New South Wales Supreme Court CITATION : Basto v Basto [2007] NSWSC 864 HEARING DATE(S) : 23 July 2007 JUDGMENT OF : Hammerschlag J EX TEMPORE JUDGMENT DATE : 23 July 2007 DECISION : The winding up of Basto Management Limited be terminated. CATCHWORDS : CORPORATIONS – Application to terminate winding up under s 482 of the Corporations Act 2001 (Cth) – Winding up initially stayed to allow resolutions to be passed and then terminated LEGISLATION CITED : Corporations Act 2001 (Cth) PARTIES : Richard Basto Basto Management Limited (in liquidation) subject to a deed of company arrangement FILE NUMBER(S) : SC 3166/2007 COUNSEL : S.M. Golledge (Plaintiff) SOLICITORS : Uther Webster & Evans (Plaintiff) - 5 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST HAMMERSCHLAG J 23 JULY 2007 3166/2007 RICHARD BASTO –v- BASTO MANAGEMENT LIMITED (IN LIQUIDATION) (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) EX TEMPORE JUDGMENT 1 HIS HONOUR: This is an application pursuant to s 482 of the Corporations Act 2001 (Cth) brought by the plaintiff Richard Basto for an order that the voluntary winding up of Basto Management Limited, (in liquidation) (subject to a deed of company arrangement), ("the company") be terminated or, alternatively, stayed indefinitely. 2 Mr Golledge of counsel appeared for the plaintiff on the application. In it were read the following affidavits: Richard Basto 6 June 2007, Michael Jones 1 June 2007, Andrew Wily 13 June 2007, Michael Garvin 16 July 2007, David Winston Jago 4 July 2007 and Richard Basto 23 July 2007. 3 Also tendered and admitted into evidence was exhibit RB1 to the affidavit of Mr Basto of 6 June 2007. The history of the matter is set out in that affidavit. 4 It is not necessary to deal with the early history of the matter, suffice it to say that Mr Basto is a shareholder in, and creditor of, the company, the company was incorporated on 24 March 1980, and on 2 July 1997 its directors appointed Mr Hugh Wily and Mr Andrew Wily to be joint administrators. 5 The directors were then Mr Basto, Mr Jago and Mr Kelvin. As appears below, Mr Kelvin has vacated his office. 6 A deed of company arrangement was proposed but did not proceed. A resolution of the majority of creditors on 28 July 1997 resulted in the company being wound up and Messrs Wily and Wily becoming liquidators. 7 On 11 February 2004 Mr Hugh Wily appointed Mr Michael Jones as administrator. A second deed of company arrangement was voted on by creditors of the company on 1 June 2005 and was executed on 17 June 2005 by Mr Basto, Mr Jago, Mr Kelvin and Mr Jones, as administrator. 8 Pursuant to cl 5.1 of that deed, it does not come into operation unless and until, amongst others, the following condition precedent has been satisfied: "An order by the court staying the winding up of the company is obtained by Basto and/or the Directors". 9 The evidence establishes that the deed is clearly for the benefit of the company's creditors (who voted in its favour), and that, if performed, it would ensure that those creditors who proved claims will be provided for out of funds to be made available by Mr Basto. They will be paid both principal and interest. 10 In his affidavit of the 6 June 2007 Mr Basto says, in paragraph 36 that he is prepared to pay the following amounts as required by the second deed of company arrangement: a $170,505.36 to be paid to the deed administrator immediately prior to the hearing of these proceedings; b such fees as the Court determines are to be paid to the Australian Securities and Investment Commission; and c upon the retirement of the deed administrator the sum of $10,000 to the company for future operating expenses. 11 Mr Basto is himself a creditor of the company, as appears from a list of creditors and possible creditors prepared in Mr Jones' office. 12 I am informed by Mr Golledge from the bar table, and I accept, that the $170,505.36 to be paid to the deed administrator has already been paid and is held by the administrator in trust. There are, it would appear, no fees and charges presently owing to the Australian Securities and Investments Commission. There is, accordingly, no need to make any order with respect to that matter. 13 As far as the sum of $10,000 to be paid to the company by Mr Basto is concerned, although if I make the orders which are sought, the company will be returned to its directors and all creditors provided for, I nevertheless, consider it appropriate to require an undertaking from Mr Basto to pay that amount or procure its payment to the company within 14 days of the making of this order. 14 In addition, I am informed that it is proposed to capitalise, by way of converting into redeemable preferential shares, the amount presently owed by the company to Mr Basto on loan account. To that end, I am informed by Mr Golledge, and I accept, that upon the winding up being stayed, which I propose to order, there will be held a meeting to attend to that conversion. It is proposed immediately thereafter that the winding up of the company be terminated. 15 There is a further matter. One of the directors of the company, Mr Kelvin, is, pursuant to article 75 of the company's articles of association, disqualified from being a director and has vacated the office of director because he has become of unsound mind. 16 It is accordingly necessary for the directors to fill a casual vacancy on its board of directors in order to proceed. They may fill a casual vacancy pursuant to article 72 of the articles of the company. 17 The evidence establishes that upon performance of the obligations under the deed of company arrangement the company will be solvent. Mr Golledge points out that the company has been under a winding up order for a long period of time, which in the circumstances here, in my view, does not preclude the making of the orders sought. They are, in this case, justified. 18 There is nothing in the material provided which indicates, so far as the administrator is concerned, any reason for the company not to be restored to its directors, the winding up to be stayed and subsequently to be terminated. Reliance upon the undertaking of the directors to convene the necessary meeting and to arrange for the conversion of the loan account into redeemable preference shares presents no difficulty because of the course I propose to take, which is to stay the winding up for a short period to allow that to happen. I will then be able to satisfy myself that it has occurred and that the company may be returned to the directors. 19 I stay the voluntary winding up of the defendant until 3.15pm on 23 July 2007. 20 At approximately 2.30pm the foreshadowed resolutions and undertaking from Mr Basto were tendered. I accepted the undertaking. 21 In the circumstances I order that the winding up of Basto Management Limited be terminated. ********** 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.