Warner v Shulamite Pty Limited, in the matter of Shulamite Pty Limited

REASONS FOR JUDGMENT (REVISED FROM TRANSCRIPT) 1 By an originating process filed on 6 July 2012 the plaintiff seeks an order that the defendant company be wound up under s 461 of the Corporations Act 2001 (Cth) (the Act). The plaintiff relies on s 461(1)(k) which provides that the Court may order the winding up of a company if the Court is of the opinion that it is just and equitable that the company be wound up. 2 The plaintiff moves for the winding up order on the following affidavits: (a) Matthew John Davis sworn 6 July 2012; (b) Matthew John Davis sworn 11 July 2012; (c) Matthew John Davis sworn 15 August 2012; (d) Adam Chen sworn 11 July 2012; and (e) the plaintiff's own affidavit sworn 6 July 2012. 3 The brief facts of the matter, taken substantially from the plaintiff's affidavit, are as follows. 4 The plaintiff is the trustee of the joint and separate bankrupt estates of Donald Brownlie Fleming and Dee Dee Fleming. On 12 January 2012 Mr and Mrs Fleming presented debtor's petitions and filed statements of affairs with Insolvency Trustee Service Australia. Phillip Kenneth Aggs was appointed trustee of their bankrupt estates. On 30 June 2012 the plaintiff was appointed trustee of the bankrupt estates. In the course of his investigations as trustee he ascertained that Mr and Mrs Fleming held shares in the capital of the defendant. 5 On 4 July 2012 the plaintiff directed Mr and Mrs Fleming to execute transfer forms to enable him to be listed in the share register of the defendant as the holder of those shares. On that day the plaintiff received duly executed share transfers from Mr and Mrs Fleming. At that time the only recorded director of the company was Mr Mark Fleming. Mr and Mrs Fleming had previously been directors of the company but on their bankruptcy Mark Fleming was appointed as the sole director of the company. So far as the records of ASIC show, Mark Fleming remains the sole director of the defendant. It appears, however, that he resigned as a director of the defendant a few weeks after his appointment. No other person has been appointed to the office of director of the defendant. In that state of affairs it is apparent that the defendant was a rudderless ship. 6 In the course of the plaintiff's investigations as trustee he ascertained that the defendant may be the registered proprietor of real property in South Australia identified as Lot 29 in Primary Community Strata Plan 25752. That property is the subject of a registered mortgage. The registered mortgage showed a repayment date of 15 July 2012. 7 The plaintiff also received copies of his predecessor trustee's reports to creditors. Those reports referred to the defendant as being the trustee of the Shulamite Trust. On 6 July 2012 Mr and Mrs Fleming produced to the plaintiff a Deed of Variation concerning the Shulamite Trust. The Deed of Variation was dated 3 February 2011. It is not necessary for me to set out in any detail the variations to the trust deed purported to have been made by the Deed of Variation. On 6 July 2012 Mr and Mrs Fleming also produced to the plaintiff a Deed of Appointment of New Trustee dated 14 December 2011. That deed purported to appoint Ross Cameron Consulting Pty Ltd as the new trustee of the Shulamite Trust. 8 In light of the possibility that the property in South Australia was property of the defendant and given that (a) the mortgage registered over the property had a repayment date of 15 July 2012; and (b) the defendant appeared to be a rudderless ship, the plaintiff moved the Court for interlocutory relief. On 11 July 2012, I appointed Ian Struthers to act as provisional liquidator of the defendant. That appointment was made pursuant to s 472 of the Act. 9 It is Mr Struthers's opinion that the defendant should be placed in official liquidation. There is material before me which expresses his view that it may be necessary to establish whether the mortgage registered in respect of the South Australian property is a sham by examining the director of the mortgagee company pursuant to s 597 of the Act. He has also stated that it is not possible for him to identify a person who is willing to act as a director of the defendant. 10 On 13 August 2012 HMW Consulting Pty Ltd (HMW) filed a notice of intention to appear on the hearing of the application presently before me. The notice of intention to appear is supported by an affidavit of Bernard Colin Walrut sworn 13 August 2012. Mr Walrut is a solicitor employed in the firm of solicitors acting for HMW. His affidavit establishes that the defendant is indebted to HMW in the sum of $32,496.35 pursuant to a judgment of the Adelaide Magistrates Court. 11 By letter dated 25 June 2012, HMW served on the defendant a creditor's statutory demand for payment. The time for compliance with the statutory demand expired on 16 July 2012. The defendant failed to pay HMW the amount of the debt or to secure or compound for the amount of the debt to HMW's reasonable satisfaction on or before that date. It follows that the defendant is deemed to be insolvent. 12 HMW supports the application made by the plaintiff that the defendant be wound up in reliance on the ground stated in s 461(1)(k) of the Act. 13 I am satisfied that it is appropriate that an order winding up the defendant be made. It seems to me that no person is prepared to act as a director of the company and, on Mr Walrut's evidence, the defendant is plainly insolvent. In my view that circumstance supports the making of an order based on s 461(1)(k). 14 I note that Mr Struthers has consented to act as liquidator of the defendant. His consent was filed on 31 July 2012. I am satisfied that the plaintiff has standing to seek the order based on s 461(1)(k) as a contributory: see ss 9 and 529 of the Act. I note that notice of the application for the winding up of the defendant has been given in the prescribed form to ASIC. I also note that an advertisement was placed with the ASIC insolvency notices website advertising the hearing of today's application. I am satisfied that Mr Struthers, as provisional liquidator of the company, has notice of this application. Indeed, as I have indicated, he not only consents to be liquidator but urges on the Court that the defendant be placed in liquidation for the reasons I have given. 15 In the circumstances, I will order that: 1. Leave be granted to HMW Consulting Pty Ltd pursuant to r 2.13 of the Federal Court (Corporations) Rules 2000 (the Rules) to be heard in this proceeding without becoming a party to the proceeding. 2. To the extent necessary, compliance with r 5.6 of the Rules be dispensed with. 3. The defendant be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth). 4. Ian Struthers, an official liquidator, be appointed as liquidator of the defendant. 5. The defendant pay the plaintiff's costs as agreed or assessed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.