In the matter of Yield Service Pty Limited (deregistered)
[2014] NSWSC 764
•06 June 2014
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Yield Service Pty Limited (deregistered) [2014] NSWSC 764 Hearing dates: Friday, 6 June 2014 Decision date: 06 June 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: ASIC to reinstate deregistered company
Catchwords: CORPORATIONS - deregistration - reinstatement - to place company into liquidation in order to avoid consequence of directors' penalty notice Legislation Cited: (Cth) Corporations Act 2001, s 601AB, 601AH(3)(b) Cases Cited: Andrews Re Pink Foods Pty Ltd [2011] NSWSC 332
Application of Rade Stojic [2006] NSWSC 608
Teffaha v Australian Securities and Investments Commission [2010] NSWSC 511Category: Interlocutory applications Parties: Nalin Rukmal Wijesooriya (plaintiff)
Australian Securities and Investments Commission (defendant)Representation: Counsel:
A Kozary (solicitor) (plaintiff)
Solicitors:
ERA Legal (plaintiff)
File Number(s): 2014/169674
Judgment - ex tempore
HIS HONOUR: Yield Services Pty Ltd was deregistered on 28 March 2014 pursuant to (Cth) Corporations Act 2001, s 601AB, for failure to lodge an annual return or returns. The plaintiffs Nalin Rukmal Wijesooriya and his wife Shalini Darneila Wijesooriya, together with PK Kunalan Kulandasamy, were the directors of the company until its deregistration. Mr Wijesooriya, Mrs Wijesooriya and Mr Kulandasamy were also the shareholders in the company. The company ceased trading in 2009. It has accumulated unpaid taxation liabilities in respect of PAYG withholding amounts totalling approximately $40,000 in respect of periods from 1 July 2009 to 30 November 2010.
On 19 May 2014, the Australian Taxation Office issued directors penalty notices to the directors, that they had incurred a liability to pay a penalty equivalent to the amount of the unpaid PAYG withholding liabilities, but that the penalty would be remitted if, by 21 days from the date on which the notice was given, the company's liability had been discharged or the company was under administration or the company was being wound up. That notice period expires next Monday 9 June, which is a public holiday. To avoid that consequence, the plaintiffs apply for an order that ASIC reinstate the registration of the company.
Such orders have been made in similar circumstances in a number of cases, including Application of Rade Stojic [2006] NSWSC 608, Teffaha v Australian Securities and Investments Commission [2010] NSWSC 511, and Andrews Re Pink Foods Pty Ltd [2011] NSWSC 332.
Notice of intention to make the application has been given to ASIC, which understandably has not had an opportunity to consider it, but has indicated to the solicitor for the plaintiff that it does not intend to appear. There is nothing about the application which would suggest that ASIC would have any interest in resisting the application.
Notice has also been given to the relevant officer of the Australian Taxation Office. The solicitor for the plaintiff has informed the Court that he has indicated that the ATO takes the view that placing the company in liquidation, which the directors propose to do if it is reinstated, is one of the courses open under the notice, and the ATO therefore does not oppose the course proposed.
I must say that, in circumstances where the relevant liability appears to be in respect of sums withheld by the company as a PAYG taxpayer which ought to have been promptly remitted to the tax office and not applied by the company for its own benefit, there is a certain attraction in the proposition that the directors should be left to be personally liable for those sums. After all, it was under their direction that the company incurred and failed to pay the relevant liability. Although in Teffaha and Pink Foods, Barrett J suggested that reinstating the company in such circumstances did not adversely affect the position of the ATO, I have difficulty in understanding why that is so, given that the company has no assets, whereas, but for reinstatement, the ATO would be able to recover the liability directly from the directors, who presumably do have assets.
Nonetheless, it must be acknowledged that but for the relatively recent deregistration of the company, the directors would in any event have been able to avoid the consequence of personal liability by placing the company into liquidation, as they now propose to do. If they have traded the company while insolvent, or if it is otherwise appropriate that they be held personally liable, the Taxation Administration Act makes provision in that respect.
Accordingly, although not without reservation, it seems to me that it is appropriate to make the orders sought, but I will reserve leave to ASIC and the ATO to apply to set aside the order.
Upon the undertaking of Thomas Russell, Solicitor, to pay the appropriate filing fees, I grant leave to Nalin Wijesooriya to file an originating process in the form initialled by me and dated this day and placed with the papers. I direct that the originating process be returnable on Monday 16 June 2014 at 9.45am in the Corporations Judge Motion List. I abridge time for service of the originating process to 5.00pm this day, 6 June 2014.
Upon the undertaking of Nalin Rukmal Wijesooriya and of Shalini Darneila Wijesooriya to the Court that forthwith upon this order being made they will take all steps, do all things and execute all documents necessary or convenient for the purpose of causing Yield Services Pty Limited to be wound up by way of creditor's voluntary winding up and to appoint Blair Pleash or such other qualified person who may consent to be appointed as liquidator, the Court orders that:
(1) ASIC reinstate the registration of Yield Services Pty Limited ACN 111 520 346.
(2) Pursuant to Corporations Act, s 601AH(3)(b), in the event that ASIC has not been able to complete reinstatement of the company on 6 June 2014, any special resolution or other action of and relating to the company to implement a creditor's voluntary winding up and the appointment of a liquidator be validated.
(3) Liberty be reserved to ASIC and the Australian Taxation Office to apply on or before 16 June 2014 to set aside this order.
(4) A copy of the originating process supporting affidavit and this order be served on the Australian Taxation Office
These orders are to be entered forthwith.
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Decision last updated: 10 December 2014
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