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Judgment - ex tempore

1. By Interlocutory Process filed on 10 June 2015 the Applicant, Mr Mahesh Raj, seeks an order that an order winding up Westside Sugar Cane Juicery Pty Limited ("Company") made on 4 June 2015 be set aside. The parties to the application include the liquidator who has been appointed to the Company, and the Deputy Commissioner of Taxation who was the applicant on the winding up. The liquidator has indicated that he is satisfied that he may properly consent to the application, a matter which Courts have frequently recognised is of considerable significance in applications of this kind. The Deputy Commissioner of Taxation does not oppose the application, on the basis that amounts due to it have been paid. Both the liquidator's costs of the winding up and the costs of the winding up of the Deputy Commissioner of Taxation have also been paid, and sufficient monies have also been provided to the liquidator, by bank cheque, to provide for payment of amounts due to the Company's creditors.
2. I will return to the legal basis of an application to set aside a winding up shortly, after first referring to the affidavit evidence in support of the application. The application is supported by an affidavit of Mr Mahesh Raj dated 10 June 2015, which refers to the circumstances in which the Company was wound up. Mr Raj notes that the registered office of the Company had been located, as I understand it, at its business premises in Allen Street, Harris Park, and that he had moved the business premises of the Company to Marion Street, Harris Park in March 2010 but inadvertently failed to notify the Australian Securities and Investments Commission ("ASIC") of the Company's new address.
3. Mr Raj notes that the Company came to be in arrears to the Australian Taxation Office in a significant amount, but he did not receive a demand from the Australian Taxation Office for payment of that amount and did not receive notification of the winding up proceedings in respect of the Company. That is not surprising, in circumstances that such proceedings would likely have been served upon the Company's registered office, at its old address, given the absence of notification of a change of that address to ASIC. Mr Raj's evidence is that, had he been aware of the winding up application, he would have contested the application on the basis that the business is viable. I infer that Mr Raj would, in effect, have sought to defend the winding up application on the basis that the Company was solvent, notwithstanding the debt owed to the Australian Taxation Office.
4. Three further affidavits are relied on in support of the application. Mr Muhammad Farooq is a solicitor who acts for Mr Raj in the application, and he gives evidence of steps that have been taken to discharge debts owed by the Company, including payment of the Company's Business Activity Statement liabilities to June 2015, payment of the liquidator's costs and payment of costs due to the solicitor for the Australian Taxation Office in respect of the winding up application. He gives evidence as to payment of employees' superannuation and that certain other amounts have been paid. There is evidence of the availability of additional funds to support the Company's business from Mr Raj and Mr Bathla, who is an investor in or financier to the Company. That evidence is not in the strongest of forms so far as it is, in effect, a claim that monies are held in personal accounts which would be made available to support the Company's business. On the other hand, the Company's activities are in relatively narrow scope, and there is other evidence as to the Company's financial position to which I will refer below.
5. There is evidence that the rent of the Company's business premises is up to date and a cash flow projection for the Company's business is in evidence that seeks to establish the likelihood of its future profitability. Several employees of the Company have provided statements indicating that, at least to their understanding, their wages and holiday pay are up to date. There is evidence that taxation returns have been lodged by the Company, in the ordinary course, in the years from 2011 to 2014. An affidavit of Mr Sanghvi indicates that he is a close friend of Mr Raj and has confidence in Mr Raj's business abilities and he has also indicated his willingness to make funds available to support the Company.
6. Mr Raj also relies on an affidavit of the Company's tax agent, Mr Sheth, who refers to his review of the accounts of the Company and confirms, consistently with Mr Raj's evidence and Mr Farooq's evidence, that wages and accrued holiday pay to staff have been paid in full; trade creditors and payables have been paid in full; Mr Raj has sufficient funds, in his personal capacity, to pay superannuation entitlements which are due as at 8 June 2015; and all amounts due to the Australian Taxation Office and to the liquidator have been paid. Mr Sheth also gives evidence, albeit in a somewhat conclusory fashion, that the business is profitable and viable, although he refers to matters supporting that conclusion including that it requires relatively low working capital and has been profitable over the last three years and has an established clientele and goodwill in the relevant community. He notes, with some force, that the payment of the Company's debts, which has now taken place, is likely to facilitate its future operation in a profitable manner.
7. I now turn to the basis on which the Court may set aside or terminate a winding up. The first basis is r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) which permits the Court to set aside an order made in the Company's absence. The Company was absent, in this case, when the winding up order was made, albeit its absence reflects in part the failure to give notice of the change of its registered office. The fact of the Company's absence when that order was made may authorise, in an appropriate case, the setting aside of that order to protect the Company's right to be heard and the integrity of the Court's process: Double Bay Newspapers Pty Ltd v Fitness Lounge Pty Limited [2006] NSWSC 226; (2006) 57 ACSR 131 at [36]. That jurisdiction is available, on proof of the Company's solvency, notwithstanding that there was nothing irregular about the process by which the winding up order was made, where it had been properly served, albeit at the Company's former premises which were still recorded as its registered office: Workers Compensation Nominal Insurer v Teca Pty Limited [2011] NSWSC 686 at [4]; Re Joe's European Auto Specialists Pty Limited [2014] NSWSC 195 at [9]. It seems to me that, on proof of the Company's solvency, the fact that it was absent when the winding up order was made and did not have an opportunity to seek to establish its solvency in opposition to a winding up order, is capable of providing support for an application to set aside a winding up order under that rule.
8. Alternatively, a winding up may be terminated under s 482 of the Corporations Act 2001 (Cth). A person who seeks such an order must establish that the order terminating the winding up is appropriate even if it is not, as here, opposed by the liquidator. Relevant factors include the attitude and interests of creditors, including future creditors whose interests might be prejudiced if the Company were released from the winding up. In the present case the Company's liquidator has indicated that no debt is owed to it and the Australian Taxation Office does not oppose the termination of the winding up. Other relevant factors include whether the Company's debts have been discharged, its trading position and general solvency and circumstances leading to the winding up: Re Warbler Pty Limited (1982) 6 ACLR 526 at 533; Re Yelin Group Pty Limited [2012] NSWSC 74 at [8] and [11]. In Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797 at [24] Bergin CJ in Eq observed 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."
9. The Company has, in this case, led evidence as to solvency, although that evidence could have been led in better form. Notwithstanding any difficulties in that respect, the evidence includes accounting evidence in which the Company's tax agent indicates that his review of the Company's records supports a conclusion as to its future solvency, and points to matters, including the discharge of existing debts and the low working capital required for the business, which provide at least some support for that conclusion. This is not a case where the Company relies only on the evidence of a director or shareholder without external confirmation, and the Company has led evidence that is capable of providing support for a conclusion of solvency: compare Expile Pty Limited v Jabb's Excavations Pty Ltd [2003] NSWCA 163; (2003) 45 ACSR 711 at [16]; Re Joe's European Auto Specialists Pty Limited above at [11]. The Company's position is also strengthened by the fact that the liquidator, who has had an opportunity to become familiar with this business while it was in liquidation, consents to the termination of the winding up. I have noted above the liquidator's position in respect of an application of this kind has significant weight.
10. It may be that this was not the strongest case for termination of a winding up. However, the business is in relatively small scope; significant efforts have been made by those involved in the business to discharge its existing debts and I accept that the payment of those debts is likely to provide support for the Company's future viability; and the steps which have been taken to pay those debts are indicative of the commitment of the director and its shareholder to the continued operation of the Company. On balance it seems to me that there is sufficient evidence to establish that the winding up should be terminated. In this case it may be that the preferable basis for that course is under UCPR r 36.16, so far as the winding up order was made in the Company's absence, although a basis for termination under s 482 of the Corporations Act is also available.
11. One administrative matter was properly raised by the liquidator's representative. The liquidator has been placed in funds to discharge the remaining debts of the Company but, plainly, the liquidator would lose the capacity to do so, at least as liquidator, once the winding up order was terminated. For that reason, the best practical course is to defer the effect of any order terminating the winding up for a short time, to allow the liquidator to take steps to discharge those debts, prior to the termination of the winding up becoming effective. If any difficulty arises in respect of the discharge of those debts, I will grant liberty to the parties to apply. Alternatively, the parties could submit consent orders to the Corporations Judge in chambers varying the date on which the termination of the winding up became effective, if the need to do so arose.
12. Accordingly, I make the following orders:
13. That the winding up of Westside Sugar Cane Juicery Pty Limited ACN 126 732 554 be terminated with effect from 9 July 2015.
14. Liberty to the parties to apply on 24 hours' notice specifying the relief sought.