If ever a creditor seeking to wind up a debtor was itself teetering upon an anorexic crust of solvency it was Drummond Carpentry Services (DCS) Pty Ltd.
“The statutory presumption under s 459C(2)(b) of the Act relied upon by Drummond is not often used as a ground by creditors making application for an order that a company be wound up in insolvency.” Associate Justice Simon Gardiner.
The trustee for the Drummond Family Trust (Trust) first applied to the Supreme Court of Victoria seeking to liquidate Roberts Construction Group Pty Ltd in July 2024.
As described by Associate Justice Simon Gardiner in Re Roberts Construction Group Pty Ltd (No 2) [2025] VSC 620 DCS sought winding up orders pursuant to Section 459C(2)(b) of the Corporations Act.
Acknowledging that this was an unconventional route, justice Gardiner said: “The statutory presumption under s 459C(2)(b) of the Act relied upon by Drummond is not often used as a ground by creditors making application for an order that a company be wound up in insolvency.
“The overwhelming majority of such applications rely upon the presumption under s 459C(2)(a) arising from non-compliance with a statutory demand,” he said.
Section 459C(2)(b) relates to the presumption of insolvency on the basis of unsatisfied warrants of seizure and sale and garnishee orders either partly or wholly unsatisfied.
DCS had evidence of both but months before the winding up application came on for hearing the judge was informed by Roberts’ solicitors that DCS had been de-registered by ASIC in February this year after failing to pay the fee for its annual company review.
Invariably that meant DCS was removed as trustee of the trust and its standing to make the application was cast into doubt.
Five months later the lawyers on record for DCS told the court a supporting creditor would make an application for substitution.
Before that hearing could take place the court was told that Trust appointor and DCS director David Drummond had applied to ASIC to have DCS reinstated.
Sensing blood Roberts’ lawyers pressed for a formal explanation of the position in respect of Drummond’s deregistration.
“Directions were made, including an order extending the time in which the application was required to be determined under s 459R(2) of the Act, to enable agitation of the issues arising from Drummond’s deregistration on a proper evidentiary basis,” the judge said.
But there was more to come. Next the court heard that Drummond had decided not to pursue the reinstatement application because he wasn’t prepared to make the declaration that the company wouldn’t be immediately insolvent upon reinstatement.
This Drummond blamed on Roberts’ failure to pay a costs order made in his favour in a separate but related proceeding. The substitution application was suddenly back on!
But to allow for that to proceed the judge had to make orders extending the time for determination.
Roberts wanted none of it and appealed, leading to a different judge staying the substitution application timetable until the appeal was heard.
That occurred on August 22, 2025 with the court dismissing Robert’ appeal. But lest ye think hearing of the substitution application could now proceed, beware.
On September 2 the court was told that Drummond had succeeded in having DCS reinstated by ASIC and that the supporting creditor intended to discontinue its application for substitution.
When this tortured dispute finally come on for hearing Roberts didn’t bother filing evidence as to solvency.
It didn’t need to. The unorthodox Section 459C(2)(b) path chosen by Drummond provided Roberts’ legal team with a compelling opportunity to argue for the primacy of discretion in this instance and the judge agreed, having found that Drummond avoided the 459C(2)(a) statutory demand route because he knew Roberts had an offset up its sleeve.
“I observe that a feature of the use of s 459C(2)(b) may enable a creditor to contend that a presumption of insolvency arises if, by chance, in the process of obtaining garnishee orders it comes across an account of the debtor with a minimal balance not sufficient to satisfy a judgment in full,” the judge concluded.
“This may be perhaps because the account is no longer used by the debtor. Upon the garnishee order being returned partly unsatisfied, the creditor could potentially rely on that as a basis for contending that the debtor should be presumed insolvent.
“This, to my mind, in the context of establishing a presumption of insolvency, is unsatisfactory. Contrast this with the statutory demand regime, which enables agitation of disputes and offsetting claims before the presumption of insolvency can be arrived at.”
He dismissed the application and made the predictable order as to costs. Whether the costs Drummond incurred having DCS reinstated now represent wasted money is an open question.
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That tends to ignore the legislation which is unfortunate.
It is not clear how a company could apply under s 601AA from deregistration where there was a liability outstanding in excess of the Statutory Minimum.
Unless and until the trustee is replaced it would remain a bare trustee of the underlying Trust and if deregistered the assets of the underlying Trust would vest in the Commonwealth under control of ASIC