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Walder v Finance Technology Australia Pty Ltd

 

[2007] QSC 188

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Walder v Finance Technology Australia Pty Ltd [2007] QSC 188

PARTIES:

WILLIAM RUSSELL WALDER

(applicant)

v

FINANCE TECHNOLOGY AUSTRALIA PTY LTD

(respondent)

FILE NO/S:

BS 3766 of 2007

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

1 August 2007

DELIVERED AT:

Brisbane

HEARING DATE:

13 June 2007

JUDGE:

Mackenzie J

ORDER:

  1. The application, insofar as it relates to the issue whether there is a prima facie case, is adjourned to a date to be fixed.
  1. The applicant file and serve any additional affidavits in relation to the issue of whether there is a prima facie case on or before 17 August 2007.
  1. The respondent file and serve any additional affidavits in relation to the said issue on or before 31 August 2007.
  1. In the event that a prima facie case is established, the applicant is ordered to give security for costs in the sum of $30,000 before the application to wind up the company is further proceeded with.
  1. The application to wind up the company is in all other respects adjourned to a date to be fixed after the security is provided.
  1. Costs are reserved.

CATCHWORDS:

CORPORATIONS – WINDING UP – APPLICATIONS FOR WINDING UP BY COURT – WHO MAY APPLY – CREDITORS – PARTICULAR CREDITORS – CONTINGENT CREDITOR – where applicant is a former director of company – where applicant financed a loan to the company – where applicant requested repayment of loan –  where conflicting information as to when the loan was to be repaid – where applicant applies for the winding up of company on just and equitable grounds – where applicant alleges sharp and misleading practices to the detriment of shareholders and creditors – whether applicant is a contingent creditor or prospective creditor – whether a prima facie case has been established – whether security for costs should be given

Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455, cited

Edwards v AG (2004) 60 NSWLR 667, cited

Environmental and Earth Sciences Pty Ltd v Vouris (2006) 57 ACSR 629, cited

Stonegate Securities Ltd v Gregory [1980] Ch 576, cited

Corporations Act 2001 (Cth) s 461(1)(k)

COUNSEL:

P D Hay for the applicant

M D Martin for the respondent

SOLICITORS:

Bennett & Philp Solicitors for the applicant

Bennett Carroll Solicitors for the respondent

  1. MACKENZIE J:  This is an application to wind up a company under s 461(1)(k) of the Corporations Act 2001 (Cth), the just and equitable ground.  The application has some unusual features, as will appear from what follows.  The applicant is a person who was a director from the registration of the company on 21 March 2002 until he ceased to be a director on 27 August 2004.  Although the ASIC company extract shows him as an existing shareholder as at 27 April 2007, he claims that the company bought those shares back from him in about September 2006.  He bases his standing to apply under s 461 on s 462(2)(b) which permits a creditor, including a contingent creditor or a prospective creditor, to apply for an order to wind up a company. 
  1. His claim as creditor is founded on a loan of $50,000 on 18 September 2002 and a further loan by him and his wife of $211,625 in May 2002. The latter was derived from a loan to Mr Walder and his wife from the National Australia Bank. He has exhibited an email dated 27 May 2004 concerning the $211,625 loan and an undated letter, allegedly received on 22 October 2004, which acknowledges both advances. There is, however, conflict between the letter and the applicant’s understanding with regard to the time of repayment of the second loan. According to the letter, the balance was repayable when, in the opinion of the directors of Finance Technology Australia, its financial position was sufficient to enable the loan to be repaid. According to Mr Walder, he had been told by Mr Allan Payne, who it is alleged, was a “shadow director” and really in control of the company, that all of the loan would be repaid in full by the end of December 2004.
  1. On 13 March 2007 there was a request by Mr Walder to the company to “consider repayment of the loan” or transferring it to alternative secured property in the company’s portfolio. His letter also asserted that it was well over two years since Allan Payne’s promise to repay the loan amount in full in terms of the original letter of agreement. There is no letter fitting that description in evidence unless it is the letter said to have been received on 22 October 2004. The letter of 13 March 2007 also acknowledged that Finance Technology Australia had, in accordance with the terms on which the loan was made, paid interest due on the NAB loan.
  1. In ordinary usage a creditor is someone who is presently entitled to be paid a specified sum of money by another person (Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455).  In the present case there is a dispute about whether monies are presently due and payable.  The loan is not disputed.  It is the time at which the obligation to repay crystallises.  In those circumstances it is not established that the applicant is a “creditor”.  However, he is, on the evidence, either a contingent or prospective creditor.  A contingent creditor is one whose entitlement to be paid a sum of money depends on the happening of some event that may or may not occur.  A prospective creditor is one who will become entitled to payment of money by some other person when the actual date for payment in the future is fixed or can be determined by reference to the occurrence of a future event (Stonegate Securities Ltd v Gregory [1980] 1 Ch 576, 579; Edwards v AG (2004) 60 NSWLR 667, 679; Environmental and Earth Sciences Pty Ltd v Vouris (2006) 57 ASCR 629, 645).
  1. Where a person is a contingent creditor or a prospective creditor, a consequence is that pursuant to s 462(4), the court must not hear an application to wind up a company unless and until:
  1. such security for costs has been given as the court thinks reasonable; and
  1. a prima facie case for winding up the company has been established to the court’s satisfaction.
  1. The application is based on a line of authority under which a company may be wound up if there has been serious fraud, misconduct or oppression in regards to the affairs of the company. Particular reliance was placed by the applicant on Macquarie Bank Ltd v TM Investments Pty Ltd (2005) 223 ALR 148 and Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1 as recent examples of the application of the principle. 
  1. To establish an evidentiary basis for relief, there is an affidavit from Mr Walder which contained sections alleging Mr Payne’s dominant role in the company although he was not a director, and allegations about the company’s business practices. There is also commentary on transactions concerning particular investors, including Gary Jeffrey Quin. Some transactions are alleged to involve superannuation accounts which were not kept in an appropriate form.
  1. Mr Quin, who was in heavy machinery and extractive industry businesses, became involved with the company, amongst other things, for the purpose of tax minimisation and asset protection. It appears that he was told about offshore banks connected with the company and, perhaps, a principality to be formed by secession from Australia. One of the objectives seems to have been to put his assets out of the reach of creditors by creating what Mr Quin believed were sham mortgages over his assets. He was also involved in other transactions the nature of which is also shadowy.
  1. There was also an affidavit from Gary Tolliday, a former corporate finance manager of the company and later a partner of Mr Walder in a finance business, who expresses opinions about the quality of Mr Payne’s conduct with regard to Mr Quin’s affairs and about the nature of the asset protection scheme as it was presented to Mr Quin. He also deposes that the company used its position as first mortgagee of Mr Quin’s properties to borrow monies on the basis of that security.
  1. There is an affidavit from Mr Harper, who has a complaint over a transaction involving a defective prime mover and front end loader purchased from a person who is said to be an associate of Mr Payne’s and financed by the company. It is at least debateable, as this evidence stands, whether the company’s dealings with Mr Harper are of particular relevance to the issues involved in the application to wind up the company on the just and equitable ground.
  1. There is also an affidavit from Mr Willis who entered into a joint venture agreement with the company to import car parts from China. Mr Willis complains that notwithstanding the terms of the agreement, monies were not repaid. He has an action current in the District Court at Toowoomba in respect of this matter. The relevance of this transaction is also debateable.
  1. There is also reference in some affidavits, without evidence from the investors themselves, of dealings of the company with other investors. The essence of the applicant’s submission is summarised in the following paragraph of his written submissions:

“The evidence shows a sustained and deliberate course to engage in sharp and misleading practices with the investing public.  Particularly in respect of the superannuation funds, there appears to be complete failure to appreciate the trust and fiduciary duties that arise on the reception of those funds – which were paid over for a specific purpose.  In particular, the evidence shows a persistent and widespread practice of failing to properly invest funds coupled with the exaction of illegitimate fees and administration charges.  It appears that any real profits made by the company were then transferred to interests associated with Allan Payne.”

