FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Xpress Resources Pty Ltd (No 3) [2018] FCA 1956
ORDERS
DEPUTY COMMISSIONER OF TAXATION Plaintiff | ||
AND: | XPRESS RESOURCES PTY LTD (ACN 166 781 451) Defendant | |
DATE OF ORDER: |
UPON THE UNDERTAKING OF:
Patricia Jayne Davies to subordinate her claim as a creditor of the defendant to the claims of any other creditor whose debt had been incurred by the defendant up to and including the date upon which her application is granted to the extent that she will not in any future winding up of the defendant seek to claim in priority to or in competition with any of those creditors nor make any claim against the defendant in its winding up until such creditors have been paid in full.
THE COURT ORDERS THAT:
1. Pursuant to s 482(1) of the Corporations Act 2001 (Cth) the winding up of Xpress Resources Pty Ltd (ACN 166 781 451) be terminated with immediate effect.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
COLVIN J:
1 On 25 September 2018, I made orders winding up Xpress Resources Pty Ltd on the application of the Deputy Commissioner of Taxation. No other creditor sought to support the winding up application at the time. On the evidence in support of the winding up application, the insolvency of Xpress arose solely by reason of its inability to meet taxation liabilities. Xpress sought a stay of the winding up order pending an appeal, which I granted, and since then the stay order has been extended from time to time, first by me and then by other judges of this court. The stay orders were made on certain conditions, including that there be no dealing or disposal of the company's property other than in the ordinary course of business.
2 On 31 October 2018, the appeal was withdrawn upon certain undertakings being given by Xpress and upon certain conditions, including the commencement of an application under s 482 of the Corporations Act 2001 (Cth) within a specified time. The applications having been commenced within the time specified, I am now asked to make orders terminating the winding up or granting a permanent stay.
3 It is for Xpress to establish that there is a proper basis for the order sought and, for the following reasons, I am satisfied that there should be an order terminating the winding up.
Financial position of Xpress
4 Xpress conducts a transport business supplying services to mining companies. As a result of the downturn in the mining industry in 2015, a number of its creditors failed to meet their obligations placing Xpress in financial distress. Some creditors went into liquidation owing substantial amounts to Xpress. The unpaid amounts were of the order of $1,250,000. The business continued and, on the evidence, is securing work to enable it to trade profitably.
5 Xpress is a family company. The director and manager of the company is Mr Mark Davies. His brothers were previously involved in the company but have ceased their involvement.
6 Xpress has now met its liabilities to the Commissioner. The application to terminate the winding up is brought by the major creditor of Xpress. Commonwealth Bank is a secured creditor and, on the evidence, the current exposure to the bank of Xpress is about $286,000. Commonwealth Bank was notified of this application and I am informed that it has notified through its solicitors that it has no objection to the application.
7 On the evidence before me as at 26 November 2018, there were three unsecured creditors in addition to the applicant. They are CJD Equipment Pty Ltd for an amount of about $14,000, Oasis Newman Pty Ltd for an amount of about $17,000 and Camilleri Tarps Solutions Pty Ltd for an amount of about $8,500. They have been notified of the present application and have raised no objection. They do not seek to appear.
8 Xpress now only contracts with what are described as 'reputable mining companies and public companies providing logistics to mining companies'. Mr Chesson of AustAsia Accounting Services Pty Ltd, who has been responsible for preparing the financial accounts for Xpress and also for preparing a cash flow forecast for the transport business of Xpress, deposes, based upon that information, to his belief that Xpress is now solvent.
Application under s 482 of the Corporations Act
9 The application under s 482 has been brought by Ms Patricia Jane Davies, the mother of Mr Mark Davies and a former director of the company. She is the sole shareholder in Xpress. She has provided funds by way of loan to Xpress in the amount of $1 million to enable it to meet its outstanding liabilities. Ms Davies has deposed that she is committed to ensuring that all creditors are paid before there is any repayment of the loan she has made to the company.
10 Ms Davies has provided a signed personal undertaking in support of her application. It is in the following terms:
I, Patricia Jayne Davies, do hereby undertake to this Honourable Court that in the event that it makes orders permanently staying or terminating the winding up of the Respondent herein pursuant to my application dated 1 November 2018 I will subordinate my claim as a creditor of the Respondent to the claims of any other creditor whose debt had been incurred by the Respondent up to and including the date upon which my application is granted to the extent that I will not in any future winding up of the Respondent seek to claim in priority to or in competition with any of those creditors nor make any claim against the Respondent in its winding up until such creditors have been paid in full.
11 The application invites the court to exercise a discretionary power. It must be exercised having regard to the purposes for which a winding up order is made. A creditor who cannot obtain payment is, as a general rule, entitled to the winding up order as a matter of right: Cain v Whyte (1933) 48 CLR 639. The public interest normally requires that an insolvent company be wound up and the administration of the company proceed under the supervision of a liquidator: Bungey t/as John Bungey Real Estate v Magnate Projects Pty Ltd [2006] NSWSC 734 at [44].
12 The principles to be applied on an application under s 482 were summarised by Gleeson J in Judson, in the matter of Maneroo Pty Ltd (in liq) [2015] FCA 783 at [21]-[23]. In considering the exercise of the discretion, useful guidance may be taken from the list of factors stated in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533. I have considered those factors and the matter generally.
Reasons why application should be granted
13 The following matters lead me to conclude on the evidence that the winding up of Xpress should be terminated.
14 First, due to the support provided by Ms Davies, Xpress is solvent.
15 Second, Ms Davies has given an undertaking that will ensure that the interests of other creditors are protected in the event of a winding up by the subordination of her claim.
16 Third, the debts claimed by the Commissioner that were the basis for the order have been paid and the Commissioner does not oppose the order.
17 Fourth, the winding up order was stayed from the outset, so no issue arises in relation to the conduct of the winding up or the remuneration of a liquidator.
18 Fifth, the creditors of Xpress have been identified and served with the application and none have raised opposition.
19 Sixth, the company is trading profitably and evidence has been provided of current contracts with Xpress to provide transport services.
20 Seventh, the events that resulted in the winding up order have been explained and the steps taken to address those matters have been the subject of evidence on the application.
21 Eighth, no issue has been raised as to concerns about ongoing breaches by the company of its obligations to maintain proper accounts and meet its taxation liabilities.
22 Ninth, aside from the matters relating to tax liabilities, there has been no issue raised in relation to breach of statutory obligations or misconduct by any officer of the company.
23 Tenth, no issue has been raised that would mean there is a public interest in the affairs of Xpress being wound up under the supervision of a liquidator.
24 Eleventh, the application is brought by the sole shareholder of the company and therefore is an application which all members of the company join.
25 The order of the court will be, for those reasons, that upon the undertaking of Ms Davies to which I have already referred, pursuant to s 482(1) of the Corporations Act, the winding up of Xpress Resources Pty Ltd (ACN 166 781 451) be terminated with immediate effect.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin. |
Associate:
