Rupert Co Ltd v Chameleon Mining Nl
[2004] NSWSC 1261
•22 December 2004
NEW SOUTH WALES SUPREME COURT
CITATION: Rupert Co Ltd v Chameleon Mining NL [2004] NSWSC 1261
CURRENT JURISDICTION: Equity Corporations List
FILE NUMBER(S): 4822/04
HEARING DATE{S): 24 & 25 November 2004
JUDGMENT DATE: 22/12/2004
PARTIES:
Rupert Company Limited v Chameleon Mining NL
JUDGMENT OF: Smart AJ
LOWER COURT JURISDICTION: Not Applicable
LOWER COURT FILE NUMBER(S): Not Applicable
LOWER COURT JUDICIAL OFFICER: Not Applicable
COUNSEL:
(P) G Carolan
(D) G McVay
SOLICITORS:
(P) Webster O'Halloran & Associates
(D) Spencer Whitby & Co
CATCHWORDS:
Winding-Up - Application to set aside Statutory Demand dismissed - Moneys claimed not paid into Court - Failure to satisfy Court that defendant company is solvent - discretion exercised to wind up the defendant
ACTS CITED:
Corporations Act s 459
DECISION:
See paras 69 and 70
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LISTSMART AJ
Wednesday, 22 December 2004
4822/04:RUPERT COMPANY LIMITED v CHAMELEON MINING NL
JUDGMENT
1By its application filed 1 September 2004 Rupert Company Limited (Rupert) seeks the winding up of Chameleon Mining NL (Chameleon). In December 2003 Rupert served a statutory demand upon Chameleon for the payment of $200,000, being the balance of expenditure costs undertaken on six Prospecting Licenses in Fiji with a verifying affidavit.
2On 2 August 2004. Emmett J, sitting in the Federal Court of Australia dismissed Chameleon's application to set aside the statutory demand and ordered Chameleon to pay Rupert's costs of that application. Emmett J stayed these orders up to and including 9 August 2004 and ordered that upon Chameleon paying $205,000 into Court the earlier orders be dissolved and the following orders take effect:
(a)The further hearing of the proceeding be adjourned to a date to be fixed
(b)On or before 18 August 2004 Chameleon file and serve any further evidence in support of its application
(c)Chameleon pay Rupert's costs thrown away by reason of the adjournment fixed in the sum of $5000
(d)The applications to set aside the creditors' statutory demand be stood over for further directions on 20 August 2004
3I was told that $205,000 had not been paid so that the dismissal of the application to set aside the statutory demand stood.
4In the affidavit filed in support of the application the plaintiff stated that it relied upon the following grounds set out in the Corporations Act 2001:
(a)that the defendant is an insolvent company (s 459A)
(b)that it is just and equitable that the defendant be wound up
(c)that the application to set aside the statutory demand was dismissed on 2 August 2004.
5The grounds upon which Chameleon opposed the winding-up application were
(a)Chameleon can pay its debts as and when they fall due, and
(b)Chameleon is solvent.
6It was common ground that in the circumstances the onus lay on Chameleon to establish that it was solvent.
7Chameleon was incorporated on 16 November 2001. It was a public company and listed on the Australian Stock Exchange. It is presently suspended. Rupert is a major shareholder in Chameleon, holding about 18.76 per cent of the fully paid ordinary shares. It has about 1132 holders of fully paid ordinary shares.
8Chameleon engaged Mr A H J Wily, a Chartered Accountant with extensive experience in insolvency administrations including corporate recovery to make an assessment of its financial position. From his report it appears that Chameleon was floated for the specific purpose of raising money to promote gold mining. Chameleon has eleven separate exploration areas, six in Fiji and five in the Kimberley region of Western Australia. Chameleon is now also interested in purchasing the Cerro Negro copper mine in Chile.
9Mr Wily has reported that the company is not effectively trading and has only incurred costs associated with the holding of certain assets and statutory obligations of a public company and that its day to day costs are minimal. Various creditors in respect of past, present and future costs and debts have agreed to postpone their entitlement to payment. The postponing creditors include directors and other companies associated with them. Chameleon is hopeful that the Cerro Negro mine in Chile which is being acquired, will, within a relatively short period of time, produce sufficient profits to meet its various debts. The strategy of Chameleon over the last two years when it has needed money to meet its external obligations has been to sell assets or to procure further substantial cash subscriptions and allot further shares, It has not had a significant income.
10The list of current creditors and available assets propounded by Chameleon, with variations to reflect the factual position, follows::
Creditors (Current)
| G Coleman – counsel's fees – Federal Court proceedings Registries Limited – company registry services (para 7 of affidavit of G Barnes of 5/11/04) Armstrong Wily – preparation of solvency report Legal fees – for proceedings in Warden's Court, WA and these proceedings Australian Stock Exchange – estimate of fees for next 3 months Registries Ltd – estimate of fees for next 3 months Jackson Grieve - auditors ($25,000 plus GST of $2,500) (para 10 of affidavit of G Barnes of 5/11/04) Plaintiff's costs in Federal Court (claimed but not agreed – para 11 of affidavit of G Barnes of 5/11/04) Claimed debt of Rupert Available Assets Moneys subscribed on 24/11/04 For further shares (1.6 million). (Cheque cleared) St George Bank A/c 552154796 National Australia Bank A/c 544-183-5334 (Annexure J2 to affidavit of G Barnes of 5/11/04) | $ 4,785 969 10,000 15,000 3,000 3,000 27,500 17,228 $205,000 $286,482 $250,000 $ 40,000 6 ,000 2,000 $ 298,000 |
11This shows a surplus of liquid assets over debts of $12,000. Chameleon also claimed that it was entitled to a GST refund of $38,000 but this is debatable and the evidence did not establish that any refund for the year ended 30 June 2004 had not been received, I have not taken it into account.
12One of the features of the history of Chameleon is that when it appears to be in a tight corner it manages to find a substantial share investor. See, for example, the issues in July and August 2004 (p.33 of Annual Accounts of Chameleon for 2004) and the November issues mentioned herein.
13The deferred liabilities of Chameleon include:
| Amount payable to vendors $38,255 These figures are shown at pp 17 & 28 of Ex 4, Chameleon's financial financial accounts for year ended 30/6/04 (a) Amount payable to Pinnacle Nominees Pty Ltd as at 30 June 2004 Mr G Barnes, the managing director of Chameleon refers in his affidavit of 15/11/04 to Pinnacle Nominees Pty Ltd as "my company". He is the sole shareholder, a director and the general manager. He has attached a copy of some ledger entries in the accounts of Chameleon showing the dealings between Pinnacle Nominees Pty Ltd and Chameleon from 1 July 2003 to 30 June 2004. There are substantial charges for consulting fees by Pinnacle Nominees and for office rental space provided by Pinnacle for Chameleon in Perth. (b) Amount payable to Chameleon Ventures Ltd as at 30 June 2004 Mr L Roberts, the secretary and a director of Chameleon is also a director and secretary of Chameleon Ventures Ltd. In his affidavit of 15/11/04 he includes (Annexure A) a detailed list of the Dealings from 1 July 2003 to 30 June 2004 between Chameleon and Chameleon Ventures Ltd. The latter seems to have met expenses on behalf of Chameleon. (c) Amount payable to Vendors as at 30 June 2004 It appears that on 11 August 2004 Chameleon made an issue of 5-million shares to ordinary investors The result of the issue was to reduce this liability to Nil and the total of the deferred liabilities to | $336,224 $183,373 $ 14,596 $ 38,255 $297,969 |
| 14 On 10 November 2004 the directors of Chameleon Ventures Limited passed these resolutions: |
"It was resolved that the loan balance Chameleon Mining NL has with the company will be deemed non-recourse, not repayable to the company for a further period of 12 months or until profits arise from the Cerro Negro mine sufficient to repay the loan.
It was resolved that all consulting fees in relation to its contract with Chameleon Mining NL be held to be received as being credited to the company's loan balance with Chameleon Mining NL.
It was resolved that the company meet the costs of administration (office, rent, telephone, printing and stationery) in relation to the Sydney Office of Chameleon Mining NL and that these expenses are credited to the loan account the company has with Chameleon Mining NL."
15On 10 November 2004 the sum of $100,000 was deposited in Chameleon's account No 2-080-57-487-5770 with the National Australia Bank
16Mr Roberts states that this was part of $120,000 received for the sale of Chameleon's stock in Murchison Metals Limited. The balance of $20,000 was banked into the same account in sundry amounts between 9 and 12 November 2004.
17On 12 November 2004 Chameleon issued 4 million shares in its capital to Equitable Investments Limited for $120,000 and that sum was received in total on 9 and 12 November 2004. A further $25,000 was received on 12 November 2004 for further shares issues to Equitable Investments Limited.
18The sale and the issues explain why the company had such a large balance in its account at the time of the hearing. Chameleon relied on these to demonstrate that it could meet its current liabilities as and when they fell due.
19Mr Roberts stated that Chameleon Ventures Ltd also met the administrative costs of Chameleon associated with the running of the Sydney office, with all accounts paid by Chameleon Ventures Ltd for Chameleon being recorded as a liability of Chameleon in the accounts of Chameleon Ventures Limited and Chameleon.
20On 10 November 2004 the directors of Pinnacle Nominees Pty Ltd passed the following resolutions:
"It was resolved that the loan balance Chameleon Mining NL has with the company will be deemed non-recourse, not repayable to the company for a further period of 12 months or until profits arise from the Cerro Negro mine sufficient to repay the loan.
It was resolved that all consulting fees in relation to its contract with Chameleon Mining NL be held to be received as being credited to the company's loan balance with Chameleon Mining NL.
It was resolved that the company meet the costs of administration (office, rent, telephone, printing and stationery) in relation to the Perth Office of Chameleon Mining NL and that these expenses are credited to the loan account the company has with Chameleon Mining NL."
21In his affidavit of 15 November 2004 Mr Barnes points out that the accounts of Chameleon for the year ended 30 June 2004 show that there was no revenue from ordinary activity and that Chameleon still does not receive any revenue from ordinary activity. The only costs incurred by the company other than ordinary administration costs are the costs of holding its mining tenement leases and the statutory costs of maintaining the listing on the Stock Exchange. Chameleon is not presently trading and has no employees. It is not carrying out any mining operations.
22Mr Barnes stated that at present G B Barnes & Associates, (under which name Pinnacle Nominees Pty Ltd trades) was meeting the administrative costs associated with running Chameleon. These expenses include the provision of an office, telephone and FAX services, secretarial accommodation, taxi charges, geological consulting fees, rent and associated expenses. They do not include air travel expenses, legal expenses, accountants' or auditors' fees or the fees of government or statutory authorities. G B Barnes & Associates will not be seeking payment from Chameleon for these services or reimbursement of expenses incurred until after the Cerro Negro mine offer is finalised which is expected to be not later than March 2005.
23Chameleon has agreed to purchase all shares in Chalceus Limited. This is subject to the approval of the shareholders in Chalceus Limited which is expected to be given. Chalceus Limited owns the option to purchase the Cerro Negro copper mine in Chile.
24Outstanding Court Proceedings
Chameleon has instituted proceedings in the Federal Court against Rupert, Mr R M McLennan and Nationwide Mineral Consultants Pty Ltd for damages for representations which were allegedly misleading and deceptive or likely to mislead and deceive. Damages are estimated by Chameleon to exceed $4-million. I do not know whether Chameleon is likely to succeed. Nor am I able to comment on the amount of damages claimed.
25Chimera Emporium has instituted proceedings against Chameleon, Chameleon Ventures Limited and Landan Roberts. Chameleon has lodged a defence denying that it is a proper defendant and has filed a cross-claim against the other defendants seeking indemnity. Judgment has been entered in favour of the plaintiff against Chameleon Ventures Ltd and Landon Roberts. No defence has been lodged to the cross-claim.
26Rupert's Attack on Chameleon's Figures
Rupert attacked the information provided by Chameleon to the Court. Chameleon has not produced a set of accounts as at 31 October 2004 nor bank statements covering the period from 1 July 2004. Rupert referred to the unpaid accounts in the first section of Mr Barnes' affidavit of 5 November 2004 and pointed out that while some had recently been paid two were still outstanding. Rupert was particularly critical of Chameleon's failure to disclose either in its annual accounts or in its earlier evidence its debt to On-Line. The explanation for this omission was that the debt was disputed. The debt was ultimately compromised for $15,000 and that sum was paid about 15 November 2004. It was another example of attempting to clear the decks before the Court hearing.
27Mr Barnes was queried about payments of $8800 made to each of Mr S H Koh, and Mr D Evans on 21 September 2004. Mr Koh is an investor and Mr Evans was recently appointed as a director. Mr Barnes said these amounts were for consulting, commission on raising money and possibly for work done in China and Chile. Mr Barnes was further queried about a cheque for $7500, the cheque butt showing $2500 going to each of Koh, Evans and Roberts. Mr Barnes saw these as normal exploration costs at a very low level.
28This evidence was given by Mr Barnes (T27):
"Q.…this company is still undergoing various activities associated with its commercial purposes, isn't it?
A.Yes.
…
A.…[Chameleon] is in mothballs and in a holding pattern. It is spending nowhere near as much money as it would like to be spending on these particular things.
Q.… it is spending money, isn't it?
A.Yes"
29Mr Barnes estimated that between 24 November 2004 and Christmas virtually nothing would be spent on exploration activities. Mr Barnes was unable to say how much had been spent in the last quarter of 2004. He would have to sit down and add it up. He did not think it would be quite as high as $100,000. Even if payment was deferred it would still be substantial.
30Mr Barnes agreed that the Chilean copper mine was a substantial project and if approved by the shareholders involved the company spending $4 to $5-million. He said that Chameleon was intending to purchase all the issued shares in Chalceus Ltd which had an option to purchase a producing mine in Chile. Chameleon had lent Chalceus $US50,000 about the end of August 2004 and a further $US50,000 about 1 October 2004. The moneys were paid directly to the vendor.
31A third instalment of $US250,000 was due at the end of November 2004. Mr Barnes said that Chalceus would be paying that sum. Chalceus Ltd was incorporated on 8 July 2004. Its directors and three of its shareholders were Messrs Evans, Koh and Gaal. Evans was a recently appointed director of Chameleon. Koh and Gaal were investors and shareholders in Chameleon. The fourth shareholder was Union Pacific Investments.
32In its letter of 28 July 2004 to the Australian Stock Exchange Chameleon wrote "The company plans to make the first four payments from the company's current cash reserves."
33Mr Barnes agreed that as at February 2004 Chameleon had $3 million on deposit with Zenith Development International. Such $3 million were the proceeds of share subscription moneys. Mr Barnes said that that company had not been wound up but the Australian arm, Zenith Development Corporation Australia Pty Ltd had been wound up.
34Mr Barnes said that after the "kafuffle" over the money, Chameleon had written off $3-million. This was done after pressure from the plaintiff and its officers and pressure from the Press. Mr Barnes claimed that "the people who had the $3 million were still offering not only the $3 million but an extra $5 million for funding for Chile, that's three sources of funds". Mr Barnes said that Zenith International held the $3 million and "Zenith is still saying the money is there and still offering money for the continuation of Chile ('the purchase of Chile')". He added, "They have now offered $3 million plus another $5 million towards the purchase, but they are only one of three".
35Mr Barnes said that there was no document which he could produce which evidenced the deposit of $3 million for the benefit of Chameleon. He agreed that in Chameleon's accounts for the year ended 30 June 2004 it had effectively written off the $3 million. Those funds were not available to meet the moneys owed to Chameleon's Australian creditors but were available to meet moneys owed to overseas creditors. He maintained that those funds could be used for the purchase of the Chile project. Mr Barnes gave this evidence:
"Q.Mr Barnes, does Chameleon Mining NL have access to a cash flow or a cash facility?
