In the matter of Kadzielski Soto Holdings Pty Ltd (in liquidation)

[2015] NSWSC 1734

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Kadzielski Soto Holdings Pty Ltd (in liquidation) [2015] NSWSC 1734
Hearing dates:	29 June 2015
Decision date:	29 June 2015
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Orders made in accordance with renumbered orders 1-5 initialled and placed in the file. Order that there be liberty to apply on three days’ notice, specifying the relief sought.
Catchwords:	CORPORATIONS – Winding up – Application under s 482 of the Corporations Act 2001 (Cth) to terminate a winding up
Legislation Cited:	- Corporations Act 2001 (Cth) s 482
Cases Cited:	- Re BBB Construction Pty Ltd (in liq) [2014] NSWSC 1894 - Re Glass Recycling Pty Ltd [2014] NSWSC 439 - Re Warbler Pty Ltd (1982) 6 ACLR 526 - Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103
Category:	Principal judgment
Parties:	Stanley Kadzielski (Plaintiff) Neil Robert Cussen (First Defendant) Rosalba Cipriani (formerly Kadzielski) (Second Defendant)
Representation:	Counsel: G M McGrath (Plaintiff) J Singh (First Defendant)     Solicitors: Robert Webley & Associates (Plaintiff) Champion Legal (First Defendant)
File Number(s):	2015/18037

Judgment – ex tempore

1. By Originating Process filed on 20 January 2015 the Plaintiff, Mr Stanley Kadzielski, sought a range of orders, although the only order now sought is an order under s 482 of the Corporations Act 2001 (Cth) terminating the winding-up of a company, Kadzielski Soto Holdings Pty Limited (in liquidation) ("Company"). The Company was wound up in February 2014 in respect of a land tax debt in a relatively small amount, in the order of $7,000. A range of other orders which had originally been sought were not pressed in this application.

2. The application is supported by Mr Kadzielski's affidavit dated 19 January 2015, which indicated that, at the date of its winding up, the Company had unencumbered premises at Wollongong, in respect of which the land tax was chargeable, and had a significant amount in credit in its bank account. Mr Kadzielski refers to commitments which he had at the relevant time in dealing with his sick mother and to a number of difficulties which occurred in respect of the winding up application, by reason of the circumstances in which notifications of that application were given.

3. By a further affidavit dated 12 June 2015, Mr Kadzielski sets out his employment history and his specialist expertise, and refers to consultancy services which he has, at least in the recent past, provided through the Company in respect of substantial projects. He indicates that he would prefer to bring the Company out of liquidation and points to the possibility that he can sell that property if he needs to do so, while expressing confidence that that will not be necessary, given the earnings that he anticipates continuing to make, as he has recently made, from consultancy work provided through the Company, which he anticipates will generate sufficient income for it to meet its obligations. It appears that the circumstances of the Company's winding up do not really put that proposition in doubt, so far as it appears to have arisen from a failure to attend, with appropriate care, to the land tax obligations that arose in respect of the property owned by the Company.

4. A further affidavit of Mr Webley, the solicitor acting for Mr Kadzielski, refers to a conversation with a third party who has placed an amount in trust to be released on termination of the liquidation. As matters have developed, I have indicated that I would not be prepared to make an order to terminate the winding up, until that amount is in the hands of the liquidator, although would be prepared to make an order to terminate the winding-up once that money is in the hands of the liquidator. That will in turn potentially require an amendment to the terms of that trust, so far as the funds would need to be released prior to a formal order for termination of the liquidation, and not after it. I anticipate that will be uncontroversial.

5. It appears, from Mr Webley's affidavit, and Mr McGrath has confirmed in submissions, that the relevant arrangement is one that involves a personal arrangement between the third party and Mr Kadzielski and, at its highest, some form of loan to Mr Kadzielski personally. I proceed on that basis. I note that a loan to the Company would not necessarily have restored its solvency, since it would have raised a further question of how liabilities on that loan might be met.

6. The application is supported by an affidavit of Mr Cussen, the Company's liquidator, which indicates that, after the proposed transactions, the Company will have a modest surplus, which he anticipates would be sufficient to meet its liabilities over the next 12-month period, quite apart from any earnings that Mr Kadzielski may achieve from his consulting work. A liquidator's affidavit of this kind is a matter to which the Court gives considerable weight in such an application. There is also evidence that the liquidator will be in funds to meet his costs of the winding up.

7. My attention has been drawn to a letter from the Australian Securities and Investments Commission which indicates that an amount is outstanding, or at least was outstanding, to ASIC in respect of annual review fees. Plainly, that amount needs to be attended to as part of the application to terminate the winding up. I think I can readily infer that that would occur, not least because it would be highly imprudent for Mr Kadzielski to expose himself to the risk that, after the winding-up were terminated, the Company was then deregistered by ASIC by reason of failure to pay annual review fees.

8. Mr McGrath draws attention to the relevant authorities in written submissions. Those authorities are well known and I need not refer to them at length. In particular, Mr McGrath draws attention to the often quoted observations in Re Warbler Pty Ltd (1982) 6 ACLR 524 and to the factors summarised by Austin J in Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103. Brereton J also identified relevant factors in his judgment in Re Glass Recycling Pty Ltd [2014] NSWSC 439 at [15], where the winding up of a company was similarly terminated where arrangements had been made to ensure that it was placed in surplus, and I referred to his Honour's approach with approval in Re BBB Construction Pty Ltd (in liq) [2014] NSWSC 1894.

9. In this case, there is no reason to think that the interests of the Company's creditors, including future creditors, would be prejudiced by termination of the winding up. Mr McGrath submits, with considerable force, that Mr Kadzielski will have suffered considerable loss as a result of the earlier liquidation of the Company, and there is no reason to consider that he would allow a similar event to occur in the future, in circumstances that it appears that the Company has unencumbered property and there is no reason that it ought to be in a position not to meet its liabilities as and when they fall due. The interests of the liquidator have been addressed, particularly with respect to costs, and there is no suggestion that the Company's activities have placed the interests of contributories or the interests of the public at risk, or involve any matters which give rise to issues of commercial morality. Here, it seems to me that the winding up of the Company resulted from an unfortunate combination of circumstances, although those circumstances included a lack of attention to the Company's tax affairs, in the particular circumstances which have been explained by the affidavit evidence.

10. I am satisfied, in these circumstances, that an order for termination of the winding up can properly be made. However, as I indicated in the course of submissions, where part of the process adopted is that third party funds presently held in Mr Kadzielski's solicitor's trust account will be made available to the liquidator, it seems to me to be preferable that that occur before an order is formally made to terminate the winding up, even one with future effect, to avoid any difficulty with that order if something were to go wrong with that process.

11. For these reasons, I will make the orders that are initialled by me and placed in the file, which I have renumbered as orders 1–5 respectively. I will indicate that, upon confirmation to my Associate that the amount referred to in order 1 has been made available to the liquidator, as contemplated by order 1, I will then make an order terminating the winding up with effect from 31 July 2015, provided that confirmation is given in sufficient time that the payments contemplated by order 2 may be completed prior to that date. I do not make an order that the orders be entered forthwith, where that is not necessary given the nature of the orders, and they will in any event be entered on JusticeLink within the next day or so.

(Discussion ensued.)

12. I will make another order that there be liberty to apply on three days' notice, specifying the relief sought. I should indicate that in the first instance that application can be made to the Corporations Judge in chambers because it may not be necessary to attend if all that is required is a minor administrative amendment.

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Decision last updated: 11 December 2015