FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v Guardian Group Australia Pty Limited ACN 003 952 056 [2007] FCA 469 Corporations Act 2001 (Cth), s 482 DEPUTY COMMISSIONER OF TAXATION v GUARDIAN GROUP AUSTRALIA PTY LIMITED ACN 003 952 056 NSD2159 OF 2006 EMMETT J 8 MARCH 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD2159 OF 2006 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: GUARDIAN GROUP AUSTRALIA PTY LTD ACN 003 952 056 Defendant JUDGE: EMMETT J DATE OF ORDER: 8 MARCH 2007 WHERE MADE: SYDNEY THE COURT: 1. Notes the undertaking of the applicant, Frank Lim, given to the Court by his Counsel to: (1) Pay on behalf of the defendant to the Commonwealth Bank of Australia Limited, the amount of $80,000; (2) Call and hold an extraordinary general meeting of the defendant (the EGM) within 24 hours of the return to Australia of Tek Eak Lim or in any event not later than 22 days from today; (3) Move for and vote at the EGM to remove the existing directors of the defendant and to replace them with himself and Siv Lim. 2. Notes that the applicant has today procured the payment of $432, 013.21 to the plaintiff in satisfaction of the debt owed to the plaintiff and the plaintiff's legal costs of this proceeding, and of $22,000 to the Official Liquidator of the defendant, Steve Nicols, in relation to his remuneration and expenses of the winding up of the defendant, and the sum of $59, 080 to Gordon & Johnstone to be dispersed by them in payment of the unsecured creditors referred to in annexure "A" to the affidavit of Sophie May sworn today. 3. Notes assurance given by the Court by Mark Tierney of Gordon & Johnstone to disburse the sum accordingly. ORDERS THAT: 4. Pursuant to s 482 of the Corporations Act 2001 the winding up of the defendant is terminated with effect from today. 5. The applicant, Frank Lim, pay the liquidator's costs of this application as agreed or as taxed. 6. To the extent necessary the defendant pay the plaintiff's further costs of this proceeding including costs of the interlocutory application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD2159 OF 2006 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: GUARDIAN GROUP AUSTRALIA PTY LTD ACN 003 952 056 Defendant JUDGE: EMMETT J DATE: 8 MARCH 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 23 February 2007 a Deputy Registrar ordered that the defendant, Guardian Group Australia Pty Limited (the Company), be wound up pursuant to the Corporations Act 2001 (Cth) (the Act). Mr Frank Lim, a shareholder of the Company, has now applied under s 482 of the Act for the winding up of the Company to be terminated. The application is based on the fact that the creditors of the Company have been, or in the immediate future will be, paid in full. 2 The only shareholders of the Company are the applicant and his father, Mr Tek Yak Lim. The Company was formed to carry on the business of industrial cleaning, mainly the removal of asbestos. The Company holds a licence from Workcover to operate that business. The present directors of the Company are the applicant's father and brother, Cameron. 3 The asbestos removal business is a labour intensive one that requires equipment and motor vehicles that are generally housed at 42 Church Street, Cabramatta, a property owned by the Company. The business has a substantial turnover of approximately $100,000 per month. The Church Street property was bought by the Company in about 1994 for $415,000. There is some evidence to suggest that if it were to be sold now it would realise significantly more than that sum, perhaps in the vicinity of $900,000. 4 Part of the property is let by the Company and the rents generate about $78,000 per annum. The property is subject to a mortgage to Commonwealth Bank of Australia Limited to secure advances to the Company by the Bank. 5 In about 1996 the Company acquired the business of a Chinese restaurant conducted in Cabramatta. The restaurant was run by the applicant's parents on behalf of the Company. The restaurant business appears to have created difficulties for the Company. 6 Cameron Lim is presently in China with his parents. The applicant's mother was taken ill in China although arrangements have been made for his father to return to Australia immediately. 7 It is common ground that a statutory demand on behalf of the plaintiff, the Deputy Commissioner of Taxation, was served on the Company. It is also common ground that a winding up application was also served on the Company. It appears that Cameron Lim was responsible for ensuring that the statutory obligations of the Company were satisfied. For reasons that are not entirely clear Cameron Lim took no steps to deal with those matters prior to his departure from Australia. 