Bungey v Magnate Projects [2006] NSWSC 734

New South Wales Supreme Court

CITATION : Bungey v Magnate Projects [2006] NSWSC 734

HEARING DATE(S) : 4 May, 28 June, 3 July 2006

JUDGMENT DATE : 21 July 2006

JURISDICTION : Equity

JUDGMENT OF : Austin J

DECISION : Proceeding stayed. See paragraph 2.

CATCHWORDS : CORPORATIONS - winding up - discretion under s 467 - agreement between defendant in Commercial List proceeding and creditor of plaintiff, under which creditor took proceeding to wind up plaintiff prior to hearing of Commercial List case - relevant considerations

Civil Procedure Act 2005 (NSW), s 14 LEGISLATION CITED : Corporations Act 2001 (Cth), ss 459C, 459G, 467 Supreme Court (Corporations) Rules, 1999, r 5.4

BP Australia Ltd v Brown (2003) 58 NSWLR 322 CASES CITED : Expile Pty Ltd v Jabb's Excavations Pty Ltd [2003] NSWSC 699 Re Chapel House Colliery Company (1883) 24 ChD 259 Re St Thomas' Dock Company (1876) 2 ChD 115

PARTIES : John Alfred Bungey trading as John Bungey Real Estate (P) Magnate Projects Pty Ltd (D)

FILE NUMBER(S) : SC 1297/06

COUNSEL : B Gillard (Solicitor) (P) D A Allen (D)

SOLICITORS : Gillard Consulting Lawyers (P) Proctor & Associates (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

FRIDAY 21 JULY 2006

1297/06 JOHN ALFRED BUNGEY TRADING AS JOHN BUNGEY REAL ESTATE V MAGNATE PROJECTS PTY LTD JUDGMENT 1 HIS HONOUR: These are my reasons for judgment on the hearing of the application of the plaintiff (Mr Bungey) to wind up the defendant company ("Magnate"), and Magnate's application to enjoin Mr Bungey from proceeding with the winding up application. The hearing of these matters took place on 4 May and 28 June 2006. The hearing was then adjourned to 3 July 2006. On that occasion, with the consent of the parties, I announced my decision and made orders, reserving my reasons for judgment. I did so because Magnate is the plaintiff in a Commercial List proceeding set to begin on 24 July 2006, a proceeding that would obviously be disrupted if I made a winding up order. I thought it important to let the parties know where they stood so that Magnate could prepare for the Commercial List proceeding and not lose the hearing dates. 2 My orders were as follows: 1. Proceeding No 1297/06 ("the present proceeding") is stayed until the entry of judgment in proceeding No 50049/04 between the present defendant as plaintiff and Youma Constructions No 2 Pty Ltd as defendant. 2. Liberty to either party to restore the present proceeding to the list before the Corporations Judge on 3 days' notice after the entry of judgment as aforesaid. 3. Order under s 459R of the Corporations Act that the period within which the application in the present proceeding for the defendant to be wound up is to be determined, be extended until 31 December 2006. 4. Costs reserved. 5. Note that the publication of the court's reasons for these orders is reserved. 6. Further note that the existing undertakings of Mr Luu are extended until the entry of judgment in proceeding No 50049/04. 3 These are my reasons for judgment for the making of those orders. The present litigation 4 By an originating process filed on 6 February 2006, Mr Bungey sought an order for the winding up of Magnate on the ground of insolvency. The originating process relied on a statutory demand for payment of the sum of $18,050.57, described as a sum due as a judgment debt in accordance with a Certificate of Judgment issued by the Local Court in Liverpool St Sydney (File No 8367/04). The evidence shows that the amount for which judgment was entered was the amount of assessed costs payable pursuant to a costs order of this court. 5 According to the evidence, the demand was served by Mr Bungey by personal delivery to Magnate's registered office on 12 January 2006. No application was made to set aside the demand within the time allowed under s 459G of the Corporations Act, or at all. 6 Save in one respect, the procedural and formal requirements for the winding up of a company have been proved by appropriate affidavit evidence. Magnate submitted that Mr Bungey had failed to comply with rules 5.4(2) and 5.4(4) of the Supreme Court (Corporations) Rules 1999. Those sub-rules require that the affidavit in support of an originating process for winding up in reliance on failure to comply with a statutory demand must verify service of the statutory demand, and must be made within 7 days before the originating process is filed. In the present case Mr Gillard, Mr Bungey's solicitor, purported to verify service by his client. His evidence was objected to and eventually the affidavit was tendered only to prove its contents, rather than (relevantly) the truth of the contents. The requirements of rule 5.4 were not satisfied, because Mr Gillard's statement that his client had personally served the demand was not admitted to prove the truth of the assertion and therefore did not verify service. But there is no contest about the fact of service of the demand on the date to which Mr Gillard has deposed. In the circumstances, I shall dispense with the requirements of rule 5.4, to the extent that the rule has not been complied with, under the court's general power to do so conferred by s 14 of the Civil Procedure Act 2005 (NSW) (the application of which would be impliedly confirmed, if confirmation were needed, by rule 1.3(2) of the Supreme Court (Corporations) Rules). 7 The first return date for Mr Bungey's winding up application was 9 March 2006, and on that day Magnate appeared before the Registrar, by counsel, and sought time to put on a Notice of Opposition under s 465C of the Corporations Act, and supporting affidavits. Magnate's application was referred to Campbell J as duty judge. His Honour decided to give Magnate until 24 March to "put before the court such material as it could muster". He did so after receiving undertakings from Mr Dinh Luu, Magnate's only director and shareholder. As finally formulated, Mr Luu's undertakings were as follows: (i) to ensure that the defendant does not trade except to the extent that it continues to pay legal expenses incurred in this and the Commercial List proceedings No 50049 of 2004; and (ii) to withdraw any Notice of Opposition if the court is not satisfied that