DCT v Comdox

[1999] NSWSC 493

CITATION:	DCT v Comdox [1999] NSWSC 493
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	1011/99
HEARING DATE(S):	14 May 1999
JUDGMENT DATE:	14 May 1999
PARTIES :	Deputy Commissioner of Taxation (P) v Comdox No 69 Pty Ltd (D)
JUDGMENT OF:	Austin J

COUNSEL :	J Vens (P) M Ryckmans (D)
SOLICITORS:	P A Somerset & Co (D)
CATCHWORDS:	Corporations - companies - winding up - application to set aside winding up order - evidence required
ACTS CITED:	Corporations Law, s 471A Supreme Court Rules, Pt 40 r 9(3)
CASES CITED:	George Ward Steel Pty Limited v Kizkot Pty Limited (1989) 15 ACLR 464 Object Design Inc v Object Design Australia Pty Limited (1997) 24 ACSR 678 Re Rick Wilson Pty Limited (1982) 7 ACLR 354 Rockbottom Fashion Market Pty Limited v HR & CE Griffiths Pty Limited (1997) 25 ACSR 467
DECISION:	Winding up order set aside

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

FRIDAY 14 MAY 1999

1011/99 - DEPUTY COMMISSIONER OF TAXATION v COMDOX NO 69 PTY LIMITED

JUDGMENT

1 HIS HONOUR: In this matter the Deputy Commissioner of Taxation took proceedings for the winding up of the company. Those proceedings were dealt with by the Registrar on 4 May 1999 at which time there was no appearance for the company. An order was made for the winding up of the company and a liquidator was appointed. Subsequently the company purported to file a notice of motion seeking an order pursuant to Pt 40 r 9(3) of the Supreme Court Rules that the order made by the Registrar on 4 May be vacated and that the winding up summons be dismissed. That motion came before me on 12 May 1999. 2 I expressed some hesitation on a number of grounds. I was uncertain that it was appropriate for the company, by its directors, to make the application after an order had been made for the winding up of the company and a liquidator had been appointed. 3 I was also concerned that the company's state of solvency was unclear. In particular the balance sheet of the company as at 30 April 1989, which was an annexure to an affidavit by the director of the company, indicated a net deficit of $13,502 and a non-current liability to the deponent director of $68,514. 4 The company's solicitor urged me to make the orders sought. He drew attention to the fact that both the liquidator and the plaintiff in the winding up proceedings had indicated that they neither supported nor opposed the application. He referred to the decision in George Ward Steel Pty Limited v Kizkot Pty Limited (1989) 15 ACLR 464 and submitted that the evidence then before the Court literally satisfied the matters which in that case Hodgson J said should be satisfied before the orders would be made. I, nevertheless, declined to make the orders on 12 May 1999 and indicated I needed to be satisfied with respect to the concerns which I have described. 5 Today the company, as applicant, returns to the Court and the plaintiff in the winding up proceedings is also represented. 6 The plaintiff's solicitor has confirmed to the Court that there are no outstanding debts to the Deputy Commissioner and that he neither consents to nor opposes the application. 7 As far as the matters which concerned me on the previous hearing are concerned, I am now satisfied that these concerns have been overcome and that the orders should be made as sought. 8 First, as far as the applicant's standing is concerned, the position under s 471A(1) of the Corporations Law is that, while a company is being wound up in insolvency, a person cannot perform or exercise and must not perform or exercise a function or power as an officer of the company unless one of a number of conditions is satisfied. There is some dispute as to whether s 471A has the effect of removing from the directors of the company any residual power which they may otherwise have had to make an application such as the present one: cf Rockbottom Fashion Market Pty Limited v HR & CE Griffiths Pty Limited (1997) 25 ACSR 467; Object Design Inc v Object Design Australia Pty Limited (1997) 24 ACSR 678. However, it is not necessary for me to resolve that issue in the present case because the applicant has tendered evidence that the liquidator has given written approval to the director of the company making the present application and has authorised the application. One of the exceptions to the operation of s 471A(1) is found in sub-para (c), which applies where a person performs a function as an officer of the company with the liquidator's approval. 9 The application in the present case is an application under Pt 40 r 9 to set aside the winding up order made on 4 May 1999. It is not an application brought under s 482 by, for example, a contributory. However, the use of Pt 40 r 9(3) in such a case is well established: see Re Rick Wilson Pty Limited (1982) 7 ACLR 354 . 10 As regards the director's loan account, evidence has been tendered in the form of an affidavit by the external accountant for the company, that a deed poll has been executed by Paul Anthony Ginty, director, with respect to the debt which the company owes him in the amount of $68,514. In that deed poll Mr Ginty agrees that payment of the whole or any part of the debt owed by the company to him was postponed until such time as all other debts the company owes, whether secured or unsecured, have been satisfied in full. The relevance of this deed poll is that it goes to the basic question of solvency of the company. It would be inappropriate, in my opinion, to make the orders sought in the application if I had any significant concern that the company would, if resuscitated, then be insolvent. Section 95A of the Corporations Law defines solvency and insolvency. The definition refers to the question whether the person concerned is able to pay all of that person's debts as and when they become due and payable. The effect of the deed poll is that debt to Mr Ginty would not become payable until all other debts have been satisfied. It seems to me that in those circumstances it is appropriate to conclude that for the purposes of the winding up provisions of the Corporation Law the company should be regarded as solvent. 11 The solicitor for the company indicated he had Mr Ginty's instructions that if the Court was not otherwise satisfied as to solvency Mr Ginty would undertake to the Court to convert the loan account debt into equity. It seems to me that is not necessary in the circumstances. 12 My final concern in the matter was to ensure that there was some independent verification of the company's financial position, independent of the director or directors of the company. That is provided in this case by a further affidavit deposed to by the company's accountant. 13 The company is not a company which trades. There are no sub-contractors or employees other than Mr Ginty. In those circumstances it appears to me appropriate that the orders be made. 14 I grant leave to the applicant to file in Court an affidavit of Christopher Thomas Duffy sworn 13 May 1999. 15 I maker orders one to three in the notice of motion filed on 12 May 1999. 16 The orders are to be taken out forthwith in the registry.

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Last Modified: 06/03/1999