Acconci v Alpha Technologies Corporation Limited

Acconci v Alpha Technologies Corporation Limited - [2010] FCA 970 - FCA 2010 case summary — Zoe

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introduction 1 This is an application made by originating process dated 16 July 2010 under s 482 of the Corporations Act 2001 (Cth) ("the Act") to terminate the winding up of Alpha Technologies Corporation Limited (in liquidation) ("Alpha"). 2 The plaintiffs, Paolo Acconci, Christiano Talpo and FKM Holdings Pty ("FKM") (a company of which Fernando Marchitelli is a director) seek the following relief: 1. An order under section 482(1) of the Act that the winding up of the First Defendant be terminated at the conclusion of the general meeting of members referred to below. 2. Orders under section 482(3) of the Act that: a. the liquidators call a general meeting of members of the First Defendant as soon as possible after the making of such an order in order to elect directors; and b. until such time as the general meeting of members is held, the liquidators do not dispose of any assets or make distribution to creditors of the First Defendant or exercise any powers other than those necessary to preserve the status quo of the First Defendant. 3. In the alternative to 1 and 2 above, orders under sections 600A and 447A of the Act that: a. the resolution made by creditors on 25 June 2008 to wind up the First Defendant be set aside; b. the period of time for which the second meeting of creditors may be adjourned pursuant to section 439B(2) of the Act be extended; c. the administrators reconvene the adjourned second creditors meeting of creditors and put to creditors the resolutions originally proposed pursuant to section 439C of the Act; and d. the following related party creditors are not entitled to vote on the resolution to be proposed pursuant to the above order: i. Alpha Technics Asia Ltd ii. E-Fulfillment.com Pty Ltd iii. FKM Holdings Pty Ltd iv. Hollingsworth & Co Pty Ltd v. Kevin Hollingsworth vi. Panache Global Holdings Pty Ltd vii. Polestar Consulting Pty Ltd viii. Richard Rubin ix. Rob Allan x. Terry Bickerton 4. An order that the Defendants pay the Plaintiffs' costs of this application. 5. Any other orders or relief as this Honourable Court thinks fit. 3 The plaintiffs did not pursue their claim under ss 600A and 447A of the Act. 4 Together, the plaintiffs hold 471,393,616 shares in Alpha, representing 32.78% of the total issued shares. FKM is also a creditor of Alpha for a debt claimed by FKM to be $1,510,716 but admitted to vote for $1,144,506. 5 The defendants are Alpha and its liquidators, Kenneth Sellers and Mathew Muldoon. 6 The following affidavits were filed in support of the application: 1. Affidavit of Leath John Nicholson sworn 16 July 2010 ("First Nicholson Affidavit") 2. Affidavit of Michael Salvatore Canzoneri sworn 16 July 2010 ("Canzoneri Affidavit") 3. Affidavit of Anthony Zita sworn 16 July 2010 ("Zita Affidavit") 4. Affidavit of Fernando Marchitelli sworn 9 August 2010 ("Marchitelli Affidavit") 5. Affidavit of Simon Wallace-Smith sworn 9 August 2010 ("Wallace‑Smith Affidavit") 6. Second Affidavit of Leath John Nicholson sworn 9 August 2010 ("Second Nicholson Affidavit") 7. Third Affidavit of Leath John Nicholson sworn 18 August 2010 ("Third Nicholson Affidavit") 8. Second Affidavit of Michael Salvatore Canzoneri sworn 18 August 2010 ("Second Canzoneri Affidavit) 9. Affidavit of Jason Croall sworn 18 August 2010 ("Croall Affidavit") 10. Fourth Affidavit of Leath John Nicholson sworn 19 August 2010 7 The following affidavits were filed in opposition: 1. Affidavit of Christopher David Morris sworn 13 August 2010 2. Affidavit of Richard Harold Rubin affirmed 13 August 2010 3. Affidavit of Daniel O'Brien sworn 16 August 2010 4. Affidavit of Kenneth Stewart Sellers sworn 16 August 2010 5. Affidavit of Gavan Paul Stewart sworn 17 August 2010

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14 Following the commencement of voluntary administration, the voluntary administrators made a number of applications to extend the convening period for the second meeting of creditors under s 439A of the Act. 15 Mr Sellers deposed that the extensions were sought in order to investigate selling Alpha's shareholding in ATA and Alpha's main asset, its shareholding in its American subsidiary Alpha Sensors USA ("ASI"). The investigations included obtaining an indication of the value of the shareholding in ASI to assist in determining whether to vote for a deed of company arrangement ("DOCA"). The administrators engaged an American marketing firm, "CBIZ", to make discreet inquiries about marketing ASI. 16 The voluntary administrators' investigation revealed that the value of assets of the business significantly exceeded creditors' claims. They prepared a DOCA options paper. 17 Between September 2009 and March 2010, the voluntary administrators had approximately a dozen discussions or meetings with Gavan Stewart, a director of E‑Fulfilment.com Pty Ltd ("E-Fulfilment"), Alpha's largest shareholder (and a creditor for over $1 million), and E‑Fulfilment's solicitor, Mr Nicholson, about E‑Fulfilment's DOCA proposal. 18 E‑Fulfilment's DOCA proposal involved a six month deferral of related party creditors and apparently contemplated the non‑payment of the claims of Panache (a creditor for $451,000 and a 17.2% shareholder of Alpha) and its controller, Mr Rubin. Mr Sellers deposed that although the voluntary administrators requested the proponent to pay $954,000 to a Deed Fund to facilitate the payment of related party creditors (except for FKM), the final version did not provide for any up‑front payment. The voluntary administrators were also concerned at the possibility that certain creditors would not be paid. 19 Mr Sellers deposed to "in fighting" between existing and former directors of, and parties interested in, Alpha, describing five proceedings concerning, inter alia, allegations of breach of directors' duty and excessive service agreements. 20 Mr Sellers deposed: It is my opinion that should the Company be placed back into the control of the current directors there is the likelihood of continued disputation between the directors and the shareholders, including Mr Stewart (EF), Zac Anthony, Mr Rubin (Panache), Mr Acconci and Mr Marchitelli, as is evidenced by the litigation referred to above and as is apparent from various discussions I have had with the current directors and shareholders. In particular, I note that at a meeting with Michael and Sebastian Canzoneri, who act on behalf of Mr Acconci, on 25 June 2010 Sebastian Canzoneri advised that it was the intent of Mr Acconci upon the control of the Company being returned to the directors, to query the issuing of shares generally to EF, Panache and MVA Corporate on the basis that a number of the more recent share allocations to those parties appeared questionable. 21 On 3 May 2010 (four days prior to the first convening of the second meeting of creditors), E-Fulfilment (although it had propounded a DOCA) applied to this Court to adjourn or restrain the second meeting of creditors on the ground that the voluntary administration should end, as the company was solvent and Part 5.3A of the Act was being abused. 22 In that application, E‑Fulfilment proposed that if the voluntary administration ended: it would forbear from enforcing its claimed debt for at least 12 months; would advance a two year, $217,500 unsecured loan at 8% interest to maintain solvency; Acconci would advance $217,500 on the same terms; and Talpo would advance $65,000 on the same terms. 23 Mr Sellers deposed that the voluntary administrators learnt of such offers for the first time only on reading the relevant affidavit on about 5 May 2010. At the hearing before Gordon J on 5 May 2010, the voluntary administrators undertook not to enter into any DOCA which might be resolved at the second meeting of creditors for 15 days after the meeting, upon which E‑Fulfilment's application was adjourned to 21 May 2010. It was then successively adjourned, by consent, four further times to 23 July 2010. 24 Mr Sellers deposed that although E‑Fulfilment proposed that the voluntary administration should end on the basis, inter alia, that various parties (including FKM (a company controlled by Mr Marchitelli which claimed a debt of over $1 million) would defer their debts, FKM's solicitors did not confirm its readiness to defer its debt to the voluntary administrators and indicated that conditions would apply to any deferral. 25 The voluntary administrators therefore requested, inter alia, that the DOCA include from E‑Fulfilment and FKM (each owed over $1 million) irrevocable deeds of forbearance for 12 months, and undertakings that E‑Fulfilment and Acconci each pay $250,000 prior to the second meeting. The voluntary administrators forwarded for execution the agreements reflecting what they required to Acconci, E‑Fulfilment and FKM, but did not learn until July that any of them had been executed. 26 The voluntary administrators reiterated their concerns that if the company were returned to the directors, some creditors would not be paid in full. 27 The reconvened second meeting of creditors on 21 May 2010 was adjourned. 28 The reconvened second meeting of creditors on 4 June 2010 was again adjourned to allow negotiations between Messrs Stuart and Rubin (representing E‑Fulfilment and Panache respectively) to continue. It was adjourned again on 11 June 2010 and on 18 June 2010. 29 The voluntary administrators were informed that E‑Fulfilment and Panache had reached agreement and Panache's lawyer would receive a proxy from E‑Fulfilment. 30 On 2 July 2010, the six new parties associated with Mr Acconci (including Michael Canzoneri) who had deeds of assignments of debt dated 1 July 2010 forwarded proofs of debt, advising that they wanted the voluntary administration to end and did not wish the company to be liquidated as it was financially viable. 31 On 2 July 2010, at the reconvened second meeting of creditors, Mr Sellers put a number of resolutions to the vote. Mr Sellers deposed: On 2 July 2010, the Second Meeting of Creditors was again reconvened. At that meeting, inter alia: (a) I stated that I would put the following resolutions to the meeting in the following order: (i) DOCA 3; (ii) the Company come out of Administration; and (iii) Liquidation; (b) I then called for a proposer of the resolution that the Company enter into DOCA 3, however, there was no proposer for this resolution so the resolution failed; (c) I then called for a proposer for the resolution that the Administration of the Company should end and Mr S. Canzoneri proposed that resolution in his capacity as proxy for CASD. This resolution was then put to a vote. A majority in number of the creditors voted against the resolution so the resolution failed; (d) I then called for a proposer for the resolution that the Company be wound up and that the Administrators be appointed as liquidators of the company and Mr Jepson proposed that resolution in his capacity as proxy for Panache. (e) The resolutions were voted on as follows: (i) Resolution I - That the Company execute deed of company arrangement 3 There was no proposer for the resolution. (ii) Resolution 2 - That the administration of the Company should end Voting For Numbers Dollars 7 1,195,903.01

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(f) Mr M Canzoneri asked me whether I was prepared to give the Plaintiffs 48 hours notice before I undertook any action to implement the winding up that may prejudice them and I agreed to that request .. 32 On 13 July 2010, the liquidators' solicitors advised Mr Canzoneri that they intended to enter an agreement to sell Alpha's patent rights and its shareholding in ATA, ATM and Electromax Electric Motor Company Pty Limited, and to instruct CBIZ to recommence its marketing campaign to sell the shares or assets of ASI and the Asian operations, which would probably result in a termination fee of $275,000 if the sale did not proceed. 33 The present application was issued on 19 July 2010. 34 The plaintiffs collectively hold 32.78% of the issued share capital in Alpha. The plaintiffs and the creditors supporting them in this application have claims admitted for voting totalling $1,193,560.94, which is about one third of the total admitted claims. 35 E‑Fulfilment, Panache and MVA Corporate Management (whose shareholdings collectively amount to 47.42% of Alpha's issued shares) oppose the termination of the winding up. (Although E‑Fulfilment was originally a plaintiff, it was removed as a party by an order made on 27 July 2010.) 36 Three creditors (E‑Fulfilment, Panache and Mr Rubin) whose claims admitted for voting total $1,647,532.50 (about 50% in value of the claims admitted for voting) oppose the application. 37 The application was not advertised and a large number of small shareholders received no notification of it. 38 Of Alpha's three directors, Mr Anthony deposed that he supported the winding up and opposed the application, Mr Bickerton voted in favour of the winding up and the attitude of the third director, Mr Perdue, is unknown. 39 Mr Sellers deposed that the liquidators were concerned that the application would occasion further delays in the sale of the ASI business and its subsidiaries, which could result in substantial loss if prospective purchasers withdrew their preliminary offers ranging between US$8 million to US$16 million. The liquidators had put the sale process on hold to avoid incurring a termination fee. 40 Mr Sellers deposed that, in his view, Alpha was insolvent at the date of the appointment of voluntary administrators on 2 September 2009 and remains insolvent. 41 Mr Sellers deposed that the company would have about $300,000 with which to pay the creditors' claims in its bank account after the payment of the costs and expenses of the liquidation, if the winding up were terminated. 42 Mr Sellers estimated that (even assuming that no money were paid to FKM/Mr Marchitelli due to a deed of forbearance) the amount necessary to pay all other creditors' claims in full was $1,846,653.89, calculated as follows: Total amount of creditors' claims admitted for voting purposes: $3,291,159.89 Less FKM (Deed of Forbearance for 12 months): $1,144,506.00 Sub-total $2,146,653.89 Less funds from Liquidators' bank account available to pay creditors (approx) $300,000.00 Amount of additional funds required to pay creditors $1,846,653.89

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My review of the financial statements of the Company for the past 10 years has revealed a significant dilution in the shareholders investment, in excess of 10 times, with shares on issue increasing from 114,705,025 in 1999 to 1,437,989,423 in 2009 and issued capital reducing from $30.950 million to $14.691 million over the same period. Over this period the Company invested in a number of business ventures that have all been subsequently written off or sold at a loss. These business investments include: (a) the write down of the investment in LCD Network Inc for $5,000,000 (in 2001 and 2004); (b) the loss from discontinued operations of Alpha Technics Europe S.R.L. of $1,025,000 (in 2009); and (c) the write off of the investment in the hand sanitising technology of approximately $16,130,000 (in 2009). 46 In cross‑examination, Mr Sellers adjusted his estimate of the $1.8 million Alpha required as working capital as follows: (a) an addition of $50,000, as cash at bank was reduced from $300,000 to $250,000; and (b) a reduction of $150,000, as that sum had now been paid by Mr Marchitelli pursuant to a costs order. 47 Mr Sellers was cross‑examined about whether the amount of working capital required could be reduced by a total of $377,000 (representing three proofs by Messrs Rubin, Bickerton and Hollingsworth pursuant to an indemnity for their legal fees paid as directors) because the debts had already been discharged and the company's liabilities could thus be reduced by the total amount. 48 Mr Sellers testified that he had not seen the three amounts in the 2009 statutory accounts (prepared by the company's accountants and auditors and signed by the directors with the administrators' permission) or in the half year accounts. He believed that the $377,000 was probably included in the statutory accounts in the 2009 annual report as a "trade payable" (a category which totalled $486,000), but agreed that he would not describe an undertaking to indemnify as a "trade payable". Mr Sellers could not recall whether he had seen an agreement indemnifying the directors. He testified that he had requested his staff to assess the proofs of debt and advise him whether they should be admitted. He could not recall whether the staff orally advised him that the proofs should be admitted or advised him in writing. 49 Mr Sellers testified that there were disputes between various shareholders. Gavan Stewart informed Mr Sellers that if he obtained control, he would not pay E‑Fulfilment's claim and Mr Canzoneri indicated that Mr Acconci would not wish to pay Mr Rubin's claim. Therefore, in Mr Seller's view, there was a risk that even were the funds available, particular creditors would not be paid. Mr Sellers stated that "major shareholders of the company have told me that they wouldn't be paying certain creditors" and irrespective of who was elected, major shareholders might bring pressure to bear. 50 Mr Sellers disagreed that the company could bring proceedings for breach of directors' duty or in relation to various transactions only if the liquidation were terminated. He testified that he had instructed his solicitors to review relevant transactions and possible breaches of duty. 51 Mr Sellers testified to his concern as to how the company would meet its ongoing obligations if the winding up were terminated. 52 It was put to Mr Sellers that as Alpha had received $1.5 million in dividends from ASI in the 2010 year (and ASI's forecasts indicated that it would have $1.3 million in additional cash for the 2011 year), Alpha would have sufficient funds to cover its future operating costs (which would be significantly reduced) if it came out of liquidation. Mr Sellers disagreed, because Alpha's typical annual administration costs for the three years prior to going into administration were between $1.2 million to $1.3 million. Further, Mr Sellers disagreed that Alpha's future operating expenses would be significantly reduced. Although the company no longer had its hand dryer business, and its most recent annual expenses of $1.2 million included legal expenses of about $500,000, such legal expenses were not unusual. The company had a history of incurring significant legal expenses, such as, for example, in 2008 and 2009, and a history of paying its associates a "fair amount of money" by way of consultancy fees.

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Affidavit of Daniel O'Brien 55 Daniel O'Brien, a director of ASI for three years, deposed that ASI has sales of $13 million, secured debt of $133,150 and that its largest assets are $2.4 million in trade account receivables. Its customers pay on 30‑90 day terms. As at 30 June 2010, ASI had $1.3 million in the bank. It acts as banker for the Alpha Technics Business. Mr O'Brien considered that it would be prudent for ASI to retain $1.5 million at all times, in order to meet requirements. 56 Mr O'Brien deposed that ASI cannot borrow by using its inventory as security because as it deals in a specific customer product, the inventory is unacceptable to financiers. As a cash resource of last resort, ASI could borrow against its accounts receivables, but has never done so as, in Mr O'Brien's view, it would not be in ASI's best interests, because it would not create new cash but just accelerate cash flow, and lenders have many requirements. Therefore, borrowing against the accounts receivables of ASI was reserved for unexpected crises or growth. The bank had indicated that the accounts receivable balance could be used as security. It was about $2 million as at 30 June 2010 and about 80% of that could be borrowed. If ASI did so, it would need to maintain extra cash to keep within monthly loan limits and the bank would conduct an internal audit. Mr O'Brien believes it would be irresponsible to borrow the maximum amount permitted. If ASI did borrow, the maximum prudent amount would be $704,000. ASI has no other sources of external funds. 57 Mr O'Brien deposed that if Alpha borrowed $1.5 million, it would leave ASI with problems, and unable to follow up business and growth opportunities. If ASI had to make a cash transfer of $1.5 million to its parent, whether as a dividend or loan, it would have a significant detrimental effect on ASI's ability to fund new business opportunities and to maintain its working capital. In short, ASI could not both remit $1.5 million to Alpha and meets its own reasonable requirements.

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Mr Wallace‑Smith 58 Mr Wallace‑Smith, a chartered accountant and partner of Deloitte Touche Tohmatsu, prepared an expert report on behalf of the plaintiffs. In the section of his report entitled "Background of Appointment of Liquidators", Mr Wallace‑Smith noted that the second report to creditors of Alpha stated "a best case" for the sale proceeds of ASI of $18 million and a lowest cash sale proceeds of $8 million. In Mr Wallace‑Smith's view, even on the lowest case, there was likely to be a 100% return to creditors and a surplus available for distribution to shareholders. 59 Mr Wallace‑Smith stated, in that context: In my experience of having acted as an Administrator, this case appears to have had a number of potential outcomes that would provide for the continuation of the business and a full return to creditors. It does not appear to be a company that is hopelessly insolvent and in need of immediate closure with potentially little or no return to creditors. 60 Mr Wallace-Smith stated that the most recent audited balance sheet for Alpha as at 30 June 2009 showed: Current assets - $166,000 Non-current assets - $3,566,000 Total assets - $3,726,000 Current liabilities - $2,559,000 Non-current liabilities - $0.00 Total liabilities - $$2,559,000 Net assets - $1,167,000 61 The consolidated accounts as at 31 December 2009 showed net assets of $4,786,000. The second creditors' report revealed a surplus of $1,845,089 (book value) and $801,187 (ERV). 62 Mr Wallace-Smith reconstructed Alpha's balance sheet based on information in the second creditors' report (including the summary RATA as at 2 September 2009, information presented to at the second creditors' meeting and "other information"). He noted that "the reconstructed balance sheet has not been prepared pursuant to accounting standards and is not an audited or fully reconciled balance sheet at a single balance date, however, it provides a guide as to what the balance sheet for Alpha may currently approximate". 63 The reconstructed balance sheet assumed that the $1,144,506 debt to FKM was not due for 12 months and that a $500,000 facility (from an unidentified source) would be available to Alpha, repayable after 12 months. 64 The reconstructed balance sheet showed net assets of $1,588,197, current liabilities of $2,289,714 (less FKM's debt) and current assets (cash at bank) of $1,211,573. 65 Mr Wallace-Smith acknowledged that the positive net asset position in the reconstructed balance sheet was primarily due to Alpha's investment in ASI and ATA. The November 2009 KPMG report valued the Alpha Technics business in the range of $12.6 million to $15.4 million. 66 Mr Wallace-Smith acknowledged that the working capital position was in a negative position of $1.07 million (even assuming that new funding of $500,000 was immediately available) and observed that a deficiency of working capital is indicative, albeit not conclusive, that a company is insolvent. 67 Mr Wallace-Smith stated: In my opinion based on my review, the BS analysis gives rise to solvency concerns from a working capital perspective but not from a net asset position perspective. 68 Mr Wallace‑Smith assumed that the debts currently due (excluding the FKM debt) totalled $2.29 million. The available assets to meet them were cash at bank of $711,000 and new funding of $500,000, giving an approximate deficiency of $1.08 million required to clear creditors' claims which were due and payable. 69 Mr Wallace-Smith identified the "most likely source of funds" to meet the deficiency would be "via ASI" and "consideration needs to be given as to its ability to borrow funds and then … repatriate those funds". On the basis of ASI's financial accounts and information which he had obtained from ASI's management, Mr Wallace-Smith concluded that "there is potential funding available of approximately USD 1.68 million (approximately AUD 1.8 million at current exchange rates)." 70 At the date of preparing his report, Mr Wallace-Smith had seen no forecasts for Alpha or its subsidiaries. 71 Mr Wallace-Smith stated that the checklist of factors in Australian Securities and Investments Commission v Plymin (No 1) (2003) 46 ACSR 126 did not appear relevant to this case. He concluded: 6.1.3 In this regard the position outlined in Section 5.2 shows that an amount of approximately $2.29 million is required to clear the creditors that are due. Based on available cash, there is an immediate deficiency of approximately $1.08 million.

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6.2.2 If Alpha were to be removed from liquidation and solvency has been restored on the basis of 6.2.1 above, then the nature of any funding provided by ASI would need to be considered. Assuming there was no immediate need to repay this funding and that it could, for example, be offset over time by dividends payable by ASI to Alpha, then on this basis Alpha could be considered solvent. 72 Mr Wallace‑Smith also gave oral evidence in chief in relation to the cash flow forecasts for ASI for the financial year ending on 30 June 2011, which were prepared by ASI's director, Mr O'Brien, and provided to Mr Wallace‑Smith after the completion of his report. 73 The forecast consolidated Mr Wallace‑Smith's view that ASI was a profitable company, with a steady, reasonably consistent increase in sales. The monthly operating expenses were steady and the EBITDA was $2.5 million. ASI's business was thus mature, steady and profitable, and its balance sheet was very strong. The cash position was forecast to increase by June 2011 by $1.5 million, while the forecast liabilities seemed to be stable. The forecast net profit for the year was $1.3 million. 74 Mr Wallace-Smith considered that, given the consistency of the ASI cash flows over the next 12 months, an Australian bank would offer ASI a normal banking overdraft facility, as opposed to an invoice financing arrangement. He acknowledged that he was not an expert in American banking. Mr Wallace‑Smith considered that an Australian parent could "probably" borrow against a stable and well‑performing subsidiary, such as ASI, "but the main banking security would obviously be the subsidiary where the assets rested". 75 Jason Croall, the auditor of Alpha since 2007, deposed that he was aware that Alpha was placed in voluntary administration on the basis of two on‑call loans of $451,000 to Panache and an alleged $556,000 to E‑Fulfilment. 76 Mr Croall deposed that, as at 30 June 2009, the cash and cash equivalents of Alpha and its subsidiaries was $2,098,435, it had trade and other receivables of $2,485,861 and current assets less current liabilities of $3,224,000. Further, Alpha paid an outstanding loan of US$544,482 on 21 July 2009. 77 Mr Croall opined that on the basis of the cash and positive working capital position of Alpha and its subsidiaries as at 30 June 2010 (assuming a cash operating performance by ASI for the two months ended 31 August 2010), Alpha would have been able to pay out the total sum of $1,007,000 under the loans or its subsidiaries would have been able to borrow against their assets to pay them. Accordingly, Mr Croall (who was not consulted by the Board on whether Alpha should be placed in administration) opined that "prima facie, this would indicate that Alpha was not insolvent at the time it was placed into administration". Mr Croall deposed that: The 31 December 2009 accounts showed that Alpha had a consolidated cash balance of $2,157,000 and a net working capital position of $2,157,000 and a net working capital position of $2,752,000. 78 Mr Croall anticipated that as Alpha's hand sanitiser business was no longer operational, Alpha functioned only as the corporate head office for ASI and there were no significant non‑operational items (such as legal disputes), the management fee of approximately $600,000 to $700,000 ASI paid to Alpha would suffice to cover tis head office operating costs. 79 Mr Sellers, in his oral testimony, made clear that Alpha had trade and other receivables of only $5,000, and the $2,485,000 referred to by Mr Croall were those of the consolidated entities. Similarly, Mr Croall's reference to net working capital of $3.2 million was a reference to the consolidated entities, while Alpha itself had a significant deficiency. Further, Mr Croall incorrectly assumed that a total of $1,007,000 was demanded by E‑Fulfilment and Panache, as the total was about $1.5 million although E‑Fulfilment's claim was reduced. 80 Mr Sellers also denied that there was a material change in Alpha's operations which would reduce its future administrative costs, as it had always functioned essentially as a head office. He considered that the administrative costs for the last three years, 2007, 2008 and 2009, had on average consumed both the ASI management fee of $600,000 to $700,000 and its dividend of a similar amount, totalling about $1.2 million.