A.Well, what sort of time scale? If you are looking at a cash flow facility after March next year after the purchase of Cerro Negro, it is around $14 million US profit a year. Up until that date, no access to a cash flow, although there is a gentleman working one of our properties in the Kimberley's on a tribute basis who is producing about an ounce a day. We will get a portion of that."
36On p.4 of Chameleon's letter of 8 November 2004 to the Australian Stock Exchange this passage appears:
"Funds of $3 million plus a fee of $100,000 was agreed to be offset against a facility which Zenith would obtain, up to a sum of $8.2 million, for the acquisition of the Cerro Negro Copper Mine.
The arrangement with Zenith is dependant on shareholders approval of the acquisition of Chalceus Ltd and the acquisition of the Cerro Negro Copper mine after which Zenith will use its financial capacity to assist Chameleon in the acquisition of the Copper Mine.
However, the Directors have considered it prudent to provide fully for the Receivable, as some uncertainty does exist.
In the event that the company does not proceed with the acquisition of the Cerro Negro Copper Mine, the Comp[any will commence legal action in relation to the recovery of the funds."
This does not inspire confidence.
37It was difficult to accept Mr Barnes' claim that the written-off sum of $3 million, part of Chameleon's loss of $4,443,66 for the year ended 30 June 2004 would be paid by Zenith Development International on account of the cost of acquisition of the Cerro Negro copper mine in Chile and I did not accept that claim. There was no evidence from Zenith Development International to that effect and its Australian arm (or company) has been wound up.
38It is not easy to understand how Chameleon, if moderately competently managed, could end up losing or putting at substantial risk $3 million in the manner suggested in the evidence.
39Mr Barnes was unable to explain an entry in the notes to Chameleon's accounts for the year ending 30 June 2004, p 20 under the heading "Going Concern":
"The company has been provided with a finance facility of $205,000 to meet the company's short term requirements."
40An earlier note read "The Consolidated Entity has incurred a loss during the year of $4,434,666 and has a working capital surplus of $161,023."
41Mr Barnes stated that he had provided personally a bank performance bond (an environmental bond) for $95,000 for the Department of Mines of Western Australia. He had not treated it as a liability as he could not see it being called up based on his experience with the Department. This bond was provided on behalf of Chameleon. If the bond was called up it would become a liability of Chameleon.
42Mr Barnes agreed that Chameleon's accounts for the year ended 30 June 2004, p32 state, "The Company has contracted to pay to Pinnacle Nominees Pty Limited, in which Mr Barnes is a director and shareholder, the sum of $12,000 per month to provide geological management services in line with the conduct of business carried on by the company following its listing". Mr Barnes agreed that this amount was currently being entered on the company's loan account. He was not currently receiving a salary from Chameleon nor commissions. All Chameleon's directors have agreed to defer receipt of remuneration for one year, that is, until Cerro Negro copper mine produces profits. There was no affidavit from Mr Suli Nurayu that he had so agreed but Mr Barnes insisted that he had. He is in Fiji.
43Mr Barnes was referred to a document filed by Chameleon with the Stock Exchange on 3 November 2004. That document stated that Chameleon was continuing to work on Butcher's Creek exploration and the Cerro Negro project and that Chameleon had spent $95,000 in the September quarter on exploration and evaluation, $133,000 on administration expenses and $240,000 for equity investments. Mr Barnes thought that this last mentioned figure related to the purchase of Cadetta (some mining leases at Peak Hill). He believed that this was achieved by a share issue. The documents also indicated that Chameleon lent $260,000 to other entities. Mr Barnes was unable to say, without checking, to whom these loans were made. That seemed odd He agreed that the document contained an estimate for the cash flow for exploration and development in the quarter ending 31 December 2004 of $100,000. Mr Barnes would have to go to the records to ascertain the components of that figure.
44Mr Barnes said that the figure of $100,000 was a prediction and that Chameleon had delayed certain of the steps which it had intended to undertake. The figure of $100,000 was not wrong when communicated to the Exchange.
