Case: Wilson Market Research Pty Ltd and the Corporations Law; Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 39 NSWLR 311
Outcome: applied
it is submitted by counsel for ThoughtWeb Systems that Mr Loughnan has a threshold problem that even if he were granted leave to use the documents he seeks to rely on to prove the insolvency of ThoughtWeb Systems, the Court would be reluctant to hear the matter where there is a disputed debt involved. In this regard, I was referred to what was said by Santow J in Wilson Market Research Pty Ltd and the Corporations Law; Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 39 NSWLR 311, first at [3] at 317, 318: '3. Section 459P of the Corporations Law ... provides that amongst those with standing to apply to have a company wound up are its creditors, even if they be prospective or contingent creditors. Indeed all the predecessors of s 459P , here and in the United Kingdom, similarly so provided. This followed the recommendations to the Board of Trade of the United Kingdom Amendment Committee of 1908: see at par below. By virtue of s 459P , such an applicant is required to establish a debt, in order to have standing to bring the winding up proceedings. However, where there is a bona fide dispute of substance as to the existence of the debt, it cannot be said that the claimant is a creditor who has the right to bring proceedings. Thus Ungoed-Thomas J said, in Mann v Goldstein [1968] 1 WLR 1091 at 1098-1099, in a frequently quoted passage: "... I would prefer to rest the jurisdiction directly on the comparatively simple propositions that a creditor's petition can only be presented by a creditor, that the winding-up jurisdiction is not for the purpose of deciding a disputed debt (that is, disputed on substantial and not insubstantial grounds) since, until a creditor is established as a creditor he is not entitled to present the petition and has no locus standi in the Companies Court; and that, therefore, to invoke the winding-up jurisdiction when the debt is disputed (that is, on substantial grounds) or after it has become clear that it is so disputed is an abuse of process of the court."' And then at [10] and [11] at 319, 320: '10. In CVC Investments Pty Ltd v P &amp; T Aviation Pty Ltd (1989) 18 NSWLR 295, however, Cohen J came to a different conclusion. He did so in a case of some complexity. It appears that the winding up applications were made on the basis of presumed insolvency. However, the question of actual insolvency was also considered (at 299 and 303), though without concluding there was a situation of actual insolvency. Thus his statements of principle were not limited to a context where the only basis of the plaintiff's application was presumed insolvency, though actual insolvency was not found. His Honour concluded (at 302) (agreeing with Smart J in Ron Pritchard Pty Ltd v Horwitz Grahame Pty Ltd (1988) 6 ACLC 258) that: "The authorities seem almost unanimously to agree that where a claimed debt is bona fide disputed on substantial grounds and there is no basis for regarding the claimant as a contingent or prospective creditor then that claimant has no standing to bring proceedings to wind up the company, and if he does so the bringing of those proceedings is an abuse of process. The fact that there is a ground for winding up in existence does not give that claimant any greater standing." His Honour said (at 302) that he did not regard the decision of McPherson J in National Mutual Life Association of Australasia Ltd v Oasis Developments , upon which Young J relied, as establishing that where there is a bona fide dispute as to the whole of the debt and this dispute is based on substantial grounds, then the petitioner can still proceed with the status of a creditor. Importantly, Cohen J goes on to say (at 303) that: "... if it is established that the petitioner or plaintiff has or would have no standing to obtain a winding up order then there is no justification for proceedings being commenced or continued. If the company is insolvent then it is a matter for a creditor, established as such, or one of the other persons designated under s 383 of the Code, to bring the matter to the court. It is necessary for the court to make a careful scrutiny of the evidence in order to establish the genuineness of the alleged dispute and the substance of the defence or cross-claim. If there is a likelihood that the debt may be owing even in part then the question of the solvency of the company may become relevant in the consideration of the court's discretion." 11. ... I prefer the view of Cohen J in CVC Investments. I therefore conclude that an applicant to wind up a company claiming standing as a creditor but who fails to establish that standing, thereby commits an abuse of process of the court, which is not avoided by demonstrating that the company is actually insolvent. The court only has to consider the question of solvency after the initial threshold of standing has been passed. Before that, it is irrelevant. Both in later considering the threshold of standing, and in presently making that choice between conflicting authorities, a powerful factor remains the importance of not giving the trigger for the potentially fatal step of winding up to someone who is unable with sufficient certainty to establish that status of a creditor. As illustrated here, the mere application to wind up can have devastating commercial consequences, reinforcing the need for not making an exception for general insolvency without warrant from the words of the statute. There is the ever-present danger of an unqualified claimant using the winding up procedure as a threat to force concessions from the company concerning a claimed debt. Such a result is quite contrary to the fundamental basis of bankruptcy legislation. This basis denies preference to one creditor over another, a fortiori where the first may not have that status of creditor in reality. The public interest in bringing insolvent companies to winding up can be pursued by others, in particular the Australian Securities Commission: see s 459P(l)(f) (and note also s 459P(1)(g)). The legislature's proper concern with premature triggering is reinforced by the fact that where a contingent or prospective creditor applies, as compared to an ordinary creditor, the application requires leave of the court and that in turn requires a prima facie case of insolvency (s 459P(2) and (3)).' On the evidence before me, I am not satisfied that Mr Loughnan has standing as a creditor of ThoughtWeb Systems sufficient to bring proceedings to wind it up or, if he does have such standing, that that standing would survive disputation on the part of ThoughtWeb Systems.