Capital Globe Investments Pty Ltd v Parker Investments Australia Pty Ltd [2011] QSC 146

SUPREME COURT OF QUEENSLAND CITATION: Capital Globe Investments Pty Ltd v Parker Investments Australia Pty Ltd [2011] QSC 146 PARTIES: CAPITAL GLOBE INVESTMENTS PTY LTD ACN 111 631 559 (applicant) v PARKER INVESTMENTS AUSTRALIA PTY LTD ACN 089 580 450 (respondent) IN THE MATTER OF CAPITAL GLOBE INVESTMENTS PTY LTD (RECEIVERS & MANAGERS APPOINTED) ACN 111 631 559 PARKER INVESTMENTS AUSTRALIA PTY LTD ACN 089 580 450 (applicant) v CAPITAL GLOBE INVESTMENTS PTY LTD (RECEIVERS & MANAGER APPOINTED) ACN 111 631 559 (respondent) FILE NO/S: S990 of 2010 BS3605 of 2011 DIVISION: Trial Division PROCEEDING: Application to set aside statutory demand DELIVERED ON: 1 June 2011 DELIVERED AT: Brisbane HEARING DATE: 31 May 2011 JUDGE: Mullins J ORDER: In S990 of 2010: 1. The statutory demand of the respondent served on the applicant on 10 December 2010 is set aside. In BS3605 of 2011: 1. The application filed on 26 May 2011 is dismissed. CATCHWORDS: CORPORATIONS – WINDING UP IN INSOLVENCY – STATUTORY DEMAND – application to set aside demand – genuine dispute as to indebtedness – whether creditor can apply for winding up other than for failure to comply with the statutory demand before the application to set aside the statutory demand has been determined – whether creditor’s -- 1 of 6 -- 2 application to wind up should be struck out as an abuse of process Corporations Act 2001 (Cth), s 459C, s 465B Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, followed Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) (2004) 185 FLR 130, considered COUNSEL: GA Thompson SC and E Morzone for the applicant Capital Globe Investments Pty Ltd D Tucker (Sol) for the respondent Parker Investments Australia Pty Ltd SOLICITORS: Emanate Legal for the applicant Capital Globe Investments Pty Ltd Tucker & Cowen for the respondent Parker Investments Australia Pty Ltd [1] In proceeding S990 of 2010 Capital Globe Investments Pty Ltd (Receivers & Managers Appointed) (to which I will refer in these reasons as the applicant) seeks to set aside the statutory demand dated 3 December 2010 served on it by Parker Investments Australia Pty Ltd (to which I will refer as the respondent). The application and the supporting affidavit of the chief executive officer of the applicant, Mr Duff, were filed on 23 December 2010. [2] On 31 January 2011 receivers and managers were appointed by a secured creditor, National Australia Bank Limited, to certain real property of the applicant. The receivers and managers did not wish to pursue this application to set aside the statutory demand. Mr Brian Lee, a director of the applicant, obtained a declaratory order from Applegarth J on 24 February 2011 that he had standing to continue to prosecute the application to set aside the statutory demand: Capital Globe Investments Pty Ltd v Parker Investments Australia Pty Ltd [2011] QSC 31. On 31 March 2011 orders were made by Applegarth J in relation to security for costs for the application. [3] Before the application to set aside the statutory demand was determined, the respondent on 29 April 2011 filed the application to commence proceeding BS3605 of 2011 to wind up the applicant. That application has a return date of 15 June 2011. The ground for seeking the winding up the applicant is that it is presumed to be insolvent pursuant to paragraphs (c), (e) or (f) of s 459C of the Corporations Act 2001 (Cth) (the Act) or, in the alternative, that the applicant is insolvent. The respondent is not relying on its statutory demand to presume insolvency. The applicant therefore re-listed its application to set aside the statutory demand and filed an application on 26 May 2011 to strike out the respondent’s winding up application. Both applications were heard together. [4] The respondent submitted that it was not necessary for the court to determine whether there was a genuine dispute as to the existence of the debts claimed by the respondent, as irrespective of the outcome of that application, the respondent could be characterised as a contingent or prospective creditor of the applicant. -- 2 of 6 -- 3 [5] The winding up process was embarked upon in broad terms upon the service of the statutory demand by the respondent on the applicant on 10 December 2010. There have been numerous appearances in this court in relation to the application to set aside that statutory demand. That process was still engaged and incomplete at the time the winding up application was filed. In the circumstances of this matter, the respondent should not avoid the process that it instigated by serving the statutory demand. The first issue to determine therefore is whether there is a genuine dispute as to the existence of the debts that the respondent claims are owed to it by the applicant. The approach to determining that issue is well settled: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787-788. [6] The grounds on which the applicant can rely to dispute the debts must be raised in the supporting affidavit of Mr Duff filed on 23 December 2010. Those grounds are set out in paragraph 10 of that affidavit and can be summarised as: (a) The agreements do not bind the applicant or are invalid as the applicant was not a party to the agreements, as the agreements were entered into by its director Mr Haque who acted outside the scope of his authority and did not and could not bind the applicant. (b) The agreements are uncertain in their terms and therefore void for uncertainty. (c) The applicant did not receive any of the moneys allegedly transferred by the respondent pursuant to the agreements. [7] The three written agreements relied on by the respondent were exhibited to the affidavit of Mr Parker that accompanied the statutory demand. Each is entitled “Portfolio Management & Advisory Agreement.” The introductory words of each of the agreements are identical: “THIS AGREEMENT FOR ADVISORY SERVICES is made between CG WEALTH MANAGEMENT LTD / L H L INVESTMENTS PTY LTD A.C.N. 111 631 559 IT’S PRINCIPLES; collectively herein referenced as (CGWM) and PARKER INVESTMENTS AUSTRALIA PTY LTD A.C.N. 089 580 450 as Trustee for The Parker Family Trust herein referenced as, ‘Client.’” [8] The applicant was formerly called LHL Investments Pty Ltd and the ACN that is in each of the agreements is the ACN for the applicant. It appears that both CG Wealth Management Ltd (to which I will refer as CG Wealth) and the applicant are referred to in each of the agreements by the shorthand description of CGWM. [9] Clause 1 of each of the agreements provides: “Client will be facilitated to open a commodity trading account hereafter known as the ‘Account’ Client herein acknowledges that the client funds will be held in a sub account under CGWM. The account is to be traded by CGWM under the terms and conditions of this Agreement.” [10] Each of the agreements is signed on 2 December 2008 by a person designated as “Authorized Signing Officer” for CG Wealth/the applicant. The signature is identified by Mr Parker as that of Mr Shaquil Haque who was a director of the applicant at the relevant time and continued as a director until his sudden death on 1 May 2010. -- 3 of 6 -- 4 [11] Mr Parker referred to each of the agreements respectively as the first agreement, the second agreement and the third agreement. I will use the same terms. Under clause 2(c) of the first agreement the respondent acknowledged that it would transfer the sum of AUD$1m “into the sub account” within three business days after receiving a signed copy of the agreement. The second and third agreements are in identical form and signed on behalf of CG Wealth and the applicant in the same manner as for the first agreement, except that the second agreement relates to AUD$250,000 and the third agreement relates to USD$200,000. [12] The evidence shows that the applicant is a property holding and development company. On the face of each agreement, the obligations under the agreement are dependent on moneys being paid pursuant to the agreement to CG Wealth and the applicant to be held in “a sub account under CGWM … to be traded by CGWM under the terms and conditions of this Agreement.” The intent of the agreement therefore appears to be that the trading account would be managed by both companies identified collectively as CGWM. [13] This is at odds with the nature of the business of the applicant and with what the respondent claims it knew of the operations of the Capital Globe group from a promotional brochure provided by Mr Haque to Mr Parker that shows CG Wealth in its financial services division and the LHL group in its property development division (although I note that Mr Duff claims never to have seen that brochure). On the date the agreements were signed by Mr Haque, there was another director of the applicant, Mr Price, who states that he knew nothing of the agreements. As far as Mr Price was aware during the time of his directorship between 9 October 2008 and August 2009, the sole business activity of the applicant was as the owner and developer of land in Cairns, principally the North Point residential subdivision and proposed Town Centre at Smithfield. According to Mr Duff’s supporting affidavit there is nothing in the minutes or resolutions of the applicant about the agreements. Mr Duff did not become aware of the agreements until a prior statutory demand dated 13 May 2010 was served by the respondent on the applicant. The agreements are unusual in their terms, having regard to the known business activities of the applicant. There is arguably an issue raised about the authority of Mr Haque to enter into the agreements. It is more compelling, however, to consider the ground relied on by the applicant that disputes the debts on the basis that the funds were not provided by the respondent under the agreements. [14] In relation to the first agreement, Mr Parker deposes to borrowing $1m from Arab Bank Australia Limited (of which Mr Duff coincidentally was an employee at the relevant time) on 2 December 2008 that was sent on the instructions of Mr Haque (shown in the email as a director of Capital Globe Ltd) to the Hong Kong based account of Capital Globe Ltd. Capital Globe Ltd is a different company to the applicant. The respondent made a request to redeem $500,000 of an investment account held with CG Wealth on 19 December 2009. CG Wealth sent a “Notice to Investors” dated 30 December 2009 to the respondent signed by Mr Haque advising that all funds would be returned to the respondent between the date of the letter and 30 June 2010. The Capital balance was shown in the letter as US$200,000 and A$1,050,000. [15] This material points to a transaction of an investment type emanating from the respondent for the sum of $1m to Capital Globe Ltd or CG Wealth. Mr Parker’s affidavit accompanying the statutory demand does not assert that the funds were -- 4 of 6 -- 5 transferred to or at the direction of the applicant, but merely asserts that the funds of $1m were transferred pursuant to the agreement. The matter has no doubt been made difficult for both the respondent and the applicant by the death of Mr Haque. In view, however, of the lack of material in the applicant’s own records about the transaction, the discordance between the transaction and the usual business of the applicant and the evidence put forward by the respondent that is consistent with the transaction involving a company