45Mr Barnes denied that the moneys standing to the credit of Chameleon in the recently opened second NAB account was committed to the Cerro Negro project. He said that such moneys were committed to the core of Chameleon, that is, exploration in Australia, expenses in Australia. Mr Barnes said that there would be a glass wall between the Australian operations and Cerro Negro.
46Mr Barnes said:
(a)Chameleon has ongoing commitments with its Australian and Fiji interests which require it to spend money to maintain those mining leases
(b)at present there is no exploration going on in the field
(c)any work to be done in the field is being carried out by him.
47Mr L Roberts said that the second National Australia Bank account was set up to receive the proceeds of sale of the shares in Nicu Metals and any further fund raising through share issues.
48Mr Roberts agreed that Chameleon had ongoing exploration commitments which he had estimated at $100,000 for the final quarter of 2004. That estimate included all the consulting fees and Perth office expenses presently being paid by Pinnacle Nominees being respectively 3 months at $12,000 per month and 3 months at $5,000 per month.
49Mr A H J Wily made it clear that his report depended on the accuracy and completeness of the information he was given by Chameleon and its officers. He was not told of the debt to On-Line. With the arrangements in place for payments to be deferred he thought that Chameleon was solvent.
50Mr Wily agreed that he could not tell from the one page transaction listing supplied to him and purporting to come from the National Australia Bank how Chameleon had been meeting payment of its debts. To do this he would need to examine the complete NAB account.
51The auditors of Chameleon advised Mr Wily of a further claim of $15,000 to be made resulting from Chameleon's acquisition of the Palm Springs tenement in March 2004.
52Similarly, Mr Wily acted on the advice of the directors and auditors that Chameleon was entitled to a GST refund of $38,000. He did not check whether any refund for the year ended June 2004 had been received.
53Mr Wily was not aware of the capacity of Chalceus to repay the loan of $180,000 if required. He was not shown any security for that loan or any contract associated with that loan. Nor was he shown any documents associated with the purchase of the Cerro Negro interests. He was aware that a payment of $250,000 had to be made in respect of the Cerro Negro acquisition at the end of November 2004 and that Chameleon in a document dated 28 July 2004 had indicated to the Stock Exchange that it was going to be making that payment at the end of November 2004. If Chameleon made that payment it would have exhausted any cash resources. To meet the obligation mentioned Chameleon would have to acquire moneys from other sources.
Statutory Framework
54Section 459A of the Corporations Act 2001 provides that on an application under s 459P the Court may order that an insolvent company be wound up in insolvency. Chameleon emphasised that even if the Court concluded that Chameleon was insolvent the Court still had a discretion whether to wind up Chameleon: Hamilhall Pty Ltd v A T Phillips Pty Ltd (1994) 54 FCR 173; Re Presla Engineering (Aust) Pty Ltd (1983) 1 ACLC 675 at 676; Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd BC 990 2928. It was submitted that the Court not exercise its discretion to wind up Chameleon.
55Section 459C(2)(a) provides that the Court must presume the company is insolvent if, during or after the three months ending on the day when the application was made the company failed (as defined by s 459F) to comply with a statutory demand. Under s 459F the standard period to comply with a statutory demand is 21 days after it is served. There are provisions dealing with the case where an application is made to set aside the statutory demand.
56Section 459S(1) provides:
"(1)In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:
(a)that the company relied on for the purposes of an application by it for the demand to be set aside; or
(b)that the company could have so relied on, but did not rely on (whether it made such an application or not)."
57Chameleon accepted that the onus lay on it to show that it was solvent. My attention was directed to the following remarks of Hayne J in Commonwealth Bank v Begonia & Ors, 11 ACLC 1075 at 1081 when dealing with a winding-up application based on a failure to comply with a statutory demand and s 459S applied, namely:
"Ordinarily one would expect on an application of this kind the company would provide the fullest and best possible material in support of its case."
58I agree. It was a little surprising that the officers of Chameleon did not supply fuller instructions to Mr Wily when they retained him to prepare his report on Chameleon's insolvency.
