In the matter of Gym & Tonic Healthclubs Pty Limited (ACN 135011853) [2017] NSWSC 49

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Gym & Tonic Healthclubs Pty Limited (ACN 135011853) [2017] NSWSC 49 Hearing dates: 6 February 2017 Decision date: 06 February 2017 Before: Barrett AJA Decision: Substitution order made. Catchwords: CORPORATIONS – winding up in insolvency – application for substitution as applicant for winding up – whether person seeking to be substituted in a creditor with a debt not subject to bona fide dispute Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: CVC Investments Pty Ltd v P&T Aviation Pty Ltd (1989) 18 NSWLR 295 Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd [2004] NSWSC 527; (2004) 185 FLR 130 Category: Principal judgment Parties: GoGetta Equipment Funding Pty Ltd (Applicant) Gym & Tonic Healthclubs Pty Ltd (Respondent 1) Representation: Counsel: GoGetta – Mr PR Gaffney Gym & Tonic – no appearance

Solicitors: GoGetta – RBG Lawyers File Number(s): 2016/00263106

Judgment – Substitution application 1. BARRETT AJA: An application under s 459P of the Corporations Act 2001 (Cth) for the winding up of Gym & Tonic Healthclubs Pty Limited ("Gym & Tonic") was initiated by Xton Group Pty Limited ("Xton") by originating process filed on 1 September 2016. Xton relied on deemed insolvency arising from Gym & Tonic's failure to comply with a statutory demand served by Xton. 2. An accommodation was reached between Xton and Gym & Tonic in December 2016 and Xton indicated that it would not be proceeding with its winding up application. It is in those circumstances that the present applicant, GoGetta Equipment Funding Pty Limited ("GoGetta"), seeks an order under s 465B(1) that it be substituted as the applicant for winding up. 3. Section 465B(2) says that such an order may only be made if the Court considers the order to be appropriate, either because the winding up application is not being proceeded with diligently enough or for some other reason. In this case, the withdrawal of the original applicant and the fact that it is not proceeding satisfy this requirement. 4. The other issue to be addressed is whether the present applicant, GoGetta, is, in terms of s 465B(1), a person "who might otherwise have so applied for the company to be wound up." 5. GoGetta claims to be within that description because it is a creditor of Gym & Tonic. On the authorities, however, substitution will be refused if the claimed debt from which creditor status arises is bona fide disputed: see, for example: CVC Investments Pty Ltd v P&T Aviation Pty Ltd (1989) 18 NSWLR 295 and Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd [2004] NSWSC 527; (2004) 185 FLR 130. The rationale was stated by White J in the latter case at [66] - [68]: "Section 459P does not provide that any person, or any person claiming to be a creditor, may apply to the Court for a company to be wound up in insolvency. It provides that a creditor (including a secured, contingent or prospective creditor) may make that application. As a matter of power as distinct from discretion, the Court may order a company to be wound up in insolvency where the creditor's debt is disputed if the Court determines that the applicant has standing to bring the application. The Court has the power to determine the disputed question and if it determines that the applicant is a creditor it may make an order for winding up. ( Re QBS Pty Ltd [1967] Qd R 218 per Gibbs J at 225; Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455; [1969] HCA 47; Brinds Ltd v Offshore Oil NL (1985) 60 ALJR 185 at 188). As a matter of discretion, where the debt and hence the applicant's standing is disputed, the Court will usually not entertain the application for winding up." 1. White J held (at [81]) that the court could not make an order under s 465B(1) without first determining whether the applicant for substitution is a creditor. The question whether GoGetta is a creditor of Gym & Tonic therefore lies at the heart of the present application. The question is, moreover, to be answered according to circumstances as they now exist, not by reference to some earlier state of affairs. 2. The affidavit evidence shows that, in 2013 and 2014, GoGetta entered into a series of rental contracts with Gym & Tonic for the hire or leasing of items of gymnasium equipment. Gym & Tonic fell into default, and as at 25 July 2016, more than $469,000 was due to GoGetta and unpaid. 3. In August 2016, a deed of settlement was, on GoGetta's case, entered into with Gym & Tonic and certain associated entities for the purpose of effecting a compromise. The deed provided for a schedule of payments. Those payments have not been made. 4. Correspondence and other documents indicate a possible view of Gym & Tonic that the deed did not become binding on it. If that is correct, the deed cannot be the source of any indebtedness of Gym & Tonic to GoGetta. Nor, however, can it be the source of any satisfaction or extinguishment of the pre-existing indebtedness of more than $469,000 to which I have referred. 5. On either basis, therefore, there is shown to be substantial indebtedness of Gym & Tonic to GoGetta – indebtedness, moreover, that on, on one basis or the other, must be regarded as not disputed on any bona fide ground. 6. In those circumstances, GoGetta has established the matters necessary for exercise of the s 465B(1), discretion in its favour. There is no reason why the discretion should not be exercised. 7. I make order 2 in the interlocutory process of GoGetta Equipment Funding Pty Limited dated 12 December 2016.