Stat demands, divorcees and former business partners now rivals in the Northern Territory’s child care sector? The question here is what could possibly go right.
Sydney liquidators David Solomons and Riad Tayeh might well be wondering the same, after a Judge of the Queensland Supreme Court found that liquidators don’t have to have acted unreasonably before they can be stung with order that they pay costs personally.
The dVT Group duo were appointed liquidators of the wife’s company – NT Two Nominees Pty Limited – in July 2019.
Subsequent to that appointment Solomons and Tayeh on December 20, 2019 issued a statutory demand for more than $135,000 to the husband’s company, SJG Developments Pty Limited.
This sum purportedly represented payments made by the husband from the wife’s company’s account which she told the liquidators were “unauthorised”.
The point to note here is that Solomons and Tayeh relied on what they were told because as is revealed by Justice John Bond in SJG Developments Pty Ltd v NT Two Nominees Pty Ltd (in liq) [2020] QSC 104, not only were there no company records that could explain why the payments were made, there were no records to confirm if they were made.
Lawyers for the ex-husband responded on the same day.
They requested that the stat demand be withdrawn on the basis that there were no records to substantiate the claim their client owed a debt to NT Two Nominees.
They also said it was based solely on the ex-wife’s say so, and most tellingly of all, their client had repaid money he owed to his wife (as opposed to the company) via a bank cheque for $122,886.00 issued on February 4, 2019. A record of the cheque was provided.
And here’s where it gets weird. Still on December 20, 2019, the liquidators then issued a second stat demand, this time for $60,000.
In an affidavit attached to the demand one of the liquidators stated that he believed there was no genuine dispute that the debt existed but he didn’t declare why the amount now being claimed in the second stat demand was less than half the amount of the first.
The $60,000 apparently represented payments made to a third party by NT Two Nominees on SJG Developments’ behalf.
On January 13, 2020 the husband’s company filed an originating process seeking orders that the stat demand set aside; that the liquidators pay its costs and that they pay those costs personally so as to ensure no doubt that the ex-husband didn’t become an unsecured creditor in the liquidation of his ex-wife’s insolvent and probably assetless company.
Whilst the liquidators were never parties to the subsequent action, the judge rejected the submission of counsel for NT Two Nominees that for a court to order costs against liquidators personally, it must also rule that they had acted unreasonably.
“In my view considerations of justice do support such an order being made in the circumstances of this case, and they do so without my needing to form a view that the liquidators have acted unreasonably or otherwise in such a way as would affect their right of indemnity,” Justice Bond said.
“In this case, the applicant could not have protected itself by a security for costs order.
“Rather, it was forced to commence litigation against the company in liquidation by the liquidators’ conduct in relation to the statutory demand.
“Although the respondent and the liquidators concede that an order should be formulated which will afford the applicant priority in the winding up above even the liquidators’ indemnity, why in the present circumstances should the liquidators be entitled to plead that they should not be responsible beyond the extent of the assets in their hands?
“If, as is suggested by the applicant, there is a risk of a shortfall, it is the liquidators who should bear that risk because, as Hansen J observed in Ultra Tune Australia Pty Ltd v McCann (1999) 30 ACSR
651 at [84], it is the “… liquidator, and not an opposite party in litigation, [who] knows what the financial position of the company is and, in particular, whether the assets of the company will be sufficient to cover the costs and expenses of litigation (including unsuccessful litigation) and [the liquidator’s] remuneration”. Support INO’s continued chronicling of the insolvency sector.
Security for costs can be ordered where the proceedings are for real practical purposes defensive. There is also the need yo obtain leave to start action against company in liquidation but that can be given nunc pro tunc