FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v WR Estates Pty Ltd ACN 111 955 572 [2009] FCA 1602

INSOLVENCY – consideration of an application to further adjourn an application for an order that the defendant be wound up in insolvency

Corporations Act 2001 (Cth)

DEPUTY COMMISSIONER OF TAXATION v WR ESTATE PTY LTD

ACN 111 955 572

QUD 266 of 2009

GREENWOOD J

23 DECEMBER 2009

BRISBANE

THE COURT ORDERS THAT:

1.                  Victoria Walters is given leave to appear on behalf of WR Estates Pty Ltd. 

2.                  Leave is given to the defendant to file and read the affidavit of Victoria Walters sworn 21 December 2009 and the affidavit of Gary John Rose sworn 21 December 2009. 

3.                  WR Estates Pty Ltd ACN 111 955 572 be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).

4.                  Gregory Michael Maloney, an official liquidator, be appointed liquidator of the company.

5.                  The plaintiff’s costs be fixed in the sum of $1137.31 and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth).

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                                             This is an application for an order that WR Estates Pty Ltd be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).  The application was filed on 6 November 2009.  The application relies upon a failure on the part of the company to comply with a demand within the period for compliance set out in s 459F(2) of the Corporations Act.

2                                             The matter came before the court some three weeks ago and on that occasion, Mrs Victoria Walters applied for leave to appear on behalf of the company.  The relevant director of the company is Mr Walters, the husband of Mrs Victoria Walters.  On that occasion, Mrs Walters was accompanied by her son and she sought an adjournment of the application, essentially on two grounds. 

3                                             The first ground was that Mr and Mrs Walters had entered into a contract for the sale of a property at a price of $610,000.  Settlement of that property was programmed to occur on 14 January 2010 and the net proceeds after the discharge of encumbrances was said to be approximately $120,000.  Mrs Walters, on behalf of the company, sought the adjournment on the footing that those funds, when they became available at settlement, would be paid to the plaintiff and there was some discussion of the possibility of the Deputy Commissioner of Taxation making arrangements to attend at settlement and obtain a bank cheque for the balance funds.  Those funds would then have come from the sale of an interest in the property by the vendors which is not the company itself.

4                                             In addition to those matters, Mrs Walters’s son was present and he was invited to approach the bar table and advise the court what circumstances were then prevailing.  He told the court that he was in the process of seeking to raise funds in relation to a property development project and his expectation was that an approval was likely to occur before 23 December 2009 and, once an approval was obtained, he intended to make $500,000 of the approved funds available to his parents to enable them to discharge the balance of the debt to the Deputy Commissioner of Taxation.

5                                             On that occasion, I advised Mrs Walters that I would adjourn the matter until 23 December 2009 on the basis that the contract was likely to settle on January 2010 and that Mrs Walters’s son had an expectation that a finance approval might be forthcoming by the return date.  On the return date, the court would examine the extent to which Mrs Walters and her son had been able to make good some of the things which would influence the question of whether a winding‑up order ought to be made. 

6                                             I also directed Mrs Walters and her son to file affidavits deposing to the various matters which had been put to the court from the bar table.  I pointed out at that time that the statements made were simply statements from the bar table and they would need to be put in the form of affidavits as admissible evidence, as statements from the bar table do not constitute evidence of the matters upon which they would seek to rely as informing the question of whether a winding‑up order ought to be made or whether the application ought to be further adjourned.

7                                             Subsequently, Mrs Walters prepared an affidavit as did her son, Gary John Rose, and Mrs Walters sought to fax those documents to the court.  The Registry refused to accept them in the form in which they were proffered.  I have seen a facsimile of those affidavits and I have before me now the original affidavits.  Accordingly, I give leave to read and file the affidavit of Victoria Walters sworn 21 December 2009, and I give leave to read and file the affidavit of Gary John Rose, the son of Mrs Walters, also sworn 21 December 2009.

8                                             The affidavit of Gary Rose is quite short and simply says that he is making his best endeavours:

…to seek and obtain finance with my own property and I state that I intend to gift my mother Victoria Walters the sum of $500,000 to assist them in paying their current ATO Bill.

9                                             The affidavit does not provide any content to the application for finance.  Nor does it identify who the financier might be, the state of the application, whether there is any preliminary approval subject to conditions, or any of those sorts of matters.  The affidavit is simply one paragraph and it is handwritten.  It gives no content or substance to those matters.

