Re Simionato Holdings Pty Ltd (ACN 065 117 259); The Commissioner of Taxation of the Commonwealth of Australia v Simionato Holdings Pty ltd [1997] FCA 125 (28 February 1997)

CATCHWORDS

CORPORATIONS - winding up application - statutory presumption of insolvency - adequacy of evidence to prove to contrary - whether claim for damages against company is "contingent" - company failing to adduce evidence of value of real estate - company failing to adduce detailed financial statements - liability - whether contingent liability taken into account - whether statements by company's counsel in separate proceedings as to its insolvency admissible - weight to be given to such statements - winding up order made.

Corporations Law ss 9, 95A, 459A, 459C(2)(a), 459C(3),

459D(1), 459J(1)(b), 459P(1)(b), 459P(2), 459S, 553 and

554A

Corporations Regulations reg 5.6.54(2)

Evidence Act 1995 s 87(1)

Ford's Principles of Corporations Law, Butterworths looseleaf, para 27.080

McPherson B H, The Law of Company Liquidation, 3rd ed LBC 1987

Byrne and Heyden, Cross on Evidence, looseleaf, Australian Edition, Vol 1, para 35640

Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ACSR 682

Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 22 ACSR 235

Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075, discussed

Re Tweeds Garages Ltd [1962] 1 All E.R. 121

Rees v Bank of New South Wales [1964] HCA 47; (1964) 111 CLR 210

Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666

Melbase Corporation Pty Ltd v Segenhoe Ltd [1995] FCA 1225; (1995) 13 ACLC 823

The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 14 ACLC 925, considered

Community Development Pty Ltd v Engwirda Construction Co [1969] HCA 47; (1969) 43 ALJR 365, considered

Re Gasbourne Pty Ltd (1984) 2 ACLC 103, considered

Re PMC Investments Pty Ltd (1991) 9 ACLC 1559, considered

Thomas v Mackay Investments Pty Ltd (1997) 22 ACSR 294

Re Community Development Pty Ltd [1969] Qd.R. 1

Re K.L. Tractors Ltd [1954] VLR 505

General Welding & Construction Co. (Qld) Pty Ltd v International Rigging (Aust) Pty Ltd (1983) 2 Qd.R. 568

Stonegate Securities Ltd v Gregory [1980] Ch. 576

L & D Audio Acoustics Pty Ltd v Pioneer Electronics Australia Pty Ltd (1982) 1 ACLC 536

Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647

H Clark (Doncaster) Ltd v Wilkinson [1965] Ch. 694

Mercantile Credits Ltd v Foster Clark (Aust) Ltd [1964] HCA 66; (1964) 112 CLR 169

Forsayth NL v Juno Securities Ltd (1991) 4 ACSR 281

Yassim v Australian Mid-Eastern Club Ltd (1988-1989) 15 ACLR 449

Australian Mid-Eastern Club Ltd v Yassim (1989-1990) 1 ACSR 399

No SG 3101 of 1996

In the matter of SIMIONATO HOLDINGS PTY LIMITED

(ACN 065 117 259)

THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v SIMIONATO HOLDINGS PTY LIMITED

Mansfield J

Adelaide

28 February 1997

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 3101 of 1996

)

GENERAL DIVISION )

In the matter of

SIMIONATO HOLDINGS PTY LIMITED

(ACN 065 117 259)

BETWEEN:

THE COMMISSIONER OF TAXATION OF

THE COMMONWEALTH OF AUSTRALIA

Applicant

- and -

SIMIONATO HOLDINGS PTY LIMITED

Respondent

MINUTES OF ORDER

CORAM: Mansfield J

PLACE: Adelaide

DATE: 28 February 1997

THE COURT ORDERS THAT:

1. Simionato Holdings Pty Limited be wound up by this Court under the provisions of the Corporations Law.

2. Anthony Milton Sims of 81 Flinders Street, Adelaide an official liquidator be appointed the liquidator of the company.

3. The applicant's costs (including reserved costs) be taxed and reimbursed out of the property of the company in accordance with s466(2) of the Corporations Law.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 3101 of 1996

)

GENERAL DIVISION )

In the matter of

SIMIONATO HOLDINGS PTY LIMITED

(ACN 065 117 259)

BETWEEN:

THE COMMISSIONER OF TAXATION OF

THE COMMONWEALTH OF AUSTRALIA

Applicant

- and -

SIMIONATO HOLDINGS PTY LIMITED

Respondent

REASONS FOR JUDGMENT

CORAM: Mansfield J

PLACE: Adelaide

DATE: 28 February 1997

On 15 July 1996 the applicant applied for an order pursuant to s459P of the Corporations Law ("the Law") that the respondent be wound up. I am satisfied that the requirements of s459Q of the Law and of the Federal Court Rules have been complied with. The time within which the application is to be determined has, within the period specified in s459R, been extended. There is also before the Court a motion dated 17 December 1996 by the applicant for the appointment of a provisional liquidator of the respondent.

Background

The applicant is a creditor of the respondent in the amount of $14,600, being the amount of taxed costs to which the applicant is entitled from the respondent pursuant to a bill of costs certified on 8 May 1996 following the dismissal of proceedings by the respondent against the applicant in separate proceedings in this Court: see Simionato Holdings Pty Ltd v Federal Commissioner of Taxation (No.2) (1995) 95 ATC 4720. It is unnecessary to refer to the nature of those proceedings. The liability is not disputed.

A statutory demand made under s459E of the Law for payment of that sum was served on the respondent by service on the two directors of the respondent, namely Robert Anthony Simionato ("Mr Simionato") and Alesandro Caruso ("Mr Caruso") on 17 and 19 June 1996 respectively. The respondent did not comply with the requirements of the demand within the period for compliance. Nor did the respondent make any application under s459G of the Law to set aside that statutory demand. Consequently, on this application, the Court is directed pursuant to s459C(2)(a) of the Law to presume that the respondent is insolvent, except so far as the contrary is proved: s459C(3). Section 459S precludes the respondent, except with the leave of the Court, from opposing the application on a ground that it could have relied on in any application to set aside the statutory demand; and the Court may only grant such leave if it is satisfied that the ground is material to proving that the respondent is solvent.

On 6 August 1996 the respondent gave notice of its intention to appear at the hearing of, and to oppose, this application. The specified grounds referred to certain proceedings in the Supreme Court of South Australia in Action No 1880 of 1995 ("the Supreme Court action") in which sixty-four companies known collectively as the Emanuel Group ("the Emanuel Group"), all of which are in liquidation, have brought action against the respondent and five other companies, Liddan Pty Ltd ("Liddan"), Thomco (No.832) Pty Ltd ("Thomco"), Parachilna Nominees Pty Ltd ("Parachilna"), Sardona Pty Ltd ("Sardona") and Melbourne Projects Pty Ltd ("Melbourne Projects") which hereafter together I refer to as "the Supreme Court defendants". It then referred to an interlocutory injunction in those proceedings restraining it and the Supreme Court defendants generally from dealing with any of their property, including from paying any money to any person other than the Supreme Court plaintiffs without the written consent of the liquidator or order of the Supreme Court, and to the respondent's attempts to have the $14,600 paid. Mr Simionato on 29 April 1996 instructed the respondent's solicitors to seek the liquidator's consent to pay the amount of the taxed costs of $14,600 in anticipation of their final certification, and caused that request to be followed up, but the liquidator did not immediately provide his consent. I intend no comment or inference adverse to the liquidator in that observation; there was ongoing communication about the request over a period of time. On 15 July 1996 the liquidator consented in writing to the payment of the sum of $14,600 by Liddan rather than the respondent, on the basis that Liddan has a substantial loan account with the respondent. On 17 July 1996 a cheque of Liddan drawn on its bank in that amount was sent to the applicant's solicitors. It was not accepted by the applicant. I shall refer to the reasons for that non- acceptance hereafter. Finally, it asserted that the respondent "is solvent and is a substantial creditor of [Liddan], a related company". No details of its assets and liabilities or any detailed information as to its financial position were given. The notice was supported by an affidavit of Mr Simionato, simply affirming the grounds of objection. It added no detail on the topic of solvency.

