Deputy Commissioner of Taxation v Dlthai Pty Limited; In the Matter of Dlthai Pty Limited

6 The liquidator also drew Mr Thai's attention to the need for the company to ensure that all of its suppliers are paid and that its landlord is paid. Its landlord is a company called 8 Property Group Pty Ltd. 7 In his first affidavit, the applicant said that he had paid the total amount due to the DCT by two payments, one on 20 January 2016 and one on 8 February 2016. He also said that he had paid the liquidator's fees and disbursements in full on 21 January 2016. 8 In his second affidavit, the applicant testified that he had paid the rent due to 8 Property Group Pty Ltd up to and including 24 March 2016. He also said that no moneys were due to anyone in respect of "Insurance" or "Grays online" and that payments to the company's suppliers were up-to-date. 9 The DCT has been represented before me on the hearing of the applicant's application. This is because, contrary to the assertions in the applicant's first affidavit, there was a dispute as to whether the full amount due to the DCT had, in fact, been paid as asserted by the applicant. That dispute has now been resolved and the DCT's legal representative has informed me that the full amount due to the DCT has now been paid. 10 The applicant has explained the circumstances in which the company came to be wound up. Those circumstances may be briefly summarised as the company's failure to pay due attention to the payment of tax and other expenses of the company and some apparent dilatoriness on behalf of the accountants representing the company in its dealings with the Australian Taxation Office. The applicant seems to accept that his management of the business going forward will need to improve, but he also seems to be willing to support the company with loan funds where necessary. He has also sworn that the company has stock and equipment on hand so that, if the Court makes the orders sought today, the company will be in a position to recommence trading immediately. 11 The evidence before me included financial statements for the years ended 30 June 2014 and 30 June 2015. Those financial statements established that, as at 30 June 2015, the company had net assets in the amount of $33,872.31 and that it had traded at a small profit in each of the 2014 and 2015 financial years. The company's financial position was brought up to date by further financial statements prepared as at 9 December 2015. As at that date, there was a deficit on the balance sheet of $27,360.09 and a trading loss of $61,232.40. The company generated a relatively small gross profit in the six months to 9 December 2015 but had made a net loss for that period when legal fees, liquidator's fees, depreciation and other expenses were brought to account. Nonetheless, taking a somewhat optimistic view, there was every reason to think that the company could continue in business provided it had the financial support of the applicant. The applicant said that he would support the company in order to enable it to overcome the difficulties which it has experienced recently. 12 Recent judgments of the Court have contained discussion of the factors which the Court will take into account on an application such as this. In Judson, in the matter of Maneroo Pty Ltd (in liq) [2015] FCA 783, Gleeson J re-affirmed what had become known as the "Warbler" principles at [21]-[22] of her judgment in the following terms. 21 The jurisdiction to terminate a winding up under s 482 is discretionary. The court ordinarily has regard to a range of factors which were set out in the judgment of Master Lee QC in Re Warbler Pty Limited (1982) 6 ACLR 526: Benedict v Olde; in the matter of ATS (Asia Pacific) Pty Ltd [2011] FCA 1008 ("Benedict v Olde") at [5]. Those factors are not to be rigidly applied but it is well accepted that the eight factors listed by Master Lee provide useful guidance: Benedict v Olde at [5], citing Dubolo Pty Ltd (t/as Fender Signs) v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723. See also In the matter of 311 Hume Highway Liverpool Fund Pty Ltd (in liquidation) [2013] NSWSC 465; (2013) 93 ACSR 683 ("311 Hume Highway") at [4] and the cases there cited. 22 The Warbler factors are as follows: (1) The grant of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: Re Calgary & Edmonton Land Co Ltd (in liq) (1975) 1 WLR 355 ("Re Calgary") at 358-359 per Megarry J. (2) There must be service of notice of the application for a stay on all creditors and contributories, and proof of this: Re South Barrule Slate Quarry Co (1869) LR 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113. (3) The nature and extent of the creditors must be shown, and whether or not all debts have been or will be discharged: Krextile Holdings Pty Ltd v Widdows [1974] VR 689 ("Krextile"); Re Data Homes Pty Ltd [1972] 2 NSWLR 22. (4) The attitude of creditors, contributories and the liquidator is a relevant consideration: Re Calgary. (5) The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: In Re a Private Company [1935] NZLR 120; Re Mascot Home Furnishers Pty Ltd [1970] VR 593 at 598. (6) If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd [1963] 2 Ch 174. (7) The general background and circumstances which led to the winding-up order should be explained: Krextile. (8) The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to "commercial morality" or the "public interest": Krextile. 13 To similar effect were the remarks made by Edelman J in Doolan, in the matter of MIH Company Pty Ltd (in liq) [2015] FCA 1130 at [8]-[11]. 14 In the present case, the only creditor who has attended Court in relation to the applicant's application is the DCT. Other creditors, as identified in Mr Donnelly's letter of 11 December 2015, have been notified of the application but have chosen not to attend. Both the DCT and the liquidator do not oppose the applicant's claim to have the winding up of the company terminated. The company is, on the face of things presently, solvent, although its financial position is somewhat precarious. However, until very recently, it had been trading profitably and there is no reason to think that it will not continue to do so in the near future. 15 The applicant has co-operated with the liquidator and attended to the payment of the liquidator's fees and expenses. He has also paid the DCT's costs of the winding up application itself. While the circumstances which led to the winding up order being made are unsatisfactory, I am satisfied that the applicant appreciates that in the future he must ensure that the company pays its taxes and otherwise complies with all relevant regulatory requirements. I am satisfied that I should make the order sought by the applicant. 16 After I had announced my reasons and orders in the matter, the legal representative for the DCT sought an order that the applicant pay the DCT's costs of and incidental to the present application. He submitted that, had the applicant attended to payment of the outstanding tax appropriately and in time, there would have been no need for the DCT to be represented at Court on the two occasions when he was so represented. 17 Ordinarily, in a matter such as this, where there is a tax debt outstanding, it is incumbent upon the applicant to satisfy the Court that that debt has been paid, either by procuring an affidavit from an officer of the DCT or at least a letter confirming the relevant facts. What actually happened here was that, in February 2016, the applicant had remitted funds to an account which, whilst being a government account, was not the relevant account insofar as the DCT was concerned. For this reason, the applicant must bear responsibility for the additional listings required in the present case and for the need for the DCT to be represented at Court. 18 The DCT seeks the amount of $2,500 inclusive of GST, representing approximately 70% of the solicitor client costs incurred by him in the matter. He seeks a lump sum order pursuant to r 40.2(b) of the Federal Court Rules 2011. This is obviously a matter where, were I minded to make an order for costs in favour of the DCT, I would utilise the power to make a lump sum order reposed in the Court by that rule. 19 I think, in the circumstances, the DCT is entitled to an order for costs and that it should be a lump sum order. I propose to make an order, pursuant to r 40.2(b) of the Federal Court Rules 2011, that the applicant pay the costs of the DCT of and incidental to the present application in the amount of $1,650 inclusive of GST. 20 There will be orders accordingly. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.