Supreme Court New South Wales Medium Neutral Citation: Shenouda v Work Safe Medics Pty Ltd [2011] NSWSC 45 Hearing dates: 4 February 2011 Decision date: 04 February 2011 Jurisdiction: Equity Division - Corporations List Before: Barrett J Decision: Winding up order Catchwords: CORPORATIONS - winding up - application for order on the just and equitable ground - company owned by husband and wife engaged in long-running matrimonial litigation - company paralysed - taxation debts not paid - Commissioner of Taxation supports application - just and equitable ground established Legislation Cited: Corporations Act 2001 (Cth) s 461(1)(k) Supreme Court (Corporations) Rules, rule 5.6 Cases Cited: Shenouda v Work Safe Medics Pty Ltd [2011] NSWSC 18 Category: Principal judgment Parties: Amgad Farouk Shenouda - Plaintiff Work Safe Medics Pty Ltd – First Defendant Sonia Shenouda – Second Defendant Representation: Counsel: Mr M Rosenblatt - First Plaintiff Mr G Loupos - Second Defendant Mr C Lee - Deputy Commissioner of Taxation Solicitors: Somerset Ryckmans - Plaintiff George Loupos and Associates - Second Defendant Australian Government Solicitor - Deputy Commissioner of Taxation File Number(s): 2010/392594 Judgment 1I am dealing now with the plaintiff's application for the winding up order in respect of Worksafe Medics Pty Limited. A number of relevant considerations were canvassed in my earlier reasons on the second defendant's application for an order transferring the winding up proceedings to the Family Court: Shenouda v Work Safe Medics Pty Ltd [2011] NSWSC 18. 2It is clear that the company is in a situation of deadlock and that it is unable to operate as companies should. 3It is said by the second defendant that the plaintiff is in control of the company and, in effect, that she has no means of causing it to do what it should do. That submission was made in particular in relation to my observation that if, as was postulated, the company had had healthy cash flow at an earlier stage, none of the cash had got to the Commissioner of Taxation, to whom a sizeable debt was owed. 4The implication was that it was the plaintiff who was responsible for the failure to pay the tax liability. But that would be a curious position given that that failure caused the plaintiff himself to be the recipient of a director penalty notice imposing personal liability on him for part of the company's tax debt under the taxation legislation. 5These factors illustrate quite starkly the predicament of paralysis in which the company is placed. 6I have also been taken to evidence about statements of the plaintiff that the company is, in effect, an agent through which he himself operates, which throws a further cloud over the real situation. 7The matters I have mentioned, taken in conjunction with the Family Court proceedings which have been on foot for four years, satisfy me quite comfortably that the company is in a state of paralysis where the ordinary corporate mechanisms have broken down and become unworkable such that it is just and equitable that the company be wound up. 8The plaintiff also relies on the insolvency ground. I am not in a position, I think, to make a positive finding of insolvency. There is evidence of an unsatisfied statutory demand but it was served in September 2010 with the result that the resulting presumption of insolvency ceased to be available three months after the non-compliance, which would have been some time in January. However, that is quite recent and indicative of a financial problem, if not formal evidence of insolvency. 9The other evidence of financial predicament is the evidence concerning the taxation liabilities to which I have already referred, including in my earlier reasons on the transfer application. 10Mr Rosenblatt who appears for the plaintiff has pointed out that the plaintiff has not complied with rule 5.6 of the Supreme Court (Corporations) Rules 1999 by publishing a notice of application for the winding up order. It may be that the company has creditors other than the Commissioner of Taxation, whose position has been ventilated before me. The balance sheet as at 30 June 2010 indicates debts for credit card bills, an intercompany debt and a car lease. 11The intention of the rule is to give notice to potentially interested persons who may wish to participate on the hearing of a winding up application. In this case there are two shareholders, both of whom are before the court. The Commissioner of Taxation is also before the court and supports the winding up application. 12If and to the extent that other creditors exist, there is no apparent basis on which their attitude should differ from that of the Commissioner of Taxation. In other words, I am prepared to think that the attitude of the Commissioner positively expressed to the court should be regarded as a proxy or surrogate for the attitudes of the creditors as a whole. 13In those circumstances I consider it appropriate to make an order as contemplated by rule 5.6(1) dispensing with the requirement of the rule. 14The orders are as follows: 1. Order pursuant to rule 5.6(1) of the Supreme Court (Corporations) Rules 1999 that the publication requirement imposed by that rule be dispensed with. 2. Order that Work Safe Medics Pty Limited ACN 109 345 904 be wound up pursuant to s 461(1)(k) of the Corporations Act 2001. 3. Order that Adam Shepard of Setter Shepard of 83 York Street, Sydney, an official liquidator, be appointed liquidator of Work Safe Medics Pty Limited. 4. Order that the first defendant pay the plaintiff's costs of the winding up proceedings. 5. Order that orders 1, 2, 3 and 4 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. Decision last updated: 16 February 2011