New South Wales Supreme Court CITATION : In the matter of Burning Palms Pty Ltd (in liq) - Inglis v Lord & Crowe-Maxwell (as liquidators) [2008] NSWSC 585 HEARING DATE(S) : 10 June 2008 JURISDICTION : Equity JUDGMENT OF : Austin J EX TEMPORE JUDGMENT DATE : 10 June 2008 DECISION : Order made under s 482(2) requiring liquidators to provide report on their receipts and disbursements and company's creditors CATCHWORDS : CORPORATIONS - winding up - application to terminate winding up - failure of liquidators to provide financial information - grounds for order under s 482(2) requiring liquidators to furnish a report to the court LEGISLATION CITED : Corporations Act 2001 (Cth), s 482 Murray Inglis (Plaintiff/Applicant) PARTIES : John Frederick Lord & Atle Crowe-Maxwell, as liquidators of Burning Palms Pty Ltd (First Defendant/Respondent) Burning Palms Pty Ltd (in liq) (Second Defendant/Respondent) FILE NUMBER(S) : SC 5970/07 COUNSEL : P Beazley (Solicitor)(Plaintiff/Applicant) No Appearance (Defendants/Respondents) SOLICITORS : Beazley Singleton Lawyers (Plaintiff/Applicant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST AUSTIN J TUESDAY 10 JUNE 2008 5970/07 MURRAY INGLIS V JOHN FREDERICK LORD AND ATLE CROWE-MAXWELL AS LIQUIDATORS OF BURNING PALMS PTY LTD (IN LIQ) & ANOR JUDGMENT – On application for order staying winding up (Ex tempore; revised on 11 June 2008) 1 HIS HONOUR: In these proceedings the plaintiff seeks an order under s 482(1) of the Corporations Act staying or terminating the winding up of a company called Burning Palms Pty Limited (in liq). The liquidators of the company are Mr Lord and Mr Crowe-Maxwell. 2 Section 482(2) provides that on such an application the court may, before making an order, direct the liquidator to give a report with respect to a relevant fact or matter. By an interlocutory process filed on 2 June 2008, with abridgement of service, the plaintiff seeks against the liquidators of the company an order that they give a report to the court on certain specified matters relating to the identity of and amounts owing to creditors, the amount of funds of the company in the liquidators' possession, an itemised account of the liquidators' fees, such other matters as the liquidators wish to bring to the attention of the court, and whether in the liquidator's opinion the company is solvent. 3 The application has been served on the liquidators, together with the supporting affidavit of Mr Beazley, the plaintiff's solicitor, made on 2 June 2008, and an affidavit of the plaintiff sworn 24 April 2008. At the hearing of the interlocutory process today, Mr Beazley informed me that he also relies on an earlier affidavit of the plaintiff made on 11 April 2008, served on the liquidators' former solicitors. 4 The plaintiff's affidavits identify the following payments made to the liquidators: · a payment by the plaintiff and his wife of $12,500 for the company's car; · a payment by Sota Event Productions of about $11,000 for an invoice owed to the company; · a payment of $4,000 by Video Australasia Pty Limited; · a payment of $1,527.12 to the liquidators out of the company's bank account; · a payment of $35,830 by the plaintiff and his wife for the purchase of the company's equipment. There is a further amount of $4,151 which, according to the plaintiff, is owing by Video Australasia Pty Limited, which, he says, that company is ready to pay the liquidators. Taking into account that last amount, the total amount paid or to be paid to the liquidators is, according to the plaintiff, $69,008.12. 5 According to the plaintiff's evidence, the company's outstanding liabilities are the following: Australian Taxation Office $ 5,949.92 Cambridge Integrated Services Aust Pty Limited $ 4,212.76 Crest Business Services $ 4,417.00 State Debt Recovery Office $ 400.00 Total $14,979.68 6 According to the plaintiff's evidence, amounts previously owing by the company to the plaintiff and his wife for loans they made to the company have been capitalised by the issue of convertible preference shares, by them so that almost all of the amounts formerly owing have been converted into equity capital. 7 Mr Beazley has given evidence that when the matter was before the court on 28 April 2008, it was stood over by consent for thirty-five days on the understanding that the liquidators would ascertain the creditors of the company, pay their fees, pay creditors, and advise the plaintiff of any shortfall or surplus in funds. He subsequently wrote to the liquidators' then solicitor and having received no reply, sent a further email to those solicitors. 8 He gave evidence that on 29 May 2008 he was advised by the solicitors that they would not pay creditors without an order of the court, and on 30 May 2008 he was advised that the defendant had terminated the solicitors' instructions. The evidence includes a letter from Premium Advisory, Solicitors, to Justice Hammerschlag's Associate dated 13 May, which confirms that the solicitors' instructions were withdrawn. 9 On 10 June 2008 Mr Lord, one of the liquidators, wrote to the plaintiff, care of his solicitor, referring, inter alia, to the interlocutory process returnable today. The letter contended that the liquidators should not have been made party to the proceedings for termination of the winding up, and invited the plaintiff to amend the originating process accordingly. The letter said that Mr Lord neither consented to nor opposed the application to have the winding up order terminated, on certain stated conditions. 10 The letter also enclosed a schedule detailing an alleged net deficiency to be paid. The schedule recorded net cash at bank as at 10 June 2008 in the sum of $54,200. This amount is less than the amount calculated by the plaintiff (as above) by $15,808.12. The schedule referred to only one creditor, namely, Cambridge Integrated Services, and then set out "outstanding liquidation costs", including liquidators' fees and disbursements and legal fees, as well as GST, amounting to a total of $50,884. 11 The schedule does not give any particulars of the figures that it presents and, on the face of it, the information contained in the schedule appears to be incomplete in various ways. Mr Beazley has submitted to the court, on behalf of the plaintiff, that his client is not in a position to obtain evidence of the true financial position of the company by commissioning a report from an independent account or auditor, in circumstances where all the relevant information is in the hands of the liquidators and they have not been co-operative in providing information that the plaintiff requires to establish the company's solvency for the purposes of the application for termination. 12 I regard Mr Beazley's submissions as plausible. The letter of Mr Lord dated 10 June 2008 is unsatisfactory, because it acknowledges the interlocutory process returnable before the court today, but provides no useful information in response to that application. Further, the liquidators have not appeared today. 13 In all the circumstances, the case for the relief sought in the interlocutory process is, in my view, compelling. My only concern is that the orders sought may need to be supplemented by more specific orders, responding to the plaintiff's evidence about receipts of the liquidators and creditors. I therefore intend to supplement the orders by requiring more specific information. 14 I make the following orders: 1. I make an order in terms of para 1 of the interlocutory process. 2. I order, without limiting the generality of order 1, that the first defendant's report is to reconcile the information it contains with the information in the affidavits of the plaintiff made on 11 and 24 April 2008 with respect to payments made or to be made to the liquidators and creditors of the company. 3. I direct that the liquidators' report be provided to the court and to the plaintiff on or before Friday 20 June. 4. I order that the costs of today be reserved. 5. I stand the proceedings over to the Corporations Judge's list on Monday 23 June 2008. ********** 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.