ALF No 12 Pty Ltd v Starkey [2006] QSC 297

SUPREME COURT OF QUEENSLAND CITATION: ALF No. 12 Pty Ltd v Starkey [2006] QSC 297 PARTIES: In re SURFERS PARADISE INVESTMENTS PTY LTD (IN LIQUIDATION) (ACN 058 247 064) ALF NO. 12 PTY LTD (ACN 083 197 380) (applicant) v GRAHAM L STARKEY (respondent) FILE NO: BS 2426 of 2004 DIVISION: Trial PROCEEDING: Originating Application ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 20 October 2006 DELIVERED AT: Brisbane HEARING DATE: 9 October 2006 JUDGE: Chesterman J ORDER: Application dismissed. CATCHWORDS: CORPORATIONS – WINDING UP – LIQUIDATORS – APPEAL FROM LIQUIDATORS’ DECISIONS – application for extension of time in which to appeal against rejection of proofs of debt – delay of eight months between rejection and appeal – applicant’s application for extension of time filed more than two years after appeals filed – whether extension should be granted – lack of documentation and significant discrepancies in company accounts – whether applicant has an arguable case Corporations Regulations 2001 (Cth), reg 5.6.54(2) Derwinto Pty Ltd (in liq) v Lewis (2002) 42 ACSR 645, followed Mine & Quarry Equipment International Ltd v McIntosh [2005] QSC 059, followed COUNSEL: Mr A Duffy for the applicant Mr R Lilley for the respondent SOLICITORS: Piper Alderman for the applicant Dibbs Abbott Stillman for the respondent -- 1 of 12 -- 2 [1] By application filed on 14 July 2006 the applicant seeks an order that the time for appealing against the respondent’s rejection of its proofs of debt be extended to 15 March 2004. The power to extend the time is found in Regulation 5.6.54(2) of the Corporations Regulation. [2] Surfers Paradise Investments Pty Ltd (‘SPI’) was incorporated on 4 December 1992. Thomas Patrick Hayes was the only shareholder and director. The company carried on business as a property developer but because of difficulties it experienced in developing a shopping centre at Sunnybank it became insolvent. The respondent was appointed administrator of SPI on 25 February 2000 on Mr Hayes’ application. The respondent became liquidator of SPI at the instance of a creditor on 5 May 2000. [3] Mr Hayes lodged two proofs of debt with the respondent on 26 June 2003. One claimed the sum of $228,912 being salary and holiday entitlements for the years ended 30 June 1998, and 30 June 1999, and for the period 1 July 1999 to 25 February 2000. The second proof was for $1,583,243.91 which was said to be a debt owed by SPI to Mr Hayes being the ‘balance … monies advanced to the company as per records … annexed hereto …’. [4] By a letter dated 14 July 2003 the respondent rejected both proofs of debt. He wrote: ‘Dealing with the proof of debt for $1,583,243.91 … it is my intention to reject … this claim as I have no means of establishing that the funds were in fact received by the company or used by the company. The claim by Mr Hayes in respect to wages and holiday pay is also rejected in light of his advice … and in view of the fact the chart of accounts shows that no wages have been paid. In addition, the payroll records … do not show that Mr Hayes was an employee of the company. I also have no way of establishing that he did not receive his salary or holiday pay as outlined in the proof of debt.’ [5] The notices of rejection which were sent under cover of the letter, and which set out the formal grounds for disallowing the claims, advised that if Mr Hayes were dissatisfied with the respondent’s determination he might appeal against it ‘no later than 21 days after service of this notice …’. [6] On 15 March 2004, eight months later, Mr Hayes filed appeals against the rejections. As I mentioned it was only on 14 July 2006 that he filed an application for an extension of time within which to appeal. [7] Regulation 5.6.54(2) of the Corporations Regulations provides that: ‘A person may appeal against the rejection of a formal proof of debt … within: (a) the time specified in the notice of the grounds of rejection; or (b) if the Court allows – any further period.’ -- 2 of 12 -- 3 Regulation 5.6.54(3) empowers the Court to extend the time for filing an appeal after the expiration of the time fixed in the notice of rejection. [8] I accept as a correct exposition of the power conferred by the regulation what was said by McMurdo J in Mine & Quarry Equipment International Ltd v McIntosh [2005] QSC 059 at [12]. His Honour wrote: ‘… the power is expressed simply and broadly as a power to allow further time. There is no material difference, at least in the context of this matter, between the respective powers. In Derwinto Pty Ltd (in liq) v Lewis (2002) 42 ACSR 645 at [47], Austin J accepted that the power under rule 14.1 should be exercised by a consideration of factors which Tamberlin J had identified as relevant to a challenge to a rejection of a proof of debt in a bankruptcy, in Re Estate of Knight (a bankrupt): Rocom International Pty Ltd (in liq) v Prentice [2002] FCA 604. I respectfully agree that the factors set out at [47] in the judgment of Austin J will be relevant in an application to extend time, whether made under rule 14.1 or reg 5.6.54. Austin J said that the principal factors might usefully be grouped under the headings: (a) delay – including the length and nature of the delay, and the responsibility and reasons for it; (b) prejudice to the respective parties; and (c) whether the claim is arguable.’ [9] On 28 October 2005 the applicant became the assignee from Mr Hayes of the debts in respect of which he had lodged proofs of debt. Notice of the assignment was given to the respondent on 29 May 2006. On 25 September 2006 the Honourable Justice Wilson ordered that the applicant be substituted for Mr Hayes as the applicant in these proceedings. [10] Of the three factors which Austin J identified as being ordinarily relevant to an application to extend time the one of most importance to this case is the third, whether the applicant has an arguable case to overturn the rejection of his proofs of debt. [11] The delay in instituting the appeal, and the delay in applying for an extension of time to appeal as well as the overall passage of time since the liquidation of SPI are obviously relevant to the exercise of the discretion as is the prejudice to the respondent and the creditors of SPI. However for reasons which I will discuss later there are some justifications for the delay and some indications that the prejudice which will undoubtedly exist had not been materially increased by the applicant’s delay. Those two factors would not, in my opinion, preclude an extension of time if the applicant had an arguable claim to the debt which the respondent refused to consider. That point therefore becomes critical. [12] It is convenient to consider first the proof of debt for unpaid wages as this can be dealt with more shortly than the other. [13] It will be recalled that the respondent’s ground for rejecting the proof of debt was, essentially, that none of the financial records or books of account of SPI supported Mr Hayes’ claim that he had been an employee. -- 3 of 12 -- 4 [14] In his affidavit of 15 September 2006 the respondent deposed: ‘21. I have searched the books and records of SPI and I have found that I have evidence of employment for many persons who were either employees of, or contractors to, SPI. 22. I have not found evidence in the books and records of SPI to show that Mr Hayes was an employee of SPI. 23. In particular, the records indicate that: (a) SPI paid no superannuation contributions for Mr Hayes; (b) SPI has paid no payroll tax in respect to Mr Hayes’ alleged employment; (c) SPI has collected no PAYE contributions on Mr Hayes’ behalf; (d) Mr Hayes is not listed as an employee of SPI in any of the files containing lists of employees; (e) there is no contract of employment between Mr Hayes and SPI.’ [15] It is to be noted that Mr Hayes first made a claim for unpaid wages and entitlements three years after SPI was ordered to be wound up. [16] On 15 March 2000 Mr Hayes signed a report ‘as to affairs’ of SPI at the request of the respondent. The report set out the best account Mr Hayes could give of SPI’s financial position and by his signature he certified ‘that the particulars contained in the above report … are true …’. Schedule E was said to contain details of ‘claims by employees’. It contains the notation ‘Not known Refer to [D]epartment of Industrial Relations’. The point is that Mr Hayes did not claim to be an employee who was owed salary or other entitlements. [17] Mr Hayes’ evidence on the point is contained in his two affidavits. In that of 15 March 2004 he said: ‘21. As I was a sole director and sole shareholder … I did not maintain internal records minuting my decisions as to salary or for going (sic) salary from time to time.’ In his second affidavit of 17 July 2006 he said: ‘34. While I was effectively making regular advances to SPI, I was not drawing a regular salary or wages from SPI. Any money that I received from SPI was for the most part treated as a loan to me by SPI … . 35. However, during the 1998 financial year I received $35,000.00 as a director’s fee … 36. From 30 June 1998 I was working approximately seven days a week at SPI and for … 14 to 18 hours per day. -- 4 of 12 -- 5 … 39. My claim therefore is calculated on the basis of an entitlement to a salary of $80,000 per annum from 30 June 1998 until the company’s liquidation.’ [18] It is apparent that the applicant has no realistic prospect of challenging the respondent’s rejection of the proof of debt for wages. The claim was made late and after Mr Hayes had professed complete ignorance of what amounts SPI owed its employees amongst whom, so he now asserts, he was numbered. He accepts he was careless at attending to the recording of the company’s relationship with him but does not dispute that none of the documents which would exist, had he in fact been an employee, were to be found amongst the company’s records. Moreover the one payment of which there was a record, the receipt of director’s fees, does not support and is perhaps inconsistent with his claim that he was an employee on a fixed remuneration of $80,000 per annum. [19] There is clear evidence that Mr Hayes applied SPI’s monies to his own use. He had the company buy a house in which he lived with his family. He instigated the company to make payments to his former wife for her maintenance and that of their offspring. Mr Hayes took money from SPI as and when he needed it and the company could afford it. He did not differentiate between his monies and SPI’s. I make no particular criticism of this but it tends to explain the lack of documentary records of any contract of employment between him and the company. Indeed it supports an inference that there was no such contract because he saw no need for one. [20] It is perhaps significant that Mr Hayes did not depose to making any decision, on behalf of SPI, that he be employed by the company on specified terms. He does not depose that he was, in fact, an employee. He says only that he ‘did not maintain … records minuting my decisions as to salary …’. He gives no evidence that there was any such decision, or what it was. Likewise he offers no explanation for the company’s failure to pay him salary in accordance with the agreement. He did nothing on behalf of the SPI that would corroborate his claim to have been an employee. I refer to the matters identified in para 23 of the respondent’s affidavit, set out in para 14 of these reasons. [21] For these reasons there should not be an extension of time to appeal against the respondent’s rejection of the proof of debt in respect of wages. [22] The rejection of the second proof of debt was for substantially the same reason: that there were no records to show that Mr Hayes was in fact owed $1,583,243.91, or any other amount, by SPI. [23] The balance sheets and profit and loss accounts for the financial years 1997 and 1998 exist and were in evidence. They lend support to the applicant’s claim that SPI was indebted to Mr Hayes. [24] It is accepted that there are no primary or source documents which evidence the payment of any monies by Mr Hayes to, or on behalf of, SPI. There are no receipts issued by the company, no cheques or cheque butts evidencing the payment, and no bank statements or minutes which provide any evidence of the loans. It is the lack of such documentation that led the respondent to reject the proof of debt. -- 5 of 12 -- 6 [25] It is the applicant’s case that when the financial statements were prepared there were appropriate primary documents proving the fact that Mr Hayes was a creditor of SPI, and the amount of the debt. The case depends upon Mr Hayes’ testimony that there were such documents which have been lost, either by the respondent or by his former accountant. The testimony is offered as an assurance to the Court that the financial statements were compiled from appropriate facts and are reliable. [26] Mr Hayes had this to say (in his first affidavit) about his financial dealings with SPI: ‘Although I had several other companies I principally dealt through SPI which was the vehicle I used for the construction of the … Shopping Village … I placed with the company available funds that I had from time to time and purchased the Gold Coast home that I lived in in the name of the company. I closed down various other companies placing the proceeds of those companies into SPI. Despite the [fluency] of financial exchanges between SPI, me and indeed other companies which I owned, there was always a paper trail which were (sic) forwarded to my accountant. I was not really good with my paperwork and had engaged an accountant, Michael Gibbons to undertake that work. He in turn engaged one Simone Promitz who attended to nearly all, if not all, of SPI’s work. I do not have a very good recollection of what occurred over what is now quite some years ago and can only say that the documentation … was provided to the accountant to prepare relevant documents.’ [27] In the second affidavit Mr Hayes deposed: ‘27. I have advanced funds to SPI … and in my belief at the time a winding up order was made, the company was indebted to me for the amount of $1,583,243.91 … 28. I am unable to depose with precision to each of the transactions by which that total was made up … records of the transactions were kept and were conveyed to my accountant who utilised those records to prepare formal accounts of the company.’ [28] Despite this testimony what Mr Hayes said and did at about the time of SPI’s failure is inconsistent with there being a state of indebtedness, in the amount claimed, by SPI to Mr Hayes. [29] The statement of affairs which Mr Hayes completed had attached to it a schedule of SPI’s unsecured creditors. The list does not appear to be in evidence but it is apparent that it did not include the debt which Mr Hayes (and now the applicant) claims. The total amount owed to unsecured creditors was said to be only $235,000. Mr Hayes admits that he ‘neglected to make any reference in the statement of affairs to the indebtedness of SPI to [him] because’ of his mental turmoil occasioned by the demise of SPI. -- 6 of 12 -- 7 [30] On 14 March 2000 Mr Hayes answered a questionnaire delivered for his examination by the respondent. He was asked how much capital ‘was introduced into the company by way of … loans …’. His answer was that he had lent $1,480,000. His answer to the question, what remuneration he received from the company during the three years prior to its liquidation, was: ‘Patrick Hayes has put money into company instead – approximately $700,000 in excess of drawings and loans.’ The clear import of the answer is that he had been paid money by SPI which had reduced the amount of the company’s indebtedness to him so that, in March 2000, his estimate was that he was owed $700,000. [31] In January 2000 SPI’s then solicitors were engaged to set aside a statutory demand for payment. As part of this preparation they compiled a list of unsecured creditors as at 25 January 2000 and sent the list to SPI for its consideration. Mr Hayes was not included in the list as an unsecured creditor. No record of a response from Mr Hayes, either from the company’s records or the solicitors, was produced to show that Mr Hayes disagreed with the accuracy of the list. [32] An examination of the evidence gives rise to doubts that the absence of source documents can be explained on the bases which Mr Hayes advances. Mr Hayes has deposed, as I recounted, that ‘there was always a paper trail which were (sic) forwarded to my accountant’. [33] It is apparent that the accountant does not have any relevant papers. Mr Gibbons said in his first affidavit that his firm had prepared the 1997 and 1998 financial statements for SPI. He deposed that those accounts were ‘accurate based on information that was available … at the time the accounts were compiled.’ He went on: ‘10. [SPI] maintained records of its financial transactions using an accounting software package known as MYOB. 11. I would have had regard to the MYOB data provided … when preparing or supervising the preparation of the accounts. 12. I also have had regard and directed staff to have regard, to source data when compiling the accounts. By “source data” I mean cheque butts, bank statements and other documents of that nature. 13. In fact, it was my particular practice to insist on the production of source documents for all clients who utilised MYOB … to minimise … errors. This was because MYOB … is often utilised by unqualified personnel and can … be prone to errors.’ [34] In his second affidavit Mr Gibbons said about those financial statements that they were not printed from MYOB but by ‘an accounting software package known as “Solution 6”’. He also deposed that SPI would provide his firm with its ‘MYOB data files’, and that he or his staff would ‘transfer the closing balances from the -- 7 of 12 -- 8 MYOB general ledger to [the] accounting software package’. Before finalising the accounts Mr Gibbons would satisfy himself that the balances ‘agreed to the balances in [SPI’s] general ledger.’ [35] In fact SPI’s accounts were prepared by an employee who cannot now be found. It is clear that in February 2001 Mr Gibbons’ firm had none of the ‘source data’ which he and Mr Hayes believed had been provided for the preparation of the 1997 and 1998 financial statements. On 14 February 2001 pursuant to a direction from the magistrate who conducted an examination into the affairs of SPI, Mr Hayes wrote to Mr Gibbons directing him to produce all records ‘pertaining to Directors (sic) Loans’. The only document produced in response was a draft copy of the financial accounts of SPI for the year ended 30 June 1998. [36] Mr Gibbons has explained that he sold his accounting practice to Harts Pty Ltd, an accounting business, at the time he was preparing the 1998 financial accounts for SPI. The earlier statements were prepared by Mr Gibbons while practising in his own firm. The 1998 accounts were prepared by ‘Harts Gibbons & Co’. [37] The point of this is that Harts Pty Ltd was wound up and its records were taken over by the liquidator from whom Mr Gibbons says he was ‘never successful in retrieving all of [his] files’. As an explanation for the lack of the source documents this is unsatisfactory. Harts Pty Ltd was put into provisional liquidation on 2 October 2001, eight months after Mr Gibbons had been unable to produce any relevant documents. When that request was made Mr Gibbons and Harts were in business. [38] The applicant has another explanation for the loss of the primary documents. Mr Hayes deposed that shortly after the respondent’s appointment he attended SPI’s premises and saw ‘documentation strewn around the office together with boxes of records in large industrial rubbish bins.’ He was told by a neighbour ‘the documents that had been at [his] home were also thrown into rubbish bins …’. [39] The respondent categorically denies any carelessness in the handling of SPI’s financial records. He deposed that upon his appointment as administrator Mr Hayes told him that all the company’s books and records were at the Sunnybank Shopping Centre or Mr Hayes’ home unit, also at Sunnybank. By arrangement between the two men Mr Hayes delivered to Mr Starkey all the documents which he had at home. The respondent by himself and his staff took possession of SPI’s books and records which were located at the shopping centre. They were put into archive boxes and taken by the respondent to his office. They have remained there, or at his solicitor’s office, ever since. The respondent is adamant that none of SPI’s records were left behind and none was discarded into rubbish bins. Mr Starkey explained: ‘Such actions are simply contrary to standard insolvency practice and would be in breach of the Corporations Act.’ [40] On an application of this kind it is neither appropriate nor possible to make definitive findings of fact about the existence or fate of the financial records that might evidence the making of the loans the subject of the proof of debt. The evidence about the documents which I have rehearsed is relevant to Mr Hayes’ claim that the entries in the balance sheet were in fact supported by primary documents which have since been lost so that one may take the balance sheets to be -- 8 of 12 -- 9 reliable. It is also of relevance in that, had there been such documents which the respondent lost, the respondent could not rely upon their absence, as he does, to claim that he will be prejudiced by an extension of time for a reconsideration of his rejection. His ground for rejecting the proof of debt, the lack of documents, would lack substance if he had lost the documents. This aspect can be put aside for the present. [41] The applicant’s explanations for the missing source documents are not convincing. I am conscious of the difficulties inherent in making findings of fact from affidavits without the benefit of cross-examination and without a full investigation of all relevant evidence. Nevertheless the best explanation which the applicant can provide lacks plausibility. [42] It is not surprising that the accountants would not have had the documents in 2001. If they had them for the preparation of the financial statements in 1997 and 1998 they would surely have been returned to SPI when the accounts were prepared and signed. Mr Gibbons does not himself swear that he saw the source documents but only that his practice was to require his staff to insist upon the production of source documents. The employee who prepared the accounts cannot now be found. None of the relevant documents were found when SPI’s records were taken by the respondent. I think it is safe to reject the conjecture that the liquidator or his staff threw documents away. [43] If there were primary documents evidencing the making of loans to SPI, Mr Hayes should have them. The transaction documents which would have effected the loans by him to SPI would have been his. The cheques by which he made the payments, or the cheques by which he paid SPI’s debts thereby giving rise to an obligation by the company to repay him, would have been Mr Hayes’ cheques written on his account. Yet he has not produced any cheque or cheque butt or bank statement which might provide evidence of the alleged loans. If Mr Hayes had not kept the documents after so many years copies could have been obtained from his bank. Nothing is said about any endeavours to obtain documents in that way. [44] These considerations lead me to have very considerable doubts that Mr Hayes was right when he said that the loans were evidenced by primary documents. The same doubt extends to whether the relevant entries in the balance sheets had a verifiable basis. [45] The critical question then becomes whether the balance sheets themselves provide sufficient evidence of an indebtedness by SPI to the applicant to show that the respondent was arguably wrong in rejecting the proof of debt. [46] SPI’s balance sheet for the year ended 30 June 1997 lists, as a current liability, loans owed to directors in the sum of $1,645,011.81. The