The Supreme Court claim involves a very substantial claim by the Emanuel Group for damages, an account, and declaratory orders that the Supreme Court defendants including the respondent hold certain property on trust for them and to have declared void certain dispositions of property by one of the Emanuel Group, Giuseppe Nominees Pty Ltd, to Liddan. The Statement of Claim in that action is before me. Briefly, it is alleged that a series of agreements was entered into between certain members of the Emanuel Group and its financier and the respondent on 15 and 17 March 1995 and at a time when the Emanuel Group was insolvent, one of which resulted in the financier paying directly to the respondent $3.3 million and which properly was money to which the Emanuel Group was entitled. It is further alleged that a further $1.3 million provided by the financier was used to have transferred from Giuseppe Nominees Pty Ltd to Liddan house properties at Cape Jervis, Mount Barker and Burnside in South Australia. The $3.3 million is alleged to have been paid to the respondent and then largely on lent to others of the Supreme Court defendants to acquire investments. Those investments were made through Sardona in respect of land at Rostrevor in South Australia, and at Altona and Campbellfield in Victoria, through Liddan in respect of land at Mission Beach in Queensland, and through Thomco in respect of land at Hallam in Victoria; corresponding loan accounts were created between the respondent and the other Supreme Court defendants. The primary allegation is that those agreements between the Emanuel Group, its financier, and the respondent, and then those applications of the funds so received and applied by the respondent, occurred in circumstances which amounted to the Emanuel Group and the Supreme Court defendants including the respondent through their largely common officers wrongly diverting assets or monies to which the Emanuel Group was entitled to its detriment and were effected improperly and by various breaches of duties. Thus the purpose of the Supreme Court action is to have restored to the Emanuel Group those assets and monies or the assets acquired with those monies to be available to the liquidator of the Emanuel Group for the benefit of its creditors. Counsel for the respondent described the case as one alleging commercial fraud.

Of course, I am not in a position to determine the likely outcome of the Supreme Court proceedings. It is apparent from material before me that the present financial position of the respondent and of the other Supreme Court defendants reflects an asset and liability position which is broadly consistent with the allegations as to how those assets came variously to be acquired. That includes the receipt by the respondent of $3.3 million on 17 March 1995 described as "EFG settlement". Indeed that was not the subject of submissions to the contrary. That is not a comment upon whether the transactions, if they took place as alleged, were or were not improper. It was also accepted that resolution of the Supreme Court proceedings adversely to the Supreme Court defendants would lead to their insolvency.

Addstead Pty Ltd and sixty-three other companies known as the Emanuel Group also gave notice of intention to appear at the hearing of the application, as creditors of the respondent pursuant to costs orders made in their favour against the respondent in the Supreme Court action, and as creditors claiming in that action equitable damages and compensation "arising out of the payment in the sum of $3.3 million to the respondent on about 17 March 1995 by the Elders Finance Group". Counsel appearing for the Emanuel Group on instructions from the liquidator adopted a watching role in relation to the unfolding of evidence concerning the Supreme Court proceedings, but otherwise took a neutral position as to the outcome of the application.

On 17 December 1996 Saverio Barbaro, Maria Barbaro, Vincenzo Barbaro, Francesca Barbaro, Paolo Barbaro, Anna Trimboli and Guiseppe Trimboli gave notice of intention to appear at the hearing, claiming status to do so as creditors of the respondent in the sum of $1,895,000. At the hearing those persons, by their counsel, sought and were granted leave to withdraw, and played no role thereafter in the hearing.

The grounds of opposition

On 6 August 1996 the application was adjourned by consent to 27 August 1996 and leave was given to the respondent to file and serve an affidavit of solvency by 23 August 1996. It was, and remained, its intention to resist the application on the ground that it was solvent.

Whatever may be the scope of s459J(1)(b) of the Law entitling a company served with a statutory demand to seek an order from the Court setting aside the demand for "some other reason", it is not within its scope that a demand may be set aside because the company is solvent: Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ACSR 682 and Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 22 ACSR 235 at 239. That ground of opposition is available, therefore, despite the absence of an application to set aside the statutory demand.

The respondent did not seek to assert that, in the circumstances, the tender by Liddan of the amount owing was per se a ground for refusing the application. It is unnecessary therefore to decide whether the tender of that amount in the circumstances is a matter which could have been raised in any application to set aside the demand so as to preclude it being raised in opposition to the application, except by leave, by reason of s459S. The respondent did rely upon the uncontested events relating to the timing and circumstances of that tender, and upon other matters, as relevant to the discretion under s459A. It also sought to develop a submission that the applicant is somehow imputed with the knowledge of the financial affairs of the respondent procured by the liquidator of the Emanuel Group in the conduct of the Supreme Court action. Although its counsel accepted that, even if the proposition were correct, it would not give rise to a ground to oppose the winding up order, it was submitted that, in some way, it is relevant to the exercise of the discretion.

Solvency

The burden of proving solvency in the matter lay upon the respondent, once the presumption of insolvency by reason of the failure to comply with the statutory demand arose: s495C(3), Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075.

