Anderson v Palmer

Judgment 1On 27 March 2014, the Court ordered that, upon the undertaking of Michael John Welsh to the Court to contribute to the company upon termination of the winding up the sum of $20,000 by equity capital, pursuant to (Cth) Corporations Act 2001, s 482 the winding up of Glass Recycling Pty Limited (in liquidation) be terminated with effect from 28 March 2014. These are the reasons for which that order was made. 2The plaintiff Michael Welsh and his wife Constantina Welsh have, since 10 December 1979, been the directors of the company Glass Recycling Pty Limited. Mr Welsh holds 13 and Mrs Welsh 4 of the 17 issued shares. 3From its incorporation in 1976, the company was in the business of glass recycling. More recently it ventured into property development, and in about 2005 commenced the subdivision and development of land, which it had purchased in 2001, at Badgally Road, Campbelltown. It sought to market the property in 2008, but did not achieve anticipated sales, and defaulted under its loan facility with the secured lender St Laurence Lending Limited ("St Laurence"). 4On 26 September 2011, Vaughan Neil Strawbridge and Neil Robert Cussen of Deloittes were appointed joint and several liquidators of the company pursuant to a special resolution of members, in a creditors' voluntary winding up. 5The land was initially estimated to be worth $4.5 million, but was ultimately sold on 1 May 2013, for $3.7 million. Otherwise, the company had sundry debtors of $51,589, and plant and equipment including motor vehicles and other assets, which ultimately realised $47,500. During the liquidation, rent was received in respect of the property, from a related entity, of $369,000. 6St Laurence held a registered fixed and floating charge over the company, securing an amount of approximately $14,459,729, which Mr Welsh had also personally guaranteed. Campbelltown City Council was owed outstanding rates, and the New South Wales Office of State Revenue was owed $49,444 (apparently for land tax). The unsecured creditors were Abelitis Solicitors for $8,590, Lilliendal Civil Pty Ltd for $216,203, and Thomson Hall Accountants for $31,735. 7The proceeds of sale of the Badgally Road were applied in partial satisfaction of St Laurence's claim as secured creditor, and the Office of State Revenue and Campbelltown City Council were also paid out. There was no dividend for unsecured creditors. 8Pursuant to Corporations Act, s 533, as there was a distribution to creditors of less than 50 cents in the dollar, the liquidators lodged a confidential report with the Australian Securities and Investments Commission in March 2012. ASIC has since advised that it does not intend to commence an investigation into the matters raised in the report. The liquidators have investigated whether there are any offences, voidable transactions or insolvent trading claims available and did not identify any offences committed by the directors or any voidable transactions. They also concluded that on balance it did not appear that the company was trading while insolvent. They did, however, form an opinion that the company had failed to maintain adequate financial records. 9The liquidators have not formally expressed a view as to the reason for the failure of the company, but it appears to have been attributable to its unsuccessful property development adventure. 10By originating process filed on 21 February 2014, Mr Welsh sought an order pursuant to Corporations Act, s 482 terminating the winding up. The directors wish to have the winding up terminated and the company returned to their control, in order to resume trading in the glass crushing and recycling business, and to take advantage of the substantial operating losses that appear to be available in the company and could be applied against future profits for tax purposes. The directors have no current intention that the company would again engage in property development. 11The liquidators have advised that they neither support nor oppose the application to terminate the winding up. The liquidators convened a final meeting of members and creditors, which was adjourned at the request of the directors to 24 February 2014. It was then further adjourned to 4 April 2014, to permit the present application to be heard and determined. 12Of the creditors, St Laurence and Lilliendal are now in liquidation. The directors engaged a consultant to negotiate compromises of their outstanding debts for $10,000 and $20,000 respectively, and Mr Welsh contributed the sum of $30,000 to fund those settlements. The liquidator of St Laurence has indicated that he has no objection to the winding up being terminated, and that upon payment of $10,000 the company's debt to St Laurence, and the liability of the guarantors, is extinguished. The liquidator of Lilliendal has agreed to release its claims upon payment of the sum of $20,000. On 24 March 2014, the creditors of Lilliendal approved the compromise of the debt owed to it by Glass Recycling and the liquidators of Lilliendal executed the Deed of Release. Thomson Hall has agreed to release its claim, as has Abelitis. 13The directors informed ASIC of the proposed application and requested that ASIC indicate whether it had any opposition or wished to be heard. ASIC asked to be provided with a copy of the application and an opportunity to consider it. By letter dated 11 March 2014, ASIC advised that it considered the matter one properly left for the determination of the Court and that it did not propose to intervene in the proceedings or to seek leave to appear. 14After payment of liquidators' remuneration, there appears to be about $4,795.00 assets remaining in the administration. 15The considerations that inform the exercise of the Court's discretion to terminate a winding up pursuant to Corporations Act, s 482, have been referred to in many cases [for example, Re Warbler Pty Ltd (1982) 6 ACLR 526; Mercy and Sons Pty Ltd v Wanari Pty Ltd [2000] NSWSC 756; (2000) 35 ACSR 70, [47]ff; Anderson v Palmer [2002] NSWSC 192, [6]; Vero Workers Compensation (NSW) Limited v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103, [17]; Re Yeling Group Pty Ltd [2012] NSWSC 74, [8]-[11]; In the Matter of TMPL Pty Limited (in liquidation) [2012] NSWSC 1059, [10]; In the Matter of 311 Hume Highway Liverpool Fund Pty Limited (in liquidation) [2013] NSWSC 465, [4]]. They include: