New South Wales Supreme Court CITATION : Goulburn Wine Beer & Spirits Supply Pty Ltd v Riviera Cove Pty Ltd [2009] NSWSC 1022 HEARING DATE(S) : 17/09/09 JUDGMENT DATE : 17 September 2009 JURISDICTION : Equity JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 17 September 2009 DECISION : 1. Order that the winding-up of the defendant be terminated today; 2. Orders may be entered forthwith. CATCHWORDS : CORPORATIONS – winding-up – application to terminate winding up – consideration of assets and liabilities of company - termination of winding-up would allow deed of company arrangement to be executed which would release claims of all existing unrelated unsecured creditors - winding-up terminated LEGISLATION CITED : Corporations Act 2001 (Cth) CASES CITED : Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70 Goulburn Wine Beer & Spirits Supply Pty Ltd PARTIES : v Riviera Cove Pty Ltd FILE NUMBER(S) : SC 6264/08 COUNSEL : Applicant (liquidator): S Golledge Respondent/Plaintiff: by consent SOLICITORS : Applicant: Paul Bard, Lawyers Respondent: Taitz Solicitors LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Thursday, 17 September 2009 6264/08 Goulburn Wine Beer & Spirits Supply Pty Ltd v Riviera Cove Pty Ltd JUDGMENT 1 HIS HONOUR: On 1 May 2009 an order was made for the winding-up of the defendant company in insolvency. Mr Steve Nicols was appointed liquidator on 24 August 2009. Bergin CJ in Eq granted leave to Mr Nicols pursuant to s 436B(2)(g) of the Corporations Act 2001 (Cth) to appoint himself as voluntary administrator of the company. Her Honour made orders under s 447A in relation to the convening of a meeting of creditors. 2 The company had been, and as at this morning is again, the trustee of a trust known as the Riviera Cove Unit Trust. In that capacity it traded a business under the name of The Ice Bar at premises in Circular Quay. Those premises are held under a lease. There is an option for renewal of the lease which, if it is to be exercised, must be exercised by tomorrow. 3 The sole shareholder and director of the defendant, Mr John Chaina, made a proposal for a deed of company arrangement. It was in light of that proposal that Mr Nicols took steps to have himself appointed as voluntary administrator so that the proposal could be put to a meeting of creditors. The proposal included payment by him of a sum of $210,000 which would be sufficient to pay Mr Nicols' fees as liquidator, voluntary administrator and deed administrator; to pay the claims of priority creditors in full; and to pay a dividend of 10 cents in the dollar to unrelated ordinary unsecured creditors. The proposal was that the debts owed to related creditors would be capitalised or released. The company also has a secured creditor, St George Bank. The proposed deed of company arrangement does not affect its debt. 4 The second meeting of creditors was held on 15 September 2009. The proposal for entry into the deed of company arrangement was accepted unanimously, except by the Office of State Revenue, which abstained. 5 The deed of company arrangement has not been executed and will not be executed until the winding-up is terminated. As part of his interlocutory process filed on 24 August 2009 Mr Nicols sought an order under s 482 terminating the winding-up of the defendant. Mr Chaina has also filed an interlocutory process seeking that relief. It is on his application that counsel now moves for an order that the winding-up be terminated. 6 There do not appear to be any issues relating to this company raising questions of commercial morality, or matters which might move the Court to refuse to terminate the winding-up in order that a liquidator make further investigations into the affairs of the company. 7 The circumstances in which the winding-up order came to be made have been explained. Mr Chaina says that the company intended to change its registered office to the offices of its accountants and he suspects that ASIC was not notified of the change of address. He deposes that he was unaware of the application made by the plaintiff for the winding-up of the company. The plaintiff was a supplier to the business and the company was wound up for a debt of a modest sum. 8 Consequent upon the company going into liquidation it was disqualified from holding the position of trustee of the Riviera Cove Unit Trust, and was temporarily replaced as a trustee. That is not a matter of any significance in dealing with this application. 9 The draft financial statements for the company as trustee of the Riviera Cove Unit Trust as at March 2009 disclosed net assets of $526,144.42. The most significant asset was the value attributed to the business of The Ice Bar. The most significant debts were debts shown to be due to the Chaina Family Trust of $1,623,329 and to Dakway Pty Limited of $273,343.49. 10 Subsequent investigations have shown that the debt shown in the draft financial statements as being owed to the trustee of the Chaina Family Trust was not in truth owed to it, but to Dakway Pty Ltd. I will return shortly to the ways with which those debts have been dealt. 11 The St George Bank was recorded as a creditor of $177,342.71. The company has given a charge to the St George Bank over all its assets which also secures liabilities to the bank of associated companies. 12 Where an application is made to terminate the winding-up of a company, the Court is concerned not only about the position of existing creditors, but about the position of future creditors. Although there may be no inflexible rules (see Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70), at least as a general principle the Court will not terminate the winding-up of a company if it appears that the company would resume trading with a deficiency of assets to liabilities. 13 In the present case I am satisfied that that will not be the position. The claims of all existing unrelated unsecured creditors will be released by the Deed of Company Arrangement. 14 The trustee of the Chaina Family Trust, a company called Tuscany Cove Pty Ltd, has entered into a deed, as has Mr Chaina, with the company. By that deed Tuscany Cove and Mr Chaina acknowledge that Tuscany Cove is not a creditor of the company at all, and they each release any debt or claim which they might have against the company or the Riviera Cove Unit Trust. 15 The debt owed to Dakway Pty Limited has been satisfied by the issue of units in the Riviera Cove Unit Trust. These steps were taken yesterday and this morning, after I made orders yesterday staying the winding-up until 2pm today. 16 The debt owed to the St George Bank, and the company's contingent liability to the St George Bank for debts of others, cannot be ignored. However, I am satisfied that there is a substantial surplus in the market value of the assets which secure the liabilities of those companies to the bank such that even if the company were called on under its guarantee, there would ultimately be a surplus of assets to which it would be entitled to have recourse. 17 In exercising my discretion, as I propose to do to make the orders sought, I also take into account the undertaking which Mr Chaina has given to the Court to invest at least a further $250,000 in return for the issue of further units in the trust to restore the operational profitability of The Ice Bar business. The profitability of that business has deteriorated because, after the company went into liquidation, the bank appointed receivers to the business. However, the bank has advised that upon the Court's making an order terminating the winding-up of the company, the receivers and managers appointed by it will retire. I understand the bank does not oppose the order for termination of the winding-up. 18 For these reasons I order that the winding-up of the defendant be terminated today. 19 These orders may be entered forthwith. ****** 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.