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Relevant legislation and case law 86 Section 482 of the Actprovides: 482 Power to stay or terminate winding up (1) At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order. (1A) An application may be made by: (a) in any case - the liquidator, or a creditor or contributory, of the company; or (b) in the case of a company registered under section 21 of the Life Insurance Act 1995 - APRA; or (c) in the case of a company subject to a deed of company arrangement - the administrator of the deed. (2) On such an application, the Court may, before making an order, direct the liquidator to give a report with respect to a relevant fact or matter. (2A) If such an application is made in relation to a company subject to a deed of company arrangement, then, in determining the application, the Court must have regard to all of the following matters: (a) any report that has been given to the Court by: (i) the administrator, or a former administrator, of the company; or (ii) the liquidator, or a former liquidator, of the company; or (iii) ASIC; and that contains an allegation that an officer of the company has engaged in misconduct; (b) any report that has been lodged with ASIC by: (i) the administrator, or a former administrator, of the company; or (ii) the liquidator, or a former liquidator, of the company; and that contains an allegation that an officer of the company has engaged in misconduct; (c) the decision of the company's creditors to resolve that the company execute a deed of company arrangement; (d) the statement that was given under paragraph 439A(4)(b) when the company was under administration; (e) whether the deed of company arrangement is likely to result in the company becoming or remaining insolvent; (f) any other relevant matters. (3) Where the Court has made an order terminating the winding up, the Court may give such directions as it thinks fit for the resumption of the management and control of the company by its officers, including directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up. (4) The costs of proceedings before the Court under this section and the costs incurred in convening a meeting of members of the company in accordance with an order of the Court under this section, if the Court so directs, forms part of the costs, charges and expenses of the winding up. (5) Where an order is made under this section, the company must lodge an office copy of the order within 14 days after the making of the order. 87 The Court's power under s 482 of the Actis discretionary. The authorities set out a number of well‑established factors relevant to the exercise of the discretion, which are not "absolute rules" but "identify the range of discretionary concerns which the Court will need to address". See Mercy & Sons Pty Ltd v Wanari Pty Ltd (subject to deed of company arrangement) (in liq) (2000) 35 ACSR 70 ("Mercy") at[53]. 88 In Re E-Fahkri, in the matter of Elfah Pty Ltd (in liq) [2002] FCA 1469, Finkelstein J set out three factors recognised as fundamental by Megarry J in Re Calgary and Edmonton Land Co Ltd (in liq) [1975] 1 WLR 355 ("Calgary"), to which Finkelstein J added the question of the public interest, as follows: [5] In re Calgary and Edmonton Land Co Ltd (in liq) [1975] 1 WLR 355, Megarry J set out most of the factors that the court must consider before making an order under s482(1). First, I must consider the interests of the creditors. That presents no difficulty in this case. In the first place there are only two creditors. They do not object to a termination of the winding up. Second, even if those creditors had objected, little weight would be given to the objection because the parties have established that the creditors will, in due course, be paid in full.

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[51] Finally, the court considers the public interest, including matters of commercial morality, taking the initial approach that insolvent companies should be wound up: Re Data Homes Pty Ltd [1972] 2 NSWLR 22. … 90 Mercy involved an insolvent company which would continue to be insolvent after implementing a proposed deed. Austin J noted that it would incur new debts to creditors in trading and a decision by participating creditors to defer their debts would not necessarily subordinate them to those of new creditors, who might therefore be prejudiced. Such matters alone probably sufficed to prove a favourable exercise of the court's discretion ([54]). Austin J observed that the applicants bore the burden of positively demonstrating that their application was supported by considering of commercial morality and public interest. If questions were left unexplained by the evidence as to the effect on the interests of relevant parties, including contributories, that burden would not be discharged ([55]). 91 In Metledge v Bambakit Pty Ltd (in liq) [2005] NSWSC 160 ("Metledge"), Barrett J stated at [5]: The jurisdiction to terminate a winding up under s 482 is discretionary. The court may have regard to a range of factors. While not to be rigidly applied (Dubolo Pty Ltd v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723), the list of criteria set out in the judgment of Master Lee QC in Re Warbler Pty Ltd (1982) 6 ACLR 526 provides useful guidance: 1. The granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: Re: Calgary and Edmonton Land Co Ltd (In liq) (1975) 1 WLR 355 at pp 358-359 per Megarry J. See also sec 243 of the Act [ie, Companies Act 1961]. 2. There must be service of notice of the application for a stay on all creditors and contributories, and proof of this; Re South Barrule Slate Quarry Co (1869) 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113. 3. The nature and extent of the creditors must be shown, and whether or not all debts have been or will be discharged: Krextile Holdings Pty Ltd v Widdows (above) [[1974] VR 689]; Re Data Homes Pty Ltd (above) [1971] 1 NSWLR 338], Law of Company Liquidation (above) at p 395. 4. The attitude of creditors, contributories and the liquidator is a relevant consideration: sec 243(1), Calgary and Edmonton Land Co Ltd (above). 5. The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: In re a Private Company (1935) NZLR 120; Re Mascot Home Furnishers Pty Ltd (1970) VR 593 at p 598. 6. If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd (above) [[1903] 2 Ch 174]. 7. The general background and circumstances which led to the winding-up order should be explained: Krextile Holdings Pty Ltd v Widdows (above). 8. The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to 'commercial morality' or the 'public interest': Krextile Holdings Pty Ltd v Widdows (above). 92 In Re King & I Pty Ltd [2007] FCA 2085, McKerracher J amplified to the above, observing that: [5] It is necessary to take into account the broad interests of both present and future prospective creditors, contributories and the 'public interest including matters of commercial morality' (see Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 157 FLR 107; Re Nardell Coal Corp Pty Ltd (2004) 182 FLR 290 and Re Data Homes Pty Ltd [1972] 2 NSWLR 22).