59Against the credit balance of liquid assets over liabilities of $12,000 of Chameleon mentioned earlier the Court has to bear in mind that it was costing Chameleon on its own estimates about $100,000 to function per quarter even though it was operating at a very low level. Much of that sum was credited to the loan accounts of Pinnacle Nominees and Chameleon Ventures with Chameleon. Pinnacle Nominees and Chameleon Ventures and the directors of those companies and Chameleon were prepared to proceed on the basis that payment of the moneys owed by Chameleon to each of them was deferred for one year, that is, until sufficient profits were realised from the Cerro Negro acquisition. If those profits are not realised and properly applied in payment of Chameleon's outstanding liabilities Chameleon will be insolvent and by a substantial amount.
60The evidence suggests that the various exploration and mining activities of Chameleon are functioning at a low level and being "nursed" with debts not being paid unless absolutely necessary to keep creditors at bay and many routine operating expenses being borne by Pinnacle Nominees and Chameleon Ventures The focus of Chameleon's activities is on the acquisition of the Cerro Negro mine and the anticipated large profits. If the anticipated profits do not materialise Chameleon will have greater debts by being allowed to continue with no off-setting income of any consequence from the other assets of Chameleon.
61It was not suggested that any consideration had been given for the deferred payments previously mentioned.
62The absence of appreciable income is not fatal if Chameleon had sufficient funds to meet its debts as they fell due. It does not have such funds. Despite its ability to attract investors Chameleon is insolvent and cannot meet its debts as they fall due. Chameleon did not ask for further time to sell assets or to raise further capital. The evidence did not establish that Chameleon had substantial credit resources available to it. I doubt if the directors realised the gravity of the situation. They were looking forward to the anticipated profits from the Cerro Negro mine acquisition.
63The question of solvency is determined at the date of hearing, save that in the present case I allowed Chameleon to adduce evidence, as it did, that the cheque for $40,000 received on the day of the hearing was subsequently cleared. Future events are not to be ignored.
64The late disclosure of the On Line debt and the paucity of financial records of Chameleon made available for the period 1 July 2004 to late November 2004 have left me unsatisfied that the court has been fully appraised of the true extent of Chameleon's liabilities. When these factors, the terms of the advice of Chameleon to the Stock Exchange, its continuing liabilities for its ongoing operations, albeit reduced in scale and its lack of sufficient funds to pay its debts as they fall due are taken into account, I am not satisfied that Chameleon is solvent. I would go further and conclude that it is insolvent.
65The principal issue litigated was whether Chameleon was solvent. The question remains whether the Court should, in the exercise of its discretion, order that Chameleon be wound up. I was told that the company has over 1100 shareholders and that a lot of creditors and shareholders would be left lamenting if Chameleon was wound up and the Cerro Negro acquisition could not proceed; it was due to take place about March 2005. For that acquisition to proceed substantial sums of cash have to be found. Rupert, as a substantial shareholder in Chameleon has made its assessment. That is not determinative. Pending the acquisition of the Cerro Negro mine Chameleon's liabilities will rise and if the anticipated profits do not materialise the creditors and shareholders will be worse off. The extent of any profits is likely to depend to a significant degree on the copper price.
66Emmett J's dismissal of the application to set aside the statutory demand was subject to the proviso that if $205,000 was paid into Court within seven days the order for dismissal would be vacated. The payment was not made even though much turned upon it. While it seems that there was no defence to the action Chameleon has a cross claim. Apparently, adequate evidence of it was not adduced before Emmett J.
67The shareholders of Chameleon would, when investing, have realised that they were dealing with a speculative stock and that the results could vary considerably. As for the creditors I am not satisfied that full details have been disclosed. On the information provided it has not been possible to assess the amount of the ongoing expenses incurred by Chameleon which will not be deferred.
68In the circumstances I have concluded that the Court should in the exercise of its discretion make an order for the winding up of Chameleon.
69I make the following orders:
1.That Chameleon Mining NL (ACN 098 773 785) be wound up under s 459 of the Corporations Act.
2.That John Vouris, an Official Liquidator, be appointed as the Liquidator of Chameleon Mining NL.
70I will hear submissions from the parties as to costs.
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