Lings Investments WA Pty Ltd as trustee for the Lings Family Trust v M.A.Q Investments Pty Ltd (in Liquidation)
[2024] WASC 175
•14 MAY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: LINGS INVESTMENTS WA PTY LTD as trustee for THE LINGS FAMILY TRUST -v- M.A.Q INVESTMENTS PTY LTD (IN LIQUIDATION) [2024] WASC 175
CORAM: MASTER RUSSELL
HEARD: 16 APRIL 2024 & ON THE PAPERS
DELIVERED : 14 MAY 2024
FILE NO/S: COR 50 of 2024
MATTER: IN THE MATTER OF M.A.Q INVESTMENTS PTY LTD (IN LIQUIDATION) (ACN 095 541 629)
BETWEEN: LINGS INVESTMENTS WA PTY LTD as trustee for THE LINGS FAMILY TRUST
Plaintiff
AND
M.A.Q INVESTMENTS PTY LTD (IN LIQUIDATION)
Defendant
Catchwords:
Corporations - Winding up - Application by sole contributory to terminate winding up of company - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 482, s 482(1), s 482(1A)(a), s 482(3), s 482(5)
Supreme Court (Corporations) (WA) Rules 2004, r 2.8
Result:
Application granted
Order made terminating winding up
Category: B
Representation:
Counsel:
| Plaintiff | : | S Paisal |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Mendelawitz Morton Commercial Lawyers |
| Defendant | : | No appearance |
Cases referred to in decision:
Aetna Properties Pty Ltd v GA Listing & Maintenance Pty Ltd (1994) 13 ACSR 422
Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685
El-Fahkri, Re Elfah Pty Ltd (in liq) [2002] FCA 1469
Ex parte James (as liquidator of Bluegold Corporation Pty Ltd (in liq)) [2021] WASC 98
Hume v Carey [2022] WASC 256
In the matter of Wiamera Pty Ltd (deregistered) [2014] NSWSC 91
Re Thoroughbred Consultants Pty Ltd [2021] VSC 627
MASTER RUSSELL
Introduction
The defendant, M.A.Q Investments Pty Ltd (in liquidation) (ACN 095 541 629) (Company), was wound up by members' voluntary liquidation on 3 March 2023.
By originating process filed on 27 March 2024 (Application), the plaintiff, Lings Investments WA Pty Ltd (Lings Investments) as trustee for the Lings Family Trust (Lings Family Trust), seeks:
(a)an order pursuant to s 482(1) of the Corporations Act 2001 (Cth) (Act) for the termination of the winding up of the Company;
(b)upon termination of the winding up, an order that pursuant to s 482(3) of the Act, the officers of the Company resume its management and control; and
(c)an order pursuant to s 482(5) of the Act that the Company lodge an office copy of the orders made with the Australian Securities and Investments Commission (ASIC) within 14 days of the making of the orders.
In support of the Application, the plaintiff relies on an outline of submissions filed on 15 April 2024, and affidavits of:
(a)Claire Louise Lings filed on 27 March 2024;
(b)Mervyn Jonathan Kitay filed on 9 April 2024;
(c)Shivangi Paisal filed on 9 April 2024; and
(d) Marnie Mitchell filed on 17 April 2024.
The Application was listed for hearing in the Master's List on 16 April 2024. At that time, I was not satisfied with the adequacy of the evidence filed confirming service of the Application and supporting affidavits on ASIC, as required by r 2.8 of the Supreme Court (Corporations) (WA) Rules 2004 (Corporations Rules). I adjourned the Application to be determined on the papers upon the filing of further evidence in that regard.
Having considered the submissions and affidavits filed in support of the Application, including the affidavit of Marnie Mitchell deposing to the service of the Application and supporting affidavits on ASIC, I am satisfied that ASIC has been served and, that it is appropriate to make the orders sought in the Application. These are my reasons.
Background to the Application
The following factual background to the Application and the context in which it was made is derived from the affidavits of Ms Lings and Mr Kitay.
Ms Lings, together with Cameron Michael Lings, are the directors of Lings Investments. They were also directors of the Company from their appointment on 13 December 2004 until the Company was wound up by members' voluntary liquidation on 3 March 2023.[1]
[1] Affidavit of Claire Louise Lings filed on 27 March 2024 (Lings Affidavit) [1] - [3], [8.1], 'CL-1', 'CL-2'.
Mr Kitay was appointed as the liquidator of the Company's voluntary winding up pursuant to a resolution of the members of the Company on 3 March 2023.[2]
[2] Affidavit of Mervyn Jonathan Kitay (Kitay Affidavit) [8], [10], 'MK‑3'.
Lings Investments, as trustee for the Lings Family Trust, is the Company's sole shareholder, holding 100% of the Company's issued share capital of 100 ordinary shares.[3]
[3] Lings Affidavit [3], [8.3], [13] - [14], 'CL-2', 'CL-5'.
The Lings Family Trust was established by deed dated 14 July 2004 between Christine Maguire as settlor and Ms Lings as trustee.[4] By a deed of removal and appointment of trustee dated 17 August 2023, Ms Lings retired as trustee of the Lings Family Trust and Lings Investments was appointed trustee in her place.[5]
[4] Lings Affidavit [9] - [10], 'CL-3'.
[5] Lings Affidavit [11] - [12], 'CL-4'.
The property located at 61 Tacoma Circuit, Canning Vale in the state of Western Australia, more particularly described as Lot 86 on Deposited Plan 43395 on Certificate of Title Volume 2578 Folio 873 (Property), is the Company's primary asset. The Property was recently valued at $1,080,000. The monthly rent of $8,800 (inclusive of GST) received from leasing the Property is the Company's primary source of income.[6]
[6] Lings Affidavit [32] - [33], [43].
The Company's assets also include a debit loan account owed by the directors of the Company with a balance of $341,706.90 as at 31 December 2023.[7]
[7] Kitay Affidavit [11].
Ms Lings deposes that, upon professional advice received in 2022, it was understood that selling the Property would be in the interests of the Company and the best way to effect the sale was to place the Company into a members' voluntary liquidation.[8]
[8] Lings Affidavit [22] - [23].
On 27 February 2023, a Statement of Assets and Liabilities and a Declaration of Solvency signed by the directors of the Company was filed with ASIC.[9] A meeting was held on 3 March 2023, at which it was resolved that the Company be entered into members' voluntary liquidation and Mr Kitay be appointed as liquidator (Liquidator).[10]
[9] Lings Affidavit [24] - [25], 'CL-7'; Kitay Affidavit [6] - [7], 'MK-1'.
[10] Lings Affidavit [26], 'CL-8'; Kitay Affidavit [8] - [10], 'MK-2', 'MK-3'.
The Company's only creditor is Australia and New Zealand Banking Group (ANZ), which provided a loan for the purchase of the Property, secured by registered mortgage over the Property, with $558,858 owing as at 15 March 2024.[11]
[11] Lings Affidavit [34] ‑ [35], 'CL‑11'; Kitay Affidavit [11.b].
In the Liquidator's initial advice to creditors issued on 10 March 2023, the Liquidator advised that:
(a)the winding up of the Company would be a solvent winding up;
(b)the Liquidator would declare a dividend after receiving tax clearance;
(c)the creditor would be paid in full; and
(d)the remaining surplus funds would be distributed amongst the members of the Company.[12]
[12] Lings Affidavit [30], [31], 'CL-10'.
Ms Lings deposes that, based on an updated valuation which showed an increase in the value of the Property and updated tax advice, it no longer makes commercial sense to sell the Property, as it would attract higher tax and duty than was initially anticipated. She deposes that the Company no longer wishes to sell the Property. She believes there is no longer a basis to continue with the proposed sale of the Property and the winding up of the Company, and that it is in the interest of the members for the control of the Company to be returned to the directors, being herself and Cameron Michael Lings.[13]
[13] Lings Affidavit [42] - [46], 'CL-14'.
The Liquidator deposes to the financial position and solvency of the Company, as referred to later in these reasons. He supports, and has expressed his consent to, the Application.[14]
[14] Kitay Affidavit [4], [27].
Legal principles
Pursuant to s 482 of the Act, at any time during the winding up of a company, the court may, upon application, make an order staying the winding up either indefinitely or for a limited time, or terminating the winding up on a day specified in the order. Any such order has a prospective effect, with the company being treated as having been in winding up until the date of the order.
Section 482(1A)(a) of the Act provides, relevantly, that an application to terminate a winding up may be made by the liquidator, a creditor or a contributory of the company.
The power to make an order under s 482 of the Act is discretionary and the onus is on the applicant to make out a positive case for termination or a stay.[15]
[15] Ex parte James (as liquidator of Bluegold Corporation Pty Ltd (in liq)) [2021] WASC 98 [21] (Strk AM), citing El-Fahkri, Re Elfah Pty Ltd (in liq) [2002] FCA 1469 [9] (Finkelstein J); Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685; Aetna Properties Pty Ltd v GA Listing & Maintenance Pty Ltd (1994) 13 ACSR 422.
Although the Act does not specify any criteria to indicate when an application to terminate a winding up will be granted, the law is well established.
In Hume v Carey,[16] Hill J stated:
[16] Hume v Carey [2022] WASC 256 [12] - [13]. See also Ex parte James (as liquidator of Bluegold Corporation Pty Ltd (in liq)) [2021] WASC 98 [22] - [23] (Strk AM), and the authorities referred to.
12.While the court does not have to find special reasons for granting an application to terminate a winding up, there must be some valid reason for the discretion to be exercised in favour of the applicant, taking into account the interests of the creditors, the liquidator, the members of the company and weighing in the balance the public interest.
13.The factors that generally inform the exercise of the court's discretion to terminate a winding up include:
(a)the attitude and interests of creditors (including future creditors who might be prejudiced if the company was released from winding up);
(b)the interests of the liquidator (particularly with respect to costs) and contributories;
(c)the nature and extent of creditors and whether all debts have been discharged;
(d)the company's current trading position and general solvency;
(e)any explanation for any non-compliance by directors with their statutory duties and of the circumstances leading to the winding up order;
(f)the nature of the company's business; and
(g)the public interest including the public interest in upholding commercial morality.
I have applied those principles in determining the Application.
Disposition
Plaintiff's standing to bring the Application
Pursuant to s 482(1A)(a) of the Act, the plaintiff has standing to bring the Application as the sole shareholder, and contributory of the Company.
Trading position and nature of the Company's business
The Company was solvent prior to the liquidation and has remained solvent during the liquidation.[17]
[17] Lings Affidavit [38] - [39]; Kitay Affidavit [17].
The nature of the Company's business is the leasing of the Property,[18] from which it receives a monthly rental income of $8,800 (inclusive of GST). The profit and loss statement attached to the Kitay Affidavit shows that, for the six months ending 31 December 2023, the Company received $52,800 in rental income and had operating expenses of $21,241.39.[19]
[18] Outline of submissions filed on 15 April 2024.
[19] Kitay Affidavit [16], 'MK-7'.
Mr Kitay deposes that the income generated by the Company is sufficient to meet its outgoings and service the mortgage to ANZ.[20]
[20] Kitay Affidavit [12].
The Company was wound up by way of members' voluntary winding up for the reasons of administrative convenience and business considerations. The plaintiff, as sole shareholder of the Company, now seeks to terminate the dissolution and winding up process for reasons of the same kind, in light of the advice received. There is no reason in the evidence before me that militates against the court exercising the power to terminate the winding up of the Company, if that is the plaintiff's wish as sole shareholder.
