Hodges v Australian Corporate Developments Pty Ltd

[2005] NSWSC 1119

CITATION:	Hodges v Australian Corporate Developments Pty Ltd [2005] NSWSC 1119
HEARING DATE(S):	28/10/05
JUDGMENT DATE :	7 November 2005
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Application for appointment of provisional liquidator dismissed

CATCHWORDS:	CORPORATIONS - winding up - application for appointment of provisional liquidator - whether jeopardy shown - no matter of principle
CASES CITED:	Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd (2003) 47 ACSR 197 Natural Extracts Pty Ltd v Stotter (Hely J, unreported, FCA, 18 December 1998)
PARTIES:	Paul Rodney Hodges - Plaintiff Australian Corporate Developments Pty Ltd - Respondent
FILE NUMBER(S):	SC 3077/05
COUNSEL:	Mr D.J. Durston - Plaintiff Mr A.J. O'Brien - Defendant
SOLICITORS:	Searle & Associates - Plaintiff Heckenberg Associates Solicitors Pty Limited - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

MONDAY, 7 NOVEMBER 2005

3077/05 PAUL RODNEY HODGES v AUSTRALIAN CORPORATE DEVELOPMENTS PTY LTD

JUDGMENT

1 The plaintiff is one of three shareholders and three directors of the defendant. The other shareholders and directors are Mr Tan and Mr Dy, each of whom is resident in the Philippines.

2 The plaintiff has filed an originating process seeking an order for the winding up of the defendant on the just and equitable ground. He seeks, in the first instance, the appointment of a provisional liquidator. It is to the latter application that this judgment relates.

3 The defendant was established by Mr Tan, Mr Dy and the plaintiff to operate a business of importing and selling scaffolding. After the establishment of the defendant, it employed as its bookkeeper a Mr Ong who is said by the plaintiff to be related to both Mr Tan and Mr Dy. An affidavit sworn by Mr Ong was filed and read by the defendant. In it, he gives as his address an address at Holsworthy in Sydney and deposes that he is the “financial controller and manager” of the defendant.

4 The plaintiff says in his affidavit in chief that, despite periodic requests to Mr Ong, he was never allowed to look at the defendant’s accounts and that, as a result, he “continued to get anxious about the company’s financial affairs”. He expresses concern that the defendant was engaging in transfer pricing to its own detriment and to the benefit of offshore counterparties, being interests associated with Mr Tan and Mr Dy who were thereby “stealing”. He further says that, after the defendant had been in operation for about seven months and he had “not received any or any sufficient information regarding the company’s financial affairs”, he proposed to Mr Tan and Mr Dy that he buy them out. He then says that he “caused an audit to be conducted by Simmons Business Centre Pty Ltd”. A report by that company dated 9 December 2004 has been introduced into evidence by the plaintiff. I shall say more about it presently. Soon after that report was received by him, the plaintiff gave a copy to Mr Tan and Mr Dy in the context of his discussions with them about a possible buy-out.

5 The report just mentioned refers, as will be seen, to another company called Golden Sphere Global Resources Pty Ltd the directors of which are Messrs Tan, Dy and Ong, the shareholders being Messrs Tan and Dy and their wives. These particulars appear from a search annexed to the plaintiff’s affidavit. The plaintiff’s affidavit goes on to say that, after receipt of what he calls “the audit report”, he “had no faith in continuing business with Tan and Dy”. He says that in November 2004 he activated a shelf company he had and changed its name to “ACD Access Systems Pty Ltd t/as Access Solutions” (referred to as “Solutions”). He says that, between 4 January and 12 February 2005, Solutions paid $700,000 to Tan and Dy for “the business and stock as well as assets”, it being his understanding that he had an agreement with them under which Solutions was to buy those items from the defendant for $1,876,000. The plaintiff’s affidavit continues:

“The rest of the money was to be paid to them after the auditor, or an independent administrator, had made the necessary adjustments to the accounts to demonstrate the real position of the company and the value of the transfer pricing which should have been credited back to the company.”

6 The plaintiff further deposes that Mr Tan and Mr Dy were to attend his home in the suburbs of Sydney on 12 February 2005 to give him executed share transfers and directors’ resignations but they failed to attend, since when he has not heard from either of them or received those documents. Solutions, however, has “taken over $700,000 worth of stock which it is selling through my new business”. This stock appears to be stock sourced from the defendant.

7 On 1 April 2005, solicitors purportedly acting for Messrs Tan, Dy and Ong wrote to the plaintiff alleging that the plaintiff, although a director of the defendant, was “interested in” businesses trading as “Australian Corporate Developments Manufacturing” and “Australian Corporate Developments Access”. The letter drew attention to the duties of company directors and alleged breach of duties of that kind owed by the plaintiff to the defendant. A claim for an account of profits was foreshadowed, as was the possibility of a meeting of members of the defendant with a view to removal of the plaintiff as a director. The letter gave 30 days notice of termination of a “commission agreement” with the defendant.

8 The plaintiff’s affidavit in chief concluded:

“Creditors of the company are looking to me to pay the company’s outstanding debts both as a director and pursuant to personal guarantees I have provided.”

9 The plaintiff says that, on the basis of this evidence in chief, “I no longer repose trust and confidence in my fellow directors”, adding that “even if Mr Ong runs the company for them he is not a director”.

10 I return to the report dated 9 December 2004. It is on the letterhead of Simmons Business Centre Pty Ltd, described as “public accountants, taxation consultants and business advisers”. It carries the signature of Mr Jerome Simmons and is addressed to the plaintiff, described as “Director, Australian Corporate Developments Pty Ltd”.

11 The content should be quoted in full:

“ RE MANAGEMENT REPORT - AUDIT
As per your instructions our firm has conducted an audit of Australian Corporate Developments Pty Ltd (ACDPL) and Golden Sphere Global Resources Pty Ltd for the period 30 June 2004 and from 1st July to 31st October 2004. I present the following for your consideration:
The financial reports of ACDPL & Golden Sphere may be flawed due to the following reasons:

1) No separation of accounting functions/duties.

2) A conflict of interest with regards to Eddie Ong as accountant for both companies.
3) A conflict of interest with the Directors wives being shareholders of Golden Sphere and Eddie Ong being a sole director of Golden Sphere.
4) Substantial Internal adjustments have been made to Stock for both companies.
5) Aged Trade debtors and Trade creditors seem to be different to that recorded on the companies general ledger.

I present the following findings for your consideration and/or attention:
1) The inventory accounts of both companies have been adjusted on many occasions. I could not investigate whether the adjustments were justified or whether they were properly investigated prior to adjustment being made.
2) Stock on hand was difficult to reconcile due to the above and the fact that no stock control sheets were provided, if at all maintained (although requested).
3) As per your advice stock on hand for both companies to 30 November should be $2.5 Million. This figure is correct on the financials, but as per your own stock take only $2.25 million of goods is on hand to 31st October 2004.
4) At the time Golden Sphere was set up, ACDPL had over $450,000 worth of stock on hand, but ACDPL made over $900,000 worth of purchases via Golden Sphere. Did ACDPL use the FIFO method? It appears that this may not be the case and most of the old stock may still be on hand.
5) The above may result in a lower than expected gross profit margin and hence a lower bottom line for Australian Corporate Developments.
6) The Gross profit margin for ACDPL was 13% in 2004 and 6% To 30 November 2004.
7) The gross profit margin for Golden Sphere was less than 1% in 2004 and negative 5.97% to 30 November 2004.
8) Trade debtors for ACDPL was out by $101,600 for the 2004 year.
9) Foreign exchange losses. As per your advice, all overseas purchases from Manila were to be in Australian dollars. However by March 2004 all purchases changed to US dollars, resulting in Exchange losses of over $30,000 in 2004 and $3,000 to 30 November 2004.
10) Forklifts (2) were purchased in Golden Sphere and not in ACDPL as thought (and decided upon) by Paul Hodges.
For your information, please find below the status of various accounts:
1) GST/BAS – All Bas returns have been lodged and paid to 30 November 2004.
2) PAYG WITHOLDING – all tax on employee wages has been paid to 30 November 2004.
3) FACTORY RENT has been paid to 19/12/04.
4) SUPERANNUATION has been paid to 30/09/04.
OPINION ON FINDINGS :
Based on the above, it appears that purchases either from Manila or Golden Sphere have been inflated (Or by both sources), thereby diverting profits away from ACDPL. The gross profit margins of both companies do not seem viable or correct and hence why I draw this conclusion. Since it is a new company, I can understand a reduction in GP from say 40% (as advised) to 20-25%, but not 13 to 6%. Both companies have made huge losses, but the main supplier in Manila is owed over $2.5 dollars and he is also a Director of ACDPL (not to mention his wife is a shareholder of Golden Sphere).
The question that must be asked is – Are the transactions between Manila/Golden Sphere and ACDPL at arms length or commercially viable and are they of benefit to ACDPL?
Non-commercial transactions, Inflating purchase prices & thereby Diverting profits overseas in this manner may well be a contravention of the anti tax avoidance laws of the Australian Tax Office (ATO). Conflict of interest, breaches of directors duties and insolvency issues may also be evident and may well breach sections of the Corporations Act as administered by Australian Securities and Investments Commission (ASIC). The actions of the two Non-resident directors may also face scrutiny from ASIC. If found guilty, substantial fines and/or jail terms may apply.
RECOMMENDATIONS:
1) Conduct an independent audit of inventory and in particular with regards to purchase prices and stock orders/adjustments.
2) Investigate why trade debtors and trade creditors summaries do not reconcile with the general ledger and ensure the financials are amended.
3) Investigate the cost of the Forklifts, as the purchase price seems a bit inflated when you consider where they were purchased (Manila).
4) If the inventory audit finds any flaws as discussed above, contact the ATO to investigate the alleged anti avoidance of tax in Australia.
5) Contact Australian Securities and Investments Commission To investigate breaches of the Corporations Act and the action of the non-resident directors of ACDPL.
Should you wish to discuss the above or require further clarification, please do not hesitate to contact this office.”

12 It is by reference to the evidence in his principal affidavit, to which I have referred (including the Simmons report), that the plaintiff initially came before the court seeking a winding up order and, as an urgent interlocutory measure, the appointment of a provisional liquidator. That was more than five months ago. In the meantime, the defendant company has put on evidence and the plaintiff, in turn, has filed evidence in reply. I should refer to salient features of this further evidence, as well as matters emerging from cross-examination of both the plaintiff and Mr Tan.

13 The principal affidavits read in the defendant’s case were an affidavit of Mr Tan, an affidavit of Mr Ong and an affidavit of an accountant, Mr Chew.

14 Mr Tan deposes that he had no idea that the plaintiff would move unilaterally to seek winding up. The proceedings were commenced without notice to him. As to the establishment of Golden Sphere, Mr Tan says that this was effected at the express suggestion of the plaintiff and that it was the plaintiff’s idea that Messrs Tan, Dy and Ong should be the directors to the exclusion of the plaintiff. The plaintiff, in his affidavit in reply, says that he flagged a possible problem in his being managing director (as distinct from just a director of Golden Sphere), that he never consented to Mr Ong’s being a director and that he thought he had been appointed a director.

15 Mr Tan described the business modus operandi, involving the plaintiff, the defendant and Golden Sphere as follows at paragraph 16 of his affidavit:

“ACD directly imported scaffolding from the Philippines and/or from China. On occasions, items would be purchased from Golden Sphere which in turn, imported the scaffolding. The Applicant was a director of ACD and was aware of how ACD sourced the scaffolding which it distributed in Australia. As the director responsible for ACD’s sales and business development he knew the stock inventory. The Applicant determined product pricing and discounts. In the event that there was a need to cover sales he had made or projected that he would make, the Applicant would coordinate with Chi Tong Dy and myself to place the orders to ACD’s overseas suppliers. The Applicant was aware of the quantity and pricing considerations for ACD’s stock inventory. Before any order was placed, all the Directors of ACD had full knowledge of the purchase price of the goods to be imported by ACD.”

16 The plaintiff’s response in his affidavit in reply:

“I refer to paragraph 16. I trusted Dy and Tan and relied on them as to the pricing of the stock inventory.”

17 Mr Tan goes on to say that the plaintiff was aware of the defendant’s business performance and had full access to the books if he needed to check on operations. The plaintiff, in his affidavit in reply, denies this. Mr Ong deposes that the plaintiff never said to him, “Can I have a look at the company’s accounts”, but that, on occasions, the plaintiff did ask for up to date sales figures and inventories which Mr Ong gave him.

18 Mr Tan refers in his affidavit to the initiation of discussions in or about September 2004 about the possibility that the plaintiff and “investors” allied with him might buy out Mr Tan and Mr Dy. The two of them discussed a price at which they were prepared to express interest. Mr Tan says that this was communicated to the plaintiff, who, after a few weeks, said that if a nominated lower price were agreed, he would be able to buy. The plaintiff, in his affidavit in reply, denies specific aspects of Mr Tan’s account but accepts that there were buy-out discussions and negotiations. Indeed, he referred to such proposals in his affidavit in chief, but said that they began in December 2004. The plaintiff says that he had given the Simmons report to the persons with whom he intended to join in making the purchase and that two (out of three) then decided to withdraw.

19 Mr Tan deposes that, on 27 January 2005, the plaintiff met with him and Mr Dy and presented them with a form of purchase agreement which was then signed by the three of them. The plaintiff, in his affidavit in reply, denies what is said in this part of Mr Tan’s affidavit. But a copy of the agreement is annexed to Mr Tan’s affidavit and, when it was put to the plaintiff in cross-examination that his signature was on it, he readily accepted that he had signed it.

20 Mr Tan says that, by 2 February 2005, the plaintiff had not paid the amounts stipulated in the agreement and that he and Mr Dy met with the plaintiff on 3 March 2005 and discussed the possibility of revised terms for a buy-out by the plaintiff. According to Mr Tan, there was a new agreement for the making of payments by the defendant but that he did not pay. The plaintiff denies the relevant passages in Mr Tan’s affidavit but, by referring to a reason why “the balance of the $1,876,000 had not been paid” acknowledges that some arrangement entailing payment by him or, at least, interests associated with him was on foot.

21 It is Mr Tan’s evidence that at some undefined point, apparently after early March 2005, he was told by Mr Ong that Solutions was engaged in the same business as the defendant and had been canvassing the defendant’s customers and taking business away from it. The plaintiff, somewhat curiously, denies this part of Mr Tan’s affidavit but then immediately says:

“Tan and Dy were both aware from the start that I was opening a new company called ACD Access Systems [i.e., Solutions] as it was Dy who suggested it.”

22 I infer from this that there is no dispute that the plaintiff was involved in the setting up of a competing business but that there is an issue as to whether this was done with the defendant’s knowledge and consent.

23 Mr Tan gave uncontradicted evidence of having called the defendant’s phone number and being told by the person who answered:

“No this is ACD Access Systems. We have taken over Australian Corporate Development. Do you want to place an order?”

24 Mr Tan says that Mr Ong later told him that the defendant’s phone and fax numbers had been diverted to ACD Access Systems (or Solutions) and that he was trying to get this reversed.

25 Other pertinent matters emerged from Mr Tan’s oral evidence. He said that, at the time of swearing his affidavit in July this year, it had been his intention to seek removal of the plaintiff as a director of the defendant, although it was recognised that he could not be removed as a shareholder. The rationale was stated in the following part of cross-examination:

“DURSTON: Q. You intended as of 12 July 2005 to remove him as a director, that is correct, isn’t it?
A. That is correct.

Q. And that was because Mr Dy [scil. “you and Mr Dy”] could not work with Mr Hodges any more?
A. Yes sir.

Q. There had been a complete breakdown in the relationship between all three of you?
A. Yes.

Q. In fact the company had always required all three of you to work together?
A. Yes sir.

Q. And in fact it is not possible for the company, without an Australian director, to work the way it was intended to work?
A. Yes sir.”

26 In re-examination, Mr Tan said that his present intention with respect to the defendant was “to collect receivables and probably wind down”.

27 I later acceded to an application to lead further evidence in chief from Mr Tan. He then testified that he had an intention of appointing a Mr Yap, resident in Australia, to be a director of the defendant. His evidence continued:

“O'BRIEN: Q. Have you had any directors’ meetings or shareholders’ meetings with regard to appointing him?
A. Not yet, but we intend to have one to appoint Mr Egbert Yap.

Q. And what will be his duties?
A. He will be the local director here in Australia. He will chase after the receivables, probably wind down the company after we get paid for the receivables.

Q. And aside from receivables what is there, just stock?
A. Yes, and maybe try to sell some of the stock remaining, if any.”

28 I refer next to the evidence of Mr Ong who, as I have said, describes himself as the financial controller and manager of the defendant. Mr Ong deposes that the defendant retained a firm of accountants, Chew & Chiu of 60 York Street, Sydney, to produce the annual accounts. He says that while he attended to the monthly BAS returns, the external accountants prepared the tax return, profit and loss account and balance sheet. He annexes to his affidavit (which was sworn on 30 May 2005) a copy of the accounts so prepared for the year ended 30 June 2004. Also annexed, as extracted from the internal MYOB system, are a profit and loss account for the period to 30 April 2005 and a balance sheet at that date. Mr Ong refers to various payments by Solutions to the defendant which he says were for sales of scaffolding and equipment and were unrelated to any business acquisition. He also refers to wrongs he considers the plaintiff to have done to the defendant.

29 In relation to the plaintiff’s complaint that he was being chased by creditors of the defendant, Mr Ong says that there are no creditors other than Golden Sphere and the lessor of the warehouse. He says that he is aware of the plaintiff’s having guaranteed the defendant’s performance under that lease but is otherwise unaware of any guarantee liability having been undertaken by him. When the plaintiff was cross-examined about this complaint of his, he referred only to the lessor, Telstra and Optus – the last two being creditors for telephone charges on services which, on the evidence, appear to have been diverted to the plaintiff’s own company.

30 The last affidavit to be mentioned is that of Mr Choy, a chartered accountant and partner in the firm of Chew & Chiu. He deposes to being aware that day to day management of the defendant is in the hands of Mr Ong who is the signatory on the cheque account. He describes the plaintiff as “the director responsible for sales and business development”. Mr Choy received a copy of the Simmons report in mid December 2004. He thereupon searched the ASIC website to see if Mr Jerome Simmons was a registered auditor and found no record of registration. Thereafter, Mr Choy spoke to Mr Ong and, in response to Mr Ong’s question what he thought of the Simmons report, said:

“It is not a proper auditor report and does not appear to have been prepared by a registered auditor. It cannot be relied upon. It contains flawed reasoning and is self-serving. It’s nonsense.”

31 Mr Choy, in his affidavit, goes on to provide a critique of the Simmons report. He refers to a number of specific matters and concludes:

“In my opinion the Simmons letter is biased, irrational, difficult to follow and confusing. In my opinion it should not be relied upon and I would not rely on it.”

32 I proceed now to consider briefly the complaints or concerns which appear to lie at the heart of the plaintiff’s claim.

33 The first is a concern that the defendant was being disadvantaged by value-shifting transactions with overseas entities in which Mr Tan and Mr Dy were interested. The only evidence of this is two price lists which may provide some evidence of prevailing prices in particular markets. But they are price lists at points of time more than a year apart and for that reason – in addition to their unclear provenance – are of very limited probative value. Otherwise there is, on the question of value-shifting or transfer pricing, no more than, first, the plaintiff’s own assertions based on what he considers to be his knowledge of the market and, second, the statements in the Simmons report which, I must say, I discount almost to the point of rejection out of hand. The Simmons report does no more than make bald and unsupported assertions, hedged around with ominous language about enforcement authorities. There is no attempt whatsoever at rational discussion and analysis. The document is, quite frankly, an unsatisfactory piece of work, devoid of real content but replete with statements of unsupported conclusion or, at least, possible conclusion: the author employs the unsubtle technique of hinting meaningfully at pregnant possibilities. Parts are simply unintelligible. The plaintiff did not see fit to call the author of the Simmons report as a witness.

