By Originating Process filed by leave on 11 November 2014, the Plaintiff, Newbart Investments Pty Ltd ("Newbart Investments"), applies for orders under ss 482 and 511 of the Corporations Act 2001 (Cth) terminating the winding up of BBB Constructions Pty Ltd (in liq) ("Company").
The application is supported by three affidavits. The first, Mr Paul Bettar's affidavit dated 10 November 2014, indicates that he has been the sole director of the Company since his appointment in mid-June 2012 and points to the fact that Newbart Investments holds 70 of the 100 issued shares in the Company. A company search that is in evidence indicates that the remaining 30 shares in the Company are held by Louis Bettar Pty Ltd, which I infer is an entity in some way associated with Mr Bettar.
Mr Bettar's evidence is that the Company was placed in voluntary liquidation in January 2014 at a time that there was no intention no trade the company, and there is some further evidence as to the circumstances in which that occurred in further affidavit evidence in the application. Mr Bettar indicates that it is now intended that the Company will resume trading in property development subject to a termination of the winding up. His affidavit exhibits the financial statements for the Company for the period ending 14 June 2014 which indicate that the Company had, for that period, current assets, including cash at bank, in the order of $165,000 and substantial non-current assets, albeit primarily in the nature of loans made to other parties. The Company also had non-current liabilities, again by way of loans received by it from other parties, but a substantial excess of non-current assets over non-current liabilities, and substantial net assets. Mr Bettar notes that the amounts held by the Company, by way of current assets, in funds at bank, are presently held by the liquidator and would be returned to the Company on termination of the liquidation, less relatively small amounts owed to the liquidator by way of fees. The amount to be returned to the Company would, on any view, be sufficient to fund its proposed operations, at least for some time. Mr Bettar also points to adverse tax consequences, if the Company were to proceed to a distribution of equity to its shareholders, on completion of a members' voluntary winding up.
Mr Bart, who is a director of Newbart Investments, which, as I noted above, is the majority shareholder in the Company, also gives evidence in support of the application, and sets out the Company's history in greater detail, including referring to the circumstances in which it was placed in voluntary administration in November 2012, and to subsequent developments, including the entry into a deed of company arrangement, and a payment to unsecured creditors in respect of the administration. He notes that the Company was subsequently returned to the control of its directors in January 2013, was dormant for a period, and was subsequently placed into a members' voluntary liquidation in January 2014. He notes that he has agreed to resume as a director of the Company, on termination of the winding up, and also refers to the financial position of the Company and to its intent to resume trading in property development on termination of the winding up, and indicates that Newbart Investments supports the termination of the winding up.
The application is also supported by an affidavit of Mr Krejci, the Company's liquidator, who indicates that he does not know of any reason why the termination of the winding up would be contrary to the interests of the Company's creditors, the public or himself as liquidator and that he does not oppose the termination of the winding up. The authorities have frequently pointed to the importance of a liquidator's evidence in assisting the Court in assessing applications of this kind.
The case law has considered, on many occasions, the matters that are relevant to the exercise of the Court's discretion to terminate a winding up, and a useful summary of the relevant factors is set out in the decision of Brereton J in Re Glass Recycling Pty Ltd [2014] NSWSC 439 at [15]ff. The relevant factors include the attitudes and interests of the creditors, including future creditors; the liquidator's interests; contributories' interests; the public interest, including matters of commercial morality; the company's trading position and general solvency; and any explanation for any non-compliance with statutory duties and to the circumstances leading to the winding up. Those factors are, of course, matters which may require greater scrutiny where a company has been wound up on the basis of insolvency than, in the present case, where it has been placed in a members' voluntary liquidation, presumably for the convenience of its members.
In the present case, it does not seem to be necessary to review the authorities at greater length, because the application is a relatively straightforward one. The creditors of the Company, so far as it has non-current liabilities, appear to be related entities, and there is no reason to think that future creditors' interests would be prejudiced if the Company were released from winding up, where it will be released with a significant sum of funds at bank and an excess of assets over liabilities. Mr Krejci's affidavit makes clear that he does not see any prejudice to the interests of the liquidator in that regard, and he also indicates that there is no reason to see any prejudice to the interests of the Company's creditors or the public in that regard. Again, it is easier to draw that conclusion in circumstances where the relevant winding up was, in the first instance, a members' voluntary winding up. The interests of contributories are a relevant factor, but in this case both of the Company's shareholders support the termination of the winding up and each of the Company's former directors are, or will be, returned to office on the reinstatement. There is nothing no suggest that any difficulty arises from the Company's trading position and general solvency, so far as any risk which the Company may face in its intended future property development business is no different from the risk which any other company would face in that regard. There is presently no indication of any non-compliance with statutory duties or arising from the circumstances leading to the winding up which requires explanation.
Subject to one matter, I am, therefore, satisfied that the evidence before me supports an order that the winding up of the Company be terminated. I should note that, in the ordinary course, notice of applications of this kind is given to the Australian Securities and Investments Commission ("ASIC"). On 28 October 2014 Newbart Investments' solicitors gave notice of the application to ASIC, without including supporting material, and providing a general description of the reasons for the reinstatement application. On 10 November 2014, the day before this application was brought, the solicitors for Newbart Investments sent copies of the originating process and affidavits to ASIC, and requested an indication whether ASIC wished to be heard on the application. It is, perhaps, not surprising that, in circumstances where ASIC has had that material for a day, it has not yet advised its position in respect of the application.
In fairness to Newbart Investments, it indicates a degree of urgency in respect of the application, so far as there are commercial opportunities that the Company wishes to progress. However, it seems to me that it would generally be preferable in applications of this kind that a greater period of notice be given to ASIC so that ASIC has a meaningful opportunity to form any view by reference to the material which supports the application, and not by reference only to a general description of its character. It is common practice, and desirable practice in applications of this kind, to tender a letter from ASIC indicating its attitude, and the absence of opposition by the regulator is a matter which may be relevant to the Court in dealing with applications of this kind.
I make those observations so far as they may be relevant to future applications of this kind. In the present case, it does not seem to me that those matters are reason to deny the relief sought by Newbart Investments, where it seems, as a practical matter, unlikely on the evidence before me that ASIC would, in fact, have any particular reason to oppose the relief which is sought, particularly where there is no suggestion from the liquidator's affidavit that gives rise to any issues of concern. I propose to make orders in this matter, but direct Newbart Investments to give notice of those orders to ASIC and reserve liberty to ASIC to apply within a specified period. The orders will take effect immediately upon their making, but they are open to the application of a party who was not present when they were made, if ASIC chooses to make such an application, within that period.
For these reasons, I make the following orders:
(1) The winding up of the company be terminated;
(2) The costs of this application form part of the costs, charges and expenses of the winding up;
(3) The Plaintiff give notice of these orders to the Australian Securities and Investments Commission by 4pm, 12 November 2014;
(4) Reserve liberty to the Australian Securities and Investments Commission to apply within 14 days; and
(5) These orders be entered forthwith.
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Decision last updated: 23 February 2015