In the matter of Teca Pty Limited [2011] NSWSC 686

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Teca Pty Limited [2011] NSWSC 686 Hearing dates: Monday, 27 June 2011 Decision date: 27 June 2011 Before: White J Decision: 1. Order that the amended notice of motion be dismissed. 2. Order that the applicant pay the defendant's costs of the application. Catchwords: CORPORATIONS - application to set aside winding up order - where order obtained regularly but in the absence of an appearance by the defendant company - where director willing to indemnify the company for debt claimed and costs incurred in setting aside winding up order - no evidence as to financial position of the director - no evidence of solvency of company - application to set aside winding up order dismissed Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Labraga v Pomfret [2005] NSWSC 654 Double Bay Newspapers v The Fitness Lounge [2006] NSWSC 226 Category: Interlocutory applications Parties: Workers' Compensation Nominal Insurer (Plaintiff) Teca Pty Limited (Defendant) Representation: D K Ratnam (sol'r) (Plaintiff) Nguyen (Defendant) Turks Legal (Plaintiff) File Number(s): 2011/153164

Judgment 1HIS HONOUR : On 7 June 2011, the court ordered that the defendant be wound up. Mr Scott Darren Pascoe was appointed as its liquidator. The winding-up order was made on the application of the Workers' Compensation Nominal Insurer. On 10 June 2011, a notice of motion was filed purportedly on behalf of the defendant but through the defendant's director, Mr Tony Pham. He sought an order that the winding-up order of 7 June 2011 be set aside pursuant to r 36.16. Today Mr Pham has filed an amended notice of motion in which he is named as the applicant. In addition to an order setting aside the winding-up order, Mr Pham seeks in the alternative an order pursuant to s 482 of the Corporations Act 2001 (Cth) terminating the winding-up of the defendant. 2Mr Pham deposed that he had not received the originating process and supporting affidavits for the winding-up of the company and had no notice of the proceedings. He does not dispute that the originating process and supporting affidavits were served at the company's registered office. The company's registered office is [xx xxxxxxxx xxxxxx], Canterbury. Mr Pham explained that this was the address at which he used to live, but he had since moved his residential address. 3This is not a case in which the winding-up was obtained irregularly. Nonetheless, because the order was made in the absence of appearance by the defendant, the court may set aside the order pursuant to r 36.16. 4It is well settled that where a winding-up is sought to be set aside under that rule and where there has been no irregularity in the obtaining of the order, it is incumbent on the company seeking to set the winding-up order aside to adduce evidence showing that the company is solvent (see Labraga v Pomfret [2005] NSWSC 654 at [44]; and Double Bay Newspapers v The Fitness Lounge [2006] NSWSC 226). Likewise, the court will not terminate the winding-up of a company under s 482 of the Corporations Act unless satisfied as to the company's solvency. Nor would it permit a company to resume trading under the control of its directors if the company has an excess of liabilities over assets. To permit such a course would be to expose the existing and future creditors to potential prejudice. 5On the present application, the applicant deposes that he is willing to meet whatever debt obligations are required to allow the operations of the defendant to continue. He offers to indemnify the company against the costs that might be incurred in setting aside the winding-up order. He proffers a bank cheque in the amount advised by the solicitors for the plaintiff (Workers' Compensation Nominal Insurer) as the amount of its debt ($10,149.32), its estimated costs of the winding-up application, and any costs of this application. 6There is no evidence as to the financial position of Mr Pham except that he is a substantial debtor of the company. An affidavit has been read of the company's accountant and tax agent, a Mr Peter Vickers. He deposes that the company has established a tax payment arrangement with the Australia Taxation Office (the "ATO") and deposes to his belief that after discharging the GIO General Limited (sic) debt, he believed that the company could pay its debts as and when they fell due and was solvent. He annexed documents said to support that view of the defendant's solvency. 7One of those documents is a letter from the ATO dated 5 May 2011. In that letter the ATO agrees to accept payments by monthly instalments of generally increasing amounts from between 1 June 2011 to 1 March 2013 in payment of the company's taxation liabilities. The amount of the debt the subject of that proposed instalment arrangement is $37,149.53. 8The financial statements produced on the application include a balance sheet for the company as at 31 May 2011. It shows that the company has an excess of liabilities over assets in an amount of $10,868.29. The balance sheet shows the company as having total assets of $83,746.29. Of this only $1,714.84 represents cash. There are debts owed to the company (as reported) of $70,221.49. The principal debt is described as " Loans to Directors " of $69,949.49. I infer that is a debt owed by Mr Pham. As I have said, there is no evidence as to his ability to pay. Otherwise the company's assets consist of property, plant and equipment at a written down value of $11,809.96. 9The company is said to have total liabilities of $94,614.58. So far as can be gleaned from the financial statements the amount of the debts owed on account of taxation liabilities, are $2,237 described as " tax liabilities " and $16,517.26 described as " ATO - Client Integrated Account ". This is about half the debt owed to the ATO which is the subject of the instalment arrangement. The discrepancy between the reported statement of liabilities and the information appearing in the letter from the ATO is not explained. 10The notes to the financial statements also record the company as owing a debt of $35,413.85 described as " Superannuation Payable ". There is no evidence as to why, if the company is solvent, there should be any amount payable for superannuation. 11I am not satisfied on the bare say so of Mr Vickers that the company is solvent. In any event, even if its liabilities and assets are correctly recorded in the balance sheet provided as at 31 May 2011, that balance sheet shows an excess of liabilities over assets. The court will not allow a company which is being wound up to resume its commercial life with such an excess of liabilities over assets, except if the company is entitled as of right ( ex debito justitiae ) to set aside a winding-up order made in its absence. That is not this case. 12I might add there is no evidence that Mr Pham has promised to pay the liquidator's remuneration to which he would be entitled or that he would be able to do so. 13I order that the amended notice of motion be dismissed. I order that the applicant pay the defendant's costs of the application. 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: 05 July 2011