the defendant has no other creditors other than the plaintiff and Kekatos Lawyers and no other potential creditors except for Youma Constructions No 2 Pty Ltd concerning the amount the subject of the cross-claim in Commercial List Proceeding No 50049 of 2004, save that it may continue to oppose the winding up on the basis of any defect in the application for winding up and in the evidence supporting the application for winding up. 8 On the 23 March 2006 Magnate made an application, by interlocutory process, for an order enjoining the plaintiff from prosecuting the proceeding. On the same day, it filed a Notice of Appearance, which included the following "Grounds of Opposition to Winding Up": 1. On 17 November 2003, the plaintiff and defendant agreed that the plaintiff would not take any action to wind up the defendant. 2. It is an actual or implied term of the agreement that the plaintiff would allow the defendant to conclude its action against Youma Constructions No 2 Pty Ltd. The current action is in breach of that agreement. The defendant is therefore estopped or otherwise precluded from prosecuting this action. 3. Except to the extent the defendant may owe the plaintiff the amount stated in the statutory demand, the defendant is solvent. 4. The court in the exercise of its discretion ought not wind up the defendant. 5. The plaintiff is put to strict proof of all matters including compliance with the matters required by the Corporations Act, Corporations Rules and the practice and procedure of the Supreme Court of New South Wales. 9 The winding up proceeding and the interlocutory application were eventually heard by me on 4 May and 28 June, as I have said. I ordered that evidence on the interlocutory process be evidence with respect to the originating process, and that evidence with respect to the originating process be evidence on the interlocutory process. Commercial List proceeding No 50049 of 2004 10 Youma Constructions No 2 Pty Ltd ("Youma") was the developer of a development at 1-35 Pine Street, Chippendale for the construction and sale of residential and commercial units. It entered into a deed with Magnate dated 11 February 2002 and varied on 27 February 2002. The deed provided for Magnate to be appointed as marketer for the sale of a number of units. The terms of this deed, and its effect in the events that happened, are matters before the court in the Commercial List proceeding, and it would be inappropriate for me to make any findings of fact on those matters in the present judgment. However, it is important for present purposes to have some understanding of the claims in the Commercial List proceeding. 11 In its Amended Summons in the Commercial List proceeding, Magnate alleges that it was a term of the deed that for each unit sold above a minimum set price, Youma would pay Magnate a "Selling Fee" calculated under the deed. The Selling Fee would be the contract price minus the "Minimum Unit Price" set out in a schedule to the deed, plus any GST payable. Magnate claims that it marketed units pursuant to the deed and sold them at a price above the Minimum Unit Price, and that in breach of the provisions of the deed, Youma failed to pay it the Selling Fee, in the sum of $3,077,695.89. Magnate also claims that under the terms of the deed Youma indemnified it for any commission payable to any real estate agent for the sale of units. It says it was indebted to Mr Bungey in the sum of $696,165.23 plus interest, by way of commission for the sale of units, and that in breach of the agreement Youma failed to indemnify it for that amount. 12 The evidence includes Youma's Amended Defence and Cross Claim, in draft form. According to the evidence, Youma intends to rely on this document, notwithstanding that it is in draft form. 13 In the draft Amended Defence, Youma denies that it received the "Total Minimum Unit Prices", or Magnate's GST contribution or other moneys due, so as to satisfy express conditions precedent in the deed, and therefore Youma denies that it is liable to pay Magnate's claimed Selling Fee. Youma says it was expressly agreed that any entitlement to the Selling Fee was dependent upon Magnate procuring the sale of specified units at not less than the Minimum Unit Price applicable to each lot within the "Exclusive Period", which expired on 1 April 2003, and Youma says that Magnate did not meet its obligations. It says that Magnate also failed to meet an express condition precedent to its entitlement to any Selling Fee, to the effect that Magnate would furnish a tax invoice for the Selling Fee, in the absence of which Magnate's claim was premature. Youma also denies any obligation to indemnify Magnate in respect of any commission claim, on similar grounds. It also says that Magnate was illegally carrying on the business of unlicensed real estate agent and was therefore precluded by s 42 of the Property, Stock and Business Agents Act 1941 (NSW) or s 9 of the Property, Stock and Business Agents Act 2002 (NSW) from bringing proceedings to recover any fee, and any entitlement to recover a fee is void for illegality. 14 As to Youma's Cross Claim against Magnate, for present purposes it is sufficient to rely on Magnate's Defence to Cross Claim, as filed, for a summary of the Cross Claim and Magnate's Response to it. Magnate there says that it has identified three disputes in the Cross Claim, and deals with them as follows: "FIRST DISPUTE The Cross Claimant alternatively claims that the Deed should be rectified, does not contain the entire agreement between the parties and should have several terms implied. The effect would be: (i) the Cross Defendant is not entitled to the indemnity it claims in the initiating pleading; (ii) that it was in fact agreed that the Cross Defendant would pay for the real estate commission; and (iii) that by seeking the indemnity the Cross Defendant is in breach of the Deed, the damages for which would be the indemnity payable for real estate commission. The Cross Defendant denies that there is any basis for rectification and the implication of terms. The Cross Defendant relies on the Deed and the indemnity provided in it. SECOND DISPUTE The Cross Claimant says that it was a term of the Deed that the Cross Defendant would secure the sale of all of the Lots set out in the Deed for a price above the listed minimum price. It is alleged that the Cross Defendant did not do this and that loss has resulted. The Cross Defendant says that it was under no obligation to sell all the Lots. THIRD DISPUTE The Cross Claimant claims that the initiating pleading itself is a breach of the term of the Deed that the Cross Defendant would sell all of the Lots. The Cross Defendant says that this does not follow." 15 The Commercial List proceeding has had what Einstein J described, in an ex tempore judgment on 9 December 2005, as "an unfortunate history". It appears that the proceeding was fixed for hearing to commence on 8 March 2005. That fixture was vacated on Youma's application on the basis that it was not ready for the hearing, and Youma was ordered to pay Magnate's costs occasioned by vacation of the hearing date. The matter was set down for a four-day hearing to begin two weeks later, on 21 March 2005, before Associate Justice Macready. Youma did not appear at the hearing, though it was found to be aware of the hearing date and had been given notice of the form of orders that the court proposed to make. His Honour found that Magnate had made out its case for an indemnity for real estate agent's commission and for payment of the Selling Fee, and he dismissed the Cross Claim. 16 Apparently the reason why Youma was not represented before Macready AsJ was that its solicitor, a sole practitioner, had suffered severe depression and had not communicated the hearing date to his client (see the ex tempore judgment of Einstein J dated 9 December 2005, para [4]). On 24 June 2005 Nicholas J set aside Macready AsJ's judgment on the basis that he was satisfied there was an arguable defence. Magnate appealed, by leave, to the Court of Appeal, which set aside the judgment of Nicholas J and re-exercised the court's discretion, setting aside the judgment of Macready AsJ on conditions (approximately) that Youma or its solicitor pay Magnate $20,000 on account of costs, and that Youma not apply for security for costs against Magnate beyond an order that could be satisfied by Mr Luu becoming personally liable for Magnate's subsequent costs. 17 The effect of the judgment of Einstein J on 9 December 2005, expressed in detailed orders made on 16 December 2005 which are in evidence, was that Youma was required to pay Magnate all the costs the court had ordered it to pay, on assessment of the plaintiff's bill of costs, and after that had happened, Mr Luu was required to undertake to the court to be liable for any costs incurred after 26 September 2005 and awarded against Magnate in the Commercial List proceeding. 18 On 23 March 2006 Magnate made an application by notice of motion in the Commercial List proceeding seeking, inter alia, judgment for the sum of $97,105.53 in relation to the orders of 16 December 2005. It appears that the notice of motion was heard by Brereton J who ordered Youma and its solicitor to pay Magnate $45,000 on account of costs. That amount was paid to Magnate on 19 April 2006 (Transcript, page 37). Mr Luu gave evidence in the present proceeding (Transcript, page 42) that he had given an undertaking in relation to costs of the Commercial List proceeding. As far as I am aware, the Commercial List proceeding is still listed for hearing commencing on 24 July 2006. Magnate's financial circumstances 19 Mr Luu's evidence is that the $45,000 received from Youma on 19 April 2006 has been disbursed on legal costs in the Commercial List proceeding (Transcript, page 38). Magnate's only assets are its causes of action against Youma in the Commercial List proceeding and for costs awarded in that proceeding. In his affidavit, Mr Luu denied that Magnate owes any money to Youma. He said Magnate has a liability to Mr Bungey for commission of $696,165.23 plus interest. It also owes legal fees, some of which Mr Luu has been paying personally. It appears that, before receipt of the $45,000 from Youma, Magnate's solicitor was owed approximately $80,000 (Transcript, page 56). Mr Luu said in his affidavit that Magnate's solicitor is not pressing him for payment of costs. 20 Mr Luu also said that Magnate has not traded since, at least, the Commercial List proceeding commenced in 2004, except to pursue its claim against Youma. He said Magnate has not lodged tax returns for the last two financial years "due to the litigation", and that it has not done so "on the advice of its accountant". When questioned about this in cross-examination, he said Magnate was not trading during the periods when no returns were lodged (Transcript, page 38). It was suggested to him in cross-examination that the Commissioner of Taxation is a least a potential creditor, for the purposes of the undertaking he has given to the court in the present case, because Magnate has not lodged tax returns, and he replied (Transcript, page 54) that the company had no income for the relevant years, though he agreed that Magnate had rendered an invoice to Youma which the latter had rejected. 21 In my opinion Mr Luu's evidence does not disclose that the Commissioner of Taxation is a potential creditor for the purposes of his undertaking, so as to require him to abandon his grounds of opposition to the winding up application. Mr Luu's evidence, though given in lay terms, was to the effect that he would lodge income tax returns for Magnate on a receipts rather than an accruals basis, and on that basis there would be no income for the year 2003 and subsequently and therefore no tax liability. I am not in a position to reject Mr Luu's evidence on this matter. Further, it seems to me, as a matter of construction, that any future income tax liability arising directly out of Magnate's success in the Commercial List proceeding was not intended to fall within the concept of "potential creditors" for the purpose of the undertakings. Mr Bungey's settlement with Magnate on 17 November 2003 22 It appears that during 2003, Mr Bungey pursued Magnate to recover the real estate agent's commission he claimed in respect of the Chippendale project. He commenced proceedings in this court for recovery, No 4674 of 2003, and also two applications for the winding up of Magnate, Nos 5171 and 5172 of 2003 (Transcript, pages 15-16). At about the same time a proceeding was commenced before the Consumer, Trader & Tenancy Tribunal (proceeding No Com 03/44712). All of these proceedings were settled between the parties on about 17 November 2003. 23 Evidence about the settlement was given in the affidavit of Jim Kekatos, who was Magnate's solicitor at the time. He said he had a conversation with Brian Gillard, Mr Bungey's solicitor, as follows: "Kekatos: Brian, my client has agreed to the charge against the company and to pay your fees but you know he cannot pay you now. Gillard: I know my client wants to keep the pressure on you to make sure you prosecute the proceedings against Youma. Kekatos: He wants to chase the money that is not an issue, we don't need any added pressure from you. Gillard: Provided your client pursues the matter and keeps us informed we promise not to enforce the charge or chase you for the costs. Kekatos: OK." 24 Mr Kekatos' evidence is that he gave Mr Gillard an executed company charge and Mr Gillard gave him a handwritten letter. Both documents are in evidence. 25 The instrument of charge, dated 14 November 2003 and subsequently registered, purported to create a fixed and floating charge granted by Magnate to Mr Bungey to secure the total sum of $718,036.23 comprising a judgment debt for commission of $696,165.23 plus other monies due. The charge was said to be a fixed charge over the item specified in the schedule and a floating security as regards all other present and future assets of Magnate. The item specified in the schedule as the mortgaged asset was as follows: "All of the Debtor's interests in the right to sue or recover monies from Youma Constructions No 2 Pty Ltd ('Youma') or any Related Corporation or Associate of Youma under a Marketing Deed between the Debtor and Youma dated 11 February 2002 or otherwise in relation to any remedy associated with that Deed and as against any other persons involved in the negotiation of that Deed." 26 By the handwritten letter, dated 17 November 2003, Mr Gillard confirmed that his client agreed to accept the sum of $240,000 in lieu of the sum of $718,036.23 on certain conditions including entry of judgment by consent in the Consumer, Trader & Tenancy Tribunal proceeding for $696,165.23, "payment of costs as awarded (in 4674 of 2003) within 14 days of assessment", and compliance with an approved timetable in relation to the Commercial List proceeding against Youma. On the same day consent orders were made in proceeding No 4674 of 2003, under which the proceeding was dismissed with Magnate ordered to pay Mr Bungey's costs. The court noted that: · the parties had agreed to judgment being entered for sales commission in the Tribunal proceeding in an amount including the amount claimed in the Supreme Court proceedings; and · Mr Bungey had agreed not to enforce that judgment subject to certain conditions. 27 According to the evidence of Mr Gillard, not contested on this point, the costs in proceeding No 4674 of 2003 are the costs for which judgment was entered in the Local Court, leading to the service of the statutory demand upon which the present application for winding up was made. Mr Gillard also gave affidavit evidence, that is challenged, in which he said he did not agree with Mr Kekatos that Mr Bungey would not pursue recovery of those costs. Mr Gillard pointed out in evidence that such an agreement would be at odds with the handwritten letter of 17 November 2003, in which payment of the costs is one of the conditions for Mr Bungey accepting a reduced amount for his claim. 28 Mr Gillard made a file note on 17 November, which does not shed light on his conversation with Mr Kekatos. Mr Kekatos did not make a file note, but he explained in his oral evidence that the conversation with Mr Gillard occurred outside the Downing Centre court where he was appearing in a criminal matter (Transcript, page 58). Later, the solicitors corresponded about the costs of proceeding No 4674 of 2003. Mr Gillard sent Mr Kekatos a bill of costs and Mr Kekatos said his client required the bill to be assessed. A Certificate as to Determination of Costs was issued and Mr Gillard sent Mr Kekatos a copy of his client's statutory demand on 16 August 2004. There was no mention in this correspondence of any agreement not to recover the costs. On 27 August 2004 Mr Kekatos wrote to Mr Gillard formally requesting, inter alia, that the payment of Mr Bungey's legal fees as assessed be deferred until Magnate's claim against Youma was finalised. Mr Gillard replied on 21 September 2004 indicating that his client would accept payment by instalments, but it appears that this offer was not accepted. 29 In these circumstances, I find that Mr Gillard did not give any undertaking that would restrict Mr Bungey's ability to enforce the costs order. I reached this conclusion on the following grounds: (a) my hearing of the oral evidence of Mr Kekatos and Mr Gillard and my observation of their demeanour in the witness box; (b) the evidence of Mr Kekatos was unclear as to the circumstances in which the undertaking was given (for example, how the solicitors came to be talking at the Downing Centre when Mr Gillard's notes show that he appeared at the Supreme Court); (c) Mr Kekatos did not make any file note and was relying on his recollection at a time when, according to his own evidence, he was "in the middle of something else" (Transcript, page 58); (d) finding that Mr Gillard gave an undertaking not to enforce the costs order would be inconsistent with the terms of his letter of 17 November 2003, apparently countersigned by someone on behalf of Magnate (perhaps Mr Kekatos), which stated one of the conditions of the settlement to be payment of costs as awarded within 14 days of assessment; (e) the subsequent correspondence of the solicitors implies that there was no impediment, under the terms of the settlement, to the assessment and payment of the costs, and the process of assessment was implemented without any express reservation of the obligation to pay the amount assessed; (f) Mr Kekatos' letter of 27 August 2004, requesting deferral of payment, implies that there was no previous agreement for deferral. Mr Bungey's dealings with Youma 30 It appears that recovery of his claim from Magnate has been a matter of great concern for Mr Bungey, who has followed the Commercial List proceeding closely, with the assistance of Mr Gillard. Mr Gillard gave evidence that, since Magnate commenced that proceeding, he has attended the court to ascertain the status of the proceedings on numerous occasions, sometimes with Mr Bungey. They attended the hearing before Macready AsJ, the hearing before Nicholas J and the hearing in the Court of Appeal. Magnate gave Mr Gillard access to affidavits and other documents in respect of those hearings. According to Mr Gillard, his client is entitled to access to such documents under the terms of the deed of charge. 31 Mr Bungey sought advice from Mr Gillard for the purpose of recovering the amount he claimed from Magnate. He commenced winding up proceedings against Magnate on no fewer than four occasions before the present one. Two of the proceedings were settled by the arrangements of 17 November 2003. Other proceedings were allowed to lapse. 