8 The applicant's sister, Liv, worked in the Company's business for about five years during the 1990s. After leaving the Company's employ she worked as national fleet manager for ABB Australia Pty Limited. She has left that job and is currently working as a business manager in Parramatta. She is now prepared to work in the management of the Company as well as maintain her job as business manager. 9 Another sister of the applivant, Sophie May, is a certified practising accountant and is the principal partner of an accounting firm at Bankstown. She was appointed as the Company's accountant by Cameron Lim in April 2006. She has done extensive work investigating the history of the Company and its financial affairs, which she has reported to the applicant, since the Company was wound up. She has also assisted Mr Schon Condon, an investigative accountant, prepare a report concerning the financial state of the Company. 10 The applicant has indicated his belief that both the asbestos removal business and the restaurant business are profitable and that the difficulties encountered by the Company under Cameron Lim's directorship are reversible. He proposes that he and his sister Liv become the directors, and that Cameron Lim and their father resign as directors. 11 The Company's indebtedness to the Commonwealth Bank is in the order of $400,000. The Commonwealth Bank has indicated that it will accept a payment of $80,000 in order to maintain or reinstate the accounts the Company presently conducts. Ms Sophie May has sworn an affidavit to which she has attached a list of the current creditors of the Company showing total indebtedness of slightly under $80,000. 12 Mr Condon has also prepared a report and has deposed that the report is accurate to the best of his understanding. He has not conducted an audit or given an opinion as to the accuracy or reliability of the financial information provided to him. However, he has examined that material and expressed the opinion that the Company is currently solvent and is likely to be so in the ensuing months. He expressed that view on the statutory definition of solvency and did so, on the basis of three alternative tests for solvency. 13 Mr Condon has expressed the view that the projected expenditure of the Company in coming months could be met from the expected income that he sets out in his report. He considers that there is a potential to produce a surplus of trading profit before tax or depreciation of approximately $123,000. He has also expressed the view that the Company would be able to satisfy its ordinary trade creditor obligations from its cash and receivable resources. Finally, he considers that the Company has the capacity to borrow further funds from financial institutions or private funders on the security of its land so as to ensure that its assets exceed its liabilities. 14 The applicant has provided to his instructing solicitors several bank cheques, being for the sum of $22,000 payable to the liquidator, the sum of $432,000 payable to the Deputy Commissioner of Taxation, the sum of $80,000 payable to the Commonwealth Bank and the sum of $58,080 payable to his solicitors Gordon & Johnstone. 15 The Deputy Commissioner of Taxation has no objection to the making of the order now claimed subject to payment of the amount owing in the sum of $432,013.21. The liquidator has no objection to the orders being made subject to payment to him of the sum of $22,000 for his costs and expenses. The Commonwealth Bank has also, as I have said, indicated that, upon payment of $80,000, it is prepared to reinstate the Company's accounts. 16 Mr Mark Tierney of Gordon & Johnstone has assured the Court that he has received instructions with which he will comply to disburse the sum of $59,080 in payment of creditors whose debts are presently due. In addition, the liquidator's solicitor has informed the Court that he holds approximately $53,000 of the Company's money in his trust account. That sum will, of course, be repaid to the Company upon the winding up being terminated. 17 The evidence indicates that the unsecured creditors, as I have said, amount to no more than $80,000. It is clear, therefore, that the creditors can be paid in full at the present time. In all of the circumstances I consider that it is appropriate to accede to the application and to order that the winding up of the Company be terminated with effect from today. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 29 March 2007 Counsel for the Applicant: R D Marshall Solicitor for the Applicant: Gordon & Johnstone Solicitor for the Plaintiff: The Argyle Partnership Solicitor for the Liquidator: Craddock Murray Neumann Date of Hearing: 8 March 2007 Date of Judgment: 8 March 2007