FEDERAL COURT OF AUSTRALIA

Sykes v Matthews in his capacity as Liquidator of Daycare (NSW) Pty Limited (In Liquidation) [2010] FCA 1500

THE COURT ORDERS THAT:

1.    Pursuant to s 482(1) of the Corporations Act 2001 (Cth), the winding up of Daycare (NSW) Pty Limited (in liquidation) ACN 135 797 607 (Daycare) be terminated, effective forthwith.

2.    The costs and expenses of Anthony Matthews in his capacity as liquidator of Daycare be fixed in the sum of $31,087.09, inclusive of GST and disbursements.

THE COURT NOTES THAT:

3.    The plaintiff will cause $25,000 to be deposited into a controlled monies account in the name of Parry Carroll, with a partner of both Hudsons Lawyers and Parry Carroll as joint signatories to such account in trust for Randstad Education Pty Ltd and which is not to be released unless either by agreement or an order of the Supreme Court of South Australia.

4.    The plaintiff will cause $266,805.96 on account of taxation to be paid into the trust account of Kenneally & Co Lawyers until calculation of taxation once inputation credit claimed on assessment and has issued and taxation paid and any balance to be remitted to Daycare.

5.    The plaintiff undertakes that no fixed and floating charge will be registered over Daycare’s assets, pending payment of the taxation referred to in paragraph 4 above and pending completion by the plaintiff’s solicitor of all steps required to be taken by them to give effect to the undertaking referred to in paragraph 3 above.

6.    The plaintiff undertakes that the cheques drawn in favour of unsecured creditors and employees on settlement of the sale of the Gray’s Point Childcare Centre be remitted or delivered to the payee on each cheque

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    The plaintiff, Ms Merryl Sykes, is the managing director, secretary and shareholder of Daycare (NSW) Pty Ltd (Daycare). On 9 November 2010, the Supreme Court of South Australia made an order that Daycare be wound up. Ms Sykes has now applied for an order under s 482(1) of the Corporations Act 2001 (Cth) (the Act) that the winding up of Daycare be terminated.

2    The winding up order was made on the basis of the deemed insolvency of Daycare by reason of its failure to comply with a statutory demand by Randstad Education Pty Ltd (Randstad). The statutory demand was for payment of a judgment debt arising from judgment entered in the Local Court of New South Wales against Daycare in favour of Randstad. It is common ground that the judgment debt has not been satisfied. There is evidence that the statutory demand and the winding up application were sent to the registered office of Daycare in Western Australia, although there is a question as to whether or not those documents were ever received at the registered office. Investigation of that question has not been undertaken.

3    The ground upon which Daycare seeks termination of the winding up is that, despite the failure to comply with the statutory demand, it is in fact solvent and has made provision for, or has paid, all of its creditors. The creditors consist of employees and other unsecured creditors, the Australian Taxation Office, and costs and expenses arising out of the winding up proceeding.

4    Mrs Sykes and her husband own a property situated at North West Arm Road, Grays Point, NSW. Daycare is the holder of a license for a children’s childcare centre conducted at those premises. The property is occupied by Daycare under a lease from Ms Sykes and her husband. By contract dated 1 October 2010, Daycare sold the childcare business to Grays Point Childcare Centre Pty Ltd for a price of $1,400,000. Completion of the sale was to take place on 8 November 2010. For reasons that are not presently relevant, completion did not take place on that day. In the meantime, the winding up order intervened, and that caused a difficulty with completion of the sale of the business. Completion has now taken place giving rise to substantial cash proceeds.

5    When the application first came before me, I ordered that the winding up be stayed, pending the resolution of the application for termination of the winding up. Accordingly, the control of Daycare returned to Mrs Sykes. The proceeds of sale of the business have been paid into the account of Daycare’s solicitors. A sum of approximately $266,000 has been set aside to meet the liability of Daycare to the Commissioner of Taxation. Debts due to all employees and unsecured creditors have now been paid in full.

6    Daycare proposes to enter into a new venture, in connection with which it will grant a charge to St George Bank. However, it is proposed that execution of the charge will be deferred until such time as the liability to the Commissioner of Taxation has been satisfied.

7    In addition to the business to which I have referred, Daycare has another business consisting of a childcare centre operated in Hurstville Road, Hurstville Grove, NSW. There is evidence that that business has a value similar to that of the businesses that has been sold, of around $1.4 million.

8    It is clear that notwithstanding the winding up order, and the failure to comply with the statutory demand, Daycare is solvent and is able to pay all of its debts as and when they fall due. It is therefore appropriate to make an order terminating the winding up, subject to making adequate provision for the costs and expenses incurred in relation to the winding up. The liquidator of Daycare is a defendant in the proceeding, and has been represented at the hearing of the application. After several false starts, arrangements have now been made that satisfy the liquidator that all creditors have been paid or provision has been made for them.

9    In addition, Ms Sykes has arranged for payment of fees due to the liquidator, in connection with the work that has been done so far. Those fees do not exceed $33,000, although the amount that has been agreed by Ms Sykes is the sum of $31,087. Subject to that last sum being set aside, the liquidator does not oppose the termination order now being made.

10    Ms Sykes has also proffered an undertaking to the Court that the sum of $25,000 will be deposited into a controlled moneys account in the name of the solicitors for Ms Sykes and the solicitors for Randstad. Such sum is not to be released unless by agreement or by order of the Supreme Court of South Australia. That sum covers the amount of the judgment debt owing to Randstad and the costs of its solicitors in pursuing the winding up application. Ms Sykes has proffered undertakings to establish that account, to pay a sum in excess of $266,800 into the trust account of Daycare’s solicitors until calculation of the tax liability, that no fixed or floating charge will be registered over the assets of Daycare pending payment of the tax liability and pending the completion by Ms Sykes’ solicitors of all steps required to be taken by them to give effect to the undertaking to deposit the sum of $25,000 into their controlled moneys account, and that the cheques drawn in favour of unsecured creditors and employees will be remitted or delivered to the respective payees, in respect of each cheque.

11    In all of the circumstances, I propose to make an order under s 482 of the Act as requested by Ms Sykes.

Associate:

Dated:    25 January 2011