Re 52 the Esplanade Pty Ltd

Case [2021] QSC 318

SUPREME COURT OF QUEENSLAND

CITATION:

 Re 52 The Esplanade Pty Ltd [2021] QSC 318

PARTIES:

100 BRISBANE STREET PTY LTD

(applicant)

v
52 THE ESPLANADE PTY LTD ACN 641 819 641

(respondent)

FILE NO/S:

BS 10826 of 2021

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

3 December 2021

DELIVERED AT:

Brisbane

HEARING DATE:

25 November 2021

JUDGE:

Kelly J

ORDER:

Upon Ajay Bakshi giving the usual undertaking as to damages, the orders of the Court are that:

1. Pursuant to s 472(2) of the Corporations Act 2001 (Cth), Terry John Rose of SV Partners Insolvency (Qld) Pty Ltd, 22 Market Street, Brisbane, Queensland, 4000 be appointed as provisional liquidator to the defendant, 52 The Esplanade Pty Ltd;

2.   The provisional liquidator shall, within 14 days of his appointment, provide to the Court and to the plaintiff, 100 Brisbane Street Pty Ltd, a report as to the provisional liquidation of the defendant, including:

a.   The identification of the assets and liabilities of the company;

b.   An opinion as to the solvency of the company

c.   An opinion as to the value of the assets of the company;

d.   The likely return to creditors of the company; and

e.   Any other information necessary to enable the financial position of the company to be assessed;

3.   Liberty to apply.    

CATCHWORDS:

CORPORATIONS  –  WINDING UP  –  LIQUIDATORS  –  APPOINTMENT  –  IN WINDING UP BY COURT  –  OTHER MATTERS  –  where the applicant held 50 of 100 shares in the respondent company – where the applicant asserts that a provisional liquidator should be appointed because it has reason to believe the respondent company is trading insolvently – where the respondent asserts the applicant held all of their shares on trust – whether the applicant is a “contributory” or “member” within the meaning of the Corporations Act 2001 (Cth) such that it has standing to bring the application – whether a provisional liquidator should be appointed.

Corporations Act 2001 (Cth), s 9, s 461, s 472

 ASIC v Merlin Diamonds Ltd [2019] FCA 1546, considered
ASIC v Activesuper Pty Ltd (No 2) (2013) 93 ACSR 189, cited
Dalgety Downs Pastoral Company Pty Ltd v FCT (1952) 86 CLR 335, cited
Maertin v Klaus (2006) 233 ALR 358, cited
Sutherland v Take Seven Group Pty Ltd (1998) 29 ACSR 201, cited

COUNSEL:

G Beacham QC and J Byrnes for the applicant
G J Radcliff for the respondent

SOLICITORS:

Pennisi Zia Lawyers for the applicant
Legacy Legal for the respondent

Introduction

  1. By an originating application filed on 17 September 2021, 100 Brisbane Street Pty Ltd (“the applicant”) commenced a proceeding against 52 The Esplanade Pty Ltd (“the company”) seeking an order that the company be wound up pursuant to s 461 of the Corporations Act 2001 (Cth) (“the Act”). On 30 September 2021, orders were made by consent that the proceeding continue as if started by claim and requiring the applicant to file and serve a statement…

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Details
AGLC
Re 52 the Esplanade Pty Ltd [2021] QSC 318
Case
[2021] QSC 318
Decision Date

CaseChat Overview and Summary

In the matter of Re 52 The Esplanade Pty Ltd, 100 Brisbane Street Pty Ltd applied for the appointment of a provisional liquidator on the basis that it held 50 of 100 shares in the respondent company and had reason to believe that the company was trading insolvently. The respondent company, 52 The Esplanade Pty Ltd, countered the application by asserting that the applicant held all of their shares on trust. The court was required to determine whether the applicant was a “contributory” or “member” within the meaning of the Corporations Act 2001 (Cth) such that it had standing to bring the application. Additionally, the court needed to decide whether a provisional liquidator should be appointed.

The court examined the nature of the applicant’s shareholding in the company and concluded that the applicant held its shares on trust for Mr Ajay Bakshi. This finding meant that the applicant was not a member of the company within the meaning of the Corporations Act 2001 (Cth) and, therefore, did not have standing to bring the application for the appointment of a provisional liquidator. Despite this finding, the court considered the merits of the application and the potential risk of the company incurring debts while insolvent. It concluded that the applicant had established that there was a likelihood that the company was trading insolvently, and it was in the interests of creditors for a provisional liquidator to be appointed. The court appointed Terry John Rose of SV Partners Insolvency (Qld) Pty Ltd as the provisional liquidator, who was required to provide a report on the company’s financial position within 14 days of his appointment.

