New South Wales Supreme Court CITATION : Vartanians v St. Gregory's Armenian School Inc [2010] NSWSC 701 HEARING DATE(S) : 21 June 2010 JUDGMENT DATE : 21 June 2010 JURISDICTION : Equity JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 21 June 2010 DECISION : Make orders 1, 2 and 3 in the originating process. These orders may be entered forthwith. The exhibits may be returned after 28 days. CATCHWORDS : CORPORATIONS - application for winding-up of incorporated association under Associations Incorporation Act 1984, s 51(1)(c) - defendant unable to pay debts - winding-up order made LEGISLATION CITED : Associations Incorporation Act 1984 (NSW) CATEGORY : Principal judgment Plaintiffs: Vahanoush Vicky Vartanians Robyn Miller Sue Robinson Lee Hurst PARTIES : Pauline Johnson Georges El-Haddad Defendant: St Gregory's Armenian School Inc FILE NUMBER(S) : SC 2010/66795 COUNSEL : Plaintiffs: M Nagy Defendant: Dr D Ghoughassian (Chairman of defendant) SOLICITORS : Plaintiffs: Maurice Blackburn Lawyers Defendant: n/a IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Monday, 21 June 2010 2010/66795 Vahanoush Vicky Vartanians & Ors v St. Gregory's Armenian School Inc JUDGMENT 1 HIS HONOUR: The defendant is an association incorporated under the Associations Incorporation Act 1984 (NSW). The plaintiffs were formerly employed by the defendant as teachers at a school conducted by the defendant in north-western Sydney. The plaintiffs seek an order for the winding-up of the defendant on the ground that it is unable to pay its debts. The application is made pursuant to s 51(1)(c) of the Associations Incorporation Act. The plaintiffs have standing as creditors (s 51(2)). 2 On or about 9 November 2008 the plaintiffs were advised by the defendant that because of low enrolments at the school, the plaintiffs would be made redundant from the end of the 2008 school year. By letters dated 21 January 2009, the plaintiffs were advised of their entitlements to final salary, long-service leave and redundancy pay. They were advised that the amounts due to them would be transferred by no later than 30 January 2009. Those payments have still not been made. 3 On 27 August 2009 orders were made by the Chief Industrial Magistrate's Court against the defendant, ordering payment within 28 days of the award entitlements of the plaintiffs. Those orders have not been complied with. There is no appeal from those orders. There is no stay of the orders. 4 The defendant does not dispute that the plaintiffs are owed the moneys claimed to be due to them. The amounts due to the plaintiffs as at 16 March 2010 total $185,688.32. It is clear that the defendant is presently unable to pay those debts. 5 Orders were made for the defendant to file and serve its evidence in reply to the plaintiffs' evidence by 11 June 2010. No such evidence was filed or served. 6 I earlier refused the defendant's application for an adjournment. Although there was no evidence tendered by the defendant on the application, I was told by Dr Ghougassian (whom I understand is the chairman of the governing body of the defendant) of the defendant's position on this question. He said that moneys which had been received from the government by way of government grants totalling some $185,000 were wrongfully applied by the Commonwealth Bank in early 2009 in reduction of an overdraft account of the defendant with the bank. He contends that the bank had no right so to apply the moneys received from the government, and that, had the money been released, as it ought to have been, the moneys would have been used to pay the plaintiffs' debts. 7 It appears from a file in the Common Law Division (number 2009/296139) that on 7 September 2009 the Commonwealth Bank commenced proceedings against the defendant. In those proceedings it seeks judgment against the defendant in the sum of $854,900.21, together with interest from 26 June 2009. It also seeks orders for possession of land of which the defendant is the registered proprietor pursuant to a mortgage. 8 Default judgment was entered in those proceedings in favour of the Commonwealth Bank against the defendant on 14 December 2009. That judgment was set aside by Harrison AsJ on 19 March 2010. Orders were made for the defendant to file and serve its defence and any cross-claim. Those orders were not complied with, but further orders have been made extending the time for the filing and service of a defence and cross-claim. 9 The fact remains that, as at today, almost 18 months after the Commonwealth Bank allegedly misapplied moneys which the defendant says it ought to have allowed to be used to pay the plaintiffs' entitlements, the defendant has still to file any claim or cross-claim articulating any such cause of action. It is not known when any such claim, if it is made, is likely to be finally determined. 10 The defendant's position appears to be that the plaintiffs are not entitled to an order winding-up the defendant until the defendant has pursued that claim. There is no evidence before me to establish the prima facie merits of the claim articulated by Dr Ghougassian against the bank. Whatever the merits might be, the position at the moment is (and has been for almost 18 months) that the defendant is unable to pay its debts. It appears inevitable that that will remain the position unless and until the defendant is successful in litigation against the Commonwealth Bank. There is no reason to continue to adjourn the winding-up application so that the defendant can pursue those claims at its leisure. The ground for winding-up of the defendant is clearly established. It will be a matter for a liquidator as to whether the rights which Dr Ghougassian maintains the defendant has against the bank should be pursued. 11 For these reasons I make orders 1, 2 and 3 in the originating process. These orders may be entered forthwith. The exhibits may be returned after 28 days. ****** 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.