Deputy Commissioner of Taxation v Atsikbasis Nominees Pty Ltd

REASONS FOR JUDGMENT 1 On 10 November 2010, the District Registrar made an order that Atsikbasis Nominees Pty Ltd ACN 007 769 557 ("the company") be wound up on the ground of insolvency on the originating process of the Deputy Commissioner of Taxation. Mr John Sheahan, an official liquidator, was appointed the liquidator of the company. 2 On 4 April 2014, the company filed an interlocutory process in which it sought the following orders: 1. The winding up of Atsikbasis Nominees Pty Ltd (ACN 007 769 557) is terminated as and from the date of this order. 2. The Officers of Atsikbasis Nominees Pty Ltd (ACN 007 769 557) at the date on which the winding up commenced, are reinstated. 3. No order as to costs. 3 On 16 April 2014, I made the following orders: 1. Manuel Atsikbasis be joined as an applicant to the interlocutory process dated 3 April 2014. 2. The winding up of Atsikbasis Nominees Pty Ltd ACN 007 769 557 is terminated as and from the date of this order. 3. The officers of Atsikbasis Nominees Pty Ltd ACN 007 769 557 at the date on which the winding up commenced, are reinstated. 4. No order as to costs. 4 These are my reasons for making those orders. 5 The power of the Court to make an order terminating the winding up of a company is contained in s 482(1) of the Corporations Act 2001 (Cth). If the Court makes such an order, then it may also 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" (s 482(3)). 6 The company's application was supported by an affidavit of Mr Manual Atsikbasis, who was the managing director of the company at the time it was wound up. 7 Mr Manuel Atsikbasis states that in the mid-1990's, the company received advice in relation to an employee investment scheme. The company was advised that participation in the scheme would entitle it to tax relief for contributions made. He states that the advice was based on an Australian Taxation Office ("ATO") private ruling, which he understands was subsequently modified by the ATO. He states that at all times the company sought advice from its professional advisers and those advisers included an accountant and a lawyer with expertise in taxation law. He states that it was on the basis of the advice that the company participated in the scheme. He states that, after the ATO had changed its position, the company sought advice in relation to amounts properly owed to the ATO in relation to the relevant periods and deductions previously claimed. Again, Mr Atsikbasis states that the company relied on advice from its professional advisers as to both the amounts due and the dates upon which those amounts should be paid. In reliance on that advice, the company failed to pay amounts claimed by the ATO, "in consequence of which the company was placed in liquidation". 8 I mention at this point that, on 21 June 2012, the liquidator and the company instituted a proceeding (SAD 131 of 2012) against a related company (Atsikbasis Nominees No. 2 Pty Ltd) and the directors of the company, including Mr Manual Atsikbasis. They claimed that the defendants should compensate the company for its liabilities and other losses. The only debt of the company, other than costs and fees associated with the winding up, was the company's debt to the ATO. 9 The defendants and a company called Lincoln Engineers Pty Ltd instituted a cross-claim against their advisers. Lincoln Engineers Pty Ltd was said to be the vehicle through which the company and the cross-plaintiffs received and paid for legal advice. 10 Mr Atsikbasis states that, after the liquidator had taken control of the company, claims were made by him which were well in excess of those previously made the ATO, and that, as a consequence, it was not possible to settle the proceeding or otherwise make payment to the ATO. 11 Mr Atsikbasis states that, in October 2013, the Court delivered judgment on a separate question which determined the amount payable to the ATO, and that amount was paid to the ATO by Lincoln Engineers Pty Ltd on the day the judgment identifying the amount payable was handed down by the Court. The proceeding against the company's professional advisers for negligence was also settled. 12 I did determine a separate question relating to the ATO's proof of debt in the winding up of the company and made orders about that matter on 19 November 2013 (Sheahan, in the matter of Atsikbasis Nominees Pty Ltd (in Liquidation) (No 4) [2013] FCA 1148; Sheahan, in the matter of Atsikbasis Nominees Pty Ltd (in Liquidation) (No 5) [2013] FCA 1214). 13 The claim brought by the liquidator and the company was subsequently settled. The terms of that settlement are confidential. However, Mr Atsikbasis states that the liquidator has filed a discontinuance in the proceeding (i.e., in SAD 131 of 2012) and has agreed to consent to an application for the termination of the winding up of the company. Furthermore, the Commissioner of Taxation has agreed not to oppose the application for termination of the winding up of the company. 