same financial statement shows that for the previous year, 30 June 1996, the amount owed to directors was $397,716.27. According to the accounts then, Mr Hayes, the only director, advanced over $1,200,000 to SPI in the 1997 financial year. The balance sheet for the year ended 30 June 1998 appears to show that the amount owed to directors was $1,722,408. Oddly it shows that the figure for the preceding year, 1997, was not the same figure which appeared in that year’s balance sheet but instead the figure of $1,914,265. This discrepancy is noted by the respondent as supporting the conclusion that the balance sheet is unreliable. -- 9 of 12 -- 10 [47] Mr Gibbons attempts to explain the discrepancy by saying that the amount of the debt owed to directors at 30 June 1997, as shown in the 1998 accounts, is a revised figure, and includes five sums which together aggregate $269,253, the amount of the discrepancy. No reasons are advanced to explain why these figures, if properly included in 1998 were not included in the previous year. Nor is it obvious why those five sums have been included in the revision of the amount shown as a debt from SPI to Mr Hayes. The designation which appears against each sum gives no hint at all as to why they should be added to the amount of the debt owed by SPI to Mr Hayes. One, the sum of $35,198 is said to be ‘medical expenses’. Two others are designated respectively ‘A Hayes’ and ‘T E H Hayes’. The fifth unhelpfully is designated ‘other amounts’. Mr Hayes cannot have paid doctors’ bills on behalf of SPI, although the reverse might have happened. In that case the level of indebtedness should have been reduced not increased. Likewise whether or not payments were made by A Hayes and T E H Hayes to SPI, or by SPI to A Hayes and T Hayes, the payments cannot have affected the amount of the applicant’s loan account. The discrepancy remains unexplained. [48] The respondent has made a number of detailed criticisms of SPI’s accounts and has concluded from his examination that they are unreliable and do not provide any plausible evidence of a debt owed by SPI to the applicant. Some of the criticisms would appear to be concerned with form rather than substance and relate to the manner in which the accounts described SPI’s assets and liabilities, profits and losses. I do not mean to diminish the need for clear and coherent financial reporting but a number of the errors identified by Mr Starkey can be explained in such a way as not to cast doubt upon the overall result described in the balance sheets. There are, however, some significant errors which do show the balance sheets to be unreliable in their recording of SPI’s loans. [49] No balance sheet was prepared for the year ended June 1999. However a computerised ledger kept by SPI allowed Mr Starkey to reconstruct a balance sheet for the year ended 30 June 1999. That showed, though incorrectly described, loans to directors in the sum of $1,627,934.30, which is not the figure claimed by the applicant. Not too much should be made of that discrepancy which can no doubt be explained away by adjustments. Much more significant is the fact that Mr Clive Berghofer lent very substantial amounts of money to SPI in 1999. These advances are objectively documented. As at 30 June 1999 Mr Berghofer had lent the sum of $2,604,407.70 to SPI. Its records showed that it owed Mr Berghofer only $518,614.75. In the year 2000 Mr Berghofer lent SPI a further sum of $4,205,537.84. The company recorded its debt in the ledger in the sum of $445,995.54. These are understatements of more than $5,000,000. [50] One of the documents supplied by Mr Hayes in support of his proof of debt was a ‘Chart of Accounts (Summary)’ which appears to be a printout of the computerised SPI ledger. It showed that SPI was owed by another company, Parker Glen Pty Ltd, also owned and controlled by Mr Hayes, the sum of $744,741.10. Other amounts appear in other versions of the ledger but they all show that Parker Glen Pty Ltd’s debt was in excess of $700,000. Mr Hayes denied on oath that the debt was of that magnitude. He said he found it ‘incredible’, and that the true figure would be ‘[p]robably something like 10 per cent of that’ because: -- 10 of 12 -- 11 ‘Parker Glen has got no assets. All it does was operating the businesses (sic). It would have no reason to take $700,000 out of SPI.’ [51] The applicant’s case depends upon an acceptance that SPI’s balance sheets are correct, or substantially so, when they recorded the amount and existence of a debt owed to the applicant. The companies’ records are demonstrably erroneous in their recording of debts to others. In the absence of supporting primary documents there is no basis for making an assumption that they are accurate with respect to the debt owed to the applicant. [52] There are then substantial reasons for doubting the accuracy and reliability of the balance sheets which alone evidence the applicant’s claim to be a creditor of SPI. The existence of a debt, or of a debt of the magnitude of the one claimed, is negated by Mr Hayes’ omission to include it in the statement of affairs and in his instructions to SPI’s solicitors. When he did assert a belief that he was a creditor of SPI, it was to an amount of about $700,000. There are clearly considerable errors in the recording, in the company’s accounts, of the amounts it owed or was owed. The records which should exist to support the balance sheets have not been produced and no satisfactory explanation for their absence has been provided. [53] There remains the point that Mr Hayes own evidence gives rise to the distinct inference that any money advanced to SPI was not his but monies from other companies he controlled. It will be recalled, he said: ‘Although I have several other companies I principally dealt through SPI … I had closed down various other companies placing the proceeds of those companies into SPI.’ There is no record in SPI’s balance sheets of such inter-company advances. Those other companies appear to have been wound up and deregistered. There seems to be no basis for untangling the monies they advanced to SPI at Mr Hayes’ instigation from any monies of his own that he might have advanced. Mr Hayes can only have assigned to the applicant the debt owed to him which could not include monies advanced to SPI by others of his companies. [54] All in all the evidence is not sufficient to allow the applicant to demonstrate an arguable case that the respondent was wrong to reject the proof of debt. There is an onus on a creditor who claims to be owed money by a company in liquidation to show by satisfactory evidence that the company was indebted to him. There was not sufficient evidence in this case to discharge that onus. [55] This is enough to dispose of the application but I will deal briefly with the questions of delay and prejudice. [56] The parties treated the relevant delay as being that between 14 July 2003, when the proofs were rejected, and 15 March 2004, when the appeal was filed. That ignores the fact that the appeal was incompetent and no application for an extension of time was filed until 14 July 2006. The applicant justifies the delay on the grounds that: (i) it would have been futile to lodge an appeal any earlier as Mr Hayes lacked the resources to prosecute an appeal; and -- 11 of 12 -- 12 (ii) when the proofs were rejected SPI had no money available to distribute to creditors. [57] Following a successful appeal against a judgment upholding a creditor’s claim to have a security over property of SPI, the sum of $900,000, which had been subject to the claimed security, became available for distribution amongst all creditors. Judgment in favour of the creditors was given by the Court of Appeal on 24 October 2003. The respondent did not inform Mr Hayes of the result but his agent was told of the windfall when he spoke to the respondent on 16 January 2004. Five days later solicitors were engaged to appeal against the rejections of the proofs of debt and on 30 January 2004 the major creditors were told of Mr Hayes’ intention to appeal. Notice of that intention was given to the respondent on 11 February 2004. [58] Mr Hayes also deposes to the fact that he has been in straitened financial circumstances since SPI’s liquidation. That circumstance, coupled with the futility of prosecuting an appeal when there was no fund available to pay creditors a dividend, is a sufficient explanation for his failure to appeal within time. [59] The respondent complains that he will be prejudiced if the applicant is allowed to appeal. The liquidation will be delayed; creditors will not receive a dividend; and a number of other company administrations depend upon the payment of a dividend. These factors are no doubt true but the liquidation has been delayed by other factors, principally litigation with a secured creditor, for which the applicant is not responsible. There has been little additional delay occasioned by the applicant and, therefore, little additional prejudice. The real prejudice to the respondent, it seems to me, if the appeal proceeds, will be the lack of documentary evidence to assess the merits of the appeal. That prejudice has been present since the commencement of the liquidation because the loss of the documents, if they existed, pre-dates that event. [60] If the applicant had an arguable case the factors of delay and prejudice would not operate to justify refusing an extension of time. There is, however, no arguable case against the respondent’s rejection of the applicant’s proofs of debt and I dismiss the application for an extension of time within which to appeal. -- 12 of 12 --