Solicitors:
King & Wood Mallesons (Plaintiffs)
Gillis Delaney Lawyers (First Defendant)
Baker & McKenzie (Second and Third Defendants)
File Number(s): 2011/85140
[2]
Judgment
GLEESON JA: Application is made under s 482 of the Corporations Act 2001 (Cth) for an order terminating the winding up of the defendant company SCW Pty Ltd (in liq).
The first plaintiff, Mr Leslie Schirato, is the sole director of the company and also a shareholder in the company. He has standing to make such application, being a contributory of the company: s 482(1A)(a).
The company was incorporated on 21 June 1995. It carried on business primarily by way of investment in four properties and the ownership of two boats. Its major customer is Cantarella Brothers Pty Limited, which is the tenant of a property owned by the company in New South Wales.
At the time the company was placed into liquidation it had only one employee, a Mr Dickson, who was the skipper of the two boats owned by the company.
The shareholding in the company is equally held between Mr Schirato and Schirato Pty Limited (a company controlled by Mr Schirato and his wife), which is the second plaintiff and Ms Clelia Winton, also known as Ms Clelia Cantarella and a company associated with her, Canwin (Aust) Pty Limited.
The company was wound up by order of the court made on 11 April 2001 on the "just and equitable" ground as a result of a deadlock between Mr Schirato and Miss Clelia Cantarella, who were the two directors of the company.
When making that order, Barrett J observed that the case was one where it was acknowledged that there had been an irretrievable breakdown in relationships between members of the company and the winding up order was made by consent of all shareholders.
Mr Jamieson Louttit was appointed liquidator of the company by order of the court. A report by the liquidator dated 7 September 2011 is in evidence, and it is appropriate to refer to the following matters recorded in that report.
First, the liquidator expressed the view that after reviewing the company's books and records and undertaking various investigations, he was of the opinion that there were no other factors contributing to the company's failure other than deadlock between the directors.
Secondly, the liquidator indicated that, having received a report as to affairs from the directors and secretary of the company, the information provided in that report was consistent with the actual financial position of the company, other than that Ms Winton had recorded as "unknown" the estimated realisable value of the assets. The liquidator noted that the estimated surplus, having regard to the book value of assets and liabilities noted in the report as to affairs, was $22,987,767.
Thirdly, the liquidator noted that the books and records delivered to him by the directors were sufficient and complete to allow a clear view of the financial position and performance of the company to be undertaken. He also indicated his opinion that the company had maintained books and records in accordance with s 286 of the Corporations Act.
Fourthly, the liquidator expressed the view, having regard to the financial accounts and comparative statements attached to his report, that the company was solvent as at the date of his appointment.
On 17 October 2016, the liquidator lodged with the Australian Securities and Investment Commission (ASIC) a Form 524 (Presentation of accounts and statement). That document records that priority creditors were paid in full 100 cents in the dollar by no later than 20 July 2011; there were no secured creditors; and unsecured creditors were paid in full by no later than 15 September 2011. Three significant distributions have been made to shareholders in August 2012, June 2013 and February 2014. As at October 2016, the liquidator was holding a balance of $813,002.24.
The impetus for the current application is that the shareholders of the company have now resolved their differences. In December 2016, Ms Cantarella resigned as a director of the company. In January 2017, Ms Cantarella and Canwin (Aust) Pty Limited agreed to transfer their shares in the company to Mr Schirato or his nominee. Mr Schirato has requested and obtained the consent of the liquidator to such transfers of those shares. That consent was given on 31 January 2017. It seems, from a company search conducted of the records kept at ASIC on 28 March 2017, that the transfer of shares has not yet been effected in the register of the company.
The evidence well establishes that the company has, at all times, been solvent from the date it was placed in liquidation, up to and including today. It is clear that the state of affairs that led to the winding-up order being made in 2011 no longer exists and it is appropriate that the liquidation be brought to an end.
Notice of the application has been given to Ms Cantarella and Canwin (Aust) Pty Limited, the second and third defendants. There is evidence of a communication with the solicitor for those parties that they do not intend to take any active role in the application. Those defendants have not appeared today.
Notice of the application has also been given to ASIC. There is evidence of a telephone communication with a representative of ASIC, who indicated that ASIC neither consented to nor opposed the application. Since there are no creditors of the company at this time, there has been no necessity to give notice to creditors.
The considerations that generally inform the exercise of the Court's discretion on an application to terminate a winding up are well-established. In Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533, Master Lee QC identified a number of factors, which later cases have emphasised provide useful guidelines, although they do not constitute an exhaustive checklist. In Modena Imports Pty Ltd (in liq), In the Matter of Leveraged Capital Pty Ltd (R&M app) (in liq) v Modena Imports Pty Ltd (in liq) [2010] NSWSC 739 at [13], Palmer J identified the following considerations:
the applicant must make out a positive case for the favourable exercise of the Court's discretion;
the applicant must show the nature and extent of the creditors, and whether all debts have been discharged;
the attitude of creditors, contributories and the liquidator is a relevant consideration;
the applicant must show the current trading position and general solvency of the company;
the applicant must provide a full explanation of any non-compliance by the directors with their statutory duties;
the applicant must explain the general background and circumstances leading to the winding up order;
the applicant must show the nature of the company's business and whether the conduct of the company was in any way contrary to "commercial morality" or "the public interest".
Importantly, Palmer J did not suggest any hierarchy of importance of those factors. However, it is well-accepted that usually the most significant matter for consideration is the solvency of the company.
The solicitor appearing for the plaintiff also referred to the useful summary of principles by Brereton J In the matter of Glass Recycling Pty Ltd [2014] NSWSC 439 at [15]-[19].
Turning to the matters there identified which are relevant to the present case, first, this is a case where there are no creditors. The company has cash at bank well over $800,000 and there is no reason to consider that there would be any potential prejudice to future creditors if the company was brought out of winding-up and allowed to trade again.
Next, the plaintiffs have reached agreement with the liquidator in relation to payment of his remuneration and the liquidator has indicated his consent to the application, on the terms which have been agreed, relating to payment of his remuneration. The liquidator has a current claim for unpaid remuneration of $101,429.90 and a potential future claim for remuneration and expenses in the order of $54,700. It is proposed to make allowance for the liquidator to retain $157,000 on trust, on account of his unpaid remuneration, including future potential remuneration and expenses. That is both sensible and appropriate in the circumstances of the present case.
Next, as to the interests of contributories, Mr Schirato, and his company, now own or control all of the shares in the company and they have joined in the application to terminate the winding-up.
As to the question of public interest, Brereton J emphasised in Re Glass Recycling at [18] that the court must be satisfied that it would be reasonable to entrust the affairs of the company once again to the directors, or, as in this case, one of the directors, under whose management it previously failed. I am satisfied that the difficulties previously experienced in the management of the company have been addressed in circumstances where, in effect, one shareholder has now assumed complete control of the company and the reason or reasons for the previous disagreements between shareholders no longer exist. In saying that, I do not express any view on the position taken by Ms Cantarella in relation to previous disputes with Mr Schirato.
Next, as indicated, the company has no creditors and has significant cash at bank and the court may be well-satisfied as to the company's solvency if it is allowed to return to mainstream commercial life under the control of its sole director, Mr Schirato.
Finally, I am satisfied on the evidence, in particular the material in the liquidator's report I have referred to above, that there is nothing of concern in relation to previous compliance with statutory duties by the directors of the company in properly maintaining the books and records of the company. This is a case where the circumstances which led to the company's winding-up no longer affect the company and, upon termination of the winding-up, the company will be returned to the control of its sole director, Mr Schirato.
For these reasons I make orders in accordance with paragraphs 1, 2, 3, 4 and 5 of the Short Minutes of Order dated 10 April 2017, which I will initial and date today.
I have added in order 1 after "terminated" the words "with effect from 11 April 2017".
I will make a further order, being order 6, that these orders be entered forthwith.
Accordingly the orders of the court are:
1. Pursuant to s 482(1) of the Corporations Act 2001 (Cth), the winding up of SCW Pty Ltd (in liquidation) ACN 069 964 521, first defendant, is terminated with effect from 11 April 2017.
2. The liquidator of the first defendant (the Liquidator) deliver the books and records of the first defendant to the first plaintiff by no later than 24 April 2017.
3. The Liquidator is entitled to retain in an account to be held on trust for the first defendant, the sum of $157,000 from the cash at bank held by the first defendant, pending determination of the Liquidator's final application for remuneration by the Court.
4. Subject to order 3, the Liquidator will do all things necessary to transfer to the first defendant the balance of any monies held by the Liquidator on behalf of the first defendant, within 7 days of receiving a direction to do so from the first plaintiff (in his capacity as sole director of the first plaintiff).
5. Upon final determination of the Liquidator's application for remuneration:
1. The Liquidator may deduct the sum finally determined by the Court from the funds held in the trust account in accordance with order 4 above; and
2. Any balance is to be transferred to the first defendant within 7 days of the Court's determination.
1. That these orders be entered forthwith.
[3]
Amendments
24 April 2017 - Amendment to "Parties"
Amendment to "Counsel"
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Decision last updated: 24 April 2017