FEDERAL COURT OF AUSTRALIA Brookfield v Real Estate Now Pty Ltd (Subject to Deed of Company Arrangement) [2017] FCA 1083 File number: QUD 951 of 2016 Judge: REEVES J Date of judgment: 12 September 2017 Catchwords: CORPORATIONS – application for winding up under s 459Q of the Corporations Act 2001 (Cth) on the ground of insolvency – failure of applicant to comply with procedural requirements for winding up application – where application was filed outside the period of presumed insolvency under s 459C(2)(a) of the Corporations Act 2001 (Cth) Held: application dismissed Legislation: Corporations Act 2001 (Cth) Federal Court (Corporations) Rules 2000 (Cth) Cases cited: Pinn v Barroleg Pty Ltd (1997) 138 FLR 417 Sheslow v Diamond Rose NL (2005) 54 ACSR 376; [2005] NSWSC 492 Woodgate v Garard Pty Ltd (2010) 239 FLR 339; [2010] NSWSC 508 Assaf, F, Statutory demands and winding up in insolvency (2nd ed, LexisNexis Butterworths, 2012) Date of hearing: 13 April 2017 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 15 Counsel for the Applicant: The Applicant appeared in person Solicitor for the Respondent: Mr C Cliff of Mills Oakley ORDERS QUD 951 of 2016 BETWEEN: IAN WALTER BROOKFIELD Applicant AND: REAL ESTATE NOW PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ABN: 50 153 307 432 Respondent JUDGE: REEVES J DATE OF ORDER: 12 SEPTEMBER 2017 THE COURT ORDERS THAT: 1. The originating application filed on 23 December 2016 is dismissed. 2. The applicant is to pay the respondent's costs of the application, to be taxed failing agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT REEVES J: 1 On the late morning of Friday, 23 December 2016, the last day upon which the Court's Registry was open for the year, Mr Ian Brookfield filed an originating application seeking to wind up the company Real Estate Now Pty Ltd on the ground of its insolvency. He sought to have the application heard urgently that afternoon. The application stated, in part: DETAILS OF AMENDED APPLICATION This amended application is made under Section 459Q of the Corporations Act 2001. AMENDED APPLICATION FOR WINDING UP ON GROUND OF INSOLVENCY On the facts stated in the accompanying affidavit, the Applicant claims: 1. That Real Estate Now Pty Ltd (subject to Deed of Company Arrangement); • have been in possession of the Statutory Demand for a period of more than 21 days since the date of service of the Statutory Demand • have confirmed service of the Statutory Demand • have not satisfied the Statutory Demand and have committed an act of insolvency • remain indebted to the Applicant for the full amount as specified within the Statutory Demand • have not denied, responded and or defended the Statutory Demand • have increased their indebtedness to the Applicant by $30,000 since service of the statutory demand • are now indebted to the Applicant in person via a "Deed of Assignment" • an application was filed with this honourable court on the 2nd day of August however it was rejected as it failed to comply with the rules of The Federal Court of Australia • the current amended application has been cross-checked with the courts checklist for a wind-up application. (Errors in original) 2 This description of the application contains numerous indicia which, independently, or in combination, meant that the application could not be heard immediately, as Mr Brookfield wished, and when it was heard, it would be most likely to fail. Most of those indicia would have been apparent to a person familiar with the provisions of the Corporations Act 2001 (Cth) (the Act). Regrettably, Mr Brookfield does not have that kind of familiarity. He has, throughout these proceedings, represented himself and, so far as I am aware, he has no legal training or qualifications. Because of this, during the course of this matter, I alerted him to the complexities that are present in the winding up provisions of the Act and urged him to obtain some legal advice to assist him to deal with them. Mr Brookfield did not act on these urgings. 3 The first of the indicia I have mentioned above concerns the statement in parenthesis in paragraph 1 of the application above "subject to Deed of Company Arrangement". Mr Brookfield obviously did not appreciate the significance of this statement when he included it in his application, but he should have in early January 2017. That is so because on 3 January 2017, the first day of the New Year upon which the Registry was open, the District Registrar, Ms Baldwin, sent an email to Mr Brookfield advising him that the first case management hearing for the application had been fixed for 9 February 2017. Additionally, Registrar Baldwin drew Mr Brookfield's attention to various provisions of the Act that affected winding up proceedings against a company under external administration. For example, Registrar Baldwin stated: There is also a provision relating to stay of proceedings during administration. Section 440D of the [Act] provides that during the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except: (a) with the administrator's written consent; or (b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes. 4 It can be inferred that Mr Brookfield ignored this advice because during January and early February 2017 he made two further attempts to have his application heard urgently. The difficulties associated with commencing a proceeding such as this against a company while it is under external administration must have eventually become apparent to Mr Brookfield because at the first case management hearing on 9 February 2017, he informed the Court that he had recently had a conversation with a person in the office of the company's Administrator and he expected that the external administration of the company would cease in early March 2017. Accordingly, that case management hearing was adjourned to 9 March 2017. On that date, Mr Brookfield informed the Court that the company had emerged from external administration on 7 March 2017. 