E.C. Services Pty Ltd v Deputy Commissioner of Taxation

1. The application filed on 5 November 2018 to set aside the winding up order made by Registrar Allaway on 17 January 2017 is dismissed.
2. Mr Immanuel Shmuel, former director of E.C. Services Pty Ltd, pay the costs of the First Respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

O'CALLAGHAN J: 1 These reasons for judgment were delivered ex tempore at the hearing on 14 December 2018 and accompany the orders set out above. 2 This is an application by E.C. Services Pty Ltd (the company) under r 39.05 of the Federal Court Rules 2011 (Cth) that a winding-up order made in respect of the company by Registrar Allaway on 17 January 2017 be set aside. The company was wound up by Registrar Allaway on the application of the Deputy Commissioner of Taxation, the first respondent to this application (the Deputy Commissioner). The liquidator of the company, Mr Norman Jones (the liquidator), is the second respondent to this application. 3 The application is supported by an affidavit of Mr Shmuel, who was a director of the company. Having read the affidavit and heard from Mr Shmuel this morning, it seems that the basis for the application to set aside the winding up order is that he was too ill to oppose the application for winding up and the debt to the Deputy Commissioner is disputed. 4 The Deputy Commissioner relies on the following affidavits: (1) the affidavit of debt sworn by Karen Martin on 10 December 2018; (2) the affidavit of Norman Jones, sworn 26 November 2018; (3) the affidavit sworn on behalf of the Deputy Commissioner in proceeding MLG2400 of 2018. 5 I am bound to dismiss the application to set aside the Registrar's winding-up order for a number of reasons, each of which is set out in written submissions filed on behalf of the Deputy Commissioner and prepared by Mr Agardy of counsel. 6 The first problem is one of standing. The company was deregistered on 20 January 2018, so it cannot apply to set aside the order. Mr Shmuel was the holder of all the issued ordinary shares in the company. 7 However, as the written submissions filed on behalf of the Deputy Commissioner state, Mr Shmuel is an undischarged bankrupt and his shares have vested in his trustees in bankruptcy. Further, the trustees in bankruptcy do not apply to set aside the winding-up order or provide Mr Shmuel with authority to do so. 8 In any event Mr Shmuel is disqualified from acting as a director pursuant to s 206B(3) of the Corporations Act 2001 (Cth) and he would not, in any event, be entitled to apply for approval to set aside the winding-up order. 9 In any event, and assuming contrary to the matters outlined above, that either the company or Mr Shmuel did have standing to set aside the order, it is without any merit. 10 As White J said in Deputy Commissioner of Taxation v NOPSA Pty Ltd [2015] FCA 1126 (NOPSA) at [28], an order for the setting aside of a winding-up order may be made if the following things are satisfied: (1) the order is made in the absence of the defendant company; (2) an application for the setting aside is brought promptly by the company; (3) notice is given to the liquidator, to the person who sought to have the company wound up, and to any creditor who appeared at the hearing; (4) the evidence shows an explanation for the non-appearance; (5) there is consent or at least no opposition to the setting aside; and (6) the liquidator shows there is nothing in her or his investigations to date showing a reason for the company to be stopped from trading. 11 It is not necessary for the company to establish that it is, in fact, solvent. It is sufficient that the evidence indicates solvency: see NOPSA at [30]. As counsel for the Deputy Commissioner submitted, in dealing with each of the principles enunciated by White J in turn: (1) the Deputy Commissioner accepts that the company did not, in fact, appear at the hearing of the winding up application; (2) the application to set aside has not promptly been brought; on the contrary, the application is sought to be made almost two years after the winding up order was made, and there is no explanation, satisfactory or otherwise, for the delay; (3) the Deputy Commissioner agrees that notice has been given as required; (4) there is no satisfactory explanation for the failure of the company to appear at the hearing and there is no explanation why the company was unable to instruct a lawyer to appear at the hearing even on the assumption that Mr Shmuel himself was too unwell to attend; (5) obviously enough, the application to set aside the winding-up order is opposed by the Deputy Commissioner and; (6) there is no evidence at all about the financial position of the company and, absent any evidence about the solvency of that company, on that ground alone it would be impermissible to grant the relief sought. 12 I should also note the fact that appears from the submissions of counsel that the debt owed by the company to the Deputy Commissioner as at the date the company was wound up in insolvency, being the sum of $869,512.81, remains unpaid. 13 Accordingly, I order that: (1) the application filed on 5 November 2018 to set aside the winding up order made by Registrar Allaway on 17 January 2017 is dismissed; and (2) Mr Immanuel Shmuel, former director of E.C. Services Pty Ltd, pay the costs of the First Respondent. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan.