Supreme Court New South Wales Medium Neutral Citation: Steelco Group Pty Ltd ACN 135 815 440 -v- Tarshu Pty Ltd ACN 003 297 121 [2011] NSWSC 902 Hearing dates: 8 & 9 August 2011 Decision date: 08 August 2011 Jurisdiction: Equity Division - Corporations List Before: Hammerschlag J Decision: Winding up order made Catchwords: CORPORATIONS - winding up in insolvency - s 459C(2) Corporations Act 2001 (Cth) - previously issued statutory demand not set aside - presumption of insolvency - no evidence to the contrary proffered - where three days before the hearing a newly appointed director resolves that a voluntary administrator be appointed - s 440A(2) Corporations Act 2001 (Cth) - whether the winding up application should be adjourned given the voluntary administration - Court not satisfied that it is in the interests of company's creditors for company to continue under administration rather than the company be wound up - winding up order made Legislation Cited: Corporations Act 2001 (Cth) Category: Principal judgment Parties: Steelco Group Pty Ltd - Plaintiff Tarshu Pty Ltd - Defendant Representation: Counsel: I. Tam - Plaintiff P. Folino-Gallo - Defendant R. Khoury - Allstop Fire Systems Pty Ltd - Supporting Creditor Mr Shin - Worker's Compensation Nominal Insurer - Supporting Creditor Solicitors: Legal Recovery Solutions - Plaintiff Dominic Carbone Sydney Law Practice - Defendant File Number(s): 2011/151166 EX TEMPORE JUdgment 1HIS HONOUR: By Originating Process issued on 9 May 2011, Steelco Group Pty Ltd, a judgment creditor of the defendant moves to wind it up on the basis that it is insolvent. The defendant was previously called Demian Constructions Pty Ltd. 2A statutory demand directed to the defendant was not set aside, giving rise to the statutory presumption of insolvency under s 459C(2) of the Corporations Act 2001 (Cth) ("the Act"). 3Section 459S of the Act provides as follows: (1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground: (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). (2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent. 4By Interlocutory Process dated 15 July 2011, the defendant sought leave, in opposing the winding up, to rely on a matter upon which it did not rely in an application to set aside the demand, namely, that the debt was genuinely disputed. However, without any resistance on the part of the defendant, that process was, earlier today, dismissed with costs. 5The defendant has led no evidence as to its solvency. 6On Friday last, 5 August 2011, a newly appointed sole-director of the defendant, Mr Vedat Gulasi, passed a resolution appointing Mr Ozem Kassem as voluntary administrator. 7Section 440A(2) of the Act provides that: The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up. 8The defendant now submits that the hearing of the winding up application should be adjourned for 28 days and that the Court should be satisfied, as required by the section, that it is in the interests of the defendant's creditors for the defendant to continue under administration rather than being wound up. 9Mr Kassem has sworn an affidavit in support of the defendant's position. 10The only basis upon which the adjournment is sought is Mr Kassem's evidence that he has been informed by the newly appointed director (who has held office for three days) that it may be that a deed of company arrangement will emerge which would give the creditors a quicker or potentially better dividend than in a winding up. 11A number of matters, including with respect to Mr Kassem's affidavit, are worthy of comment. 12Firstly, according to Mr Kassem, he has been advised by Mr Gulasi that the defendant has five creditors who are demanding payment. According to him, these include the plaintiff, which is owed $16,000 and Allstop Fire Systems Pty Ltd, which is owed $130,000. 13Information he has been given by Mr Gulasi is obviously wrong. As at 6 April 2011, the amount owed to the plaintiff was $16,625.99. Allstop Fire Systems is a judgment creditor of the defendant for $206,231.82. 14Mr Kassem's affidavit records that a supporting creditor, Employers Mutual NSW Ltd, is owed $10,375. I was informed from the Bar Table that this figure is also understated but in the absence of evidence I place no reliance on the asserted understatement. 15Secondly, there is evidence sourced from an Examination Summons directed to an erstwhile director of the defendant that its only asset is a claim against an entity styled Riverlands Club Holding Pty Ltd (in liq) ("Riverlands"). Mr Kassem's affidavit does not disclose, as the evidence establishes, that on 20 May 2011 he was appointed liquidator of this company. 16Thirdly, the evidence shows that, for a time, Mr Charbel Demian was a director of both the defendant and Riverlands. 17The faint prospect of a term unspecific deed of company arrangement, in the context of the earlier observations with respect to the evidence, falls far short of satisfying me that it is in the interests of the creditors that the company should continue under administration rather than have a liquidator appointed. 18The vast majority of the body of creditors supports the winding up. I am of the view that it is appropriate that the company be wound up. 19In those circumstances I do not propose to adjourn the hearing of the winding up application. This being the case, it is inevitable that a winding up order must follow. 20The plaintiff, however, does not have a consent to appointment by an appropriate qualified liquidator. In the circumstances, I propose to order that the defendant, Tarshu Pty Ltd, be placed under winding up order, but to order further that the order will be stayed until 2.00pm tomorrow and will be made final in the event that an appropriate consent to act is produced by a liquidator. 9 August 2011 21On 9 August 2011, the plaintiff produced a written consent from Geoffrey Philip Reidy to be liquidator upon which he was appointed. 22His Honour also ordered, pursuant to s 447A(1) of the Act that the voluntary administration of the defendant end forthwith. His Honour also directed that the plaintiff and supporting creditors be entitled to only one set of costs, collectively, in respect of the proceedings on 8 August 2011. ********** 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: 19 August 2011