That case involved applications to wind up several companies. The applications were brought against two principal borrowers, and the guarantors of the borrowers. The applications were resisted because there was separate unresolved litigation in which defences were raised, and cross claims brought, which if successful would have led to there being no liability on the part of the guarantors but still a substantial liability on the part of the principal borrowers. One guarantor had failed to apply to set aside a statutory demand served on it in relation to its alleged liability under its guarantee, but sought to prove nevertheless that it was otherwise solvent but for the disputed liability under its guarantee.

Hayne J observed that (at 1081) "[o]rdinarily one would expect that on an application of this kind the company would provide the fullest and best possible material in support of its case" and was somewhat critical of failure to adduce certain material. He found that, irrespective of the disputed debt which had been the subject of the statutory notice, the company was insolvent. Accordingly he did not give leave to the company to resist the application under s459S(2) because even the acceptance of a dispute as to that debt would have made no difference to his decision.

The evidence presented by the respondent on solvency, in the face of the statutory presumption of insolvency, was sparse. It relied on an affidavit of Mr Simionato filed on 25 November 1996. In addition, certain other material was presented directed largely to explain why there had been no earlier evidence of solvency produced, and why there was a failure to comply with the statutory demand, namely the respondent's attempts to get the consent of the liquidator of the Emanuel Group to the payment of the amount in issue, having regard to the injunction against the respondent in the Supreme Court proceedings.

Mr Simionato's affidavit of 25 November 1996 is very brief. It reads:

"2. I believe, the company and each of the other defendants, has a good defence to the Supreme Court proceeding which the defendants continue to defend.

3. As at the date of swearing this affidavit, the company has assets in the form of loan accounts to the following related companies:

(a) Liddan Pty Ltd - $1,466,169;

(b) Thomco (No. 832) Pty Ltd - $302,437;

(c) Melbourne Projects Pty Ltd - $90,000; and

(d) Sardona Pty Ltd - $1,015,939.

4. As at the date of swearing this affidavit, the company has creditors of $157,715, excluding the sum of $14,600 paid to the AGS on 17 July 1996.

5. As at the date of swearing this affidavit, Liddan Pty Ltd has assets of $2,183,573 in the form of real property at Mission Beach Queensland and at Cape Jarvis, Burnside and Mt. Barker in South Australia. It has also cash at bank of $164,399 after allowing for the unpresented cheque for $14,600 to the applicant herein.

6. As at the date of swearing this affidavit, Liddan Pty Ltd has creditors secured on the said property, of $1,155,064. It has unsecured creditors of $54,132.

7. By reason of the injunction, the financial statements of the company and the related companies for the year ended 30 June 1996 have not been completed. The foregoing information which I believe is true and correct, is derived from the ordinary business records of the company and the related companies.

8. I believe, the company and Liddan Pty Ltd is and was at all relevant times solvent and able to pay its debts as they fall due."

His cross-examination did not advance the respondent's case that it was solvent. The respondent's annual return for the financial year ended 30 June 1995, which was signed by him on 16 August 1996, a few months before his affidavit, confirmed that there are no audited accounts of the respondent and indeed no audited accounts of any of the Supreme Court defendants. In fact, no detailed balance sheets or profit and loss accounts or trading statements in any form were presented by the respondent, either current or for the periods to 30 June 1995 or 30 June 1996 or at all. The annual return referred to disclosed non current total assets, and total assets, as $100 and that the respondent was a trustee company. It did not disclose any operating profit or loss for that financial year. The four loans referred to in his affidavit are not disclosed at all in that return. His explanation was that the respondent's accounts had not been completed, and on advice from the Australian Securities Commission, he lodged the return disclosing issued share capital only. When tested about the recoverability of the four loans, namely

Liddan $1,466,169

Thomco $ 302,437

Melbourne Projects $ 90,000

Sardona $1,015,939

$2,874,545

he was uniformly optimistic but without, in my judgment, sound reasons for that optimism. In his affidavit, nothing was disclosed as to the assets and liabilities of any of those companies except for Liddan. Certain of the annual returns of those companies in relation to the financial year ended 30 June 1995, signed by Mr Simionato on 16 August 1996 (except for Thomco) have limited information. It is not information which reflects only their issued capital. No explanation was offered as to why, given his evidence of his advice from the Australian Securities Commission, differing content and quality of information was so provided.

Mr Simionato acknowledged that he, on behalf of the companies, had been asked by the liquidator of the Emanuel Group on a number of occasions for balance sheets and none have been provided as "finalised". He also said that some $50,000 had been released under the injunction to enable their preparation. Mr Simionato said he had got balance sheets "but they are not complete". They were not produced. In fact, despite his having an accounting degree and assisting in the bookkeeping of the Supreme Court defendants and being a director of each, and despite his having (as he agreed) quite detailed information in respect of their financial affairs, no attempt to produce any form of balance sheets or profit and loss statements or trading statements was made.

No evidence was given as to the potential outcome of the Supreme Court action, other than the asserted belief that each of the defendants has a good defence. Nothing was said as to the grounds of defence. The defence presumably filed was not produced. No provision at all for an adverse outcome of the Supreme Court action, or for costs to be incurred in its conduct, was made. The affidavit asserts that the respondent's outstanding liabilities are $157,715, which was he said mostly for outstanding legal fees incurred in defending the Supreme Court action, and being in addition to a very substantial sum already paid. Those payments have been made from funds of Liddan released from the injunction. He acknowledged that very substantial further costs are likely to be incurred. Those matters were not disclosed in the annual return because "the accounts to which this relates" were not complete.

I found Mr Simionato's explanation on those matters, namely the difficulty of "categorising" and in "making allowances for certain other things", and because the outcome of the Supreme Court proceedings is uncertain, as unconvincing. If his answers are correct, his assertions as to the assets and liabilities of the respondent, and of the other Supreme Court defendants, to prove solvency could carry little weight. If they are not, equally it is hard to place much if any weight on the assertions in the absence of properly prepared or any financial statements.

Those specific observations reflect a more general apprehension as to the reliability of the evidence of Mr Simionato. He was not an impressive witness, at times unable to provide specific detail when it might have been expected, at times falling back on broad generalisations, at times failing to respond appropriately to the question, and at times giving responses which lacked credibility in the manner of his response or in its content. Overall, I did not have any confidence in the reliability of his evidence and I am unable to place any significant weight on it. Given the superficial way in which he dealt with the solvency of the respondent, it would be necessary for me to have an appropriate level of confidence in his evidence, perhaps by confirmatory material, before I could be satisfied, in the face of the presumption of insolvency, that solvency was proved. There was no attempt to establish solvency independently of his evidence. It is unnecessary to conclude whether that view as to the lack of weight to be given to his evidence is a consequence of his own lack of knowledge or lack of attention to detail or for other reasons. That conclusion may be of itself sufficient to dispose of this application.

However, even were I to have taken some of his evidence on specific as distinct from conclusional matters as acceptable, I would reach the same conclusion, namely that the solvency of the respondent has not been proved.

The evidence focuses on the recoverable assets and liabilities of the respondent. The definition of solvency refers to the ability to pay all debts as and when they become due and payable: ss9 and 95A of the Law. There is a distinction between solvency and a surplus of assets: Re Tweeds Garages Ltd [1962] 1 All E.R. 121. The nature of a company's assets, and its ability to convert those assets into cash within a relatively short time, at least to the extent of meeting all its debts as they fall due from time to time, must be considered in determining solvency: Rees v Bank of New South Wales [1964] HCA 47; (1964) 111 CLR 210. As Barwick CJ said in Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 at 670:

"The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency."

Clearly, it is relevant, to know if a company is trading, if so to have regard to the nature of its business and the recurrent incomings and outgoings, as well as the nature of its assets and the ability to convert those assets to cash. The absence of creditors, other than the applicant, actively pressing the respondent for recovery of debts is not of conclusive significance: Melbase Corporation Pty Ltd v Segenhoe Ltd [1995] FCA 1225; (1995) 13 ACLC 823.

On the material before me, the respondent is not trading. It has no business of its own. It seems to have operated as a 'clearing house' for the companies comprising the Supreme Court defendants. It has no income, except perhaps minimal bank interest from time to time. Its only assets of any moment are the loan accounts referred to. In view of the tender of payment by Liddan on behalf of the respondent, and the common directors of the respondents and the four companies which owe it money, I find that those loan accounts are or, by notice can become, immediately payable. It is a separate question as to whether they are recoverable. The liabilities which the prompt realisation of those assets, or some of them, have to meet are those to the applicant, the creditors of $157,715 which represents costs outstanding to the respondent's solicitors for work done to date, and - to the extent that it is appropriate to have regard to it - the possible liability in respect of the Supreme Court action. Counsel for the Emanuel Group referred to other costs orders in its favour which have not been met, but there is no evidence upon which I could quantify those amounts and so I do not take them into account. I note also that it is anticipated that a very substantial further sum will be incurred for further legal fees in defending the Supreme Court action.

