Irwin v Yule - [2013] SASC 132

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
IRWIN & ANOR v YULE & ORS
[2013] SASC 132
Judgment of The Honourable Justice White
19 August 2013
CORPORATIONS - WINDING UP - OTHER GROUNDS FOR WINDING UP - JUST AND EQUITABLE - IMPOSSIBILITY OF EFFECTIVELY CARRYING ON BUSINESS
The applicants applied for an order winding up Bonshaw Pty Ltd (Bonshaw) under s 461(1)(k) of the Corporations Act 2001 (Cth), the just and equitable ground, on the basis that there had been an irretrievable breakdown in the relationships between the company's members resulting in a management deadlock - Bonshaw was the principal asset of an estate - disputes between the parties, who are the executors of the estate, concerned the proper administration of the estate.
Held:
1. The relationships between the members of the company have irretrievably broken down.
2. It is just and equitable that Bonshaw be wound up and a liquidator appointed.
Corporations Act 2001 (Cth) s 461, s 491; Income Tax Assessment Act 1936 (Cth) Div 7A, s 109D, referred to.
Re Tivoli Freeholds Ltd (1972) VR 445; Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325; Booker v You Run the Business Pty Ltd [2008] FCA 1762; Johnny Oceans Restaurant Pty Ltd v Page [2003] NSWSC 952; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343, considered.

IRWIN & ANOR v YULE & ORS
[2013] SASC 132
Miscellaneous Application

WHITE J. On 2 July 2013 I ordered the winding up of Bonshaw Pty Ltd (Bonshaw) under s 461(1)(k) of the Corporations Act 2001 (Cth) (the Act), the just and equitable ground. I said that I would publish my reasons for that order later. These are those reasons.
The application for the winding up order was made in the context of lack of agreement by the executors and beneficiaries as to the manner in which the estate of the late James Campbell Irwin (the testator), who died on 4 November 2005, is to be finalised. Bonshaw was a principal asset owned by the testator.
The executors of the estate are the deceased’s three sons James, Angus and Campbell and a solicitor, Ms Yule. It is convenient in these reasons to refer to the three sons by their given names, without thereby intending any disrespect.
The applicants for the winding up are James and the testator’s widow (Mrs Irwin). The application is supported by Angus (the second defendant). It is opposed, however, by Campbell (the third defendant).
The first defendant is Ms Yule. In addition to being an executor of the estate, she is one of the two directors of Bonshaw. Mrs Irwin is the other director. Although Ms Yule had previously given her consent to the winding up of the company, she adopted a neutral position at the hearing. That is, Ms Yule neither consented to, nor opposed, the winding up of Bonshaw.
The applicants seek the winding up of Bonshaw on the basis that there has…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Irwin v Yule

Details

AGLC: Irwin v Yule [2013] SASC 132
Case: [2013] SASC 132
Decision Date

CaseChat Overview and Summary

In the matter of Irwin v Yule, the court was tasked with considering an application for the winding up of Bonshaw, an investment company and a significant asset of the deceased's estate. The case involved disputes between the executors and beneficiaries of the estate, particularly focusing on the valuation of the estate assets and the management of Bonshaw. The primary legal issue was whether it was just and equitable to wind up Bonshaw to resolve the ongoing disputes and facilitate the finalisation of the estate.

The court found that the parties were at an impasse, with entrenched disagreements over the administration of the estate and allegations of misconduct and fraud. The court noted the history of discord and lack of communication between the parties, particularly between the executors. The court concluded that the only way to move towards finalising the estate was to wind up Bonshaw, as a members' voluntary liquidation was not feasible due to the lack of consensus among the parties. The court rejected alternative proposals put forward by Campbell, finding them insufficient to address the underlying issues and the breakdown in relationships between the parties.

The court ordered the winding up of Bonshaw and appointed Mr Mark Christopher Hall as liquidator, finding that this was the just and equitable course of action given the circumstances. The court emphasised that the winding up of Bonshaw would facilitate the determination of its taxation liabilities and those of its beneficiaries, thereby aiding in the finalisation of the estate.

Orders

Orders of the court

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Background

Background to the litigation

Campbell submitted that a “conspiracy” under which “the legal fraternity ... can all stick together quite well to cover something up” was in part responsible for his being unrepresented.[3] He did not, however, present any evidence of such a conspiracy, and its existence is not to be inferred. Campbell also acknowledged that he had chosen not to retain lawyers for the trial.[4][3] TX p 91.[4] TX p 88.Background The evidence at the trial was wholly documentary. The summary which follows comprises findings of fact, to the extent necessary, on the basis of that documentary material. It is not necessary to address all the matters to which the parties’ affidavits deposed, although I have had regard to them. The testator died on 4 November 2005. Probate of his will was granted to James, Angus, Campbell and to Ms Yule. The will provided, relevantly, for specific bequests of the testator’s interests in a fertiliser business and in certain rural land to Angus and James respectively, and for the residuary estate to be shared equally between the three sons. The shares of Angus and James in the residuary estate were to take account of the value of the specific bequests to them so that, in effect, each of the three sons would receive, whether in money or in kind, equal shares. Apart from the interests in the fertiliser business, the rural land, a residential unit and cash, the principal assets of the estate comprised all but one of the shares in Bonshaw. Mrs Irwin holds the one Bonshaw share not held by the estate. Bonshaw is an investment company. At the time of the testator’s death, it held shares in public companies valued at more than $10m (“the Bonshaw shares”). Regrettably, a number of disputes arose in relation to the administration and winding up of the estate. An understanding of the nature of the disputes is necessary for the determination of the present application, but it is not necessary for the Court presently to determine the merits of the positions of the respective parties, nor to attempt a resolution of those disputes. It is the circumstance that disputes have occurred which the parties have not been able to resolve which is the significant matter for the present purposes. The disputes seem to have begun in relation to the valuation of the assets making up the sons’ shares of the estate. The testator’s will provided expressly that the interests in the fertiliser business and in the rural land were to be valued as at the date of his death, but did not stipulate the date at which the remaining assets forming part of the residuary estate were to be valued. In November 2005, approximately one week after the testator’s death, the three sons and Ms Irwin held a meeting with the estate’s solicitors and accountants. Campbell asserts that the sons agreed at that meeting that all assets of the estate should, for the purposes of distribution, be valued as at the date of death. James at least denies that assertion. The rural property specifically bequeathed to James is known as Kostera. As a result of his exercising a call option, James also acquired from the estate land known as the Bonshaw Land (which he acquired as part of his one third overall share). These two parcels of land were valued, as at the date of the testator’s death, by a Mr Wapper.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

WHITE J

The other matters raised by Campbell do not, in my opinion, outweigh the considerations pointing in favour of the making of a winding up order. I am satisfied that it is just and equitable, in the relevant sense, for Bonshaw to be wound up.Conclusion Mr Mark Christopher Hall, of Level 4, 12 Gilles Street, Adelaide SA 5000, has consented to being appointed as liquidator of Bonshaw. He is a suitable person to be appointed liquidator. For these reasons, I ordered on 2 July 2013 that Bonshaw be wound up and that Mr Hall be appointed as its liquidator.

Ratio Decidendi

Legal Principle Established

Established by: WHITE J

Finally, it was apparent that the proposed liquidation of Bonshaw offended Campbell’s sense of righteousness in that he considers that, in some way not identified, the liquidation of Bonshaw will preclude a proper assessment of the events which have occurred and of the liabilities, particularly the taxation liabilities, to which they give rise.Consideration The principles stated in the authorities just outlined are applicable presently. I am satisfied that the parties are effectively at an impasse. They have entrenched opposing views as to the proper approach to the administration of the estate as well as to the manner in which the administration has been carried out to date. The allegations made by Campbell using terms such as “conspiracy”, “criminal or fraudulent conduct”, “wilfully untruthful” and “perjury” indicate the extent to which relationships have deteriorated.[26] There have been a number of periods in which communications between the parties have gone unanswered. [26] Sixth affidavit of C C Irwin affirmed 2 June 2013 at [1]-[3]. Ms Yule is not willing to take any steps in her capacity as one of Bonshaw’s two directors unless her actions have the unanimous consent of the executors or are sanctioned by an order of the Court. Given the history of discord between the executors, this attitude is understandable. It means, however, that little is being done in the continued management of Bonshaw, or to finalise its affairs in order that the estate in turn may be finalised. Mrs Irwin has deposed that there have been no meetings of the directors of Bonshaw for “several years”. The last directors’ meeting mentioned in the correspondence in evidence at trial was that planned to occur in September 2008. Ms Yule does not contend that there have been any more recent meetings. It is evident that the dispute between the three sons is producing a stalemate in the affairs of Bonshaw and in particular in the distribution of its assets so that the estate can be finalised. A mediation of the issues before Mr Walsh QC on 4 November 201l failed to achieve a resolution. Campbell abandoned, in effect, proceedings in this Court which may have led to a determination of many of the matters giving rise to his dissatisfaction with the administration of the estate. The plaintiffs contend that the only way to move towards finalising the estate at this point is to wind up Bonshaw. That cannot be achieved by a members’ voluntary liquidation, pursuant to s 491 of the Act. That is because the requisite 75 per cent majority could be reached on a winding up motion only if the estate voted in favour of it. Campbell’s stance is an obstacle to a resolution of that kind. As an alternative to this Court ordering that the company be wound up, Campbell advanced the proposal that the full financial records of Bonshaw be provided to him and that the company and the beneficiaries then pay the full tax obligations, including the foreshadowed Div 7A liabilities. However, Campbell did not present a proposal as to how the management of the company can be conducted effectively given the breakdown in the parties’ relationships. Further still, the correspondence concerning the application to the ATO to which I referred earlier indicates the interrelationship between the winding up of Bonshaw, or at least an order for its winding up, on one hand, and the resolution of its taxation liabilities, on the other. The winding up of Bonshaw will facilitate the determination of its taxation liabilities, as well as those of its beneficiaries.