Law says winding up invalid if plaintiff can pay

The law is a wonderful thing but on occasion its inevitable frailties can sometimes undermine faith in its efficient operation.

In the case of HHA Architects Pty Ltd (HHA) a judge of the Supreme Court of West Australia in July last year found that the company should be wound up and liquidators appointed on the application of Norm Carey, who hadn’t proved at the time of his application that either he or his Goldblaze Nominees Pty Ltd had standing.

Some iNO readers may remember Norm. He was an architect too, of both the rise and the fall of Westpoint Corporation, which was placed into liquidation by the courts in early 2006 following an investigation by ASIC. Ultimately 4,000 mostly unsophisticated Westpoint investors lost $300 million.

As is explained in Goldblaze Nominees as Trustee for the Goldblaze Unit Trust -v- HHA Architects Pty Ltd [2021] WASC 189 the judge reasoned that while Carey and Goldblaze hadn’t established themselves as creditors they’d done enough to be considered prospective creditors on the basis that they’d commenced proceedings against HHA for professional negligence.

The fact that the professional negligence proceedings had not been heard at the time that the winding up application was brought did not perturb the court.

The orders were made and Gary Anderson and Jimmy Trpcevski of Jirsch Sutherland affiliate practice WA Insolvency Solutions were appointed, meaning that in certain circumstances the law allows for a prospective creditor to be a petitioning creditor.

HHA Architects’ director Alistair Hume however wasn’t having it.

First he sought to appeal the July 2021 decision. When he was denied leave he applied to have the winding up terminated or stayed.

As is outlined in Hume -v- Carey [2022] WASC 256 Hume won a stay on August 9, 2022, with the court declaring it was satisfied that “HHA had been wound up in circumstances that it should not have been, and that this weighed very heavily in favour of granting the application of the plaintiff”.

Hume had argued that HHA has no debt, no contingent creditors and no current PI insurance. Seemingly the court ruled that on such a basis a winding up application should not have been brought, or heard.

So the law agreed with the director in August 2022 and with his opponents Carey and Goldblaze in July 2021.

Upon the granting of the stay the only outstanding question then became which party would pay the liquidators’ remuneration because without such a payment the stay should lapse and the winding up resume.

As is detailed in Hume -v- Carey [No 2] [2022] WASC 377 each side argued that the other should pay Anderson’s and Trpcevski’s remuneration of some $31,800 odd.

When it came down to it the judge ruled that Hume as plaintiff on the termination application should pay $20,000, despite proving that the winding up orders should never have been made. Carey meanwhile was required to stump up the remainder. Wondrous indeed are the laws’ wilful ways.