The final orders of the court were that Terry John Rose of SV Partners Insolvency (Qld) Pty Ltd be appointed as the provisional liquidator of 52 The Esplanade Pty Ltd and that he provide a report on the company’s financial position within 14 days of his appointment. The report was to include an identification of the assets and liabilities of the company, an opinion as to the solvency of the company, an opinion as to the value of the company’s assets, the likely return to creditors of the company, and any other information necessary to enable the financial position of the company to be assessed. The court granted liberty to apply for further orders.

Orders

Orders of the court

Upon Ajay Bakshi giving the usual undertaking as to damages, the orders of the Court are that:

1. Pursuant to s 472(2) of the Corporations Act 2001 (Cth), Terry John Rose of SV Partners Insolvency (Qld) Pty Ltd, 22 Market Street, Brisbane, Queensland, 4000 be appointed as provisional liquidator to the defendant, 52 The Esplanade Pty Ltd;

2. The provisional liquidator shall, within 14 days of his appointment, provide to the Court and to the plaintiff, 100 Brisbane Street Pty Ltd, a report as to the provisional liquidation of the defendant, including:

a. The identification of the assets and liabilities of the company;

b. An opinion as to the solvency of the company

c. An opinion as to the value of the assets of the company;

d. The likely return to creditors of the company; and

e. Any other information necessary to enable the financial position of the company to be assessed;

3. Liberty to apply.

Background

Background to the litigation

By an originating application filed on 17 September 2021, 100 Brisbane Street Pty Ltd (“the applicant”) commenced a proceeding against 52 The Esplanade Pty Ltd (“the company”) seeking an order that the company be wound up pursuant to s 461 of the Corporations Act 2001 (Cth) (“the Act”). On 30 September 2021, orders were made by consent that the proceeding continue as if started by claim and requiring the applicant to file and serve a statement of claim by 14 October 2021. The applicant filed and served a statement of claim on 27 October 2021. On 10 November 2021, the applicant filed this interlocutory application seeking the appointment of a provisional liquidator to the company pursuant to s 472(2) of the Act. The company’s defence was filed on 23 November 2021. This interlocutory application was heard on 25 November 2021. Relevant factual background On 17 June 2020, the company was incorporated for the purpose of acquiring a restaurant business located at 52 The Esplanade, Surfers Paradise known as “Sandbar” (“the business”). The company has an issued share capital comprising 100 ordinary shares. The applicant is registered as a member holding 50 shares in the company. Mr Ajay Bakshi is the director and sole shareholder of the applicant. GB No 3 Pty Ltd (“GB No 3”), is registered as the other member holding 50 shares in the company. Mr Greg Bell is the sole director of the company and the sole director and shareholder of GB No 3. On 20 June 2020, the company entered into a written contract to purchase the business for a purchase price of $520,000.00. On or about 20 November 2020 the company entered into a written loan agreement (“the loan agreement”) with Goldsmith Farrington Capital Pty Ltd (“the lender”) pursuant to which it borrowed, inter alia, the funds required to purchase the business. Mr Bakshi and the applicant, along with Mr Bell and 4 Orchid Avenue Pty Ltd, were parties to the loan agreement as guarantors. Pursuant to the material terms of the loan agreement:(a)the lender granted to the company a facility for the principal amount of $632,000.00;(b)the “Advance Date” was the date on which the first drawing of all or part of the principal amount occurred;(c)interest was payable monthly in arrears at the rate of 5% per month but the lender agreed to accept a lower rate of 3% per month if all amounts payable under the loan agreement were paid by the company when due;(d)“the Debt” was the sum from time to time outstanding inclusive of the principal amount plus interest; (e)the Debt was required to be repaid in full by no later than twelve months from the Advance Date;(f)Mr Bakshi and the applicant granted in favour of the lender security by way of mortgages and charges over real property comprising properties situated at 6 Tristan Way, Tinana, 627 Ripley Road, Ripley and 81 Brisbane Road, Bundamba (“the secured properties”); and (g)The company granted security over the assets comprising the business and all present and after acquired property of the company;(h)Mr Bakshi and the applicant gave an indemnity to the lender in respect of the company’s obligations under the loan agreement.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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