In the matter of Catalina Genetics Genetics Pty Ltd (in liquidation)

[2024] NSWSC 759

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of Catalina Genetics Pty Ltd (in liquidation) [2024] NSWSC 759

Hearing dates:

13 and 20 June 2024

Date of orders:

20 June 2024

Decision date:

20 June 2024

Jurisdiction:

Equity - Corporations List

Before:

McGrath J

Decision:

Winding up of the defendant terminated (see [38])

Catchwords:

CORPORATIONS — winding up — application under s 482 of the Corporations Act 2001 (Cth) to terminate the winding up — where original winding up order and order appointing liquidators stayed and only to take effect upon company’s failure to pay amount of debt to plaintiff by certain date — where payment by defendant failed and winding up order automatically took effect on stipulated date — where the company has taken steps to pay all creditors and reduce or transfer liabilities — where remaining creditors support the application — where the company will likely be solvent on returning to trading — where the company is engaged in a speculative business endeavour and its future financial performance cannot be accurately predicted — where the interests of the public, creditors and commercial morality favour the termination

Legislation Cited:

Corporations Act 2001 (Cth), s 482, Schedule 2

Cases Cited:

Apostolou v VA Corporation of Australia Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84

Re Glass Recycling Pty Ltd [2014] NSWSC 439

Re Modena Imports Pty Ltd (in liq); Leveraged Capital Pty Ltd (in liq) v Modena Imports Pty Ltd (in liq) [2010] NSWSC 739

Re MWM Sydney Pty Ltd (in liquidation) [2016] NSWSC 688

Re Telescriptor Syndicate Limited [1903] 2 Ch 174

Category:

Principal judgment

Parties:

Workers Compensation Nominal Insurer (Plaintiff)
Catalina Genetics Pty Ltd (in liquidation) (Defendant)
John Farren-Price (Applicant)

Representation:

Counsel:
D Edney (Applicant)

Solicitors:
Hall and Wilcox (Plaintiff and Defendant)
Stacks Law (Applicant)

File Number(s):

2023/00438339

Publication restriction:

Nil

JUDGMENT

INTRODUCTION

1. This is an application by John Farren-Price for an order pursuant to s 482 of the Corporations Act 2001 (Cth) terminating the winding up of Catalina Genetics Pty Ltd (in liquidation).

2. Mr Farren-Price is the majority shareholder and sole director of Catalina Genetics and therefore has standing to bring the application as a contributory pursuant to s 482(1A)(a) of the Corporations Act. The other shareholders are Jenin Polanco and a company associated with Mr Farren-Price, Catalina Trading Co Pty Ltd.

3. Catalina Genetics operates a business providing advanced equine reproduction services, such as cloning, embryo transfer and ICSI (which is intracytoplasmic sperm injection, an artificial breeding technique similar to in vitro fertilisation).

4. On 18 March 2024, Black J ordered, inter alia, that:

1. Catalina Genetics be wound up in insolvency;

2. Andrew Scott and Craig Crosbie (Liquidators) be appointed as liquidators of Catalina Genetics; and

3. the winding up and the appointment of the Liquidators be stayed to 4pm on 25 March 2024 and have no effect if, by that time, Catalina Genetics paid the amount of $37,363.93 in cleared funds to the plaintiff, Workers Compensation Nominal Insurer (WCNI).

5. The Liquidators do not oppose the termination of the winding up of Catalina Genetics.

6. By reason of the extraordinary circumstances set out below, I have reached the conclusion that the winding up of Catalina Genetics should be terminated.

RELEVANT FACTS

Nature of Catalina Genetics and its business

7. Catalina Genetics is the only business providing advanced equine reproduction services in Australia and has very few global competitors, with the only known businesses in the United States of America and Argentina, neither of which provide a full range of these services.

8. Catalina Genetics operates from leased premises in Kurmond, New South Wales and employs approximately 10 people. Catalina Genetics has generated only minimal revenue to date, having been in a pre-commercialisation phase, building up its laboratory, technology and collection of genetic material, while being funded by Mr Farren-Price, before it can commence to sell its services in a commercialisation phase. Catalina Genetics is now selling its services and has entered into contracts with five customers for the cloning of horses in return for payment ranging between $60,000 and $140,000 (inclusive of GST), with a total revenue of $455,000 and expenses of $165,000, resulting in an estimated total profit margin of $290,000 on those contracts.

9. Mr Farren-Price believes that most of the value of Catalina Genetics is in its know-how and processes that have been built up during the pre-commercialisation phase and that the business with can be viable and have substantial value if it continues to operate as a going concern.

10. Catalina Genetics uses two bank accounts for all its transactions at Commonwealth Bank of Australia (CBA), being an account for which Mr Farren-Price is the only person able to authorise transactions (Director Account) and an account to which multiple employees of Catalina Genetics have access and the ability to authorise transactions (Staff Account). The practice of Catalina Genetics is to pay all of its expenses through either the Director Account or the Staff Account to ensure that Catalina Genetics’ expenses are clearly identifiable and not in any way mixed with the finances of Mr Farren-Price or any other company associated with him. This has been important for Catalina Genetics to be able to claim substantial research and development tax incentives from the Australian Taxation Office (ATO) for its expenses.

Circumstances leading to the winding up of Catalina Genetics

11. For some time, Catalina Genetics had been in dispute with WCNI regarding the calculation of workers compensation premiums payable by Catalina Genetics to WCNI. In summary, WCNI assessed Catalina Genetics as if it was a horse training business (a high-risk business type), resulting in a very high premium. Catalina Genetics disputed this assessment on the basis that its business was more akin to that of a laboratory, which attracts a much lower premium.

12. WCNI then issued a statutory demand to Catalina Genetics which was posted to the registered office address of Catalina Genetics. It appears that Mr Farren-Price will did not receive the statutory demand, was not told about it and is unable to explain what happened to it. As a result, no action was taken by Catalina Genetics in response to the statutory demand.

13. On 4 December 2023, the winding up proceedings against Catalina Genetics were commenced in this court. Mr Farren-Price says that the first time he learnt of the statutory demand was when these proceedings were served on Catalina Genetics.

14. Even though the proceedings were still on foot, Catalina Genetics continued to dispute the position taken by WCNI in relation to the premium to be paid by Catalina Genetics. WCNI then accepted that it had incorrectly assessed the workers compensation premiums payable by Catalina Genetics and reduced the amount it claimed, although continued to press for the payment of past premiums as well as the premiums for the financial year ending 30 June 2024 together with the costs of the proceedings.

15. On 18 March 2024, Mr Farren-Price appeared for Catalina Genetics at the hearing of the winding up application before Black J in these proceedings. At the conclusion of the hearing, Black J handed down judgment, making the orders winding up Catalina Genetics in insolvency and appointing the Liquidators and staying those orders to 4pm on 25 March 2024, with those orders to have no effect if, by that time, Catalina Genetics paid the amount of $37,363.93 in cleared funds to WCNI.

Attempts to transfer payment to WCNI

16. On 19 March 2024, Mr Farren-Price then attempted to pay the amount of $37,363.93 by logging into his electronic banking platform with CBA but found that the Director Account and the Staff Account had been removed from his electronic banking platform. He then contacted CBA and was told that it had removed his access to the Director Account and the Staff Account as CBA had been provided with a copy of the orders made on 18 March 2024.

17. Mr Farren-Price then communicated with the solicitor for WCNI and the Liquidators about his access to the Director Account and the Staff Account and sometime between 19 and 24 March 2024, he was provided with access to those accounts in his electronic banking platform.

18. On 25 March 2024, Mr Farren-Price electronically transferred $38,135.40 from his personal account into the Director Account and then electronically transferred $37,363.93 from the Director Account to the trust account of the solicitors for WCNI. At 12:20pm on 25 March 2024, Mr Farren-Price then sent an email to the solicitors for WCNI to which he attached a payment remittance of that amount to the credit of their trust account. Mr Farren-Price said that after this was done, he finished work for the day and had no reason to think the payment had not gone through.

19. It appears that the payment did not go through. The first time that Mr Farren-Price was alerted to any possible problem with the payment was when he received an email on 28 March 2024 from the solicitors for WCNI, stating that they had not received payment into their trust account despite the remittance advice and they would inform the Liquidators that they had not received payment.

20. The banking records for Catalina Genetics show that the funds transferred by Mr Farren-Price into the Director Account left his personal account but later bounced back into his personal account, which meant that the funds never arrived into the Director Account at all and were not there to be transferred to the trust account of the solicitors for WCNI. The only available explanation which arises as a matter of inference is that CBA had taken some steps to restore access to the bank accounts of Catalina Genetics, but there was some residual restriction upon those accounts which prevented the transfers sought to be made by Mr Farren-Price from taking effect.

21. It is clear on the evidence that CBA issued its payment receipt in apparent confirmation that the payments had gone through and it was only on 28 March 2024 that Mr Farren-Price found out the payments did not occur when the solicitors for WCNI informed Mr Farren-Price that they had not been paid. By this time, the winding up order made on 18 March 2024 had automatically taken effect pursuant to its terms and there was nothing further which could be done about it.

22. I consider that Mr Farren-Price genuinely believed that he had made the necessary payment to the trust account of the solicitors for WCNI on 25 March 2024.

Current and future position of WCNI

23. Since the winding up order took effect after 4pm on 25 March 2024, Mr Farren-Price has cooperated with the Liquidators by providing his report as to affairs as requested and he has complied with all of their demands of him.

24. The following steps have been taken in relation to the financial affairs of Catalina Genetics:

1. On 16 May 2024, Mr Farren-Price paid the amount of $46,309.94 to the trust account of the solicitors for WCNI who confirmed that they were holding that amount on trust. That amount was used to pay the debt owing to WCNI and its legal fees, which was confirmed by the solicitors for WCNI on 17 June 2024.

2. With the consent of the Liquidators, Mr Farren-Price has arranged for all of Catalina Genetics’ employees to be transferred to Catalina Stud Pty Ltd, save for those who declined the transfer, and all payroll liabilities owing to the employees of Catalina Genetics were paid out in full by Mr Farren-Price (although two of the employees in relation to minimal amounts of $127.28 and $69.46 respectively have not confirmed receipt of those amounts).

3. Mr Farren-Price has arranged to terminate Catalina Genetics’ ongoing obligations to ORIX Australia Corporation Ltd for vehicle finance by Catalina Stud paying out the amount owing and has arranged for the contract with BOC Ltd as a gas supplier to be transferred to Catalina Stud, so that Catalina Genetics has no further obligations to them.

4. Mr Farren-Price has paid Catalina Genetics to enable it to discharge nearly all of its trade creditors and pay the Liquidators’ fees and expenses.

5. Catalina Genetics’ rent to Bukovinsky Properties Pty Ltd for the Kurmond premises has been prepaid in advance to 18 October 2024.

6. Catalina Genetics’ current liabilities to the ATO are more than offset by the substantial tax refund owed by the ATO to Catalina Genetics for the financial year ending 30 June 2024.

7. The only other debts of Catalina Genetics consist of:

1. related party debts of $8,902,323 owed to Mr Farren-Price, Catalina Stud and Lucy Bliss (a former director of Catalina Genetics) for the financial support they have given Catalina Genetics during its pre-commercialisation phase, which are to be satisfied by way of the issue of further shares in Catalina Genetics to them, thereby capitalising those debts, on terms which the only other shareholder of Catalina Genetics (Mr Polanco) approves;

2. a debt owed to Innovation Structured Finance Co. LLC (known as “R&Dium Capital”) which matures on 30 November 2024 and is secured against the larger amount of the research and development tax refund to which Catalina Genetics will be entitled following the end of the current tax year, in circumstances where Innovation supports this application; and

3. debts owed to Catalina Genetics’ accountants, Ernst & Young, for mostly post-liquidation services which Mr Farren-Price and Catalina Stud are each jointly and severally liable to pay under a Deed Poll dated 20 June 2024 and which Ernst & Young has confirmed that Catalina Genetics is no longer liable to pay.

8. Mr Farren-Price has given evidence that a number of potential customers are likely to proceed to purchase Catalina Genetics’ services only if the winding up of Catalina Genetics is terminated, including the New South Wales Department of Primary Industries which is aware of this application and awaits the termination of the winding up so it can proceed with two research contracts with Catalina Genetics.

25. The outcome of these steps is that if the winding up of Catalina Genetics is terminated then it will be debt free (other than in relation to the secured debt of Innovation to be paid out of the imminent tax refund), will have minimal ongoing obligations to non-related parties and will be in a position to proceed with its business of bringing its services to the market.

26. The amount of the expected ongoing monthly expenses of Catalina Genetics are:

1. $2,150 for laboratory rental;

2. $4,500 for the laboratory manager’s salary;

3. $2,670 for accounting fees (payable annually); and

4. $1,750 for consumables, such as gas and liquid nitrogen.

27. Mr Farren-Price and Catalina Stud are prepared to continue to support Catalina Genetics but it is the expectation of Mr Farren-Price that such support would not be required beyond a period of about six months if the winding up was terminated. This is because Catalina Genetics expects a net tax refund of $741,784 and an income tax refund of over $1 million after 30 June 2024 and to receive revenue of $455,000 from existing contracts with customers, with expenses of $165,000, generating an estimated profit margin of $290,000.

28. Catalina Stud has a strong financial position, having been profitably run for the past three financial years, earning a net profit of $726,781.05 in 2022, a net profit of $1,556,377.99 in 2023 and a net profit of $1,021,062.36 in 2024 (to date).

29. The balance sheet of Catalina Genetics recorded liabilities of $169,612 owed to two former shareholders of Catalina Genetics. I am satisfied that this was a historical bookkeeping error, that the former shareholders have been notified of this application and neither has raised any dispute.

30. The Liquidators have identified three individuals who assert potential rights against Catalina Genetics for the “return of genetic material” but only one of those individuals had any dealings with Catalina Genetics, with the other two having dealt with Catalina Stud, and that person has confirmed that she supports Catalina Genetics continuing to hold her horse’s genetic material.

LEGAL PRINCIPLES

31. Section 482 of the Corporations Act relevantly provides:

(1)   At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.

(1A)   An application may be made by:

(a)   in any case — the liquidator, or a creditor or contributory, of the company; or

…

(2)   On such an application, the Court may, before making an order, direct the liquidator to give a report with respect to a relevant fact or matter.

…

(3)   Where the Court has made an order terminating the winding up, the Court may give such directions as it thinks fit for the resumption of the management and control of the company by its officers, including directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up.

(4)   The costs of proceedings before the Court under this section and the costs incurred in convening a meeting of members of the company in accordance with an order of the Court under this section, if the Court so directs, form part of the costs, charges and expenses of the winding up.

…

32. The principles pursuant to which I exercise the discretion in s 482 of the Corporations Act are long standing. They were conveniently collected in Re MWM Sydney Pty Ltd (in liquidation) [2016] NSWSC 688, by Black J at [16]–[21] as follows:

[16] I turn now to the applicable legal principles, which are well established, but may nonetheless be difficult in their application in a particular case. The Court's power to make an order terminating a winding up under s 482 of the Corporations Act is discretionary, as the case law has noted, and a person who seeks such an order must establish that the order is appropriate. The factors relevant to whether a winding up should be stayed or terminated were summarised by Master Lee QC of the Supreme Court of Queensland in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533 as follows:

“1.   The granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: Re Calgary and Edmonton Land Co Ltd (in liq) (1975) 1 WLR 355 at 358–359 per Megarry J. See also sec 243 of the Act [ie, Companies Act 1961].

2.   There must be service of notice of the application for a stay on all creditors and contributories, and proof of this: Re South Barrule Slate Quarry Co (1869) LR 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113.

3.   The nature and extent of the creditors must be shown, and whether or not all debts have been discharged: Krextile Holdings Pty Ltd v Widdows supra [[1974] VR 689]; Re Data Homes Pty Ltd supra [1971] 1 NSWLR 338].

4. The attitude of creditors, contributories and the liquidator is a relevant consideration: sec 243(1), Re Calgary and Edmonton Land Co Ltd supra.

5.   The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: Re a Private Company [1935] NZLR 120; Re Mascot Home Furnishers Pty Ltd [1970] VR 593 at 598.

6.   If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd, supra [[1903] 2 Ch 174].

7.   The general background and circumstances which led to the winding-up order should be explained: Krextile Holdings Pty Ltd v Widdows, supra.

8.   The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to “commercial morality” or the “public interest”: Krextile Holdings Pty Ltd v Widdows, supra; Re Data Homes Pty Ltd, supra …”

[17]   Master Lee noted that this list was not intended to be exhaustive and should not be regarded as a series of rigid principles, and that proposition has subsequently been endorsed in later case law: Dubolo Pty Ltd (t/as Fender Signs) v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723 at 724, Metledge v Bambakit Pty Ltd (in liq) [2005] NSWSC 160 at [5] and Von Riesefer v Mainfreight International Pty Ltd [2009] VSCA 129; (2009) 73 ACSR 427 at 438; Re 311 Hume Highway Liverpool Fund Pty Ltd (in liq) [2013] NSWSC 465; 93 ACSR 683 at [4].

[18]   In Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70 at [47]–[51], Austin J in turn observed that:

“In considering an application to stay or terminate a court-ordered winding up under s 482, the court has regard to various categories of interests. First, the court considers the interests of creditors, taking into account whether they object to the proposed termination. But even if all the existing creditors agree, the court may take the view that the proposed termination puts at risk the interests of future creditors. For example, the court is likely to be concerned where the proposal preserves the existing debts but defers their payment, particularly if the deferment has no enforceable status: see the remarks of Street J at first instance in Re Data Homes Pty Ltd [1971] 1 NSWLR 338 at 341. Similarly, if the proposal is that the principal shareholder/creditor will pay out all the other creditors and seek recovery of his debt by installments, the court is unlikely to permit the company to start trading again and thereby incur additional debts, since if the company fails again, recovery by the new creditors may be prejudiced by the existing debt. However, if the principal shareholder/creditor capitalises his debt, the court may well take a different view: Collins v G Collins & Sons Pty Ltd (1984) 9 ACLR 58.

The cases concerning the interests of creditors do not, in my opinion, establish inflexible rules. Specifically, I do not believe that there is any absolute rule that a winding up cannot be terminated as long as one or more debts remains undischarged. Instead, the cases identify the range of concerns which the court is likely to have in exercising its discretion when an application is made, and therefore give guidance as to the matters upon which the court will need to be satisfied.

Second, the court considers the interests of the liquidator, particularly with respect to costs. …

Third, the court considers the interests of contributories. Generally a stay or termination will not be granted unless each member of the company either consents or is otherwise bound not to object to it, or his or her rights are properly secured: Re Calgary and Edmonton Land Co Ltd (in liq) [1975] 1 All ER 1046. …

Finally, the court considers the public interest, including matters of commercial morality, taking the initial approach that insolvent companies should be wound up: Re Data Homes Pty Ltd [1972] 2 NSWLR 22.”

His Honour there also noted (at [53]) that the factors relevant to the exercise of that discretion were not "absolute rules" but "identify the range of discretionary concerns which the court will need to address".

[19]   Relevant factors were in turn identified by Austin J in Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103 at [17] as including the interests of the company's creditors, including future creditors; the interests of the liquidator, particularly with regard to costs; the interests of contributories and the interests of the public, including the public interest in matters of commercial morality, and the public interest that insolvent companies should be wound up.

[20]   Mr Spencer, who appears for Mr Hope, in turn refers to the helpful summary of the relevant principles by Brereton J in Re Glass Recycling Pty Ltd [2014] NSWSC 439 at [15]ff. In particular, his Honour observed at [18]–[19] (omitting citations) that:

“Essentially, on such an application, the court must be satisfied, first, that the state of affairs that required that the company be wound up no longer exists. Where the winding up was on grounds of insolvency, it will be necessary for the applicant to demonstrate that the company is not, or is no longer, insolvent. This is usually the most significant consideration ... Thus it has been said that an order terminating the winding up would usually be made if all the creditors are paid out, the liquidators' costs and expenses are covered, and the members agree ...

However, the factors to which the cases refer demonstrate that more is necessary than merely establishing that the state of affairs that required the company to be wound up no longer exists. This appears from, inter alia, the references to "commercial morality" as a relevant consideration, and also from references to the interests of future as well as extant creditors. These factors illustrate that the second broad consideration that informs the exercise of the court's discretion – once satisfied that the state of affairs that originally required winding up no longer exists – is that it would be reasonable to entrust the affairs of the company, once again, to the directors under whose management it previously failed.”

[21]   In Re Glass Recycling Pty Ltd above, Brereton J referred to the observations of Bergin CJ in Eq in Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797, which emphasised the importance of solvency in determining such an application. Her Honour there noted (at [24]) that:

“The other considerations, such as the extent of the creditors, the status of the debts and the nature of the company's business will be taken into account in determining whether the company has returned to, or will be returned to solvency.”

In Re Glass Recycling Pty Ltd above, Brereton J also referred to Apostolou v VA Corporation of Australia Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84 at [58] where Finkelstein J noted that an order terminating a winding up would usually be made if all the creditors are paid out, the liquidator's costs and expenses are covered and the members agree, although his Honour also recognised that there may be exceptional circumstances where that would not occur despite a company's solvency.

33. The interests of the public and an adherence to commercial morality by the directors loom large in the exercise of the discretion. In Re Telescriptor Syndicate Limited [1903] 2 Ch 174, Buckley J at 180 said:

…The Court refuses to act upon the mere assent of the creditors in the matter, and considers not only whether what is proposed is for the benefit of creditors, but also whether it is conducive or detrimental to commercial morality and to the interests of the public at large. The mere consent of the creditors is but an element in the case. …

34. There, Buckley J was referring to the scenario of an application made in bankruptcy to rescind a receiving order or to annul an adjudication, but noted that the discretion to stay a winding up of a company constituted an “analogous jurisdiction”, saying (at 180):

I am here asked to exercise an analogous jurisdiction, and I may say that it is in my opinion desirable that so far as possible the Court should not assume a different attitude or act upon a different principle in the winding-up of a company and in the bankruptcy of an individual. I have here to say whether it is proved to my satisfaction that all proceedings in relation to this winding-up ought to be stayed. I decline to say that I am satisfied as to that by the mere fact that since the winding-up order was made the assent of all the creditors and of a large majority of shareholders has been obtained.

35. Further, the court’s role is to strongly protect the public interest where there is no contradictor in an application to terminate a winding up. In Re Modena Imports Pty Ltd (in liq); Leveraged Capital Pty Ltd (in liq) v Modena Imports Pty Ltd (in liq) [2010] NSWSC 739, Palmer J at [8]–[9] said:

[8]   The particular circumstances of this case throw into sharp relief the role of the Court in an application of this kind. It is not the traditional role of umpire in a contest between adversaries, where the Court takes no part in the contest other than to ensure a fair trial and, at the end, to give a decision in favour of one of the contestants. On the contrary, in applications such as this, many of which have no contradictor, the Court is vigilant to protect the public interest.

[9]   Protecting the public interest is not confined to ensuring that a company, if released from liquidation, will be able to trade solvently. Public interest will also include ensuring that the creditors who are to be bound by a DOCA are treated reasonably and fairly. Further, protecting the public interest includes upholding commercial morality: the Court should not, by granting such an application, ignore and thus be seen to condone, conduct by the company’s officers which has breached standards of behaviour required by the law. Those who have already offended against those standards should not lightly be given the opportunity of doing so again.

CONSIDERATION

36. Turning to the application of the relevant factors from the authorities in the exercise of my discretion, I have weighed each of the following matters:

1. Catalina Genetics has paid in full the debt to WCNI which led to the winding up order being made on 18 March 2024.

2. The Australian Securities and Investments Commission has been notified of the application and has not appeared or indicated any opposition to it.

3. Mr Farren-Price has paid out all of the creditors of Catalina Genetics other than Innovation, who has received notice of the application and supports it.

4. The former shareholders of Catalina Genetics have been notified of the application and have not opposed it.

5. Mr Farren-Price and Catalina Trading are shareholders of Catalina Genetics and obviously have notice of the application and support it.

6. The debts owing to Mr Farren-Price, Catalina Stud and Ms Bliss have been agreed to be converted into equity and will be discharged.

7. Mr Polanco is the only other shareholder of Catalina Genetics and has received notice of the application and supports it, as evidenced by his assent to the proposal for the related party debt to be converted to further equity.

8. The debts owing to Ernst & Young are to be repaid by Mr Farren-Price and Catalina Stud, who are jointly and severally liable for them. Ernst & Young has confirmed that Catalina Genetics is not liable for those debts.

9. Innovation has lent money to Catalina Genetics on the security of the research and development refund from the ATO to which Catalina Genetics will be entitled at the end of the current tax year. Innovation supports the application, the loan made by it is within terms following the payment of $218,895 made to it by Mr Farren-Price and Innovation considers itself to be secured for the amount of the debt owed to it.

10. The Liquidators have been paid in full by Mr Farren-Price depositing funds in the Liquidators’ solicitors trust account to secure their capped remuneration and expenses in the total amount of $124,300.

11. The Liquidators have confirmed that they do not oppose the application.

12. With the payment of Innovation from the research and development tax refund, the payment of Ernst & Young now to be made by Mr Farren-Price and Catalina Stud, the payment of all other creditors and the capitalisation of the debt owing to Mr Farren-Price and related entities, all creditors of Catalina Genetics will be paid in full.

13. The financial position of Catalina Genetics will be considerably enhanced once it receives payment of a substantial tax refund owing from the ATO.

14. I am satisfied that on the payment of all creditors and the capitalisation of the related party debts, Catalina Genetics will be solvent.

15. In relation to Catalina Genetics’ future financial position if it returns to trade, I note that it is transitioning from its pre-commercialisation phase to its commercialisation phase, with a number of customers having already committed to pay Catalina Genetics for its services. The novel nature of Catalina Genetics’ business makes it extraordinarily hard to predict whether it will be successfully able to trade, there being no track record of sales made to the market for its services. The nascent business of providing horse cloning services is also of a speculative nature with an uncertain outcome.

16. I am satisfied that Catalina Genetics’ future financial position is counterbalanced by virtue of the transfer of its liabilities to Catalina Stud and/or Mr Farren-Price and the imminent receipt of a substantial tax refund upon a termination of the winding up order. I am also satisfied that it is reasonable to entrust management of Catalina Genetics to Mr Farren-Price given that the business structure has changed so that it has no employees or external suppliers.

17. There are no obvious instances of commercial immorality, save for one bookkeeping error involving the balance sheet incorrectly recording liabilities owed to two former shareholders, which has now been remedied.

18. The extraordinary circumstances in which Catalina Genetics came to be wound up have been explained. If CBA had not reversed the payment made by Mr Farren-Price on 25 March 2024, then the winding up order would never have been made.

19. It is not in the interests of Catalina Genetics, its shareholders or its creditors for the winding up to continue.

20. My overall assessment is that the public interest is not harmed by allowing Catalina Genetics to resume its business

37. Accordingly, in substance this is a case in which all the creditors are to be paid out, the Liquidators’ costs and expenses are covered and the members agree, these being the considerations mentioned in Apostolou to which reference was made in Glass Recycling, and which, where present, would usually result in the making of an order terminating a winding up.

ORDERS

38. For the reasons stated above, I propose to make the following orders:

1. An order pursuant to s 482(1) of the Corporations Act 2001 (Cth) terminating the winding up of the defendant Catalina Genetics Pty Ltd (in liquidation) ACN 624 160 989 with effect on and from 20 June 2024.

2. Pursuant to section 90-15 of Schedule 2 to the Corporations Act 2001 (Cth) that the following amounts discharge the claims, costs and disbursements of Andrew Scott and Craig Crosbie in their capacity as liquidators of the defendant, and are to be released to the liquidators:

1. the amount of $31,430.81 held in a pre-liquidation bank account of the defendant;

2. the amount of $38,568 paid by the applicant John Farren-Price into the defendant’s liquidation account on or about 27 May 2024;

3. the amount of $30,000 paid by the applicant John Farren-Price into the Hall & Wilcox trust account on or about 6 June 2024; and

4. the amount of $24,301.19 paid by the applicant John Farren-Price into the Hall & Wilcox trust account on or about 19 June 2024.

3. No order as to costs.

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Amendments

02 July 2024 - 2 July 2024 - [36(10)] - amount paid to the liquidator corrected to reflect total amount ($124,300), being the sum of the amounts referred to in [38(2)(a)-(d)]

02 October 2024 - Case name amended

Decision last updated: 02 October 2024