Apart from the asset and liability position of the respondent and Liddan which is asserted in Mr Simionato's affidavit as follows:

the respondent:

Assets: loan accounts as above $2,874,545

Liabilities: outstanding costs and

sundry creditors 157,715

Surplus of assets over liabilities $2,716,830

Liddan:

Assets: real estate $2,183,573

cash 164,399

$2,347,972

Liabilities: secured creditors $1,155,064

unsecured creditors 54,132

$1,209,196

Surplus of assets over liabilities $1,138,776,

no picture with respect to Thomco, Melbourne Projects or Sardona was given.

The evidence about the Melbourne Projects loan does not establish that any part of that loan is potentially recoverable. Mr Simionato's evidence-in-chief did not refer to it. Its annual return for 30 June 1995 signed by him on 16 August 1996 referred to current assets of $90,000 and non-current liabilities of $90,000 so the shareholder's equity was nil. The asset, according to his evidence, is money owed by one Peter Balnaves, or by Cumings Corporation. He was unsure whether the loan was to Mr Balnaves who on lent it to Cumings Corporation, or who received it as trustee for Cumings Corporation, or was to Cumings Corporation direct. He said that recovery proceedings have been commenced against each. No documents were produced. Cumings Corporation, he acknowledged, is in liquidation, and there is no factual basis to suggest that any part of the loan is recoverable from it. His attempts to contact Mr Balnaves over a number of months have been unsuccessful. His evidence provides no basis for any satisfaction that the sum is recoverable; quite the reverse. His initial confidently expressed assertion of its recoverability gives no cause for confidence in the reliability of his assertion on that score either in relation to this loan or generally. No evidence updating that material was presented.

In the case of Sardona, its annual returns (in this case for the years ended 30 June 1994 and 30 June 1995) showed the following:

30 June 1994 30 June 1995

Current assets $ 75,004 $ 229,977

Non current tangible assets 724,133

Non current intangible assets 1,297,914

Total assets 799,137 1,527,891

Current liabilities

Non current liabilities 982,297 1,851,702

Shareholders equity (190,160)* (323,811)

Operating profit (loss) (190,160) (133,651).

*There appears to be a $7,000 discrepancy not identified.

Mr Simionato acknowledged that Sardona had no money available to it. Nothing was proffered as to what the current assets item represented. The non current liabilities were said to comprise approximately $1.1 million owing to the respondent, and some $800,000 principal and accrued interest owing on two mortgages over a property at Rostrevor. On his evidence, the figure now owing on those mortgages is substantially in excess of that amount. There are also now, on his evidence, unsecured creditors apparently in the order of $250,000 but he was unable to specify those creditors or amounts relating to those creditors with any precision. There is also, he said, a further debt of some $241,000 owing to one of the Emanuel Group of Companies, Giuseppe Nominees Pty Ltd, for a separate loan. The liabilities, including the debt to the respondent, have therefore on the evidence, increased by well in excess of $500,000. No other evidence as to the nature of its assets and no evidence to identify its claimed Rostrevor property or to give any independent valuation of it was given. His re- examination led to him identifying a contract to buy certain land at Campbellfield for $8,000,000 and to have paid a deposit of $800,000 from funds lent to it by the respondent. The settlement has not been effected and some proceedings are on foot between the vendor and Sardona. No documents were produced to explain the proceedings, and I am unable on the oral evidence to be satisfied that there is any real prospect of recovery of the deposit. It is unclear if Sardona could have borrowed, as it apparently needed to do, to complete the purchase. He said also that Sardona had contracted to purchase a property at Altona for $3,000,000 on which it had paid $300,000 deposit from funds lent to it by the respondent. That contract was rescinded for non payment of the purchase price; presumably the deposit was forfeited, although I was not specifically told that.

I infer that those two interests, plus the land at Rostrevor, represent the "assets". No documents to identify those properties, or to prove their ownership, or to prove the extent of any equity in them, was produced. There is no cogent evidence as to the value of any of those properties. No valuation evidence was adduced at all. I have no evidence to conclude that there is any equity in the Rostrevor land once the mortgagees' entitlements are met. As mentioned above, it is unclear whether either of the Campbellfield or Altona properties or the deposits which were paid for them should be included at all. It is not possible to conclude that either of the deposits will be recovered by Sardona. There is no evidence of any other assets. Accordingly, I am not satisfied that there is recoverable by the respondent from Sardona the loan of $1,015,939 or any significant proportion of it.

Thomco owes the respondent $302,437. The respondent chose to lead no evidence as to its assets or liabilities. In cross-examination, some information about its creditors was identified, suggesting they are of the order of $675,000 - $695,000. It has trade creditors of some $33,000, private creditors of $240,000, a debt to the respondent of $302,437 and a debt to Pumicestone Pacific Resources Investment Trust of $100,000 or $120,000. Its unaudited 'key financial data' from its annual return to 30 June 1994 and 30 June 1995 are as follows:

30 June 1994 30 June 1995

Current assets $355,875

Non current tangible assets $578,544

Total assets 355,875 578,544

Current liabilities 372,119

Non current liabilities 592,118

Shareholders equity (16,244) (13,374)

Operating profit (loss) (16,244) (13,374).

I have no evidence before me as to what those non-current tangible assets apparently existing at 30 June 1995 represent, nor whether there are presently comparable assets, nor what they are worth. If they represent real estate, I have no evidence of title, of the extent of the interest, or any evidence of value. In the light of Mr Simionato's evidence generally I am unable to conclude that Thomco now has assets to any significant value. Consequently, I am unable to conclude that the respondent's loan to Thomco is recoverable either totally or to any substantial extent.

The position to this point is that, on the evidence, I am not satisfied that the loan accounts of the respondent with any of Sardona, Melbourne Projects, or Thomco are recoverable. I turn to consider the recoverability of the Liddan loan account.

Mr Simionato's affidavit suggests that Liddan has a substantial surplus of assets over liabilities (other than the liability to the respondent) of some $1,138,776.

The attempt in cross-examination to get a break up of the assets was barely successful. The assets were said to be land at Mission Beach worth $350,000, the Burnside and Mount Barker houses worth together $330,000 and the Cape Jervis property worth $481,000 or $477,000. No title documents were produced. No other evidence of ownership was produced. No attempt to independently verify the values claimed was made. The only evidence of the value of any of Liddan's land was in relation to the Mission Beach property about which Mr Simionato said: "you'd probably get around a million dollars for it." The basis of that asserted value was not explained. There is no evidence of the identity of the mortgagees of those several properties, or independently to confirm the amount of the debts owing on those mortgages, or whether interest commitments are being met or as to the level of those commitments. There is no evidence of Liddan having any business producing to it profit or income to meet any interest commitments. Whether it has done so to now by using (and depleting) its available cash is speculative. Accordingly there is no evidence which satisfies me that Liddan has land which now has a realisable value of $2,183,573 or more particularly that it has a value any greater than the secured debts over it, so as to satisfy me that it has the capacity, beyond its immediate cash resources, to generate cash promptly to enable it to repay the respondent any significant amount of its debt.

In the absence of evidence to that effect upon which I am prepared to act, I therefore am not persuaded that Liddan's financial position is as presented. I add that I have seen no documentary material even to support the asserted cash available of either $164,399 according to his affidavit or $140,000 according to his oral evidence although I am inclined to accept that an amount of that order is available to it. I note that its annual report to 30 June 1995 refers only to shareholders equity of $100 represented by non-current tangible assets. Clearly, in an immediate sense, it has access to funds to enable it to make payment of the $14,600 debt to the applicant (subject to the injunction) in reduction of its debt to the respondent at the respondent's request. But, beyond that, I am not satisfied as to the value of its assets as asserted, or that its liabilities properly exclude any interest to mortgagees of its several properties, and more importantly that it has, or could generate by prompt realisation of its assets, moneys to enable it to repay to the respondent any significant part of its loan or that its cash resources whether from the bank funds now available or by realisation of assets would enable it to repay the respondent and its other creditors much, if anything.

Thus, in my view, even without taking into account the possible liability in the Supreme Court proceedings, I am not satisfied that it has been proven by the respondent that its loans could be repaid so as to enable it to repay all its creditors as and when they fall due. It may receive some amount from Liddan in the short term, but I am not satisfied that any such amount would enable it to do so. Accordingly, in my view, the respondent has failed to prove that it is solvent. I have not, in reaching that conclusion, had regard to any impediment upon the respondent by reason of the injunction in the Supreme Court proceedings.

