New South Wales Supreme Court CITATION : Anderson v Palmer [2002] NSWSC 192 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5160/01 HEARING DATE(S) : 25/02/02, 26/02/02 Leave to re-open - 08/03/02 JUDGMENT DATE : 20 March 2002 Christine Joyce Anderson - Plaintiff PARTIES : Christopher John Palmer - Defendant John Howard Mann - Former Liquidator Davies' Interests - Creditors JUDGMENT OF : Barrett J Mr T.A. Alexis - Plaintiff COUNSEL : Mr R. Alkadamani - Defendant Mr A.P. Spencer - Mr Mann Mr J.T. Johnson - Davies' Interests Rockliffs - Plaintiff SOLICITORS : Truman Hoyle - Defendant The Argyle Partnership - Mr Mann Maguire & McInerney - Davies' Interests CATCHWORDS : CORPORATIONS - winding up - termination of winding up on application of contributory - need to show solvency and financial stability - such application is not occasion for disputes about claims to be determined - unsubordinated claims of related parties are relevant despite their willingness not to serve subsequent statutory demand - statutory right of creditors to interest under s.563B discussed - potential benefits to some creditors in relation to such interest not made known to them - termination premature LEGISLATION CITED : Corporations Act 2001 (Cth) Brooks v Heritage Hotel Pty Ltd (1996) 20 ACSR 61 Re Data Homes Pty Ltd [1971] 1 NSWLR 338 CASES CITED : Dubolo Pty Ltd v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723 Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 17 ACSR 61 Re Warbler Pty Ltd (1982) 6 ACLR 526 DECISION : Application refused IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J WEDNESDAY, 20 MARCH 2002 5160/01 – CHRISTINE JOYCE ANDERSON v CHRISTOPHER JOHN PALMER JUDGMENT Background 1 The Anderson Group Pty Limited ("TAG") was formed in 1983 by Mr Gavan Anderson and his then wife, the present plaintiff, Mrs Christine Anderson. They became the directors and shareholders. TAG proceeded to acquire substantial assets related to various hotel businesses, commercial activities and a farming enterprise. In 1995, Mr Anderson and Mrs Anderson separated and proceedings in the Family Court of Australia followed. Those proceedings were, I infer, long and hard fought. They have still not concluded but one outcome was an order that Mr Anderson transfer to Mrs Anderson his shares in TAG and that he cease to be a director. That order has been complied with. As a result, Mrs Anderson is now the sole director and sole shareholder of TAG. 2 Before those changes in share ownership and at board level occurred, TAG became the subject of an order for winding up. The order was made on 3 March 2000 on the basis of non-compliance with a statutory demand in respect of a debt of some $22,000. Mr Anderson, it appears, was effectively in charge of the affairs of TAG when it succumbed to the winding up order. (I should interpolate here that the transfer of his shares to Mrs Anderson after commencement of the winding up was the subject of appropriate leave of the court.) 3 The liquidator appointed upon the making of the winding up order was Mr Mann. He subsequently resigned in the context of an application by Mrs Anderson for his removal. The present defendant, Mr Palmer, is now the liquidator. Mr Mann maintains that he is entitled to substantial remuneration which remains outstanding. The present application 4 Mrs Anderson, in her capacity as sole shareholder (and thus a contributory), now applies for an order under s.482 of the Corporations Act 2001 (Cth) terminating the winding up of TAG. She does so on the general footing that TAG is now solvent and in a state of financial stability sufficient to justify its being released from liquidation and restored to her control. The application is opposed by Mr Mann. It is also opposed by Mr Davies and interests associated with him, they being creditors with whom TAG was associated in business ventures. I heard the application on 25 and 26 February 2002. An application by Mrs Anderson to re-open was heard and granted on 8 March 2002. A further affidavit of Mrs Anderson was read on that occasion. The relevant criteria 5 In referring, as I have, to solvency and financial stability as the considerations relevant to an application under s.482, I have, to some extent, pre-empted a more comprehensive statement of the criteria to be addressed on such an application and jumped immediately to what I consider to be generally the most important. There are, in reality, a number of matters for the court to consider. There is a useful summary of them in the judgment of Master Lee QC in Re Warbler Pty Ltd (1982) 6 ACLR 526, although, in Dubolo Pty Ltd v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723, Santow J cautioned against regarding Master Lee's list as in any sense a series of rigid principles. The list is as follows: "1. The granting of a stay in a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: In Re: Calgary and Edmonton Land Co Ltd (In liq) [1975] 1 WLR 355; at pp 358-359 per Megarry J. See also s.243 of the Act. 2. There must be service of a notice of the application for a stay on all creditors and contributories, and proof of this: Re South Barrule Slate Quarry Co (1869) 8 Eq 688; Re Bank of Queensland Ltd [1870] 2 QSCR 113. 3. The nature and extent of the creditors must be shown, and whether or not all debts have been or will be discharged: Krextile Holdings Pty Ltd v Widdows (supra); Re Data Homes Pty Ltd (supra), Law of Company Liquidation (supra) at p.395. 4. The attitude of creditors, contributories and the liquidator is a relevant consideration: s.243(1), Calgary and Edmonton Land Co Ltd (supra). 5. The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: In re a Private Company (1935) NZLR 120; Re Mascot Home Furnishers Pty Ltd (1970) VR 593; at p.598. 6. If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd (supra). 7. The general background and circumstances which led to the winding-up order should be explained: Krextile Holdings Pty Ltd v Widdows (supra). 8. The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to 'commercial morality' or the 'public interest': Krextile Holdings Pty Ltd v Widdows (supra)." 6 I consider that, in the present case, emphasis needs to be placed on the first, third and fifth of these factors and that, except for the fourth (which, as I shall explain in due course, becomes relevant in relation to one matter), no particular issues arise in relation to the remainder. That is the reason for the references already made to solvency and financial stability. In a case such as this where the company was wound up because of inability to pay its debts as they fell due, the whole focus has moved to a system of administration presided over by the liquidator in the interests of creditors, with the interests of members relegated to a subordinate position. It cannot be expected that restoration of control of the company's destiny to its shareholders and directors (or, in this case, its sole shareholder and director) will be allowed by the court in the exercise of its discretion unless it can be seen that the debts of the existing creditors have been or will be paid and that there is a sufficient degree of additional financial strength and stability to promote confidence in the company's ability to continue without any appreciable risk of reverting to liquidation. It would not be an appropriate or prudent exercise of the court's discretion to re-launch a company which, while for the moment technically solvent, was in such a border line position that it might well succumb again to compulsory winding up in the short term. As Street J said in Re Data Homes Pty Ltd [1971] 1 NSWLR 338, the court will not exercise its discretions in a way which has "the consequence of permitting an insolvent company to go forth again into the community". The same applies to a company which is technically solvent but likely to become insolvent. 7 In the present context, the inquiry needs to focus on three broad issues: first, the capacity of cash resources (including resources immediately convertible into cash) to meet debts due or likely to become due in the short term; second, any capacity there may be to raise money quickly by resort to assets not immediately convertible into cash; and, third, an assessment that there exists a sufficient financial capacity to create confidence that there will be no relapse into insolvency. The liquid assets position 8 It is appropriate that I proceed immediately to an examination of the financial circumstances of TAG. I take as the starting point Mr Palmer's summary of the current liquid assets position of TAG (with figures rounded to the nearest $1,000) as follows: $000 Cash held by Mr Palmer 1,417 Cash held by Mr Mann 15 Cheque (proceeds of sale) 336 1,768 Mr Palmer also details other assets which I shall consider in due course. For the moment it is this category of cash assets which is important. Items to be considered on the liabilities side 9 The evidence received concerning current liabilities (by which I mean liabilities of such a nature as to be, in my assessment, relevant to the question of solvency) identified the following as items to be considered: $000 Priority creditors (employees etc) 22 "Accepted" creditors 471 "Disputed" creditors 108 "Deferred" creditors 949 Mr Palmer's fees 185 Mr Mann's fees and costs 577 Provision for capital gains tax 372 Section 563B interest 248 2,932 10 It is necessary to comment on one item in the list of assets and several in the list of liabilities. The "proceeds of sale" cheque 11 In the list of assets, the $336,000 cheque (proceeds of sale) represents TAG's sale of the proceeds of the sale of property by the North Wollongong Hotel Partnership of which TAG was a member. For reasons which are not entirely clear to me, these funds have not been paid over to TAG's