Brooker v You Run the Business Pty Ltd

Supreme Court of NSW|2019-10-14|Before: Gleeson J

Solicitors: APJ Law (Plaintiff) No appearance (First Defendant) No appearance (Second Defendant) File Number(s): 2019/278636

Judgment

GLEESON J: Application is made by the plaintiff, Mr Robin Ramsay, for a winding-up order against the first defendant, Glen Elgin Retreat Pty Ltd, under s 461(1)(k) of the Corporations Act 2001 (Cth). The plaintiff, as a shareholder of the company, has standing to make the application: Corporations Act, s 462(2)(c). The second defendant, Mr Michael Murphy, is a shareholder of the company. The other shareholder is Dr Tamasin Ramsay, the daughter of Mr Ramsay. Mr Robin Ramsay holds 50,034 ordinary shares in the company, Dr Tamasin Ramsay holds 34 ordinary shares in the company and Mr Murphy holds 10,034 ordinary shares in the company.
The originating process filed 6 September 2019 also sought relief under s 233 of the Corporations Act, specifically the appointment of a receiver and manager of all of the property of the company pursuant to s 233(1)(h). After exchanges between the bench and counsel for Mr Ramsay, that relief was not pursued and Mr Ramsay sought an order for the winding-up of the company on the just and equitable ground and the appointment of a liquidator.

Background

The company was incorporated on 3 December 2008 for the purpose of acquiring a property at Dundee in the New England region of New South Wales with a view to conducting retreats and other spiritual activities on the property. A number of buildings were constructed on the property it seems, with the benefit of hindsight, apparently without relevant development consent or compliance with applicable bushfire control requirements. The company conducted a number of retreats at the property between about late 2012, when the buildings were completed, through to 2014. During the period 2014 to 2016 some further retreats were conducted at the property.
From about November 2016 there was a marked deterioration in the relationship between Mr Ramsay and Mr Murphy. It is not necessary to descend to the detail of those difficulties. In March 2018 a provisional apprehended personal violence order was issued against Mr Ramsay following a complaint to police by Mr Murphy. Ultimately on 24 November 2018 that application was withdrawn by the prosecutor and dismissed. There has been no effective communication between Mr Ramsay and Mr Murphy since that date.
Mr Ramsay has attempted to determine what are the development controls applicable to the buildings that have been constructed on the property. He arranged a meeting with officers of the Glen Innes Severn Council in February 2019, but the council inspectors cancelled that meeting apparently as a result of information communicated to them by Mr Murphy which led the council to the view that the cost of works originally quoted for an application to obtain a building certificate was not accurate.
It seems that the company ceased trading towards the end of 2016. Financial statements apparently prepared by an accountant retained by the company as at 29 September 2017 disclose a deficiency of assets over liabilities of $289,335.57. The primary asset of the company is the land and buildings comprising the property at Dundee. Mr Ramsay is shown as a substantial creditor in an amount in excess of $1.2 million. A subsequent trial balance dated 25 May 2018 states that the amount owing by the company to Mr Ramsay is approximately $1.33 million and that Mr Murphy is indebted to the company in an amount of $33,393.33.
There is no evidence that the accounts have been considered or approved by the directors of the company, let alone audited. Whilst it is not necessary to express a conclusion on the solvency of the company, its solvency appears to be doubtful. The property was valued in February 2017 at $800,000, but this valuation did not take into account the apparent lack of applicable planning approvals and consent.
Following the commencement of these proceedings, Mr Murphy sent a communication to the registry of the Court on 20 September 2019 stating, among other things, that he had been unwell for the past two years and identified a number of diagnoses and indicated, in effect, that he did not oppose the relief sought by Mr Ramsay in the originating process.

Irretrievable breakdown and deadlock

I am satisfied that the evidence supports the conclusion that there has been an irretrievable breakdown between the directors and the shareholders of the company and that the affairs of the company are deadlocked: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672; Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 at [132] (Barrett J); Brooker v You Run the Business Pty Ltd [2008] FCA 1752 at [11]-[13] (Finklestein J). The company, in its current configuration, is in what Barrett J described as a "predicament of paralysis" in Shenouda v Work Safe Medics Pty Ltd [2011] NSWSC 45 at [5]. Given these circumstances, it is appropriate the company be wound up on the just and equitable ground.

Procedural matters

There is evidence that Mr Andrew Barnden has given his consent to being appointed as liquidator.
Notice of this application has not been lodged with the Australian Securities and Investments Commission (ASIC) as required by s 465A(a) of the Corporations Act. Mr Ramsay seeks an order pursuant to s 467(3)(b) of the Corporations Act dispensing with that requirement. Section 467(3)(b) empowers the Court to "dispense with any notices being given or steps being taken that are required by this Act, or by the rules, or by any prior order of the court."
As White J explained in Kozlowski v JSB Developments Pty Ltd [2010] NSWSC 1022 at [15]: The purpose of advertising would primarily be to bring notice of the application to any other creditors of the defendant, particularly if creditors wish to support the application and be substituted as creditor if for any reason the applicant did not wish to proceed. But it might also be open to a creditor to oppose the application if the winding up, and the costs incidental thereto, might prejudice its ability to recover a debt or the amount that could be recovered. See also the remarks of Austin J in Carter v New Tel Ltd (in liq) (2003) 44 ACSR 661 at [23] and Black J in In the matter of Aspirion Group Pty Ltd [2014] NSWSC 39.
I do not consider that any substantive purpose would be achieved by compliance with the requirement referred to above. The evidence establishes that the company no longer trades and that the only substantial liabilities of the company are amounts owing to Mr Ramsay and Dr Tamasin Ramsay. There is no realistic prospect of any creditor of the company opposing the application. As indicated, the two largest shareholders, Mr Ramsay and Mr Murphy, are parties to the proceedings, and Mr Murphy has not opposed a winding-up order or an order appointing an independent liquidator. The Court has been informed from the Bar table, and accepts, that Dr Ramsay does not oppose the relief sought either.
As to costs, there is no reason why costs should not follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

Orders

For the above reasons, I make the following orders: 1. Pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (the Act), order that the first defendant, Glen Elgin Retreat Pty Ltd (ACN 134 462 516) (the Company) be wound up. 2. Pursuant to s 472(1) of the Act order that Andrew Barnden be appointed liquidator of the company. 3. Pursuant to s 467(3)(b) of the Act the requirements in s 465A(a) and (c) of the Act to lodge notification of the application with ASIC and to advertise or publish notification of the application be dispensed with. 4. The second defendant to pay the plaintiff's costs of the proceedings. 5. The originating process filed 6 September 2019 be otherwise dismissed. 6. These orders be carried out forthwith.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 October 2019

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