Isles v Australian Partners Management Pty Ltd, in the matter of Australian Partners Management Pty Ltd (in liq)
[2013] FCA 688
FEDERAL COURT OF AUSTRALIA
Isles v Australian Partners Management Pty Ltd, in the matter of Australian Partners Management Pty Ltd (in liq) [2013] FCA 688
Citation: Isles v Australian Partners Management Pty Ltd, in the matter of Australian Partners Management Pty Ltd (in liq) [2013] FCA 688 Parties: KEVIN ROBERT ISLES v AUSTRALIAN PARTNERS MANAGEMENT PTY LTD (ACN 160 941 453) File number: QUD 238 of 2013 Judge: COLLIER J Date of judgment: 11 July 2013 Catchwords: CORPORATIONS – s 461(1)(k) Corporations Act 2001 (Cth) – winding up on just and equitable grounds – quasi-partnership – breakdown in mutual trust and confidence between members – sole director unresponsive to member requests – company money missing Legislation: Corporations Act 2001 (Cth) ss 109X, 461(1)(k), 462(2)(c) Cases cited: Ebrahimi v Westbourne Galleries Limited [1973] AC 360 cited
Re Totex-Adon Pty Ltd [1981] 1 NSWLR 605 cited
Re Yenidje Tobacco Company Limited [1916] 2 Ch 426 citedLipton P, Herzberg A and Welsh M, Understanding Company Law (16th ed, Thomson Reuters, 2012) Date of hearing: 11 July 2013 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 22 Counsel for the Plaintiff: Mr N Thompson Solicitor for the Plaintiff: Eaton Lawyers Counsel for the Defendant: The Defendant did not appear
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 238 of 2013
IN THE MATTER OF AUSTRALIAN PARTNERS MANAGEMENT PTY LTD ACN 160 941 453
BETWEEN: KEVIN ROBERT ISLES
PlaintiffAND: AUSTRALIAN PARTNERS MANAGEMENT PTY LTD (ACN 160 941 453)
Defendant
JUDGE:
COLLIER J
DATE OF ORDER:
11 JULY 2013
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.Australian Partners Management Pty Ltd (ACN 160 941 453) be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth).
2.Peter Anthony Lucas and Glen Michael Shannon of P.A. Lucas & Co be appointed as liquidators of Australian Partners Management Pty Ltd (ACN 160 941 453).
3.Australian Partners Management Pty Ltd (ACN 160 941 453) pay the plaintiff’s costs of this application, to be taxed if not otherwise agreed.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 238 of 2013
IN THE MATTER OF AUSTRALIAN PARTNERS MANAGEMENT PTY LTD ACN 160 941 453
BETWEEN: KEVIN ROBERT ISLES
PlaintiffAND: AUSTRALIAN PARTNERS MANAGEMENT PTY LTD (ACN 160 941 453)
Defendant
JUDGE:
COLLIER J
DATE:
11 JULY 2013
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This is an application to wind up the defendant, Australian Partners Management Pty Ltd (ACN 160 941 453) on the basis that it would be just and equitable to do so pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (the Corporations Act). In summary, the plaintiff, Mr Kevin Isles claims that:
1.He is a 50 per cent shareholder in the company.
2.The company has never traded.
3.The director of the company, Ms Nadine Albutt, who is the other shareholder of the company, has failed to produce books and records of the company despite repeated requests by Mr Isles.
4.Ms Albutt has failed to account to shareholders.
Background
This winding up application is being heard urgently as Mr Isles suffers from an acute medical condition. He seeks an order to wind up the company in order to manage his affairs. I note Mr Kevin Robert Isles’ affidavit sworn 13 March 2013 in which he deposes as to these matters.
The company was incorporated on 2 October 2012. In her affidavit sworn 1 July 2013 Ms Albutt deposed that she and Mr Isles decided to create a company to conduct a business lending money to fund various types of development deposits. Mr Isles and Ms Albutt were appointed company directors and Ms Albutt was the company secretary. As I have already noted, Mr Isles and Ms Albutt each held and continue to hold 50 per cent of the share capital in the company. Ms Albutt deposed in her affidavit that between the date of registration of the company and January 2013 four potential borrowers personally approached her with a view to borrowing money from the company for their development projects, but no loans were made.
In his affidavit sworn 13 May 2013 Mr Isles deposed that while he was a director the company did not engage in any trading. He also deposes that the company has not traded since its incorporation. On 22 December 2012 Mr Isles tendered his resignation as company director. Ms Albutt deposes the company did not receive the letter of resignation until 4 March 2013. While this is somewhat odd no matters of any materiality appear to flow from this issue.
On 9 April 2013 it appears that Mr Isles’ solicitor, Mr Devin Ralph, wrote to Ms Albutt requesting confirmation that the company had not incurred any debts since incorporation. The letter from Mr Ralph sent via email sought, among other things, statements of all company accounts, copies of all instructions provided to the accountants by Ms Albutt and copies of all correspondence issued by the accountant in relation to the company. The letter stated that on receipt of that information Mr Isles intended to seek to hold a company meeting.
The accountant, ATBS Accounting Tax & Business Solutions, sent an email to Mr Ralph on 18 April 2013 stating that it had not been engaged in relation to accounts of the company and it had no accounting data or records.
On 6 June 2013 Peter Anthony Lucas and Glen Michael Shannon of P.A. Lucas & Co consented to be appointed to the Court and act as liquidators or provisional liquidators of the company were the Court minded to order the company’s winding up. On 12 June 2013 the plaintiff’s solicitor caused to be sent to the defendant a cover letter together with the affidavit of Mr Devin Ralph sworn 12 June 2013 and the consent of the liquidators filed in these proceedings pursuant to s 109X of the Corporations Act.
These documents were also sent to the defendant’s director, Ms Albutt. The evidence of this is contained in the affidavit of Mr Devin Ralph sworn 13 June 2013. On 20 June 2013 Mr Isles’ solicitor caused a notice of application for winding up order in form 9 to be published in the public notices section of the newspaper The Courier Mail. A form 519 – notification of court action relating to winding up was lodged on 20 June 2013 with the Australian Securities and Investments Commission.
Company Finance
There appears to be some issue about a considerable amount of money which has gone missing from the company’s accounts. The evidence before the Court indicates the following events.
On 31 October 2012 Ms Albutt paid an invoice from ATBS Accounting Tax & Business Solutions for the amount of $990 from her own money (this is the subject of evidence in Ms Albutt’s affidavit but without any supporting documentation). The plaintiff disputes this because he claims loans he made to Ms Albutt were for the purpose of establishing the company. On 19 December 2012 the company opened two bank accounts with Bendigo and Adelaide Bank. In his affidavit sworn 4 July 2013 the plaintiff deposes he had loaned moneys to the company.
Between 17 October 2012 and May 2013 it appears that 13 instalments were made totalling $100,000. Mr Isles deposes further that as the company had not established bank accounts at the time of the initial advances, Ms Albutt requested by email that the funds be deposited into her personal account. The plaintiff deposes that the loan funds described did not appear in the bank statements annexed to the affidavit of Ms Albutt sworn 1 July 2013.
Company Records
Ms Albutt, informed by the books and records of the company, deposed in her affidavit of 1 July 2013 that:
1.The company’s only assets are the amount of $13.60 save as to the company’s credit in two Bendigo and Adelaide bank accounts.
2. The company had never entered into any contracts with anyone.
3. The company has no creditors.
4. The company is owed no money by any debtors.
5. The company has no contracts on foot with anyone at this time.
Mr Isles deposed that as at 4 July 2013 Ms Albutt, as director of the company, had failed to make available the company’s complete books and records.
Relationship
Mr Isles deposes in his affidavit of 4 July 2013 that his relationship with the other shareholder of the company – Ms Albutt – has broken down irretrievably, and that while the company was established as a partnership arrangement it has never operated in that way. He claims further in this affidavit that Ms Albutt has conducted herself in a way which shows no regard for her duties as director of the company.
It appears that there was a meeting between Mr Isles and Ms Albutt on 6 March 2013. There is also some evidence that Mr Isles signed a document as shareholder of the company at the meeting but the Court is not aware of what that documentation is and there is some evidence of the fact that Mr Isles was ill at the time of signing it.
This Morning’s Hearing
At the hearing this morning there was no appearance by the defendant company. Immediately before Court a letter was sent by the solicitors for the defendant, Rostron Carlyle Solicitors, to the Registry of the Court stating they had been instructed not to appear at today’s hearing on behalf of the company, and requesting that a copy of the correspondence be provided to my associate. I have marked that document for identification in this proceeding.
Relevant Legislation
Pursuant to s 461(1)(k) of the Corporations Act the Court may order the winding up of a company if the Court is of the opinion that it is just and equitable that the company be wound up. A contributory has standing to apply for a winding up order under s 462(2)(c) of the Corporations Act. It is not in dispute in this case that Mr Isles is a contributory or shareholder and that he has standing to make this application. There is also no dispute in this case that the proper procedures have been employed by Mr Isles and his legal representatives to comply with the procedural requirements of the Corporations Act for a winding up application.
I note that the just and equitable ground under s 461(1)(k) of the Corporations Act has been interpreted very broadly so as to give the Courts a very wide discretion as to when to order a winding up. One example of where Courts have been prepared to order the winding up of a company on the just and equitable ground is where there has been a breakdown in the mutual trust and confidence of members.
I note the learned authors of Lipton P, Herzberg A and Welsh M, Understanding Company Law (16th ed, Thomson Reuters, 2012) at p 635 observe that:
In the case of small companies that have evolved from partnerships or that operate in a similar manner to partnerships, it has been held just and equitable to wind up the company when the relationship between the “partners” breaks down.
In my view, this statement represents the law. The leading case for this proposition is the decision of House of Lords in Ebrahimi v Westbourne Galleries Limited [1973] AC 360. In that case the House of Lords held that the understanding in that particular company, which operated as a quasi-partnership, involved mutual trust and confidence and it was appropriate in that case to order a winding up because that understanding had been repudiated on the facts of that case. In my view the case before me is another example of where a company has been incorporated to operate as a quasi-partnership and there has been breakdown in mutual trust and confidence between the partners.
Further, and in any event, there is some evidence that there has been a deadlock between the two shareholders, such that it would be just and equitable to have the company placed in winding up on the basis that it would be just and equitable to do so. The leading case in this area of law is Re Yenidje Tobacco Company Limited [1916] 2 Ch 426. The deadlock in the case before me appears to be that there are two shareholders, Mr Isles and Ms Albutt, but there is no room for any movement or resolution of the company’s affairs and Ms Albutt, on the material before the case, appears not to be responding to requests by Mr Isles for information or action. In such a case, in my view, it is also appropriate for the Court to invoke the just and equitable ground for winding up under s 461(1)(k) of the Corporations Act. I also note the discussion of relevant principles in the case of Re Totex-Adon Pty Ltd [1981] 1 NSWLR 605.
In my view on the material before the Court, it is appropriate to order that this company be placed in liquidation on the basis of s 461(1)(k) of the Corporations Act. Accordingly, I make the following orders:
1.Australian Partners Management Pty Ltd (ACN 160 941 453) be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth).
2.Peter Anthony Lucas and Glen Michael Shannon of P.A. Lucas & Co be appointed as liquidators of Australian Partners Management Pty Ltd (ACN 160 941 453).
3.Australian Partners Management Pty Ltd (ACN 160 941 453) pay the plaintiff’s costs of this application, to be taxed if not otherwise agreed.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate:
Dated: 12 July 2013
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