Absent any reason to the contrary, subject to considerations regarding the creditor and public interest, the court should be willing to order the relief sought by the plaintiff as sole shareholder to terminate the members' voluntary winding up of the Company.[21]
Attitude, interests and extent of creditors
[21] See In the matter of Wiamera Pty Ltd (deregistered) [2014] NSWSC 91 [11], and the authorities referred to.
There is only one creditor of the Company, ANZ. Mr Kitay deposes that, on 28 March 2024, he issued a circular to ANZ as notification that the plaintiff had made the Application. He has received no response.[22]
[22] Kitay Affidavit [23].
Mr Kitay stated that he also notified ANZ in the circular that the Company remained solvent and the Property had recently been valued at $1,080,000.
I am satisfied that the sole creditor, ANZ, has been provided with notice of the Application. Having had such notice, ANZ has not sought to appear or informed the plaintiff or the court that it wishes to be heard.
While the ANZ loan has not been discharged, having regard to the evidence of Mr Kitay, including the financial statements and balance sheets,[23] there is nothing to suggest that the Company will be unable to continue servicing the ANZ loan if an order terminating the winding up is made.
Interests of the Liquidator
[23] Kitay Affidavit [16], 'MK-7'.
I have taken into account the interest of the Liquidator, particularly with respect to costs. Mr Kitay deposes that the cost of liquidation to date is $10,165.92 (inclusive of GST), which has been paid in full by members of the Company, and no further fees or expenses with respect to the liquidation of the Company are expected to be incurred.[24]
[24] Kitay Affidavit [20] - [21].
Mr Kitay confirms in his affidavit that his remuneration has been approved to $11,000 (inclusive of GST). He does not anticipate seeking or charging further remuneration and expects to receive a GST refund to pay the balance of his approved remuneration.[25]
[25] Kitay Affidavit [21] - [22].
Mr Kitay provides his consent to the Application, and deposes that he believes that the termination of the winding up of the Company will not prejudice the creditor or members of the Company, or be contrary to the public interest.[26]
Public interest considerations
[26] Kitay Affidavit [26] - [27].
I have also turned my mind to the public interest in considering whether to exercise my discretion to make the orders sought for the termination of the winding up of the Company. I accept the evidence of the Liquidator as to the defendant's financial position and that the defendant is solvent.
There is a clear public interest in the court ensuring that the termination of a winding up will not result in an insolvent company being allowed to trade,[27] which may create, for example, a significant risk to any potential future creditors. This is not such a case.
[27] Re Thoroughbred Consultants Pty Ltd [2021] VSC 627 [86].
There is no evidence before me that making an order for the termination of the winding up of the Company would be contrary to commercial morality or the public interest.
Notification to ASIC
I am satisfied that notice of the Application, supporting affidavits, and of the hearing on 16 April 2024 was given to ASIC, as required by r 2.8 of the Corporations Rules.
ASIC did not attend the hearing on 16 April 2024 or seek to be heard on the Application.
I am persuaded on the evidence adduced that the procedural requirements have been satisfied and that it is appropriate to exercise my discretion to order that the winding up of the Company be terminated.
The future management and control of the Company
Having determined that an order will be made terminating the winding up of the Company, it is appropriate to give directions for the resumption of management of control of the company by its officers, pursuant to s 482(3) of the Act.
Conclusion and orders
For these reasons, I am satisfied it is appropriate to grant the relief and make the orders sought, as follows:
1.Pursuant to section 482(1) of the Corporations Act 2001 (Cth) (Act), the liquidation of the defendant, M.A.Q Investments Pty Ltd (In Liquidation) (ACN 095 541 629) (Company), be terminated.
2.Pursuant to section 482(3) of the Act, the officers of the Company resume its management and control.
3.Pursuant to section 482(5) of the Act, the Company lodge an office copy of this order with the Australian Securities and Investment Commission within 14 days.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AP
Associate to Master Russell
14 MAY 2024
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