32 In November 2005 Mr Gillard gave Mr Bungey some advice concerning his options for recovery. They had a meeting with the directors of Youma and their legal advisers on 29 November 2005, during which Mr Bungey's options for recovery were considered, including the option of commencing another application to wind up Magnate. Mr Gillard gave evidence (Transcript, page 63) that Youma proposed making a payment to Mr Bungey, although no amount was agreed, and one of the options discussed was that the payment would be on condition that Mr Bungey would make a winding up application. He said the proposal had emerged from discussions between Mr Bungey and one of the directors of Youma over the period from May to November 2005. 33 Mr Gillard made a file note of the meeting of 29 November, on the first page of which the following appears: "charge close to direct interest stat demand appoint liq exercise power to settle and/or negotiation". These words contemplate that after the service of a statutory demand, a liquidator would be appointed to Magnate and the liquidator would exercise his or her power to settle and/or negotiate with Youma. 34 The amount of Mr Bungey's claim for commission, for which judgment was entered in the Consumer, Trader & Tenancy Tribunal, was $696,165.23 plus interest. It appears that this claim was based on Mr Bungey's asserted entitlement to commission with respect to the sale of some 52 units. At the meeting with Youma on 29 November 2005, Mr Gillard was given a document which listed sales where Mr Bungey was agent and sales made before 1 April 2003 (now part of Exhibit D3). I infer that this was supplied for the purpose of assisting Mr Bungey to work out his entitlement to commission. 35 Mr Bungey gave evidence (Transcript, pages 32-34) that he and Mr Gillard attended another meeting with the representatives of Youma early in December 2005. This meeting was attended by a barrister as well as the solicitor and a director of Youma. A purpose of the meeting was to identify what properties were sold by Magnate before Mr Bungey entered into his agency agreement with Magnate, and whether any properties were sold by Youma rather than Magnate. Mr Bungey believed that those determinations would have the consequence of reducing his entitlement to commission. At the meeting a spreadsheet was used to show sales and commissions. Mr Bungey formed the view as a result of the meeting that his proper entitlement to commission was only about $200,000 (Transcript, page 31). 36 At the meeting in December, there was discussion of a proposed arrangement between Mr Bungey and Youma under which Youma would pay Mr Bungey some money and Mr Bungey would take steps against Magnate that would give Magnate the option to pay its debts, but with the prospect that Mr Bungey would proceed to seek winding up if payment was not made. 37 That proposal was developed into a formal agreement contained in a "Deed of Grant" between Mr Bungey and Youma dated 10 January 2006. By that instrument: · Mr Bungey granted Youma the right to call for the assignment of the benefit of the costs order against Magnate and/or the judgment against Magnate in the Consumer, Trader and Tenancy Tribunal; · Mr Bungey undertook to serve on Magnate a statutory demand for payment of the amount of the costs order and if Magnate failed to make payment, make an application for the winding up of Magnate; · Mr Bungey agreed that, in the event that Magnate paid him the amount of the costs order (which Youma would be entitled to recover from him), he would serve another statutory demand, this time for payment of the amount of the Tribunal judgment, and if Magnate failed to pay that amount, he would make an application for winding up; · Youma agreed to pay Mr Bungey $100,000 immediately, plus a further sum of $100,000 if either it exercised its right to call for the assignment, or Magnate went into external administration leading to liquidation. 38 Mr Gillard agreed in evidence (Transcript page 17) that Mr Bungey filed the present application to wind up Magnate, and was prosecuting it, because of his agreement with Youma, and that he would not have made the winding up application but for that agreement. In his evidence Mr Bungey agreed that the reason why he was prosecuting the winding up application was because of his obligations under the deed (Transcript, page 25). He accepted that he had received $100,000 from Youma and had used some of that money to fund the present proceeding (Transcript, page 66). 39 Mr Bungey gave evidence that he entered into the arrangement with Youma after receiving advice and documents from his solicitor, Mr Gillard, which led him to form the view that Magnate would not pay him the commission he claimed (Transcript, page 22). Mr Gillard explained the agreement by saying that Mr Bungey had "liquidated an asset" (Transcript page 17). He continued: "He has discovered that there are parts of the case which may be fatal to your client. He does not believe that he will receive anything if this matter proceeds as currently constituted, and he liquidated the asset by obtaining a payment from the party who is able to pay and to whom that asset is worthless."