other than the applicant, there is sufficient material to raise a dispute about whether the first agreement was performed with the applicant according to its terms, so as to give rise to obligations by the applicant to the respondent under the first agreement. [16] After Mr Haque died, the respondent immediately served a statutory demand dated 13 May 2010 on the applicant claiming the amount of $500,000 that was sought in the redemption notice given on 19 December 2009 and interest for the quarter ending 30 March 2010 in relation to the first and third agreements. Mr Brian Lee was appointed a director of the applicant on 18 May 2010 and, as a result of a conversation which took place between Mr Parker and Mr Lee, payments of $10,000 each were made on nine occasions by Mr Lee between 8 June and 5 August 2010. There is disputed evidence in the affidavits of Mr Parker and Mr Lee as to the terms of that conversation that resulted in the first statutory demand being withdrawn by the respondent and the payments in the total sum of $90,000 being made by Mr Lee. Mr Lee claims that he made the payments by way of loan to the respondent. Because of the dispute on the evidence, the payments by Mr Lee to the respondent do not assist in displacing the dispute that is otherwise shown to exist between the applicant and the respondent in relation to the debt claimed under the first agreement. [17] In relation to the second agreement, Mr Parker asserts that on 7 November 2008 the respondent transferred the sum of $250,000 “which money was applied” to the second agreement. There is no detail of how the moneys were so applied so as to involve the applicant. The remittance of the sum of $250,000 was from the respondent to Capital Globe Ltd’s account with a Hong Kong bank on 11 November 2008. There were two redemptions made of $100,000 each in July and September 2009, but there is no evidence of the identity of the payer. Similarly to the first agreement, there is therefore sufficient material to raise a dispute about whether the second agreement was performed with the applicant according to its terms, so as to give rise to obligations by the applicant to the respondent under the second agreement. [18] In relation to the third agreement, Mr Parker asserted that the funds were originally paid to the applicant under a loan agreement dated 19 August 2005 and, impliedly, that the sum of AUD$267,522 advanced under that loan agreement was equivalent to USD$200,000, but that loan agreement was for a term of 60 days only. Mr Parker asserts that the money transferred under the loan agreement was applied to the third agreement, without disclosing any details of how loan moneys that were repayable by the applicant some two months after being advanced in August 2005 were still held by the applicant in 2008 on account of the respondent and were applied to the third agreement. In paragraph 28 of Mr Parker’s affidavit filed on 27 January 2011, additional information is given that the “US$200,000 investment agreement was updated after Mr Carl Williams, the former director of the applicant, left the company and the money was applied to the Third Agreement.” Mr Carl Williams ceased as a director on 10 June 2008. The only other document that refers -- 5 of 6 -- 6 to the sum of USD$200,000 is the Notice to Investors dated 30 December 2009 from CG Wealth. There is therefore sufficient material in relation to the third agreement to raise a dispute about whether that agreement was performed with the applicant according to its terms in such a way to give rise to the obligation that the respondent seeks to enforce against the applicant for the repayment of its investment. [19] Because of the three agreements that are relied on by the respondent, I have analysed each of the transactions separately, but in the context of the evidence that deals with the applicant’s business generally and the other dealings between Mr Haque and the respondent. I am satisfied that there is a genuine dispute by the applicant as to its liability for the debts that are claimed by the respondent under the three agreements. It therefore follows that the statutory demand of the respondent served on the applicant on 10 December 2010 should be set aside. [20] The fact that I am prepared to set aside the statutory demand of the respondent does not necessarily resolve the application of the applicant to have the winding up application dismissed as an abuse of process. A winding up application is brought for the benefit of all creditors and not just the creditor who files the application. I consider it misconceived that the winding up application was brought, but it does not necessarily follow that it should be summarily struck out. The material that was before me on the applications indicates that there are other creditors of the applicant who may be willing to be substituted as the applicant in the winding up. If an order is made for substitution of an applicant for winding up under s 465B of the Act, the application may proceed as if the substituted applicant had been the original applicant. [21] Although I accept the correctness of the submission of the applicant that the respondent had no standing to file an application under s 459P whilst the application to set aside its statutory demand was extant, in reliance on Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) (2004) 185 FLR 130 at [72], [75], [76] and [78], the issue of what should happen to that winding up application should await the return date of that application. In proceeding BS3605 of 2011, I will therefore order that the application filed on 26 May 2011 be dismissed. [22] I will hear submissions from the parties on the appropriate costs orders. -- 6 of 6 --