34 Soon after the Simmons report was prepared and given to Mr Tan and Mr Dy, the plaintiff had discussions with them about the possibility of an acquisition by him. He gave them a written proposal which had been prepared for him by Simmons. It contained similar material about enforcement authorities and the like as well as similar allegations of impropriety. It seems likely that the Simmons report was prepared as part of a “softening up” attempt in advance of the plaintiff’s seeking to pursue buy-out negotiations with the aid of a negotiating document prepared by the very person who wrote the report itself.

35 The plaintiff next complains that he was, as a director, denied access to financial information. That is contradicted by Mr Ong who says that he, as the bookkeeper, received periodic requests from the plaintiff for particular financial information which was given. It is, in a material way, also contradicted by the fact that Simmons was apparently given access to materials enabling it to say that it had conducted an “audit” of both the defendant and Golden Sphere. The plaintiff said in the witness box that Simmons had obtained access to books and financial records of the defendant for this purpose by contacting Mr Ong and Mr Choy. Simmons was, of course, retained by the plaintiff for his own purposes. Finally, the plaintiff conceded in cross-examination that he had a means of access that enabled him to see on the MYOB system what I understood to be basic financial information but did not have a computer password that would have allowed him to access more detailed information about particular transactions. He says that he asked for this password but was not given it. Mr Tan says that he authorised the giving of the password to the plaintiff.

36 As for being chased by creditors, it seems clear enough that the demands the plaintiff received related to rent and telephone bills for premises leased by the defendant but from which the plaintiff was conducting activities other than the defendant’s activities.

37 There can be no doubt that there is estrangement between the plaintiff on the hand and Messrs Tan and Dy on the other. He thinks that they have caused the defendant to engage in improper value-shifting to their advantage and the defendant’s disadvantage. They are concerned that he has become involved in a business operated by Solutions to the disadvantage of the defendant. There have been negotiations, transactions and payments making it clear that the plaintiff is going his own way. It is neither possible nor necessary at this point to come to firm conclusions about contractual arrangements for buy-out and like matters as between the plaintiff on one hand and Messrs Tan and Dy on the other. The plaintiff says explicitly that he has lost trust and confidence in Messrs Tan and Dy. Mr Tan says that there has been a complete breakdown in the relationship and that he and Mr Dy can no longer work with the plaintiff.

38 I accept that in the circumstances I have described, there is a question to be tried on the issue of winding up on the just and equitable ground. There is, I think, some prospect that such an order might ultimately be made, although, of course, there can at this stage be no degree of certainty about that, particularly in light of the lack of detail about just what the compact among the corporators actually was and how it evolved and changed over the period of their relationship. There are obviously areas of factual dispute. But determination of the winding up application lies in the future. For the present, the sole question before me is whether a provisional liquidator should be appointed pending that determination.

39 The general issue for consideration, therefore, is whether protection of the status quo pending trial of the winding up application makes appropriate and desirable the installation of a provisional liquidator. The principles relevant to determination of that issue are stated in the judgment of Austin J in Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd (2003) 47 ACSR 197 at p.217:

“The principles to be applied in considering whether to appoint a provisional liquidator are not in dispute. In Zempilas v JN Taylor Holdings Ltd (No 2) (1990) 3 ACSR 518, King CJ (with whom Cox and Olsson JJ agreed) observed (at 520) that ‘the usual, although not the only, purpose for which a provisional liquidator is appointed is to preserve the assets of the company and the status quo in relation to its affairs.’ Thus, the primary duty of a provisional liquidator is to preserve the status quo so as to ensure the least possible harm to all concerned and to enable the Court to decide, after a proper final hearing, whether the company should be wound up: Re Carapark Industries Pty Ltd (in liq) [1967] 1 NSWR 337; Wimborne v Brien (1997) 23 ACSR 56, at 582 per Dunford AJA. In Zempilas King CJ remarked (at 522) that ‘the appointment of a provisional liquidator pending adjudication upon the petition for winding up, is a drastic intrusion into the affairs of the company and is not to be contemplated if other measures would be adequate to preserve the status quo.’ The latter observation was applied by Kirby P (with whom Meagher JA agreed) in Constantinidis v JGL Trading Pty Ltd (1995) 17 ACSR 625, at 635.”

