, in summary, for the reasons that are summarised in paragraph 11 of the outline, there is no substantial prospect, in my submission, of obtaining special leave. I understand that the section 459F point is an arguable point, your Honour, and certainly I could not resist the fact that that is an arguable point, but that is not what this proceeding is all about. Well, it is one aspect of this proceeding, but this proceeding is much more about insolvency and there is also no point to it if there is no genuine dispute. The applicant could not succeed in this proceeding, particularly for the reason that there is no genuine dispute.

HIS HONOUR: Yes. Yes, thank you, Mr Frenkel.

MR SELIMI: May I just assist your Honour briefly by referring your Honour to your Honour's decision in Patrick Stevedores v Maritime Union of Australia?

HIS HONOUR: I am familiar with Patrick Stevedores.

MR SELIMI: Perhaps if I can hand that to your Honour. Your Honour, of course, is fully familiar with it.

HIS HONOUR: There is no need to, thank you, I have - - -

MR SELIMI: But the essential point in terms of this suggestion that an abuse of process has to be found in order to support a stay or an injunction, your Honour, of course, in that case - - -

HIS HONOUR: Well, Mr Selimi, there is a golden rule in this place. If you are not invited to go back into the lion’s den, it is better to leave your hat where it is.

MR SELIMI: Yes, I beg your pardon.

HIS HONOUR: Yes, thank you, Mr Selimi.

On 14 March 2006, Esanda Finance Corporation Pty Limited, the respondent to the present application, served on Aussie Vic Plant Hire Pty Ltd, the applicant, a statutory demand made in accordance with Part 5.4 of the Corporations Act 2001 (Cth). The amount demanded was more than $400,000 and was demanded pursuant to a number of separate chattel mortgage and hire purchase contracts which it was said had been made between Esanda and Aussie Vic Plant Hire to enable Aussie Vic Plant Hire to acquire some commercial vehicles and equipment.

On 3 April 2006, Aussie Vic Plant Hire filed and served an application to set aside the statutory demand. That application was made under section 459G of the Corporations Act and was made within the time prescribed by section 459G(2) of the Act, a time prescribed as “within 21 days after the demand is so served”.

On 20 June 2006, a master in the Supreme Court dismissed the application to set aside the statutory demand. The master held that the material filed by Aussie Vic Plant Hire did not disclose any genuine dispute or genuine offsetting claim. Aussie Vic Plant Hire sought to appeal from the order of the master dismissing the application to set aside the statutory demand. The notice of appeal was filed on 28 June 2006 and was returnable before a judge of the Supreme Court on 21 July 2006. Aussie Vic Plant Hire did not apply, whether to a master or to a judge of the Supreme Court, for an extension of time within which to comply with the statutory demand. That being so, the times fixed by section 459F of the Corporations Act expired with the consequence prescribed by section 459F that the company was taken to fail to comply with the demand.

Aussie Vic Plant Hire’s appeal to a judge was adjourned from 21 July 2006 to 28 July 2006 and in the intervening period the company filed an application seeking an order that the time for compliance with the statutory demand be extended, now for then, until 14 days after the hearing and determination of the appeal. On 28 July 2006, the matter coming on for hearing before Justice Whelan, his Honour dismissed the appeal instituted by Aussie Vic Plant Hire on the basis that the time for compliance for the statutory demand had expired.

Aussie Vic Plant Hire then sought to appeal to the Court of Appeal of Victoria. That appeal was deemed to be abandoned upon failure to file a note of proposed contents of appeal book, and on 21 August 2006, Esanda commenced proceeding No 8247 of 2006 in the Supreme Court of Victoria seeking an order that the applicant, Aussie Vic Plant Hire, be wound up in insolvency. That application for winding-up was returnable on 20 September 2006. On that day, Aussie Vic Plant Hire filed a summons in the Court of Appeal seeking an order that the appeal not be taken to be abandoned, and sought and obtained an adjournment of the winding-up proceedings to a date in September 2006.

Three creditors gave notice of intention to support the application for winding-up. Each of those creditors claims an amount significantly less than $10,000. There then followed further interlocutory proceedings, both before a master of the Supreme Court and in the Court of Appeal, the detail of which it is not necessary to note. On 2 February 2007, the Court of Appeal heard the proceedings instituted by Aussie Vic Plant Hire, and on 14 June 2007 the court gave its judgment in the proceedings: see Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2007] VSCA 121.

The Court of Appeal was specially constituted as a bench of five judges. The court considered whether an appeal to that court lay as of right or only by leave, and that was a question the disposition of which turned immediately upon classifying the order made by Justice Whelan as an order in an interlocutory application: see Supreme Court Act 1986 (Vic) section 17A(4)(b).

The other principal question determined by the Court of Appeal was whether the power given to a court by section 459F(2) to make an order extending the period for compliance with a statutory demand is a power that is exercisable in the fashion contemplated by section 70 of the Corporations Act as a power which may be exercised “even if the period, or the period as last extended, as the case requires, has ended”.

By majority, the court concluded that the power to extend time for compliance given by section 459F(2) may not be exercised after the time for compliance with the statutory demand has expired. Four members of the court, however, two dissenting members of the court and two members in favour of the orders ultimately made by the court dismissing Aussie Vic Plant Hire’s appeal, may be understood as expressing the opinion that the preferable construction of the statutory provisions is to the contrary of that to which the majority’s order in the Court of Appeal gave effect by the dismissal of the appeal. That is, four members of the Court of Appeal may be understood as expressing the view that the better construction of section 459F in conjunction with section 70 is that the power to extend time for compliance with a statutory demand may be extended notwithstanding the expiration of the time for compliance with the notice.

Two members of the court who joined in the making of orders dismissing the appeal by Aussie Vic Plant Hire were of opinion that the weight of authority in Australia runs against the adoption of the construction of the statute which their Honours favoured.

On 3 July 2007, Aussie Vic Plant Hire Pty Ltd made application to this Court for special leave to appeal against the orders made by the Court of Appeal. On the same day, the applicant applied for orders which in form were cast as orders enjoining the prosecution by Esanda of the winding-up proceedings, and further enjoining Esanda from taking any further action based on a failure to comply with the statutory demand of 9 March 2006, pending the hearing and determination of Aussie Vic Plant Hire’s application for special leave to appeal and any appeal arising from the grant of leave. It is that summons which falls for determination by me today.

In opposition to the application, Esanda relies upon the affidavit of Barry Lipp, the solicitor having the care and conduct of the proceedings on behalf of Esanda, that affidavit being the affidavit sworn on 12 July 2007. At the risk of some inaccuracy, it is sufficient to summarise the arguments advanced by Esanda as being that the course of proceedings below is such as to lead to the conclusion that Aussie Vic Plant Hire is insolvent and should be wound up. Esanda points to the fact that despite repeated opportunities, indeed orders to that effect, Aussie Vic Plant Hire has filed no affidavit disclosing its financial position, let alone demonstrating its solvency.

Esanda points to the evident intention of Part 5.4 of the Corporations Act as being to ensure that companies which are insolvent are wound up and wound up promptly in the interests of all creditors and in the interests more generally of proper commercial practice in this country. The weight of these arguments advanced by Esanda is considerable.

The point which the applicant seeks to agitate in this Court is one which, at least on its face, would appear to be a point of general application concerning the operation in important respects of the national corporations legislation. The point which the applicant seeks to agitate is one in which the Court of Appeal in Victoria thought it appropriate to assemble a specially constituted bench and in the disposition of which the court divided. Further, the point is one which, at least on one reading of the reasons for judgment of members of the court, is a point which was resolved by at least some members of that majority on a basis which they did not consider to constitute the better construction of the applicable statutory provisions.

In these circumstances, it cannot be said that the application for special leave to appeal to this Court is devoid of prospects. It would be inappropriate to express any opinion about those prospects for success beyond that limited and guarded negative expression.

The immediate question for determination then becomes whether the further prosecution of the winding-up proceedings now pending in the Supreme Court of Victoria should be intercepted pending hearing and determination of the application for special leave to appeal. Although the application made by Aussie Vic Plant Hire is cast in terms of application for injunction to restrain the prosecution of the winding-up proceeding, it would seem to me that the grant of an injunction in the terms sought is not apposite for at least two reasons. First, to grant injunction directed only to Esanda would leave it open to the supporting creditors to prosecute another application for winding-up or this application for winding-up to conclusion. Second, to cast the application as one for injunction may more directly bring into play questions of consideration of abuse of process which are inapposite to considering whether a stay of proceedings in the court below should go in support of the preservation of the right to apply for special leave to appeal to this Court and, if special leave to appeal were to be granted, the consequent right to prosecute the appeal.

Because the application is one concerning insolvency, the interests of parties other that the immediate parties to the litigation may be engaged. Because the application concerns proceedings for winding-up in insolvency, it is necessary to consider whether steps should be taken as a condition for the grant of any stay that would preserve, as best one can, the status quo. In particular, it would be necessary to consider as a price for the grant of any stay whether some special arrangement should be made concerning the costs of the proceedings in this Court and more generally about Aussie Vic Plant Hire continuing to trade or to incur debts.

In the course of debate, counsel for Aussie Vic Plant Hire indicated that his client would, as the price for obtaining a stay, procure from the natural person who is sole director and controller of Aussie Vic Plant Hire, namely Mr Bruno Strangio, undertakings concerning the costs of the prosecution of the application for special leave to appeal and any consequent appeal and would further proffer undertakings by the applicant itself not to incur any new debt or otherwise trade or carry on any business.

If, but only if, undertakings to that general effect were to be offered and accepted by the Court, I am of the opinion that it is an appropriate case in which to order a stay of all further proceedings in matter 8247 of 2006 which now are pending in the Supreme Court of Victoria until the hearing and determination of the application for special leave and any consequent appeal or, of course, until further order.

Given the seriousness that is to be attached to the offering of undertakings and given further the importance of ensuring accuracy in the recording of those undertakings, it would seem to me to be appropriate that I do no more presently than indicate an intention to grant a stay of the kind generally requested upon the proffering of undertakings of the kind described and to make available to counsel for the parties a draft of undertakings and orders that might give effect to that intention.

There would remain for consideration what further or other orders should be made whether as to the costs of the present application or as to the prosecution of the application for special leave to appeal. As at present advised, and subject to anything that counsel may say, it would seem to me that the appropriate order for costs would be to make the costs of the application for stay costs in the application for special leave and any consequent appeal such that the costs of the application for stay would ultimately fall upon the party that fails in the litigation, whichever be the point at which that failure occurs - application for leave or appeal.

As for giving directions about the prosecution of the application for special leave, I would be minded to exact from the applicant, Aussie Vic Plant Hire, its undertaking that it would prosecute this application with expedition. But, as I say, the precise terms of the orders and undertakings is a question about which I would hear counsel when they have had an opportunity to consider the draft which I will have made available to them.

In the meantime, what I propose is – it is now 20 to 11, gentleman - I would propose to have my associate make available drafts for your consideration and would propose to come back at, say, 5 to 11 when you have had an opportunity to consider them without me staring balefully at you and if there are questions of undertakings, when you have had proper opportunity (a) to obtain instructions and (b), no doubt in the course of obtaining those instructions, explain in words of one syllable the consequences of failure to comply with undertakings given to a court.

Now, Mr Frenkel, you looked as though you wish to make some application.

MR FRENKEL: No, your Honour, I can - - -

HIS HONOUR: No. Very well.

MR FRENKEL: There seems to be four undertakings that would be given.

HIS HONOUR: Yes, and they are reflected in the draft so I will adjourn and come back at 5 to 11 unless sent for earlier, but in any event, I will return at 5 to 11, gentlemen.

MR FRENKEL: If it please, your Honour.

AT 10.41 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.55 AM:

HIS HONOUR: Yes, Mr Frenkel.

MR FRENKEL: Your Honour, the one substantive matter is that - - -

HIS HONOUR: Now, beware of that which is prepared by the judge on the run. Talk about the purchaser should make his own inquiries. Yes, Mr Frenkel.

MR FRENKEL: Well, actually, your Honour, I might just go to the mechanics.

HIS HONOUR: Yes.

MR FRENKEL: In my submission, the undertaking should be upon Bruno Strangio and the applicant, by their counsel.