[37]

[6] As to more specific matters, as future creditors are concerned, an important consideration arises if the proposal for termination of the winding up preserves existing debt. If that is so, it is necessary to ascertain what arrangements exist and whether those arrangements are binding for the subordination of claimants of such debt to newly incurred debts and/or whether there is any proposal to capitalise debts: see Re Data Homes [1972] 2 NSWLR 22 at 27 and Re Nardell 182 FLR 290 at 78. In this application, there are two possible debts requiring consideration of this nature. 93 In Gematech Pty Ltd v Bardi Investments Pty Ltd [2008] NSWSC 196 at [26], Hammerschlag J stated: [26] Firstly, the solvency of the Company is to be demonstrated by the applicants who bear the onus to do so by leading the "fullest and best" evidence of the company's financial position: Commonwealth Bank of Australia v Begonia (1993) 11 ACSR 609. Proper verification of assets and liabilities is critical to rebut the presumption of insolvency. Unaudited accounts and unverified claims of ownership or valuation are not ordinarily probative of insolvency: Expile Pty Ltd v Jabb's Excavations Pty Ltd (2003) 45 ACSR 711. 94 In Metledge, Barrett J considered that the applicant's evidence did not engender confidence and its partial corroboration by the liquidator would not assist, because he had undertaken only very limited investigations into the affairs of the company. Referring to his Honour stated at [34]: White J [in Lencal, infra] refers to the two approaches generally taken to proof of solvency. Sometimes, the liquidator can verify financial facts sufficiently to express an opinion that the company is solvent or, at least, to put before the court critically assessed information which assists it in coming to such a conclusion. Sometimes an external accountant can do these things. The court is receptive to that kind of evidence, provided that it sufficiently demonstrates the basis for the opinion that the company is solvent and reflects investigations and verification beyond the mere say-so of the company's controller. No such evidence has been led here. 95 In Krextile Holdings Pty Ltd v Widdows; Re Brush Fabrics Pty Ltd [1974] VR 689 ("Krextile"), Gillard J terminated the liquidation of a company wound up on the just and equitable ground due to disputes and disharmony between the shareholders, who were quasi‑partners. 96 Gillard J did not regard "the development of incompatibility" between the shareholders/quasi‑partners as tantamount to commercial immorality (at 694) as such, but in terminating the winding up was reassured that the dissension between members would not recur, due to buy‑out arrangements. 97 His Honour observed that the liquidator's report indicated that no person, firm or corporation would be adversely affected by the stay. All accounts were in credit and the companies were in "a very healthy situation" (691). Gillard J concluded that no creditors had or could be affected by the stay, as there were plenty of liquid funds to satisfy any current trade debts (695).

[38]

The plaintiffs' case 98 The hearing was complicated by the plaintiffs' late filing of affidavits, an application to amend their originating motion and their revision of the estimate of the hearing time. 99 The trial of the proceeding was listed for hearing on 20 August 2010 on an estimate of one day and directions were made for the filing of the plaintiffs' affidavits by 9 August 2010. 100 The plaintiffs filed and served a number of affidavits, together with voluminous exhibits, shortly prior to the hearing without a satisfactory explanation for the delay. On the day before to the hearing, they filed and served a notice of motion to amend the originating motion by adding, inter alia, orders that the company be treated as having never entered into administration or liquidation, and that the resolution to appoint voluntary administrators on 2 September 2009 and to wind the company up on 2 July 2010 be set aside pursuant to s 511 of the Act on the basis that no reasonable persons in the directors' position could have formed the opinion that the company was insolvent or likely to be so at some future time. The notice of motion was filed with an affidavit which did not explain its lateness. The plaintiffs also gave notice that a number of the defendants' witnesses were required to attend for cross‑examination. 101 At trial, senior counsel for the plaintiffs submitted that presentation of the plaintiffs' case now required at least a day or possibly more. Counsel declined to state a firm estimate and offered no satisfactory explanation for the further time said to be necessary. Counsel for the defendants opposed the prolongation of the hearing and offered to confine his presentation of the defendants' case to 45 minutes. In order to accommodate the plaintiffs' requirements, the Court sat beyond the usual court hours. 102 The plaintiffs did not formally pursue their application to amend, but attempted to do so indirectly by handing up a document entitled "[Issues] arising for Determination" and a Notice to Produce listing questions and documents respectively which, in substance, related to the issues in the application to amend. 103 I made clear that even were the resolutions to appoint voluntary administrators and to wind up the company properly impugned, that circumstance in itself would not, in my opinion, justify relief under s 482, which required the Court to be satisfied on fundamental matters such as the company's current solvency and the position of creditors and shareholders. 104 The allegations impugning the reasonableness or propriety of the winding up or antecedent processes related to the late application to amend, which was not formally pursued. They raised a case not reflected in the plaintiffs' affidavits or written submissions, which the defendants, understandably, were not prepared to meet. 105 In relation to solvency, the plaintiffs submitted that Alpha was, on the balance of probabilities, solvent, as there was $1.5 million in cash available from Acconci and Mr Sellers' estimate of the $1.7 million required to pay creditors could be reduced by $300,000 in dispute in indebtedness to E‑Fulfilment and there was evidence to suggest that $377,000 was expensed in 2009 and hence not due now. ASI had a projected cash accumulation of $2.8 million by 30 June 2011 and there was capacity to pay $1 million during the 2011 year. Administration costs and payments to directors could be reduced, to total only $600,000 to $700,000 per annum. 106 The plaintiffs submitted that continuing the liquidation subordinated the shareholders' interests to the creditors' interests. The shareholders who opposed the termination did not explain why, or mistakenly assumed that they would not recover their investment if the liquidation were terminated. Creditors would also be paid more promptly if the winding up terminated. 107 The plaintiffs submitted that, although the orders they sought assumed on a general meeting as a pre‑requisite of termination, they did not insist upon it and creditors would be paid, irrespective of who was appointed as directors. The $1.58 million from Acconci could be paid into court pending the hearing and determination of the application, and concerns about the deed of forbearance could be attended to. 108 The plaintiffs submitted that the evidence did not demonstrate a history of disharmony. Commercial morality would be satisfied if the winding up were terminated, as all creditors would benefit from immediate payment. Alpha had supported its subsidiary, ASI, and if the liquidation continued, the stakeholders would be deprived of the fruits of the investment. The liquidators' fees would also be paid.

[39]

The defendants' case 109 The defendants submitted that: 1. A group of shareholders with about 47% to 48% of the issued shares of Alpha opposed the termination of liquidation. 2. The orders sought assumed that termination would be conditional on a general meeting appointing new directors, for which the plaintiffs proffered consents to act. The court could not be satisfied that the company could be returned to commercial life, as the terms of the order left unclear how termination would operate, given that no directors may be elected or that the existing directors (who resolved to appoint the voluntary administrators in the first place) could be re‑elected. The feasibility of achieving the necessary resolution was not established and the process might be an exercise in futility. 3. The court could not be satisfied that the company would be solvent at the time of termination, as the evidence as to how the necessary funds would be obtained was unsatisfactory: (a) The fullest and best evidence of the company's financial position was not put forward, no‑one had proffered moneys sufficient to clear all existing debt and the liquidator's costs and expenses. The plaintiffs had not rebutted the presumption of insolvency. The liquidator had put forward the fullest evidence, and opposed the termination. (b) There was no reason to assume that the sum $372,000 was not payable, and could hence be subtracted from the estimated required working capital of $1.8 million. A reduction of $377,000 would, in any event, make no difference, as the proposal to pay anything at all, was "woolly", indefinite and uncertain. (c) No plan had been advanced for the company's future. There was no evidence as to how the future creditors would be paid. (d) In order to pay the existing debts alone, Mr Canzoneri simply referred to his instructions from Acconci to advance an offer of up to $1.58 million should it be required for the purposes of working capital which would be available to assist Alpha to meet such debts as they fall due. The offer constituted mere instructions, which could be withdrawn, amended or ignored. There was no agreement, but rather, a mere statement of intention directed, apparently, at future, not existing debts. The debt was not to be subordinated, but rather secured by a fixed and floating charge which, if it crystallised, could become payable within the two years. (e) The Marchitelli deed of forbearance in relation to $1.5 million was merely that between FKM and Alpha, previously executed and exhibited to the Zita affidavit. It was not the deed of forbearance that would be executed. Rather, Mr Marchitelli deposed that he remained willing to execute a similar deed. There was no current deed of forbearance in relation to the current proposal. The proposed forbearance was only for one year, and did not subordinate the $1.5 million to future creditors. 4. After five adjournments of the second meeting and many opportunities to propound DOCAs or other proposals to preserve the company, the creditors, by a majority in number and value, had voted for winding up. 5. There was evidence of infighting between shareholders and of legal disputes, redolent of winding up on the just and equitable ground. 6. Of the existing directors of Alpha, Mr Anthony deposed to supporting the winding up, Mr Bickerton voted for it and Mr Perdue's attitude was unknown. 7. The creditors and shareholders, who were widely dispersed, had not been notified and there was, therefore, no basis for assessing their attitude to the proposal. If the winding up were terminated, the small shareholders would be locked in if the company were delisted. If the liquidation were maintained they were likely to recover the 0.3 cents per share at which the shares were trading immediately prior on winding up, even on the lowest estimate of sale proceeds of the ASI business. If the company were handed back to the directors, the shareholders' fate was uncertain. There were only about 20 creditors and, although not formally notified, many were aware of the application. There was nevertheless the possibility that they would not receive statutory interest if the company's winding up were terminated. 8. The shareholders had made their decision recently after many delays. They sought a return on their capital, which a minority group should not be permitted to thwart.

[40]

Discussion 110 The authorities establish that an applicant for termination of winding up under s 482 of the Act must make a positive case in order to move the court to exercise its discretion. 111 The facts of the present case are unusual because (as was common ground) Alpha has a successful, wholly owned subsidiary, it is balance sheet solvent and not insolvent on a consolidated balance sheet basis. Nevertheless, its past and current solvency, and capacity to become and remain so, are disputed. The application to terminate the winding up, which was not advertised, is opposed by shareholders with over 47% of the shares in Alpha, by creditors with aggregate claims of more than 50% of Alpha's total liabilities admitted to vote, and also by the liquidators. In my opinion, considerations of solvency, the position of creditors and the position of shareholders independently and collectively, indicate that the application should be refused. Solvency 112 The solvency of the company is an issue of overriding importance central to the interests of present and future creditors, the contributories and the public, with which the court in this context is principally concerned. 113 The applicant for winding up bears the burden of establishing solvency on "the fullest and best evidence". The failure to resolve relevant doubts or answer significant questions will tell against the grant of the application. 114 In the present case, in my opinion, the plaintiffs have failed to establish either that Alpha is solvent, or that adequate measures will be implemented to achieve and maintain its solvency in the future. In the liquidators' opinion, based on comprehensive evidence, the company was, currently is and (in the absence of more definite and satisfactory measures to those so far proposed) will remain insolvent. The plaintiffs' expert witness did not contend that the company is solvent, but rather opined that it could become so by implementing a number of concurrent measures, such as deferral of loans, the input of funds from shareholders or the company's subsidiary, ASI, and the reduction of operating expenses. In that context, the plaintiffs contended that the liability to creditors could be reduced by the amounts of some disputed or uncertain claims and that Alpha's annual expenses would fall due to the changed nature of operations. 115 In my opinion, however, the evidence did not establish that Alpha's future operational costs or the total claims against it would be reduced. 116 Further, it was not established that funds could or would be provided in an amount sufficient to meet the claims of existing creditors and on terms adequate to protect the interests of existing and future creditors. Far from capitalising or subordinating its contribution of funds in order satisfactorily to address the position of future creditors, the terms of the offer by Acconci (irrespective of its uncertainty, conditionality, timing and apparent shortfall in the amount required) merely deferred the repayment of the debt for 24 months, linked the loan to a particular purpose and required the security of a fixed and floating charge. 117 Nor can there be any confidence that sufficient funds could be obtained from ASI, the alternative source identified by the plaintiffs, as ASI's director deposed that the provision of any amount approaching Alpha's requirements would be inimical to ASI's financial security, business operations and best interests. It was unclear whether or how Alpha's directors (if the winding up were terminated) would secure the provision of significant funds from an unwilling subsidiary. 118 The FKM deed of forbearance did not subordinate the debt to future creditors and was subject to a condition which, on the evidence before the court, was not fulfilled. Notice to creditors 119 While the general rule is that all creditors must be notified of the application, in Deputy Commissioner of Taxation v Lencal Excavations Pty Ltd (In liq) [2004] NSWSC 783, White J stated (at [20]): I do not think that there is a rule that all creditors must be served with notice of the application, although in appropriate circumstances it may well be desirable that all or some creditors be served with the application particularly where they have interests which may be adversely affected if the order is made. Where the court is satisfied that creditors will not be adversely affected it may well not be necessary to serve the application on those creditors. 120 In the present case, there was no evidence that the application was advertised or that all creditors were notified. There are, however, relatively few creditors, many of whom were aware of the application. 121 Nevertheless, the present case is unusual in that creditors are expected to receive 100 cents in the dollar on winding up. If the winding up is terminated, some creditors may forego the statutory interest to which they are entitled on liquidation under s 563B of the Act. The possibility that a creditor who would be adversely affected by the termination has not been notified cannot be excluded and militates against the grant of the application.

[41]

Position of contributories 122 A consideration of the interests of contributories also militates against the termination of the winding up. 123 As stated in Calgaryand like authorities, termination usually requires the contributories' unanimous consent to, or at least acquiescence in, the surrender of their right to a distribution of surplus assets, unless they are bound not to object or their rights on termination are properly secured. Accordingly, the shareholders should be notified of the application. The requirements are not absolute. In Calgary, Megarry J contemplated, for example, that the opposition of a single shareholder might not preclude the termination of winding up if its position were satisfactorily addressed. 124 In the present case, the plaintiffs failed to advertise or otherwise notify the shareholders of the application to terminate the winding up. The company has about 800 shareholders. Although a large percentage of the issued shares is held by a few significant shareholders (all of which were party to or aware of the application) most, if not all, of the many small shareholders would be unaware of the application and had no opportunity to express their views. 125 Of the shareholders who were aware of the application, about 47% opposed it, principally on the grounds that they wished the sale of ASI to proceed and to realise their investment. One shareholder also anticipated further internal disputes should the liquidation end. 126 The large number of un‑notified small shareholders did not consent to, and cannot be assumed to acquiesce in, the termination of winding up. The liquidators anticipate that even on the lowest estimate of proceeds of sale of the ASI business, the shareholders will recover the value of their shares immediately prior to winding up. If the winding up proceeds, they will avoid the risk of being locked in and the uncertainties associated with the company's continued operation. Background to winding up 127 The authorities acknowledge that the general background and circumstances which led to the winding up should be explained. In some cases, for example, the fact that winding up was due to inadvertence or mistake, such as unintended disregard of a statutory demand, provides reassurance that no pre‑existing difficulty will complicate the relaunching of the company. In Krextile, where discord between shareholders who were quasi-partners had occasioned the winding up, the court, in ordering its termination, noted that the disputes had been resolved. 128 In the present case, the plaintiffs contended that Alpha was not insolvent either at 2 September 2009 when voluntary administrators were appointed or at 2 July 2010 when the creditors resolved on winding up. They submitted that irrespective of a company's current insolvency, winding up should be terminated under s 482 if it were established that the relevant resolution were invalid or voidable. 129 Counsel relied, in that context, on Double Bay Newspapers Pty Ltd v Fitness Lounge Pty Ltd (2006)57 ACSR 131 ("Double Bay"). In Double Bay,a creditor which mistakenly (and in breach of a relevant agreement) obtained a winding up order against a debtor company itself applied to bring the company out of winding up, pursuant to s 482 of the Act and a procedural rule empowering the court to set aside a default or ex parte judgment obtained in the absence of a party due to no fault on its part. 130 White J set aside the winding up order on the basis of the procedural rule, having concluded that the evidence established neither the company's solvency nor the contrary. His Honour did not determine whether the judgment could have been set aside had the evidence made clear that the company was insolvent. Nevertheless, White J's approach did not authorise the termination of a winding up under s 482 of the Act because the basis for the winding up could be impugned, irrespective of whether the company's current solvency could be established. To the contrary, his Honour recognised that it was "well established that on an application under [s 482] the court will not terminate a winding-up unless it was satisfied as to the company's solvency…even where there had been an irregularity in obtaining the winding-up order" (at [16]). 131 In Von Risefer v Mainfreight International Pty Ltd (2009)73 ACSR 427 ("Von Risefer") Ashley JA (with whom Beach AJA agreed) observed that "Double Bay does not stand as authority for the proposition that, on a s 482 application, want of service of the statutory demand which founded the winding-up application provides a basis for exercising the discretion so as to re-launch an insolvent company…" (at 441). 132 His Honour observed that in Von Risefer, the application was brought only under s 482. He concluded, inter alia, that the applicant "conspicuously failed" to establish the company's solvency, and considerations of commercial morality and the public interest did not favour the termination or stay of the winding up (at 445). 133 In the present case, as in Von Risefer, relief was sought only pursuant to s 482, as the plaintiffs did not pursue claims under s 600A and s 447A of the Act or the application to amend. The plaintiffs did not, in my view, establish any basis on which the resolutions to appoint voluntary administrations or to wind the company up should be set aside. However, had they done so, the termination of the winding up under s 482 would not be warranted in circumstances where the solvency of the company is not established, and the position of contributories and creditors is not satisfactorily addressed. Other considerations 134 While no contraventions of law or duty by Alpha's previous officers were alleged, the evidence established a degree of discord between shareholders and not insignificant related litigation. In contrast to Krextile, in the present case, there is no assurance that discord would not recur, were the winding up terminated. Rather, the evidence suggested the contrary. 135 Further, as the defendants submitted, the terms of the orders sought did not assure their effective operation and raised potential uncertainty. 136 Such considerations, while not in themselves decisive, fortified the effect of more significant factors of insolvency and the interests of creditors and contributories which, in my view, precluded the termination of winding up in this case.

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