QBE Workers' Compensation P/L v P Russell Enterprises Pty Ltd [2005] NSWSC 1128

New South Wales Supreme Court

CITATION : QBE Workers' Compensation P/L v P Russell Enterprises Pty Ltd [2005] NSWSC 1128

HEARING DATE(S) : 13/10/05 & 27/10/05

JUDGMENT DATE : 27 October 2005

JUDGMENT OF : White J

DECISION : Applicant's amended interlocutory application dismissed.

CATCHWORDS : CORPORATIONS – Winding-up – Application to stay or terminate winding-up of defendant company – Company's total liabilities substantially exceed total assets – Where evidence as to company's financial position is incomplete and otherwise unreliable – Corporations Act s 482 – Held that ability to meet current liabilities does not suffice to justify the order – Application dismissed.

LEGISLATION CITED : Corporations Act 2001 (Cth)

Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70 CASES CITED : Re Nature Springs Pty Limited (in Liquidation) (1994) 13 ASCR 50

QBE Workers' Compensation Pty Ltd PARTIES : v P Russell Enterprises Pty Ltd

FILE NUMBER(S) : SC 3492/05

COUNSEL : Applicant: C Jackson

Applicant: Creswick McCarthy SOLICITORS : Respondent: Jones King Lawyers

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

WHITE J

Thursday, 27 October 2005

3492/05 QBE Workers' Compensation (NSW) Ltd v P Russell Enterprises Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application pursuant to subsection 482(1) of the Corporations Act 2001 (Cth) for an order staying or terminating the winding-up of the defendant company. 2 The application is made by Mr Phillip Russell, who is a director and shareholder of the defendant company. The other directors of the defendant company are Mr Phillip Russell's parents. 3 The company was wound up pursuant to an order made on 15 July 2005 on the application of QBE Workers' Compensation (NSW) Limited. QBE had served a statutory demand on 27 April 2005. 4 The circumstance in which the company failed to pay the debt for Workers' Compensation insurance premiums was explained by Mr Russell as being that he had written to QBE in about February 2005 and advised it that the business of the company was to be sold and that the defendant company was to receive proceeds of the sale at the completion date of the contract for sale. At that time, the completion date was expected to be on 1 May 2005. 5 Mr Russell said that he did not receive the creditor's statutory demand for payment dated 27 April 2005, nor the originating process filed on 16 June 2005. However, it is clear from evidence filed by Mr Russell from the company's accountant, Mr Rodgers, that both a statement of liquidated claim in the Local Court and the originating process was served at the registered office of the company. Its registered office was the office of the company's accountants. 6 Mr Rodgers deposes to having sent the documents by post to Mr Phillip Russell. Mr Russell says that he did not receive them. The way in which the company dealt with documents of that importance does not engender confidence in the manner in which its affairs were conducted. 7 In support of the present application for termination or stay of winding-up, Mr Russell and Mr Rodgers initially swore affidavits on 4 August 2005. Mr Russell then deposed to the company having creditors as at 15 July 2005, consisting of QBE Workers' Compensation (NSW) Limited, Integral Energy Australia, Greg Rodgers & Associates, Australian Taxation Office and Timezone. Mr Rodgers gave evidence to like effect. 8 The evidence initially filed in support of the application also showed that on 24 May 2005 the company entered into a contract for the sale of a business called Timezone, Wollongong for an amount of $150,000. Seventy five thousand dollars was paid to the company in June of 2005. 9 On 23 August 2005 Mr Russell swore a further affidavit identifying a further creditor who he said was owed $3,537. 10 On 23 September 2005, Mr Rodgers swore a further affidavit in which he deposed to understanding that the creditors of the defendant had been fully paid or were about to be fully paid by the liquidator. He annexed a letter from the liquidator dated 22 September 2005 in which the liquidator said that bank cheques had been drawn prior to a hearing expected to take place on 26 September for the payment of the seven identified creditors. 11 Mr Russell annexed what he said was an updated profit and loss statement for the defendant for the year ended 30 June 2005, but which included a balance sheet as at 30 June 2005. The balance sheet showed that the company had a total assets, both current and fixed as at 30 June 2005, of $78,110, and total liabilities of $141,979. The assets included intangible assets of goodwill and formation expenses of just under $16,000. 12 The liabilities included a non-current liability under the description "Loan - Blue Stone Mortgages" of $123,201. That liability was not identified in either of the affidavits of Mr Russell, nor in the affidavit of Mr Rodgers.