Khamo v XL Cleaning Services Pty Ltd - [2004] NSWSC 1134

Reported Decision:
51 ACSR 397

Supreme Court

CITATION: Khamo v XL Cleaning Services Pty Ltd [2004] NSWSC 1134

HEARING DATE(S): 18/11/04

JUDGMENT DATE:
23 November 2004

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Winding up order made

CATCHWORDS: CORPORATIONS - winding up - just and equitable ground - partnership in corporate form - irretrievable breakdown in parties' relationship

LEGISLATION CITED: Corporations Act 2001 (Cth), ss.461(1)(k), 462(2)(c)

CASES CITED: Embrahimi v Westbourne Galleries Ltd [1973] 1973 AC 360
Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426

PARTIES :
Bahjat Yonan Khamo - Plaintiff
XL Cleaning Services Pty Ltd - First Defendant
Chi Ho Jung - Second Defendant

FILE NUMBER(S): SC 5307/04

COUNSEL: Mr C.D. Wood - Plaintiff
Mr R.N. O'Neill - Second Defendant

SOLICITORS: Gells Lawyers - Plaintiff
Andrew G. Stewart & Associates - Second Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

TUESDAY 23 NOVEMBER 2004

5307/04 - BAHJAT YONAN KHAMO AKA TONY KHAMO V XL CLEANING SERVICES PTY LTD

JUDGMENT

1 The plaintiff, Mr Khamo, is a shareholder in XL Cleaning Services Pty Ltd. In that capacity, he seeks an order for the winding up of that company on the just and equitable ground under s.461(1)(k) of the Corporations Act 2001 (Cth). His standing to make this application is conferred by s.462(2)(c).

2 XL Cleaning was formed in October 2002. There were two shareholders, each holding one share, namely, the plaintiff and the second defendant, Mr Jung. They were also the only directors. Each of them already had an established cleaning business. The plaintiff's business was UEC. The second defendant's business was Jichy. Each serviced Coles Myer stores. In 2001 the principals came to know one another through that connection and later decided that it would be advantageous for them to join forces, particularly when Coles Myer decided to rationalise its cleaning contractor arrangements.

3 Each of the principals now appears to have a different understanding of the arrangement they agreed to pursue through XL Cleaning. They agree that it was to be a 50/50 arrangement, but what that was intended to mean is unclear. The two existing cleaning businesses continue, but under the umbrella of XL Cleaning, in the sense that it is XL Cleaning that deals with Coles Myer, but the separate businesses actually provide cleaning services as, apparently, sub-contractors to XL Cleaning. As far as the evidence shows, no written agreement covering this loose arrangement was brought into existence.

4 The plaintiff's wife, Maria Eleftheriades, worked on the administrative side of the business as did the wife's sister, Simoney. The second defendant says, however, that did he not agree to Ms Eleftheriades's involvement and was concerned when he saw that she had been nominated as a contact person for Coles Myer. By mid 2003 the plaintiff and Ms Eleftheriades had developed a concern that better bookkeeping was needed. They say that the second defendant agreed to do the bookkeeping, but they were worried that quarterly BAS returns…

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.

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Details

Case: [2004] NSWSC 1134
Decision Date: 23 November 2004

CaseChat Overview and Summary

The dispute in this case was between Khamo, a shareholder and director of XL Cleaning Services Pty Ltd, and the company itself. The proceedings took place in the Supreme Court of Victoria, where Khamo sought a winding up order on the basis that the company was unable to continue its operations in a just and equitable manner. This arose due to an irretrievable breakdown in the relationship between the parties. The court was tasked with determining whether the just and equitable winding up ground was applicable in this scenario, particularly considering the nature of the company as a partnership in corporate form.

The primary legal issue was whether the just and equitable winding up ground could be invoked by a shareholder of a company that was structured as a partnership in corporate form, specifically when the relationship between the shareholders had deteriorated to the point of no return. The court had to assess the relevance of the company's partnership-like structure and its impact on the application of the just and equitable winding up principle. This involved examining the nature of the company's operations, the relationship between the shareholders, and the implications of their partnership-like arrangement on the company's ongoing viability.

The court found that the partnership-like structure of the company did not preclude the application of the just and equitable winding up ground. It recognised that the irretrievable breakdown in the relationship between the shareholders, who were also directors, was a significant factor in determining the company's ability to continue its operations. The court concluded that the relationship between the parties had deteriorated to such an extent that the company could not continue to operate in a just and equitable manner. As a result, the court granted the winding up order, emphasising the importance of the relationship between the shareholders and its impact on the company's viability.

The final orders of the court included a winding up order against XL Cleaning Services Pty Ltd, reflecting the court's determination that the company could not continue its operations in a just and equitable manner due to the irretrievable breakdown in the relationship between the shareholders. The court's decision highlighted the significance of the relationship between the parties in partnership-like corporate structures and its impact on the application of the just and equitable winding up ground.

Orders