liquidator, but I am told that, if the winding up is to be terminated, the sum of $336,000 will be paid and that, if I am otherwise minded to make a termination order, arrangements can be made for that to happen as a precursor to the making of the order. Since that is, I am told, an accepted position, I shall proceed on the basis that the sum of $336,000 is properly regarded as available for the purposes of the current assessment of solvency and financial stability. Mr Mann's fees and costs 12 On the liabilities side, the first matter requiring comment is the quantum of Mr Mann's fees and costs. Although this has been included in the list at paragraph 9 above at a sum of $577,000, the actual amount is not settled. There is, in fact, pending a notice of motion by which Mr Mann seeks to have his entitlements determined. I said at the hearing on 26 February 2002 that it was not appropriate for the termination proceedings to become the occasion for a de facto trial of the issues to be covered in that determination. I consider the appropriate approach to be to look at what is, from TAG's perspective, the "worst case" regarding Mr Mann's remuneration and costs. That produces the figure of $577,000 which includes elements referable to possible need to appeal certain determinations. With the whole matter unresolved at this stage, I do not think the court can safely work on anything but this conservative assumption. The "provision for capital gains tax" 13 The next item on the liabilities side calling for comment is the item "provision for capital gains tax" ($372,000). This has been included in consequence of the sale by TAG of its interest in the North Wollongong Hotel business in circumstances where an assessable capital gain appears to have arisen and there is an apprehension that Mr Palmer, as liquidator, may incur personal responsibility for TAG's resultant tax liability. Mr Palmer has taken some advice on this but the position must be regarded as unclear. In saying this, I do not suggest that the assessability of the capital gain is unclear, just that Mr Palmer's potential personal responsibility for it is unclear. When granted leave to re-open on 8 March 2002, Mrs Anderson sought to deal with this by offering to obtain for Mr Palmer an unconditional bank guarantee for $372,000 on a basis which involves no outlay by and no recourse against TAG – in other words, from her own separate assets. On the basis that Mrs Anderson will obtain and Mr Palmer will accept such a bank guarantee, the item of $372,000 "provision for CGT" can, in my judgment, be left out of account in the present enquiry as to solvency and financial stability – subject always to its relevance to the general tax position and tax liability of TAG which are matters to be mentioned presently. "Disputed creditors" and minor adjustments 14 The basis proposed by Mrs Anderson for termination of the winding up includes a regime for testing, after the event, the disputed debts. Because Mr Palmer has not admitted any proofs, it is not possible to form any view on the validity of those debts, although grounds have been shown on which it is possible to conclude that there may be some minor adjustments. 15 A proof for $12,269.20 by Mr Davies has been withdrawn. There is a suggestion that Royal Oak Hotel, by which a proof of $9,000 was lodged, may owe more than that to TAG and that that surplus has not been otherwise taken into account. There is also a suggestion that the debt owing to Esanda is some $10,450 less than the amount of a proof previously admitted by Mr Mann. These items, if accepted, cause $31,719.20 (say, $32,000) to be deducted from the total creditors. 16 It is not the function of the court, on an application such as this, to speculate about the outcome of disputes over particular debts. Unless there are cogent grounds for thinking that disputed debts are overstated (and there may be such grounds here to the extent of $28,000), the court should take those debts into account at their proved amounts. The "deferred creditors" item 17 I come now to the "deferred creditors" item of $949,000. This represents debts owing to Mr Anderson and Mrs Anderson. They have lodged proofs of debt for $530,371 and $419,653 respectively. Some attempts have been made (and others are foreshadowed) to alleviate the impact of these claims upon TAG. I should refer to them briefly. 18 A deed of 31 January 2002 between TAG, Mr Palmer as liquidator, Mr Anderson and Mrs Anderson contains provisions relevant to the debts for which Mr Anderson and Mrs Anderson have proved. Although mainly concerned with matters in relation to a superannuation scheme, the deed provides in clause 3.1: "Until determination of the Proceedings [ie, these present proceedings in which Mrs Anderson seeks termination of the winding up], Gavan and Christine agree to defer Gavan's Proof and Christine's Proof in the winding up of TAG." 19 The precise meaning of this clause is unclear. What is clear, however, is that, whatever the effect of the clause may be, it will no longer be operative once any order for termination of the winding up is made. At that point, there will not be, by virtue of the deed, any qualification upon or in relation to the claims Mrs Anderson and Mr Anderson have upon TAG in relation to these debts. 20 This reality in relation to the deed was adverted to in the course of the hearing on 25 and 26 February 2002. The further affidavit of Mrs Anderson read on 8 March 2002 had annexed to it letters to the liquidator's solicitors from the respective solicitors for Mrs Anderson and Mr Anderson, both dated 5 March 2002, stating that their client's proof of debt was withdrawn. Mrs Anderson says in the affidavit that she undertakes to the Court "not to issue a statutory demand on TAG in respect to any claim I may have against TAG". The letter from Mr Anderson's solicitors to the liquidator's solicitors says that Mr Anderson "undertakes to the Supreme Court-Equity Division not to serve a Statutory Demand on TAG pending Final Orders of the Family Court". 21 The significant thing about the purported withdrawal of the proofs of debt and the willingness of Mrs Anderson and Mr Anderson to give undertakings to the court not to serve statutory demands in respect of their debts is that, like the deed of 31 January 2002, they say absolutely nothing about the continued existence of the debts or the fact that they remain financial liabilities which, following any termination of the winding up, will come fully to life, according to their terms, subject only to the undertakings not to use them as basis for the service of any future statutory demand. It is, of course, one thing for Mrs Anderson or Mr Anderson (or both) to express a willingness – even in the form of an undertaking to the court – not to seek to make the debt the subject of a future statutory demand. It is another thing altogether either to release and forgive the debt or to enter into a commitment not to require or accept payment so that its relevance to any enquiry as to solvency is removed. 22 An undertaking not to use a debt as a basis for a statutory demand says very little indeed. It leaves entirely at large possibilities such as obtaining a judgment upon the liquidated claim and levying execution which, if returned unsatisfied, would constitute grounds for winding up. There is also the point that an order for winding up on the grounds of insolvency can be made upon evidence which does not involve resort to the statutory presumption arising from non-compliance with a statutory demand. Furthermore, actual payment of Mrs Anderson's debt and Mr Anderson's debt (or either) would, obviously enough, reduce the resources available to meet the claims of other creditors and thus increase the likelihood of moves by them to initiate winding up if those claims were not met. 23 There is nothing in the evidence to suggest that Mrs Anderson's debt or Mr Anderson's debt has some fixed maturity date such as to cause it to be irrelevant to an assessment of solvency in the immediate future. In practical terms, each debt must be treated as payable at the sole discretion of the creditor. That gives rise to a need to choose between two possibilities in making the forward looking assessment called for here. One possibility is that, as in Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 17 ACSR 187, there is room for a reasonable assumption that the debt will be called up in the short term. The other, illustrated by Brooks v Heritage Hotel Pty Ltd (1996) 20 ACSR 61, is based on an assumption that the related party creditor will desist from making demand in order to contribute liquidity. 24 In the present case, I am conscious of two particular factors. First and as I have already said, there has been no attempt by Mrs Anderson or Mr Anderson to subordinate the relevant debt in a way that will be effective beyond any termination of the winding up. This seriously calls in question the existence of any intention which would make it safe to work on the basis of the second of the possibilities to which I have just referred. Second, it is noteworthy that TAG is now wholly owned by Mrs Anderson and that Mr Anderson, with whom she continues to be involved in litigation over matrimonial property, has no apparent incentive to contribute liquidity to TAG or, for that matter, to act otherwise than entirely in his own interests in relation to the debt owed to him by TAG. 25 In the light of all the factors to which I have referred in relation to the debts owed to Mr Anderson and Mrs Anderson, I see no sensibly available course but to regard them as representing an immediate claim upon the current cash resources. TAG's tax position 26 I turn now to a matter which has some relevance to the issue of solvency but also bears upon the wider question of future financial stability. I refer to the tax position of TAG. That tax position is summed up in a letter of 19 February 2002 to the liquidator, Mr Palmer, from Mr Mangroviti, the external accountant who advises on TAG's tax affairs and prepares its tax returns. 