10                                          Mrs Walters has also filed an affidavit which goes to the question of the contract and the settlement date in 2010. 

11                                          I pointed out on the last occasion the matter was before the court that it would be very important for Mr Walters, the director of the company, to appear and seek leave to appear on behalf of the company or, alternatively, to appear by lawyers.  Unfortunately, Mr Walters is engaged in the business of the company and is not appearing before the court and is not seeking leave to represent the company.  Mrs Walters is present and she seeks leave to appear on behalf of the company in relation to these matters.  I give leave to Mrs Walters to appear on behalf of WR Estates Pty Ltd.  She seeks a further adjournment of the matter. 

12                                          Mrs Walters, and thus the company, asks for an adjournment essentially on two grounds.  The first is that the contract of sale which was previously before the court and is now before the court again is scheduled for settlement on 14 January 2010, and the court is advised by Mrs Walters that the net balance upon settlement after discharge of encumbrances will be $120,000.  Therefore, it is put that the matter ought to be adjourned as these funds will become available to the Commissioner in part-discharge of the debt.

13                                          The second basis upon which the matter is sought to be adjourned is that Mrs Walters has assembled a range of contracts which WR Estates Pty Ltd, as a real estate agent, has been instrumental in securing between various vendors and purchasers, and it is said that the commissions due to the company arising from this parcel of contracts will be $364,000.  It is said that these commissions will flow into the company in the period January to March 2010. 

14                                          Thus it is said that the net proceeds from the contract of sale of the house property will be available by 14 January 2010, and the cash‑flows from these commissions will be available between January and March 2010.  It follows, it is said, that the debt due to the Commissioner will be fully discharged by March 2010. 

15                                          The plaintiff has sought certain material from the defendant and a letter has been put before the court from accountants called Farr RasmussenLucas dated 22 December 2009 marked “To whom it may concern”.  The letter seeks to identify the steps that the accountants are required to undertake and the difficulties of undertaking those steps within the immediate period due to the forthcoming Christmas break and other circumstances.

16                                          The debt due to the Commissioner is a debt of $333,274.02.  It represents the amount due and owing on a running balance in respect of the company’s taxation affairs and interest on that running balance.  The period of the debt in relation to the taxation obligation is for the financial years ending 2005 to 2009.  In that sense, the amount claimed by the Commissioner as a debt due to the Commonwealth in respect of tax obligations (ultimately on behalf of the people of Australia) is a significant sum and is outstanding over a reasonably lengthy period.

17                                          The effect, of course, of the failure of the company to comply with a statutory demand made upon it for payment of the amount recited in the demand notice is that a presumption of insolvency arises.  That presumption is, of course, rebuttable.  However, it is perfectly plain that the presumption of insolvency has not been rebutted and what is put forward is that a discretion ought to be exercised to adjourn the matter to enable further steps to be investigated by the accountants and then implemented with a view to discharging the debt over a period, in effect, from January to March 2010, at the outer boundary of the proposed payment period.

18                                          The merits of that matter are said to be, of course, that there are demonstrated cash‑flows and that there will be further funds arising out of additional contracts.  However, the position seems to me to be that the company has not been able to demonstrate or rebut the presumption of insolvency.  The company seeks an adjournment to enable further matters to be investigated and steps implemented which might have the effect of discharging the debt.  The company continues to trade in circumstances where there is a presumption of insolvency and, since the company has not been able to put forward clear, comprehensive affidavits arising out of the matters raised on the last occasion the matter was before the court, which depose to all of the relevant matters, I am satisfied that the company is insolvent and that the presumption of insolvency has not been rebutted.  I am satisfied that a discretion ought not to be exercised to further adjourn the matter, in all the circumstances.

19                                          Accordingly, I propose to make an order that the defendant be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth), and an order that a liquidator be appointed.  I will further order that the costs of the plaintiff are paid out of the assets of the defendant.

20                                          Accordingly, I make orders in terms of the draft orders which will be:

1.                  WR Estates Pty Ltd ACN 111 955 572 be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).

2.                  Gregory Michael Maloney, an official liquidator, be appointed liquidator of the company.

3.                  The plaintiff’s costs be fixed in the sum of $1137.31 and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth).

Associate: