Jain v Deojill Pty Ltd

REASONS FOR JUDGMENT 1 This applicant is the sole shareholder and director of Deojill Pty Ltd (In liquidation) ('the Company'). The applicant seeks an order under s 482 of the Corporations Act 2001 (Cth) ('the Act') terminating the winding up of the Company. Section 482(1) provides that at any time during the winding up of a company the court may, on application, make an order terminating the winding up on the day specified in the order. 2 Under s 482(1A)(a) of the Act, such an application may be made by a contributory of the Company. The applicant is a contributory of the Company in his capacity as a member. The Company was ordered to be wound up by a Deputy Registrar of the Court on 9 September 2005 on the application of the Deputy Commissioner of Taxation. The basis for the winding up order was a failure to comply with a demand served on the Company by the Deputy Commissioner. The demand was for payment of a judgment debt obtained by the Deputy Commissioner against the Company in the Local Court of New South Wales at Liverpool Street. The circumstances that gave rise to the alleged debt in favour of the Deputy Commissioner are not entirely clear, as will appear from what I am about to say. 3 The Company was incorporated at the behest of the applicant to be the vehicle by which he would procure purchase of a property known as Unit 9, 28 Smith Street, Chatswood ('the Property'). The Property was to be used as premises from which Silicon Memory Technologies Pty Ltd would trade. The only activity of the Company was to be the owner of those premises. 4 The evidence before me indicates that the Company has engaged in no activities other than the borrowing of money for the purposes of buying the Property, paying interest on its borrowing, possibly repaying part of the principal of the borrowing and receiving rent from its tenant, Silicon Memory Technologies Pty Ltd. Generally the amount of rent received from that Company is approximately equal to the amount of interest paid under the loan secured by mortgage of the Property. That loan was made to the Company by Australia and New Zealand Banking Group Ltd. 5 The taxation affairs of the Company were entrusted to one Raymond Tye, who has been the Company's accountant since 1996 when it was incorporated. Mr Tye has practised as an accountant since 1980 and is a registered tax agent. He is a member of the National Institute of Accountants and his office currently services approximately 1300 clients. In around 2000, Mr Tye took steps to register the Company with the Australian Taxation Office for goods and services tax purposes. It seems probable that, within a year or so, the applicant instructed Mr Tye to cause that registration of the Company to cease because the Company did not incur any GST liabilities. Whatever the precise terms of the instructions were, they were not complied with and the Company continued to be registered with the Australian Taxation Office for GST purposes. 6 The applicant said that on or about 8 or 9 August 2005, he received a telephone call from someone describing himself as a solicitor. That individual informed the applicant that an application to wind up the Company had been made and asked whether he needed any help. The applicant responded that he knew of no such application since there were no outstanding bills. He rejected the offer of assistance. That was the first intimation that the applicant had that there had been any application to wind up the Company. He was unaware at that stage that the Deputy Commissioner had commenced proceedings against the Company in the Local Court. 7 The applicant checked with the Australian Securities and Investment Commission ('ASIC') and discovered that an application to wind up the Company had indeed been made. The applicant immediately communicated with Mr Tye and recounted the conversation that he had just had. Mr Tye responded a day or so later, saying that his inquiries indicated that the Tax Office had made a self-assessment in relation to GST for the Company for the last four years and were claiming the amount of that assessment from the Company. Mr Tye told the applicant not to worry about the matter, that he had spoken to the Australian Taxation Office in relation to amending the assessment to nil as the Company had never made a profit or incurred a GST tax liability. 8 On 12 September 2005, the applicant received a telephone call from Mr Malcolm McDonald of Australian Business Consultants, in which the applicant was informed that a liquidator had been appointed to the Company. The applicant then telephoned his solicitor, Mr Rodney John Kent, and instructed him to investigate the matter. The applicant swears that if he had been aware of the claim by the Australian Taxation Office, he would have taken immediate steps to deal with it. 9 In accordance with his obligations under the Act, the applicant prepared and filed a report as to the affairs of the Company. That report indicates that the Company has an asset consisting of the property, valued at $650,000, on which there is a secured loan of $214,000. In addition, the report as to affairs discloses that the Company has other assets valued at $183,000, consisting of a one-third share in something described as Saffron Sun. 10 The only creditors of the Company, apart from expenses of the liquidation, are the judgment debt in favour of the Deputy Commissioner, a debt due to Energy Australia in respect of services provided for the Property, and the Office of State Revenue for sums of $963.75 and $625.65 respectively. 11 The applicant has caused advances to be made to the Company to enable the Company to pay the liquidator's costs, including the costs of his solicitors. The liquidator was represented on the hearing of the application and indicated that he did not oppose the orders asked for and also acknowledged receipt of payments sufficient to satisfy all of the costs and expenses of the liquidation to date. 12 The applicant has also tendered a letter addressed to his solicitors by the senior lawyer employed by ASIC. That letter acknowledges receipt of the application to this Court and the evidence intended to be relied upon by the applicant. ASIC indicates in its letter that given the matters outlined in that material, the question being for the determination of the Court, ASIC does not propose to appear and neither consents nor opposes the application. 13 The applicant is also a director of Silicon Memory Technologies Pty Limited, Saffron Son Pty Limited and McMatrix Pty Limited. Most of his time is spent in running Silicon Memory Technologies Pty Limited; Saffer and Son Pty Limited engages in property development; McMatrix Pty Limited has not yet commenced trading but is intended to undertake nursing recruitment services. 14 The applicant has filed an affidavit in which he acknowledges his obligations as a director of the Company and the Company's obligations and his own obligations to the Australian Taxation Office. He says that he ensures that each of the companies of which he is a director keeps electronic records of trading and issues tax invoices where appropriate. However, he has left the taxation affairs of any Company of which he is a director to Mr Tye up until the present time. 15 Having regard to the circumstances that I have briefly recounted, the applicant has lost confidence in Mr Tye. He has therefore instructed his solicitors to obtain documents from the Australian Taxation Office which he has not previously seen. He is proposing to make arrangements for other advice and representation in relation to taxation affairs. 16 The applicant has also proffered an undertaking to the Court to procure payment of the indebtedness of the Company to the Australian Taxation Office, to Energy Australia Limited and the Office of State Revenue by way of direct payment as a loan to the Company. 17 In all of the circumstances, I am satisfied that it is appropriate to make the orders as sought by the applicant. I note the undertaking given by the applicant to procure payment of the following amounts to each of the following creditors of the Company on 2 December 2005 by way of loan to the first respondent, namely Australian Taxation Office $24,320.71; Energy Australia Limited $963.75; Office of State Revenue $625.65. 18 I also note the acknowledgment of the liquidator of receipt of payment of costs and expenses. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.