27 Mr Mangroviti reports that the last year for which TAG has lodged a tax return is the year ended 30 June 1997. That year resulted in a tax loss of $42,250 available to be carried forward. The estimated position for the year ended 30 June 1998 is again a tax loss, $135,383. For the year to 30 June 1999, there is an estimate of taxable income of $115,106, resulting in a tax liability of $41,438 or, if certain adjustments eventuate, $68,033. 28 No tax returns have been prepared for the years to 30 June 2000 and 30 June 2001. In those instances, Mr Mangroviti is not able to make any reliable estimate or, for that matter, to say very much at all. The position as reported to the liquidator in Mr Mangroviti's letter is as follows: " 2000 YEAR We have not been provided with any statement of income and expense or other accounting records for the year ended 30 June, 2000. We understand that from August 1999 the major source of income of the company, the Print Broking business was leased to an unrelated party on a profit share arrangement. In addition the company was placed into liquidation during March 2000, and from that period to 30 June, 2000 we are not aware that there was the disposal of any significant asset which would give rise to taxable income. We would expect that during the 2000 year the company did not earn any significant taxable income. However to enable us to complete the 2000 year income tax return and determine its prima facie income tax position we require the accounting records be made available for the year from 1 July, 1999 to 30 June, 2000. 2001 YEAR As noted above the company was placed into liquidation during March 2000 and for the full year ended 30 June, 2001 the company was still in liquidation. We have not been provided with any statement of income and expense or other accounting records for the year ended 30 June, 2001. To enable us to complete the 2001 year income tax return and determine its prima facie income tax position we require the accounting records be made available for the year from 1 July, 2000 to 30 June, 2001." 29 It is, of course, too early for any predictions to be made as to any likely tax liability for the year which will end on 30 June 2002. However, the advice on capital gains tax to which I have already referred in the context of Mr Palmer's apprehension of possible personal liability contains reference to disposals of TAG property during that year generating "taxable capital gains on which it is reasonable to conclude that there will be a substantial tax liability". Any such gains and notional tax liability would, however, have to be viewed in the light of the overall result for a year which has not yet concluded and it is not really possible to come to any reliable view about the likely extent of any 2002 tax impost. 30 There must, however, be concern about the fact that tax returns have not been lodged in respect of any of the four most recently completed tax years (the most recent of which ended almost nine months ago). There is no doubt a real possibility of penalties for late lodgment of returns and, to the extent that tax liability arises, penalties and interest for the late payment of tax. These factors, plus Mr Mangroviti's inability to say more than he has about the last two of those years, leaves a significant question mark which does nothing at all to improve the financial prognostication in this case. They may also tend to raise a "public interest" issue under the eighth of the factors in Re Warbler Pty Ltd (above). The s.563B interest item 31 The final item in the list at paragraph 8 above requiring attention is "Section 563B interest". This item was not included in the material presented by Mrs Anderson or that presented by the liquidator. It was raised by counsel who appeared for the Davies interests. There was then a suggestion that such interest would not become a burden upon the available resources unless claims for it were actually made. That is an issue which requires examination. 32 The notion that interest is payable under s.563B only if demanded is one which does not withstand scrutiny against the words of the Act. Those words are quite clear. Subsection (1) is in the following terms: "If, in the winding up of a company, the liquidator pays an amount in respect of an admitted debt or claim, there is also payable to the debtor or claimant, as a debt payable in the winding up, interest, at the prescribed rate, on the amount of the payment in respect of the period starting on the relevant date and ending on the day on which the payment is made." The words "there is also payable" do not imply any requirement for demand or indicate that, in the absence of demand, there is no obligation to pay. 33 Section 563B was introduced by the Corporate Law Review Act 1992 (Cth) to give effect to a recommendation contained in the Harmer Report. Its purpose and effect are concisely explained in the following passage at page 537 of the fourth edition (1999) of "McPherson – The Law of Company Liquidation" by Professor Keay: "Once all the probable debts had been paid in full, it used to be the law that all the creditors reverted to their contractual rights against the company to the extent of the surplus in the hands of the liquidator, so that creditors with interest bearing debts were able to claim post-liquidation interest. However, this has been changed by s.563B, introduced by the Corporate Law Reform Act 1992 (Cth), which was enacted in response to the recommendations of the Harmer Committee. The Harmer Committee said that the system outlined above was unfair, as creditors who did not have interest bearing debts could not claim post-liquidation interest, despite often having to wait appreciable periods of time before being paid a dividend by the liquidator. Section 563B redresses the situation by providing that a liquidator is to pay a prescribed statutory rate of interest on all creditors' claims once all admitted debts have been paid. Once these interest payments have been made, and if there is any further surplus, then creditors who have a right, outside of the Corporations Law , for payment of post-liquidation interest are entitled to recover what they are owed." 34 This passage confirms that the right to the interest conferred by the section is absolute ("… a liquidator is to pay …") and that where, as here, the liquidation has extended over a period of two years, there is no alternative, in making the kind of assessment upon which I am currently engaged, but to count that interest as a liability which the liquidator is required to satisfy out of the readily available assets, assuming that creditors are eventually paid 100 cents in the dollar. This last point comes from s.563B(2) which makes it clear that, in general, interest does not become payable until all debts and claims in the winding up have been paid. 35 It is clear that the item referable to s.563B will become real only if it is the liquidator who makes a payment in respect of a debt or claim admitted and proved – and then only if the resources available to him have allowed 100 cents in the dollar to be paid. If, in the alternative, the winding up is terminated and it is the company under the renewed administration of its sole director which makes the payment, the statutory interest element will not become payable. Two consequences seem to me to follow. First, the fact that the company, if and when released from liquidation, will not have to make the relevant payment means that the potential liability can be omitted from the list of liabilities relevant to the present inquiry – that is, the inquiry whether there will be, upon and after release, a sufficient degree of financial stability to justify that release. 36 Secondly, however, the s.563B interest item gives rise to an important issue relevant to the fourth item in the list taken from Re Warbler Pty Ltd (above). The evidence includes elements indicating the attitude of various creditors to the notion that the winding up might be terminated. Some expressed support for termination. It seems clear, however, that none of the creditors had been made aware in any explicit way that distributions by the liquidator would in every case carry with them a s.563B interest payment if 100 cents in the dollar was achieved in respect of principal amounts, while payment of debts after termination of the winding up would not carry interest unless a right to interest formed part of the relevant contract. As will be seen later, TAG has significant assets in addition to those already identified as current liquid assets. Those assets, although not presently in the form of cash and not immediately convertible into cash, may in due course allow the payment of 100 cents in the dollar to all creditors, together with the full amount of interest provided for in s.563B. For some creditors (particularly those whose debts do not carry a contractual right to interest), that might well be a more attractive proposition than earlier receipt of the principal amount alone. Yet, as I have said, no creditor has been made aware of this as a factor to be considered in relation to the proposal that the winding up be terminated. 37 This matter is, to my mind a significant one when it comes to the exercise of the court's discretion, particularly since the possibility of an ultimate ability to pay 100 cents in the dollar plus interest seems, in this case, to be a real one. Other assets 38 I come now to the additional assets to which I have just referred. The current liquid assets of $1,768,000 referred to in Mr Palmer's summary mentioned at paragraph 8 above do not represent the whole of the assets in his hands. There are, according to Mr Palmer's evidence, the following additional items: $000 50% interest in the proceeds from the sale of the assets and business of Skadtag Pty Ltd (formerly known as North Wollongong Hotel Pty Ltd) ACN 060 647 010 ("SKADTAG") 443 50% interest in the leasehold hotel known as The Royal Oak Hotel, Parramatta ("The Royal Oak") 158 Farm property located at 8 Falls Road, Woolamia (near Huskisson) 800 Case tractor located at Woolamia 52 Less: Amounts due under asset purchase agreement With Commonwealth Bank of Australia (27) Shareholding in other companies Unknown Unsecured loans Unknown ________ 1,426 39 None of these is, however, immediately available to meet debts. It may be that some will be converted into cash at some future time. I refer in particular to the interest TAG has in the company Skagtag Pty Ltd (the former North Wollongong Hotel Pty Ltd) which sold substantial assets in conjunction with those of the North Wollongong Hotel Partnership, the partnership and the company having, in effect, pooled assets to form a single business enterprise. It may well be that Skagtag, with a cash surplus in its hands, will take action to make a distribution to its shareholders by going into liquidation or in some other way such as dividend or reduction of capital but, unless and until that happens, the sum of $443,000 representing what is, in realistic terms, TAG's "share" of the Skagtag cash resources cannot be regarded as available to TAG. 40 The interest in the Royal Oak Hotel, the farm property and the tractor likewise cannot be of relevance to an inquiry of this kind unless and until converted into cash or seen to be readily convertible. There is no evidence of such ready convertibility. Conclusions 41 The overall result, in relation to TAG's solvency and financial stability, is that the liquid assets of $1,768,000 may appropriately and safely be regarded as available to meet existing financial obligations which are either due or capable of being made due without any decision or action of TAG. For reasons already given, those financial obligations must be regarded as including, in addition to the priority creditors ($22,000) and "accepted" creditors ($471,000) mentioned at paragraph 9 above, all of the other categories of claims appearing in the list at paragraph 9 with three exceptions, namely, the provision for capital gains tax (as to which Mrs Anderson would provide to Mr Palmer the proposed bank guarantee without resort or recourse to the assets or credit of TAG), the s.563B interest element (which will become payable only if is the liquidator who pays out creditors) and a sum of $28,000 in respect of the total $108,000 for "disputed" creditors. In particular, the "deferred" creditors of $949,000 representing the debts claimed by Mr Anderson and Mrs Anderson, neither of which will be the subject of any effective subordination to other claims if the winding up is terminated, must be taken into account. The total of the relevant liabilities is therefore $2,280,000. 42 It follows that, with debts due or capable of being made due without any decision or action of TAG being $2,280,000 and the immediately available resources to cover those debts being $1,768,000, the consideration emerging from Re Warbler Pty Ltd (above) which I have identified as the most important in this case has not been addressed in such a way as to enable the court to see clearly that TAG should be allowed, in the words of Street J in Re Data Homes Pty Ltd, "to go forth again into the community". One or a combination of several future developments (such as receipt of a shareholder distribution from Skagtag, sale of the farm property for cash and effective subordination of the debts of Mr Anderson and Mrs Anderson) might well allow a favourable decision to be made on a future occasion, provided that creditors are adequately informed of the respective merits of the alternative outcomes for them. Much more reliable information about the tax position of TAG would very likely be another requirement on any such occasion. 43 I have not lost sight of Mrs Anderson's strong desire – expressed several times by her counsel – to put an end to the circumstances which see TAG's affairs in the hands of a liquidator whose ongoing remuneration and expenses are recouped out of the assets of the company. There would probably be appreciable savings in the cost of administering the company if the present regime no longer applied. That factor is not, however, one which can in any way be afforded precedence over the others to which I have referred. 44 The present application for an order under s.482 terminating the winding up of TAG is refused. ********** Last Modified: 03/20/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.