HIS HONOUR: Yes.

MR FRENKEL: Undertaking to the Court that they will pay.

HIS HONOUR: No.

MR FRENKEL: No?

HIS HONOUR: What I am not going to have is an insolvent company incurring other debts. That is why the first undertaking was cast as Mr Strangio to bear the costs, so that if you are right and Aussie Vic is insolvent, it is not pushed further into the red.

MR FRENKEL: Then, your Honour, line 3, after the words “incidental to this application”, I think it should be then “and the application for special leave”.

HIS HONOUR: Well, it was intended to be the whole application for special leave, including not just this application for stay.

MR FRENKEL: Yes, so this application and the application for special leave and then the next line “and the costs of the respondent of this application and its application for special leave and any appeal, if either the application” and the rest is “if either the application for special leave, or any consequential appeal is unsuccessful”.

HIS HONOUR: Yes.

MR FRENKEL: And a few lines down “(a) that it will prosecute the special leave application and any appeal with expedition”. Just the next line down, your Honour, “that until the hearing and determination of the application for special leave” and it would continue on. So they are the mechanics, your Honour. The more substantive matter is my instructing solicitors are acting for Westpac in another proceeding against Aussie Vic. This is all deposed to in the affidavit of – it is an exhibit to the affidavit of Mr Lipp, it is exhibit No 7.

Now, exhibit No 7 is an affidavit of Kristine Hopkins who is also a solicitor at Gadens, who are solicitors for Esanda, but they are also the solicitors for Westpac and in one of the, I think, seven-odd proceedings in which Aussie Vic is currently a party – I am sorry, was a party as at October last year when this affidavit was sworn - one of those proceedings is a proceeding in which Gadens act for Westpac and that is due to come on for hearing on 8 August, I am told by my instructors, in the Supreme Court. I am told that Mr Strangio is also a defendant in that proceeding and it is, as I understand it, another debt proceeding, if I can put it that way.

So I just should raise in open court, if my learned friend is giving undertakings on behalf of both the applicant and Mr Strangio, in circumstances where there is a trial in less than a month and presumably some sort of prospect that the company will have a judgment against it and Mr Strangio may have a judgment against it, firstly it is, I think, difficult for them to give the undertakings, but that is a matter for them. The second thing is, of course, that if they are parties to a proceeding with Westpac, coming up for trial in a few weeks, then to that extent they are trading and incurring debts, which is the last part of your Honour’s proposed draft.

So to that extent, without wanting to reagitate the matters your Honour has already ruled upon, I just make the point, in open court, that if they are going to undertake that they will not incur any new debt - - -

HIS HONOUR: Well, it is not “they” for a start, Mr Frenkel. It is Aussie Vic.

MR FRENKEL: I am sorry, “it”, yes.

HIS HONOUR: Yes. Now, do you have some application you want to make because I am not going to sit here listening to speeches. What is it you want me to do?

MR FRENKEL: Well, I am just mentioning in open court, your Honour, that - - -

HIS HONOUR: I understand that. I am not going to hear any speeches. What is it you want me to do?

MR FRENKEL: Well, nothing, your Honour, I just raised that matter on the basis that - - -

HIS HONOUR: Yes, well, you have done it.

MR FRENKEL: - - - my learned friend is to give the undertaking, that is all - - -

HIS HONOUR: Yes, you have done it. Thank you, Mr Frenkel, is there anything else you want to add? No? Mr Selimi?

MR SELIMI: Your Honour, just following on from my learned friend’s submissions, my learned friend is correct in drawing to your Honour’s attention proceedings involving Aussie Vic Plant Hire and - - -

HIS HONOUR: I am not interested in those. They are not before me.

MR SELIMI: Yes.

HIS HONOUR: What the parties do about them is a matter for them.

MR SELIMI: Yes, well, it is relevant in terms of the undertaking, your Honour. Clearly, the applicant and Mr Strangio - well, the applicant, certainly Aussie Vic Plant Hire, has a proceeding against Westpac Pty Ltd in order to - out of an abundance of caution, your Honour, my respectful submission is this. The undertaking should be modified in order to address what my learned friend has alluded to, by adding the words “save for the prosecution of any proceedings, or defence of any proceedings presently on foot”.

HIS HONOUR: I am not minded to do that, Mr Selimi. I understood the undertaking that was proffered was an undertaking not to trade.

MR SELIMI: Yes.

HIS HONOUR: The further consequence to which I took that was that if the company is insolvent it should not incur further debts.

MR SELIMI: Yes.

HIS HONOUR: If it is not in a position to offer the undertaking, so be it, but that is the price that I propose to exact as the price for a stay. Now, I understand there is a real commercial world out there and there are real commercial questions at stake. Those real commercial questions may mean that the price, which I say I would exact as the price of the stay, cannot be paid. So be it. Do you offer an undertaking in the terms described, or not, or do you wish to have further time? Now, I say again to you, the importance of these undertakings is such that if you want time without my sitting here staring at you, say so. I will leave the Bench and give you time to consult properly with your client. These are important steps. They are steps that are to be taken advisedly. Now, what is it you want me to do?

MR SELIMI: Well, my submission, your Honour, is that the undertaking, in its current form, would effectively stultify other litigation if that - - -

HIS HONOUR: The undertaking in its present form will preserve the position in respect of a company which has hitherto had a number of opportunities to disclose its financial position and has not. Now, that is the position, Mr Selimi. On its face a statutory demand is made, not met, ordinary consequence is deemed insolvent. Lots of opportunities to say, “Hang on, we're solvent”, not taken. Now, the only question I am presently interested in is the form of the undertaking and whether your client is able to and willing to proffer it. I am not minded to enter into further debate about the substance of the undertaking that I would exact as the price for the stay. Now, do you want some time Mr Selimi?

MR SELIMI: If I may have five minutes, your Honour?

HIS HONOUR: Yes, it is now a little after five past. I will come back at quarter past and I will want to know then whether your client will proffer undertakings substantially in the form described.

MR SELIMI: If it please, your Honour.

HIS HONOUR: Quarter past 11.

AT 11.06 SHORT ADJOURNMENT

UPON RESUMING AT 11.17 AM:

MR SELIMI: I do apologise, your Honour. I was explaining in detail the - - -

HIS HONOUR: Yes, Mr Selimi.

MR SELIMI: Yes. I am instructed to give those undertakings that are sought, your Honour.

HIS HONOUR: Yes. You have heard the comments Mr Frenkel had about the drafting of them. Do you wish to be heard on the drafting of them?

MR SELIMI: No, your Honour.

HIS HONOUR: Are there any other orders other than orders disposing of the costs of the application?

MR SELIMI: No, your Honour. Perhaps the cost of the summons be costs in the application for special leave.

MR FRENKEL: Qualified by what your Honour said in relation to it would follow the event of the special leave application or the appeal.

HIS HONOUR: Yes. Then, Mr Selimi, do you on behalf of Bruno Strangio undertake to the Court that he, Mr Strangio, that is, will pay (a) the applicant’s costs and expenses of and incidental to this application, the application for special leave and any consequent appeal and (b), in any event the costs of the respondent, if either the application for special leave or any consequential appeal is unsuccessful?

MR SELIMI: Yes, your Honour, I am instructed to give those undertakings.

HIS HONOUR: And on behalf of Aussie Vic Plant Hire Pty Limited do you undertake to the Court (a) that that company will prosecute the application for special leave and any appeal with expedition and (b) that until the hearing and determination of the application for special leave and any consequent appeal or further order, it will not incur any new debt or otherwise trade or carry on any business?

MR SELIMI: I am instructed to give that undertaking, your Honour.

HIS HONOUR: Upon those undertakings I will order:

1. That until the hearing and determination of this application for special leave and any consequent appeal or further order, all further proceedings in matter No 8247 of 2006 now pending in the Supreme Court of Victoria in which Esanda Finance Corporation Limited is applicant and Aussie Vic Plant Hire Pty Limited is respondent are stayed.

2. The costs of the application by summons of 3 July 2007 are to be costs in the event.

MR SELIMI: Yes. If it please your Honour.

MR FRENKEL: If your Honour pleases.

HIS HONOUR: Adjourn the court.

AT 11.20 AM THE MATTER WAS ADJOURNED