5 The second indicia I have mentioned above concerns the statement at the head of the application above "On the facts stated in the accompanying affidavit …". According to the Court's records, no accompanying affidavit was filed with the originating application. The third indicia compounds the procedural irregularities reflected in the second. It concerns the statement in the application "the current amended application has been cross-checked with the courts checklist for a wind-up application" (errors in original). That statement is plainly inaccurate. If Mr Brookfield had indeed cross-checked the application as he claimed, he would have identified a number of procedural steps with which he had failed to comply. For instance, s 459Q of the Act, the section under which the application was expressly made, provides: If an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the application: (a) must set out particulars of service of the demand on the company and of the failure to comply with the demand; and (b) must have attached to it: (i) a copy of the demand; and (ii) if the demand has been varied by an order under subsection 459H(4)—a copy of the order; and (c) unless the debt, or each of the debts, to which the demand relates is a judgment debt—must be accompanied by an affidavit that: (i) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (ii) complies with the rules. 6 While particulars of service of the statutory demand were set out in the originating application, no copy of that demand was attached to the application in accordance with s 459Q(b)(i) above. Furthermore, despite the fact that the debt to which the demand related was not a judgment debt, the application was not accompanied by an affidavit in accordance with s 459Q(c) above. These matters, and many more, are mentioned in the "courts (sic) check-list" that Mr Brookfield claims to have complied with. 7 At the case management hearing on 9 March 2017, despite again being urged to obtain some legal assistance with his application, Mr Brookfield insisted upon it being set down for hearing. Accordingly, a hearing date was fixed in April 2017 and directions were made for the exchange of affidavit material. 8 At the commencement of the hearing in April 2017, Mr Brookfield had to confront the fourth indicia, one that ultimately presented an insurmountable barrier to his application. It concerned the heading to his application "Amended Application". This description of the application appears to have arisen out of Mr Brookfield's failed attempt on 2 August 2016 to file a similar originating application with the Court. That application was rejected by the Court Registry because it failed to comply with various aspects of the Federal Court (Corporations) Rules 2000 (Cth) (the Rules). The present application was therefore the first regular application that Mr Brookfield had filed. Whether it was an amended version of that earlier application does not alter that fact. 9 Consequently, noting that Mr Brookfield had contended in his materials that his originating application had been filed on 2 August 2016, and not 23 December 2016 (as noted at [1] above), at the commencement of the hearing Mr Cliff, for Real Estate Now, raised a preliminary issue concerning the application of s 459R of the Act. That section provides: (1) An application for a company to be wound up in insolvency is to be determined within 6 months after it is made. (2) The Court may by order extend the period within which an application must be determined, but only if: (a) the Court is satisfied that special circumstances justify the extension; and (b) the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires. (3) An application is, because of this subsection, dismissed if it is not determined as required by this section. (4) An order under subsection (2) may be made subject to conditions. 10 After a lengthy debate during which Mr Brookfield made, and then withdrew, an application for an adjournment so that he could prepare an application for an extension of time under s 459R(2), he changed his position to rely upon "the current applications (sic) made on 23 December 2016". Following this change of position, Mr Cliff withdrew his objection and the hearing proceeded on the basis that the originating application was made on 23 December 2016 and s 459R did not therefore apply to it. 11 Nonetheless, Mr Brookfield then had to confront the barrier I have mentioned above. It arose out of the provisions of s 459C(2), which relevantly provides: (2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made: (a) the company failed (as defined by section 459F) to comply with a statutory demand; or ... The following matters made this provision applicable to Mr Brookfield's application. In the particulars of service of the statutory demand set out in his application, Mr Brookfield claimed that the demand was served on 1 July 2016. That date was therefore almost six months before his application was filed on 23 December 2016. The application was therefore filed well outside the three months period set by this provision. 12 It is worth recording that the purpose of s 459C(2) is to provide contemporaneous evidence of insolvency within a reasonably short time after non-compliance with the statutory demand (see Pinn v Barroleg Pty Ltd (1997) 138 FLR 417 at 421 per Santow J and see also Sheslow v Diamond Rose NL (2005) 54 ACSR 376; [2005] NSWSC 492 at [10] per Barrett J). 13 Mr Brookfield did not make any attempt to confront the provisions of s 459C(2) at the hearing. Since his application was based solely on s 459Q of the Act and Real Estate Now's failure to comply with the statutory demand served on 1 July 2016 and since he made no attempt to amend his application to advance any other ground, it necessarily follows that it must fail. 14 Even if Mr Brookfield's application had survived the barrier presented by s 459C(2), as I have foreshadowed above, it would have been liable to be dismissed because of his failure to comply with a range of procedural requirements in the Act and Rules, some of which have already been identified above. They include, but are by no means limited to: (a) the failure to attach a copy of the statutory demand to the application: s 459Q(b)(i); (b) the lack of any accompanying affidavit: s 459Q(c) and r 5.4 of the Rules; and (c) the failure to give notice of the application: s 465A and r 5.6 of the Rules. With respect to (a) and (b) above, it is to be noted that the requirements of s 459Q have been held to be mandatory (see Woodgate v Garard Pty Ltd (2010) 239 FLR 339; [2010] NSWSC 508 at [56] per Palmer J). Further, with respect to (c) above, while the requirement to give notice of the application may be dispensed with, there are very few cases in which that has occurred (see Assaf, F, Statutory demands and winding up in insolvency (2nd ed, LexisNexis Butterworths, 2012) para 9.29). In any event, Mr Brookfield made no such application. 15 For these reasons, I will order that: 1. The originating application filed on 23 December 2016 is dismissed. 2. Mr Brookfield is to pay Real Estate Now's costs of the application, to be taxed failing agreement. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves. Associate: Dated: 12 September 2017