Anderson v Palmer

REASONS FOR JUDGMENT 1 The order to wind up AFIYF Pty Limited (in liquidation) ACN 074 864 805 (the company) was made on 10 February 2006. The application was made on behalf of the Deputy Commissioner of Taxation. As I understand the position, no external creditor appeared on that occasion notwithstanding the usual advertisements and notifications. I am satisfied from the evidence that the non-appearance and non-defence on the part of the company on that occasion was due to inadvertence and was in no sense to be regarded as an admission. 2 The matter having come to the attention of those concerned with the company, an application was promptly made to bring this proceeding for termination of the winding up. I have had the benefit of evidence from Mr De Groot and Mrs De Groot, the principals, if I may put it that way, behind the company concerned and companies associated with it, and an affidavit from the employee of the liquidator who has had carriage of the matter. 3 The application requires some scrutiny. Although it is a case, in effect, of winding up by inadvertence and although it is very promptly brought and although no external creditor appeared, the authorities are quite clear that caution needs to be exercised before a winding up is stayed or terminated lest an insolvent company is returned to commerce. So, even though this is a matter in which the insolvency was purely based upon a non-compliance with the statutory demand which was not in fact received, it is my duty to ensure that I do not, so far as I can, permit an insolvent company to return to trading. 4 I will not deal with the fine detail of the evidence which relates to the question of solvency. That appears sufficiently from the affidavits. I say that because it is clear enough that, although it is contended that there is an excess of current assets over current liabilities and although it is said that current trading will be profitable, the overall position is that liabilities exceed assets if account is taken of all liabilities, including liabilities which are described as subordinated. In my opinion, a company in which the assets are exceeded by liabilities is not solvent, although it may be able to continue trading because it has excess liquidity for the time being. 5 With that in mind, the matter was adjourned to enable consideration to be given to a cure for that. I have now received written undertakings along the lines of those accepted by Barrett J in Brolrik Pty Ltd v Sambah Holdings Pty Ltd (2001) 40 ACSR 361 particularly at [49]. The effect of those undertakings to the Court are to ensure that what were described as the subordinated liabilities will be in truth subordinated to the claim of any unsecured creditor. 6 Under the particular circumstances of this case, notwithstanding the principles that I referred to in Deputy Commissioner of Taxation, in the matter of Northview Developments Pty Limited (in liq) (ACN 092 804 254) v Northview Developments Pty Limited (in liq) (ACN 092 804 254) [2005] FCA 1825 based upon the decision of Barrett J in Anderson v Palmer [2002] NSWSC 192, I propose to make the orders sought. 7 I should note that the plaintiff, the Deputy Commissioner who appeared on the last occasion, has endorsed consent to a previous form of short minutes of order which was less protective of creditors than the one I have finally approved and the solicitor for the liquidator is present and consents. In those circumstances I make orders in accordance with short minutes of order which I have initialled and dated and placed with the papers. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.