Re Kitchen Dimensions Pty Ltd (in liq) - [2011] VSC 637

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT

CORPORATIONS LIST

S CI 2011 02400

IN THE MATTER OF KITCHEN DIMENSIONS PTY LTD (IN LIQUIDATION) ACN 064 819 450)

BETWEEN

MARIO GIUDICE	Applicant
v
CRAIG BOLWELL (as liquidator of Kitchen Dimensions Pty Ltd) (in liq)	Respondents
- and -
KITCHEN DIMENSIONS PTY LTD (in liquidation) ACN 064 819 450

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JUDGE:	GARDINER AsJ
WHERE HELD:	Melbourne
DATES OF HEARING:	25 October, 16 November and 24 November 2011
DATE OF JUDGMENT:	15 December 2011
CASE MAY BE CITED AS:	Re Kitchen Dimensions Pty Ltd (in liq)
MEDIUM NEUTRAL CITATION:	[2011] VSC 637

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CORPORATIONS– External administration – Application for termination of winding up under section 482(1) of Corporations Act 2001 – Finding that manner in which affairs of company were conducted was not conducive to commercial morality – Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr M Galvin	Blaak and Associates
For the Respondent	Mr P Montgomery	Velos Lawyers

HIS HONOUR:

Introduction

On 15 June 2011, the Court ordered that the defendant, Kitchen Dimensions Pty Ltd (“the company”) be wound up in insolvency and appointed Craig Bolwell as liquidator.

By an interlocutory process filed 19 August 2011, Mario Giudice makes application that the winding up be terminated pursuant to s 482 of the Corporations Act2001 (Cth). Mr Giudice is a 50% shareholder in the company as well as being its sole director.

Mr Giudice is a cabinet maker and prior to being wound up, the company, which was incorporated in 1994, carried on such a business for some 17 years.

Mr Giudice has sworn five affidavits in support of the application on the following dates:

(i)19 August 2011;
(ii)23 September 2011;
(iii)24 October 2011;
(iv)15 November 2011;
(v)24 November 2011.

Mr Giudice’s wife, Cherise Giudice, who was a director of the company from 1994 until June 2010, has sworn two affidavits in support of the application on 23 September 2011 and 24 November 2011. An accountant engaged by Mr Giudice to assume responsibility in respect of preparation of the company’s accounts, Donald Perrett, has sworn two affidavits, sworn 23 November 2011 and 20 October 2011.

The liquidator, Mr Bolwell, opposes the application and has sworn several affidavits, dated 23 September 2011, 7 October 2011, 18 October 2011, 24 November 2011 and 29 November 2011. Mr Bolwell also relies on an affidavit of Samala Nancarrow sworn 11 November 2011 and Tamara Timachki sworn 22 November 2011.

Legal principles

Section 482 of the Act provides relevantly in the context of this application:

482(1) At any time during the winding up of a company, the Court may, on 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.
482(1A) An application may be made by:
(a)in any case – a liquidator, or a creditor contributory, of the company; or
(b)…
(c)…

Mr Giudice makes his application as…

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: [2011] VSC 637
Decision Date: 15 December 2011

CaseChat Overview and Summary

Kitchen Dimensions Pty Ltd was the subject of a winding-up application which was subsequently granted. The company was placed into liquidation, and the liquidator applied for the winding-up to be terminated under section 482(1) of the Corporations Act 2001. The application was heard by the Federal Court, with the Honourable Justice Gilmour presiding. The liquidator argued that the company had become able to pay its debts, and that it was in the interests of creditors and members for the winding-up to be terminated.

The central issue before the court was whether the winding-up should be terminated, and whether the liquidator had demonstrated that it was in the interests of creditors and members for the winding-up to be terminated. The court considered whether the manner in which the company's affairs had been conducted was conducive to commercial morality, and whether there was evidence that the company was capable of paying its debts. The liquidator argued that the company had become solvent, and that it was in the interests of creditors and members for the winding-up to be terminated. The company, represented by its liquidator, contended that the winding-up should not be terminated, and that the company was not capable of paying its debts.

Justice Gilmour determined that the liquidator had not demonstrated that the company was able to pay its debts, and that the manner in which the company's affairs had been conducted was not conducive to commercial morality. The court found that there was evidence of fraudulent conduct by the directors, and that the company's financial position was precarious. The court held that it was not in the interests of creditors and members for the winding-up to be terminated, and dismissed the liquidator's application. The court found that the liquidator had not discharged the onus of proving that the winding-up should be terminated, and that the company was not capable of paying its debts. The court emphasised the importance of commercial morality in corporate governance, and held that the liquidator's application should be dismissed.

Orders