Universal Greening Pty Ltd v Sabine [1999] FCA 747

FEDERAL COURT OF AUSTRALIA

Universal Greening Pty Ltd v Sabine [1999] FCA 747

UNIVERSAL GREENING PTY LTD (ACN 059 475 348) v JOHN ROBERT SABINE AND SABINE HOLDINGS PTY LTD (ACN 060 117 277)

VG 3183 OF 1999

NORTH J

19 MAY 1999

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 3183 OF 1998

BETWEEN: UNIVERSAL GREENING PTY LTD (ACN 059 475 348)

Applicant

AND: JOHN ROBERT SABINE

First Respondent

SABINE HOLDINGS PTY LTD (ACN 060 117 277)

Second Respondent

JUDGE: NORTH J

DATE OF ORDER: 19 MAY 1999

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. The motion is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 3183 OF 1998

BETWEEN: UNIVERSAL GREENING PTY LTD (ACN 059 475 348)

Applicant

AND: JOHN ROBERT SABINE

First Respondent

SABINE HOLDINGS PTY LTD (ACN 060 117 277)

Second Respondent

JUDGE: NORTH J

DATE: 19 MAY 1999

PLACE: MELBOURNE

EX TEMPORE REASONS FOR JUDGMENT 1 NORTH J: The respondents, Dr Sabine and his company, Sabine Holdings Pty Ltd, served statutory demands on the applicant, Universal Greening Pty Ltd (Universal Greening) on 5 May 1998. Universal Greening sought to set aside the statutory demands on the ground that there was a genuine dispute as to the amounts claimed. This application was rejected first by a Registrar of the Court, and then on 30 April 1999 by Kenny J. As a consequence, Universal Greening has applied by a motion, notice of which was filed on 6 May 1999 under section 459F(2)(a)(i) of the Corporations Law, for an extension of time within which to comply with the statutory demands. The extension is sought until the hearing and determination of an appeal which was filed yesterday against the decision of her Honour. 2 Mr Esser, who appeared as counsel for Universal Greening, made three submissions in support of the application. First, he argued that the appeal had a good chance of success. Second, he contended that Universal Greening would suffer prejudice by a refusal to make the orders. Third, he contended that Universal Greening would be robbed of the fruits of any appeal in the event that the orders were refused. 3 In my view, the most important factor in the consideration of this application is an assessment of the chances of success of the appeal against her Honour's order. Her Honour determined that the advances made by Dr Sabine and his company to Universal Greening were in the nature of loans, not seed capital, and, if as contended by Universal Greening, were repayable when Universal Greening was in a position to do so, were so uncertain that the law would regard the transactions as loans repayable on demand. Her Honour's decision was based upon an analysis of company records and an application of the law to the facts found. The law which her Honour applied is not controversial. There was no issue of credit raised in the proceedings before her Honour. No deponents were cross‑examined. 4 It is therefore an appeal which on this issue does not appear to have a high chance of success or indeed even a reasonable chance of success. The same should be said in relation to the other grounds upon which her Honour relied, namely that the application was an abuse of process and the argument concerning offsetting claims. This latter was not particularly pressed by Mr Esser on this occasion. 5 The applicant's second submission concerned the commercial consequences for Universal Greening which would follow if the statutory demands became enforceable immediately. Mr Esser contended that Universal Greening would lose the commercial benefit of the intellectual property which grounded its reason for existence. I am not satisfied on the evidence before me that this ground has been made out. The evidence was of the most unparticularised and uncertain nature. It failed entirely to identify transactions or opportunities which would be available to the company in the near future. In addition, this ground overlooks the contention made by Mr Hyde, who appeared as counsel for Dr Sabine and his company, that the law provides a mechanism for the orderly disposal of a company which is insolvent, namely the process of liquidation. If the company is wound up, which was an assumption which Mr Esser made in putting this argument, the commercial advantage of the intellectual property would be retained for the company, at least in the sense that the liquidator would have control of the intellectual property and manage it to the best advantage of the creditors. 6 As to the third submission that Universal Greening would be robbed of the fruits of an appeal, this argument must also be seen in the light of the totality of the circumstances. I have already decided that the appeal has a low chance of success. Furthermore, the Corporations Law provides a system in which an appeal may be conducted by a liquidator should the company be placed into liquidation, and should the liquidator so decide. The appeal therefore could be continued. 7 The final matter that persuades me that no extension of time should be granted is that the consequence of the refusal does not necessarily lead to the result assumed by the parties; that is, that Universal Greening will necessarily be placed into liquidation. An order appointing a liquidator is made on application to the court. The court hearing such an application has a residual discretion as to whether to make a winding up order. Nothing in these reasons should be taken to indicate that a winding up order should or should not be made. The considerations on that application are not necessarily the considerations relevant to this application. 8 It should be mentioned that Universal Greening, in return for an order extending the time, was prepared to accept a restriction on the creation of any further charges over its assets. Similarly its solicitors, who presently have the benefit of a charge over those assets, were prepared to withdraw that charge. Furthermore, Universal Greening was prepared to provide Dr Sabine and his company with monthly accounts in order to monitor the progress of Universal Greening. These proposals were not, however, attractive to Dr Sabine and his company, and although acceptance of them would have reduced some of the prejudice which would flow from the making of the order, they are not, in my view, sufficient to cause the court to make the orders sought. 9 Consequently the order of the court is that the motion filed by Universal Greening on 6 May 1999 is dismissed with costs. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.