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[2020] FCA 189
Federal Court of Australia
2020-02-24
Smith J
Original judgment source is linked above.
BANKS-SMITH J: 1 This matter comes before me on an urgent basis. The defendant Company, He To Be Pty Ltd, seeks an order terminating the winding up made by order of the District Registrar of this Court on 21 January 2020. 2 The Company was wound up on the basis of an unpaid debt in the amount of $24,546.15 claimed by the Commissioner of State Revenue and the subject of an unsatisfied statutory demand dated 28 August 2019. 3 The directors and shareholders of the Company are Mr Howard Bessant and his wife, Ms Michelle Bessant. The Company operates solely as the trustee of the H&A Family Trust and does not otherwise trade. It is a vehicle used by Mr and Ms Bessant and the trust for the acquisition and management of commercial and residential investment properties for the purpose of planning for their retirement.
The challenge to service 4 It is not in issue that the statutory demand issued by the Commissioner was posted by pre-paid ordinary mail to the registered office of the Company as recorded in the registry records of Australian Securities and Investments Commission (ASIC). Mr and Ms Bessant deny that the statutory demand was received. They say they would have immediately acted upon the demand and paid it had it been received. 5 The demand was posted to a residential address. Mr and Ms Bessant have deposed to the location of the residential premises; that the letterbox on site is obscured; and that despite having checked the mailbox they have no record of receiving either the statutory demand or the subsequent winding up application or notice of hearing. 6 In effect, the winding up order was made in their absence. This application was initially brought by way of an application to review the winding up order, but rather than contest the service issue, the Company now seeks relevantly to terminate the winding up under s 482 of the Corporations Act 2001 (Cth).
Section 482 7 Section 482 of the Corporations Act relevantly provides that 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. 8 An application may be made by a liquidator or creditor or contributories of the company. As already noted, Mr and Ms Bessant are the only shareholders of the Company and so in effect all members have joined in the application. Mr Bessant seeks leave to facilitate bringing the application by the Company under s 198G(3)(b) of the Corporations Act: to the extent such leave is required, it is granted. 9 The Court has discretion under s 482 as to whether the winding up should be terminated. In exercising its discretion it considers the interests of the company's current and future creditors, the liquidator, the contributories and the public interest in matters of commercial morality and the winding up of insolvent companies: Vero Workers Compensation (NSW) Ltd v Ferretti [2006] NSWSC 292 at [17] (Austin J). 10 The principles relevant to the granting of an order terminating a winding up under s 482 were summarised by Black J in Re Living Creatively Exhibitions Pty Ltd (in liq) (subject to a deed of company arrangement) [2013] NSWSC 717 as follows: [7] Generally, the court will not terminate a winding up unless a company will have additional financial strength and stability to provide confidence that it can continue without an appreciable risk of returning to liquidation: Re Data Homes Pty Ltd (in liq) [1972] 2 NSWLR 22 at 27; Leveraged Equities Ltd v Hilldale Australia Pty Ltd [2008] NSWSC 190; (2008) 26 ACLC 182; Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797. A question will arise as to whether sufficient steps have been taken to recapitalise a company or restore its solvency so that, in the language of Re Pine Forests of Australia (Canberra) Pty Ltd [2010] NSWSC 1127 at [3], its 'financial health' is such that it may safely be released from the form of external administration focussed mainly on the interests of creditors and returned to the mainstream of commercial life where it may, under the control of its directors, incur new debts that have to be paid as and when they fall due. Similarly in Re SNL Group Pty Ltd (in liq) above at [24] Bergin CJ observed that: it is clear that in determining whether to terminate the winding up of a company, it is usual that the most significant matter for consideration is the solvency of the company. The other considerations, such as the extent of the creditors, the status of the debts and the nature of the company's business will be taken into account in determining whether the company has returned to, or will be returned to solvency. See also the observations of Gleeson J in Judson, in the matter of Maneroo Pty Ltd (in liq) [2015] FCA 783 at [21]-[23].
Reasons why application should be granted 11 The following matters lead me to conclude on the evidence that the winding up of the Company should be terminated. They are disclosed by the two affidavits of Mr Bessant and the affidavit of Ms Bessant relied upon in the application. I have also taken into account the affidavit of Mark Hyde, a solicitor acting for the liquidators. 12 First, the events that resulted in the winding up order have been explained and steps have been taken to bring this application quickly. 13 Second, additional cash flow of the Company has been and will continue to be provided when required by a director loan provided by Ms Bessant (and with only long term potential recourse). Ms Bessant is independently employed. 14 Third, the secured creditor, being the National Australia Bank, has not indicated any intention at present to call in the amount owed by the Company or enforce any of its securities. It has security by way of a registered mortgage over a commercial property in Bunbury and by way of a substantial term deposit. The Bank is aware of steps currently being taken by the Company to realise one of the commercial properties and according to Mr Bessant, the Bank is working with him to facilitate a sale. Mr Bessant says that if the property is not sold it will be leased, with the rental stream enhancing cash flow for meeting the Company's debts going forward. 15 Fourth, as to its financial position, apart from the Bank and subject to the position as to the liquidators' costs, the Company currently has no other creditors with debts due and payable. The amount claimed by the Commissioner has been paid; the amount of costs awarded to the Commissioner on the winding up application has been paid; the sum of $15,000 has been deposited into the Company's solicitor's trust account to meet, in part, the costs of the liquidators; the City of Bunbury is a creditor with respect to council rates not yet due and the property manager for the relevant premises has told Mr Bessant that she holds sufficient funds to pay those rates due by the Company; and otherwise there are no other creditors. 16 The annual trial balances for the H&A Family Trust for the years ending 30 June 2018 and 30 June 2019 have been prepared by the Company's accountants. Mr and Ms Bessant have retained external accountants since 1999 and all taxation records for the Company, including profit and loss and balance sheets, are up to date. Mr and Ms Bessant both depose to the fact that, having reviewed the accounts for the trust and Company, they believe the Company to be solvent and able to pay its debts as and when they fall due. 17 Having regard to the interests of creditors, I am satisfied on the basis of the evidence before me that the financial health of the Company is such that it may safely be released from liquidation and returned to the control of its directors. 18 Fifth, the Commissioner consents to an order for termination of the winding up. 19 Sixth, the liquidators do not consent to, but do not oppose, the application. They have indicated through counsel that they have not been in a position to investigate the solvency of the company in any detail. 20 Seventh, I am satisfied that ASIC has been informed of the application to terminate the winding up. It has not sought to participate. 21 Eighth, whilst I acknowledge that the liquidators' role to date has necessarily been somewhat limited, the evidence does not indicate that any issue has been raised in relation to any ongoing breaches by the Company of its obligations to maintain proper accounts or meet its taxation liabilities, or in relation to any breaches of statutory obligations or misconduct by any officer of the Company. 22 Ninth and finally, no issue has been raised that would mean there is a public interest in the affairs of the Company being wound up and remaining under the supervision of a liquidator. 23 Taking into account those matters, in my view it is appropriate to make orders terminating the winding up. 24 There is only one outstanding issue, being the payment of the balance of the liquidators' costs. I am told that the payment of the balance of the liquidators' costs in the sum of $14,576.75 has been remitted to the company's solicitors' trust account but those funds have not cleared. However, should there be any issue as to the clearance of those funds, I have been told through counsel that the company's solicitors undertake to the liquidators that such balance will be paid. The liquidators accordingly did not oppose the termination order being made despite part of their costs remaining outstanding as at the date of the order. 25 There will be no order as to costs of the application. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Banks-Smith.
Commissioner of State Revenue
He To Be Pty Ltd