Deputy Commissioner of Taxation v Lencal Excavations P/L (in Liq) (No. 2) [2004] NSWSC 801

New South Wales Supreme Court

CITATION : Deputy Commissioner of Taxation v Lencal Excavations P/L (in Liq) (No. 2) [2004] NSWSC 801 HEARING DATE(S) : 18/08/04 JUDGMENT DATE : 18 August 2004

JUDGMENT OF : White J DECISION : 1. Pursuant to s 482 of the Corporations Act 2001, the winding-up of Lencal Excavations Pty Limited (in Liq) (ACN 078580257) be terminated forthwith; 2. No order as to costs; 3. Orders to be entered forthwith; 4. Exhibits to be returned.

CATCHWORDS : Application for order that the winding-up of a company be terminated - Adequacy of evidence of the financial position of the company - Proposal to postpone debts owed to directors in event of later liquidation of company rather than inject funds as to capital - Failure to serve notice of application on ASIC - Service of notice of application on creditors whose debts would not be discharged by application. LEGISLATION CITED : Corporations Act 2001 (Cth) Deputy Commissioner of Taxation PARTIES : v Lencal Excavations Pty Ltd (in Liquidation) FILE NUMBER(S) : SC 2506/04 COUNSEL : Plaintiff: N/A Applicant: J Chard (sol) SOLICITORS : Plaintiff: ATO Legal Services Applicant: Paul Bard

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WHITE J

Wednesday, 18 August 2004

2506/04 DEPUTY COMMISSIONER OF TAXATION v LENCAL EXCAVATIONS PTY LTD (in Liquidation) JUDGMENT

1 HIS HONOUR: The background to these proceedings is set out in my reasons of 10 August 2004 for declining to make the orders sought pursuant to s 482 of the Corporations Act 2001 on that day and for standing over the proceedings to today. I will not repeat that background. 2 There were essentially four matters of concern which I then had. The first was that the interlocutory process had not been served upon the Australian Securities and Investments Commission. The second was that I was concerned that notice be given to the three creditors who are described as "lessor creditors". The third was that I was not satisfied with what was then the corroboration by an external accountant or liquidator of the evidence given by Mr Johnston as to the financial position of the company. The fourth matter of concern was that the injection of funds which the applicant and his wife proposed to make to the company would be by debt finance, rather than by subscription for capital, albeit that they agreed to provide undertakings to postpone their claims to those of other creditors. 3 The proposal has now been amended. The evidence filed today addresses each of the concerns which I had. Each of the Australian Securities and Investments Commission, Westpac Banking Corporation, Orix Australia Corporation and CBFC Limited has indicated that it does not oppose the application. I have already indicated the position of the petitioning creditor and of the liquidator. 4 There is additional evidence filed by the liquidator, Mr Nicols, and by Mr Holliday, to verify the financial information which has been provided. In addition, the applicant and Carole Ann Johnson have offered an undertaking to the Court to pay any creditor of the defendant company, other than a creditor whose liability arises under a lease commercial hire purchase agreement or commercial equipment loan agreement, whose debt has not been disclosed in a list of creditors. 5 They also have given an undertaking to the Court to cause 290,000 ordinary shares in the defendant company to be issued to them and, in consideration of that issue, the debt owed to them by the defendant company will be reduced by $290,000. The effect of that will be that the assets of the company will exceed its liabilities. 6 In these circumstances, I am satisfied that it is appropriate to terminate the winding-up of the defendant upon the various undertakings which I will note. 7 I note the undertakings to the Court by each of Leonard Barry Johnston and Carole Anne Johnston that: