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[2019] FCA 1567
Federal Court of Australia
2019-09-20
Mr J, Anderson J
Original judgment source is linked above.
ANDERSON J: 1 Brian Andrew Sutcliffe (Mr Sutcliffe), a director of the defendant company in liquidation, NRA Engineering Pty Ltd (Company), has made an application in this proceeding for the review of the order of Registrar Luxton dated 21 June 2019 winding up the Company and appointing Nicholas John Martin as liquidator of the Company (Liquidator). That application is yet to be heard. 2 Mr Sutcliffe subsequently sought an order staying the winding up order. Today, on 20 September 2019, I delivered ex tempore reasons for dismissing Mr Sutcliffe's stay application. A revised version of those reasons is set out below.
Background 3 On 21 June 2019, Registrar Luxton made an order winding up the Company and appointing the Liquidator. 4 On 17 July 2019, Mr Sutcliffe purported to commence a proceeding to set aside the winding up order made by Registrar Luxton on 21 June 2019 in relation to the Company. That interlocutory proceeding was irregular as Mr Sutcliffe had not obtained leave to commence and maintain the proceeding under the Corporations Act 2001 (Cth) (Act). 5 On 31 July 2019, on the return of this proceeding for a case management hearing, Mr Sutcliffe applied to the Court for an adjournment to enable him to obtain legal representation. I granted that adjournment and made the order granting Mr Sutcliffe leave pursuant to s 198G(3)(b) of the Act for him to commence and maintain on behalf of the Company the interlocutory proceeding. 6 On 23 August 2019, the proceeding was listed for a case management hearing. Mr Sutcliffe said that he had retained a solicitor to provide advice to him but the solicitor had insufficient time to review documents and to provide Mr Sutcliffe with advice. Mr Sutcliffe asked for a further adjournment to enable him to obtain that legal advice. I granted the application for a further adjournment. 7 The matter was listed for a case management hearing on 6 September 2019. Prior to that day, Mr Sutcliffe wrote to my chambers requesting a two week adjournment to enable him to obtain legal advice and to enable his solicitors to appear. I granted that adjournment. The matter was listed for a case management hearing on 20 September 2019. 8 Prior to the case management hearing on 20 September 2019, the Liquidator filed an affidavit sworn 5 September 2019 in which he deposes to his attempts to have Mr Sutcliffe provide him with the Company's books and records and to make out and verify in the prescribed form and submit to the Liquidator a report on the Company's activities and property as at the date of liquidation, 21 June 2019. The Liquidator deposes to numerous correspondence passing between Mr Sutcliffe and the Liquidator wherein Mr Sutcliffe maintains that the Liquidator has no power to act on the basis that Mr Sutcliffe has filed an interlocutory application applying to set aside the winding up of the Company. 9 The Liquidator in his affidavit also deposes to Mr Sutcliffe instructing stockbrokers - EL&C Baillieu - to purchase on behalf of the Company as trustee for the BAS Super Fund an option over certain shares. 10 The Liquidator then deposes to various correspondence passing between his office and Mr Sutcliffe in which Mr Sutcliffe continues to assert that the Liquidator's appointment had been suspended. 11 The Liquidator, having reviewed the BAS Super Fund Trust Deed, identified that there was no clause in that Trust Deed removing the Company as trustee of the BAS Super Fund following the company being placed into liquidation. In August 2019, the Liquidator as a consequence instructed EL&C Baillieu to sell the options which they did for the sum of $1,448. 12 On 30 August 2019, the Liquidator received an email from Mr Sutcliffe requesting that the Liquidator stop interfering with the BAS Super Fund. The Liquidator responded advising Mr Sutcliffe that he had obligations to provide the Company's books and records and the required report to the Liquidator and that to date he had not done so. Mr Sutcliffe subsequently replied later on 30 August 2019 that he had exercised certain powers as the sole member of the BAS Super Fund to remove the Company as the trustee. 13 The Liquidator deposes that, as at 5 September 2019, Mr Sutcliffe, as the sole director and secretary of the Company, had failed to provide the Company's books and records to the liquidator and has failed to offer any reasonable excuse for such failure. Mr Sutcliffe has failed to submit the prescribed report to the Liquidator and has not offered in the Liquidator's opinion any reasonable excuse for his failure to do so. The Liquidator deposes that without the Company's books and records he is unable to establish the financial position of the Company including identifying its assets and liabilities. 14 The Liquidator deposes to the fact that he has reviewed the reasons for decision of the audit conducted by the Australian Taxation Office (ATO) of the Company dated 4 April 2018 that shows that an administrative penalty of $494,694 has been applied to the Company's taxation account. This audit advised that the Company's registration for goods and services tax from 30 June 2017 had been cancelled, as it was not carrying on an enterprise for tax purposes and the tax credits claimed had been disallowed. 15 The Liquidator expresses the opinion that he is presently unable to say whether the Company can pay the amount sought by the ATO or whether it has grounds to contest the imposition of the penalty. 16 The Liquidator deposes that his investigations to date indicate that there is an estimated deficiency of company assets of at least the amount owing to the ATO of $494,694.
Application for stay 17 Mr Sutcliffe applies for a stay of the winding up order made by Registrar Luxton on 21 June 2019. Mr Sutcliffe relies upon his affidavit sworn 12 July 2019, and upon his various written submissions emailed to my chambers and the oral submissions that he has made to me today. The power to grant a stay under s 23 or 35A(6) of the Federal Court Act 1976 (Cth) is a matter for the discretion of the Court in light of all the circumstances of the case. There is no real confining of the exercise of that discretion which requires special reasons to be shown for its exercise. 18 In the statutory context of Part 5.4 of the Act, however, the power is to be exercised with caution so as not unduly to delay the liquidator or hinder his or her capacity to carry out the duties imposed by the statute. There is therefore a clear onus on the applicant to make out a positive case: see Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533 per Master Lee QC. 19 In addition to the general considerations which enjoin caution in the making of such orders, specific considerations relevant to the present class of case include: (a) any detriment or risk of detriment to creditors or contributories flowing from the stay; (b) the merits of the proposed review; (c) the current trading position and solvency of the company; (d) the prejudice to the company if a stay is not granted; and (e) the legislative policy against delay from the liquidation process. See generally HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd [2002] FCA 1638; 44 ACSR 169 at [48]-[49] per French J. See also Australian Securities and Investment Commission v Aviation 3030 Pty Ltd (No 2) [2019] FCA 391 at [7] per O'Callaghan J, quoting Deputy Commissioner of Taxation v Ansett Resources & Industries Pty Ltd [2010] FCA 833; 79 ACSR 347 at [11]-[12] per Reeves J, and Mutton v Living Australia Pty Ltd [2019] FCA 1051; 136 ACSR 644 at [13]-[15] per White J. 20 I dismiss Mr Sutcliffe's application for a stay for the following reasons: (1) Mr Sutcliffe has not established that there is positive case for a stay. In particular, there is no evidence that the administrative penalty applied by the ATO in the sum of $494,694 is in error; (2) there is no evidence that the Company is solvent, in fact the evidence of the Liquidator is that the Company owes at least $494,694 to the ATO; (3) Mr Sutcliffe has refused to comply with his statutory obligations as the sole director and secretary of the Company to provide the Liquidator with the Company's books and records and to make out and verify in the prescribed form under the Act a report on company affairs and property as at the date of liquidation - 21 June 2019; (4) Mr Sutcliffe has sought to interfere with the Liquidator undertaking his responsibilities as liquidator of the Company; (5) Mr Sutcliffe, whilst the Company was in external administration, instructed stockbrokers EL&C Baillieu to purchase an option on shares in circumstances where the Liquidator was in control of the Company and Mr Sutcliffe's application to set aside the winding up order had not yet been heard and determined; and (6) in light of the circumstances that I have identified above, there is, in my opinion, a risk of detriment to creditors of the Company should I grant a stay.
Conclusion 21 Mr Sutcliffe's application for a stay of the order made by Registrar Luxton winding up the Company is dismissed. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Anderson.
Deputy Commissioner of Taxation
NRA Engineering Pty Ltd