14 Mr Atsikbasis states that all sums payable pursuant to the settlement deed have been paid and that the liquidator has indicated that he consents to an order terminating the winding up of the company. Furthermore, all amounts owing to the ATO have been paid, and the ATO was the only creditor of the company. In those circumstances, the company seeks an order terminating the winding up. 15 On the hearing of the application, I raised with counsel for the company the company's ability to bring the application. In order to overcome any difficulties in that regard, I made an order that Mr Manuel Atsikbasis be joined as an applicant to the interlocutory process. 16 The liquidator of the company appeared and indicated that he did not oppose the first order sought in the application (i.e., an order terminating the winding up of the company). He said that he had no attitude to the second order in the application. The ATO appeared and indicated that its attitude to the application was the same as that of the liquidator. 17 The Australian Securities and Investments Commission ("ASIC") was served with the interlocutory process and the affidavit of Mr Manuel Atsikbasis. A letter from ASIC was tendered and it states that the Commission considered that the matter was one properly left for the determination of the Court. Furthermore, ASIC said that it did not propose to intervene in the proceeding or seek leave to appear at the hearing. 18 The evidence before me establishes that, at the time of the winding up, there were five directors of the company and three shareholders. All directors and shareholders are members of the Atsikbasis family. Counsel for the company and Mr Manuel Atsikbasis also appears for the shareholders. 19 As to the relevant principles, counsel for the company, Mr Atsikbasis and the shareholders, referred to In the matter of 311 Hume Highway Liverpool Fund Pty Limited (in liquidation) (2013) 93 ACSR 683 where Black J said at [5]: Relevant factors to such an application were identified in Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70; 157 FLR 107; [2000] NSWSC 756; Re Nardell Coal Corporation Pty Ltd (2004) 49 ACSR 110; [2004] NSWSC 281 and summarised by Austin J in Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd (2006) 57 ACSR 103; [2006] NSWSC 292 at [17] as including the interests of the company's creditors, including future creditors; the interests of the liquidator, particularly with regard to costs; the interests of contributories and the interests of "the public", including the public interest in matters of commercial morality, and the public interest that insolvent companies should be wound up. Generally, the Court will not terminate a winding up so as to restore control of a company to its shareholders and directors unless the 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) 28 ACLC 182; [2008] NSWSC 190; Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797. (see also LL Nominees Pty Ltd, in the matter of LL Nominees Pty Ltd [2009] FCA 1144; Gyrro Pty Ltd v Deputy Commissioner of Taxation [2009] FCA 1477.) 20 The company has no creditors and the liquidator does not oppose the making of an order terminating the winding up. The shareholders seek an order terminating the winding up. In those circumstances, the critical question is whether the interests of future creditors or considerations of public interest or commercial morality should dissuade me from making the order sought. 21 As to future creditors, this is not a case where there is clear evidence of a lack of management skills on the part of the directors of the company. Rather, it seems a case where the parties became locked in a dispute which they could not resolve. The allegations made against the directors in SAD 131 of 2012 were serious and I do not have to find (and do not) that they were completely blameless as Mr Atsikbasis' affidavit rather suggests. The important point is that there is nothing to suggest that they cannot manage the company competently in the future. That observation is made in a context where there is nothing to prevent them from establishing an alternative company or companies. 22 I do not think that there are any matters of public or commercial morality which suggest the winding up should not be terminated. The type of conduct that might engage that consideration has not been established here. Again, it is also relevant to take into account the fact that there is nothing to prevent the directors establishing an alternative company or companies (In re Kitchen Dimensions Pty Ltd (in liq) [2012] VSC 280). 23 It seems to me that there is no point ordering that a meeting be convened to consider the election of directors because the shareholders are represented before me and they do not seek such an order. They are content for the directors to resume their pre-liquidation functions. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.