  1. On behalf of the respondent, there is an affidavit from Ian Alexander Jones who succeeded Mr Walder as CEO in March 2004. He makes allegations of misrepresentation by Mr Walder as to his capacity to attract factoring business to the company and of negligence and impropriety. He foreshadows possible legal action against him for a sum in the vicinity of $1,000,000. He deposed that the applicant was “very territorial”, with the result that the other directors had little knowledge of his activities, which included preparation of documents and securities in relation to Mr Quin’s affairs. It is a fair reading of Mr Jones’ affidavit that he was unaware of and not involved in many of the dealings between Mr Payne and Mr Quin. There is no evidence from Mr Payne himself. Mr Jones deposes that the company is trading and solvent.
  1. The respondent points out that the events about which the complaints have been made date back from 2004. There is no evidence, it is submitted, that the company is currently conducting its affairs to the detriment of shareholders or creditors. Apart from Mr Harper, no one who claims to be aggrieved or is alleged to have suffered a detriment has taken any action against the company to seek redress. (It may be added that there is no evidence that any of the matters that may be of interest to regulatory or investigatory bodies have been brought to their attention).
  1. It is said in the respondent’s written submissions that further evidence of an ulterior purpose lies in the applicant’s “conduct in issuing a statutory demand and then withdrawing it after discussion with representatives of the company”. That should be read in the light of the evidence in Mr Walder’s affidavit that the occasion when that happened was about the time when Mr Walder was trying to recover unpaid wages after he had left the company. It is therefore somewhat remote in time from institution of the present proceedings. The “discussion”, according to the evidence, consisted of Mr Payne summoning Mr Walder to the company’s office. Mr Payne then phoned the managing director Mr Train who said, loudly over the telephone so that Mr Walder could hear, “tell him we will sue for two million if he does not pull it”. After further conversation with Mr Payne in similar vein, Mr Walder says, he took legal advice and withdrew the notice of statutory demand because he apprehended that even if sued without foundation, he would have to spend a lot of money defending himself.
  1. As can be seen from what has been said above, there is a multiplicity of factual issues that are in dispute and quite incapable of being resolved on the present evidence. There are probably also issues of relevance in respect of some parts of the evidence and issues of admissibility of some parts in their present form. There may also be a fundamental issue of whether an application under s 461(1)(k) is appropriate in this particular kind of situation. If it merely turned out to be a circuitous attempt by Mr Walder and those associated with him to advance personal interests that could be advanced in a more direct way, without the risk of counterclaim, the question would become acute.
  1. If it was clear that there was no prima facie case, the obligation would be to terminate the application summarily.  In many, if not most, cases it will be possible to definitively resolve both of the issues involved in s 462(4) together.  In the present case I am not able to conclude, at this point, that there is no prima facie case. The credibility issues with which the case is replete and the generality of the claims and lack of supporting evidence for many of the allegations from both sides suggests that a conclusion on the issue of whether there is a prima facie case can only be satisfactorily resolved if the parties are given the opportunity to supplement the evidence on the issue if they wish. One thing is certain, in my view.  That is that it is a case where, if the applicant wishes to proceed with the present application rather than pursue his individual interests in an appropriate action, he should provide security before the matter proceeds further. 
  1. There is evidence from an experienced solicitor that the application would need to be listed for at least two days. Based on his experience, he believes that the party and party costs of a two day trial of the matter would be in the region of $30,000. That estimate is not controverted. The figure does not appear to be demonstrably unsustainable. A submission was made by the applicant that there had been no application for security for costs. That is not required by s 462(4), which is phrased in a way that casts an obligation on the court to consider the issue of security for costs. I am satisfied that security for costs in the sum of $30,000 is reasonable.
  1. The orders are as follows:
  1. The application, insofar as it relates to the issue whether there is a prima facie case, is adjourned to a date to be fixed.
  1. The applicant file and serve any additional affidavits in relation to the issue of whether there is a prima facie case on or before 17 August 2007.
  1. The respondent file and serve any additional affidavits in relation to the said issue on or before 31 August 2007.
  1. In the event that a prima facie case is established, the applicant is ordered to give security for costs in the sum of $30,000 before the application to wind up the company is further proceeded with.
  1. The application to wind up the company is in all other respects adjourned to a date to be fixed after the security is provided.
  1. Costs are reserved.
Close

Editorial Notes

  • Published Case Name:

    Walder v Finance Technology Australia Pty Ltd

  • Shortened Case Name:

    Walder v Finance Technology Australia Pty Ltd

  • MNC:

    [2007] QSC 188

  • Court:

    QSC

  • Judge(s):

    Mackenzie J

  • Date:

    01 Aug 2007

Litigation History

No Litigation History

Appeal Status

No Status