40 It is particularly important that the court bear in mind the last matter mentioned in this extract, namely, that the appointment of a provisional liquidator is a drastic and intrusive step which, as Hely J said in Natural Extracts Pty Ltd v Stotter (unreported, FCA, 18 December 1998), “requires the exercise of very great care”.

41 The plaintiff’s principal concern regarding safety of assets is about transfer-pricing or value-shifting which he equates with “stealing” from the company. But the evidence about this is sketchy, to say the least. It is so sketchy that I do not think I can safely or reliably conclude that the defendant is now exposed to any jeopardy of that kind. This is particularly so when it is recognised that the defendant’s stocks are depleted and, according to Mr Tan, the plan for the future is merely a general plan to sell off any remaining stock as part of the “wind down” to which he referred. There is no plan to acquire further stock, so that the context in which value-shifting of the relevant kind might occur is not expected to be created.

42 I do not think that there is any suggestion by the plaintiff that assets are otherwise in jeopardy. Nor do I see any room for any such inference. Mr Ong is said to be the signatory on the bank account. There is nothing to suggest that he is otherwise than honest and reliable.

43 Nor can there be any suggestion that on-going administration is dislocated or ineffectual or that matters of prudent corporate conduct are being ignored or neglected. Mr Ong is functioning as the bookkeeper and the administrative officer in Australia. He says he attends to monthly BAS returns. There is nothing to suggest that he does not. Even the Simmons report finds no fault on that front. Mr Choy acts as the external accountant. The plaintiff himself said that Simmons obtained financial information not only from Mr Ong but also from Mr Choy. Mr Choy deposes to preparing tax returns and annual accounts. Again, Simmons does not say that these requirements are being ignored. There is thus no suggestion of jeopardy or prejudice on that front.

44 It is true that Mr Ong, the only officer “on the ground” in Australia (apart from the plaintiff who remains an apparently inactive director), is involved on the accounting and bookkeeping side, rather than in business and commercial matters. The plaintiff, now engaged in his new and separate enterprise, no longer, as a matter of fact, attends to the defendant’s commercial needs. I say nothing about questions of breach of duty in that respect because there is no need, in the present context, to do so. But the reality seems to be that there is no great need for immediate attention to commercial matters. There is a quantity of remaining stock. There are some debtors. Mr Tan testified that plans are in hand to get in the debts and sell the stock in due course. These are the plans involving the proposed appointment of Mr Yap. On the face of things, there is no need for urgent attention to those matters and no need for apprehension that some new administrative regime needs to be installed as an interim measure of an emergency kind.

45 In summary therefore, the plaintiff has not shown that there exists any need for the court to take the intrusive step of supplanting the existing administration and appointing a provisional liquidator with a view to resolving jeopardy in which the assets and affairs of the defendant are placed.

46 The plaintiff’s application for the appointment of a provisional liquidator is accordingly dismissed.

47 Any party seeking an order concerning costs should forward to the other party and to my Associate within 14 days written submissions stating the terms of the order and saying why that order should be made. A party receiving such submissions should forward submissions in reply (with a copy to my Associate) within 14 days after receipt.

48 I direct that the winding up proceedings be placed in the Registrar’s list on Monday, 14 November 2005 for directions.

49 I make one observation in conclusion. The plaintiff wishes to see the defendant wound up and a liquidator appointed. Mr Tan says, in effect, that the only future for the defendant is collection of receivables and disposal of remaining stock by way of “wind down”. There is, it seems to me, fertile ground here for some agreed outcome that will see the parties and the court spared the need to devote further energies to the question of compulsory winding up.

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