If that failure be a consequence of the level of information put before me, that is regrettable. But, as Hayne J observed in Begonia (supra), in circumstances such as the present one would expect the fullest and best possible material in support of its case to be presented by the respondent.

It is desirable to deal with the submissions as to whether the possible liability in the Supreme Court action should be considered in determining whether solvency has been proved.

As indicated above, the respondent in its case on solvency made no allowance for any possible liability in the Supreme Court action. Apart from the statement of claim, I have no evidence about it, even as to the nature of the defence, nor as to the timetable for its disposition save that the plaintiff has applied for summary judgment and that the hearing of that application has taken place or is imminent. If it is successful, clearly the respondent and Liddan, and all the Supreme Court defendants, will be insolvent. That was acknowledged.

Clearly a possible judgment adverse to the respondent in the Supreme Court action is not a present liability. The applicant submits that I should take it into account as a 'contingent or prospective liability' of the respondent: s459D(1) of the Law. The cases on the topic are generally focussed on the eligibility of a particular entity to itself apply for a company to be wound up in insolvency as a contingent or prospective creditor: s459P(1)(b) as such a person needs the leave of the Court to make such an application: s459P(2). Earlier legislative provisions contained much the same expressions; except where necessary, I shall not therefore in referring to the authorities refer expressly to the particular legislative context. The history of that expression is set out in some detail in the judgment of Santow J in The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 14 ACLC 925 at 932-933.

The question is whether the possible liability of the respondent to the Emanuel Group arising from the Supreme Court action is a contingent or prospective liability of the respondent. The authorities relating to s459P(1)(b) are, in my view, helpful because I can see no reason why the expressions used in that section and in s459D should apply differentially to particular circumstances.

In Community Development Pty Ltd v Engwirda Construction Co [1969] HCA 47; (1969) 43 ALJR 365 the High Court concluded that a building contractor was entitled to present a winding up petition, alleging a debt in respect of work done in the construction of a building, as a contingent creditor. That was so despite the absence of either an architect's certificate under the contract of moneys owing or an arbitrator's determination of moneys owing under the arbitration clause of the contract. The contingency was either the architect's or the arbitrator's satisfaction of the amount claimed to be owing. Kitto J (with whom Barwick CJ agreed) said at 366:

"In Re William Hockley Ltd., [1962] 2 All E.R. 111, at p. 113, Pennycuick J. suggested as a definition of "a contingent creditor" what is perhaps rather a definition of "a contingent or prospective creditor", saying that in his opinion it denoted "a person towards whom, under an existing obligation, the company may or will become subject to a present liability on the happening of some future event or at some future date". The importance of these words for present purposes lies in their insistence that there must be an existing obligation, and that out of that obligation a liability on the part of the company to pay a sum of money will arise in a future event, whether it be an event that must happen or only an event that may happen."

The existing obligation in that case arose from the building contract.

The general question of whether regard may be had to an entity which has an arguable claim for damages against the company (it is accepted by the respondent that the Emanuel Group's claim is arguable) has been considered in a number of recent cases: Re Gasbourne Pty Ltd (1984) 2 ACLC 103; Re PMC Investments Pty Ltd (1991) 9 ACLC 1559; Thomas v Mackay Investments Pty Ltd (1997) 22 ACSR 294 and Roy Morgan (supra); and see also the cases referred to in Ford's Principles of Corporations Law, Butterworths looseleaf, para 27.080. No common answer to that question emerges from those authorities.

In Gasbourne (supra), R D Nicholson J recognised a bank as a contingent creditor with the appropriate status to challenge the appointment of provisional liquidators to a number of companies, first because it had proceedings extant against the companies claiming indemnity from them in respect of claims made against it by them for negligence and misapplication of money as a constructive trustee, and secondly in respect of the costs it might recover if the companies' claims against it were unsuccessful. Nicholson J of course followed Engwirda (above), but regarded the definition there adopted whilst apt to the particular facts as not "exhaustive" of the definition of contingent debt. As he pointed out, the judgment of Owen J with whom Windeyer J agreed referred with apparent approval to a number of judicial observations which conveyed a more liberal meaning to that term, namely a liability about which there may be some doubt either as to whether it will ever come into existence or when it will come into existence.

The control of the Court, where there is a disputed indebtedness in proceedings, is of course available under s459P(2); it can refuse leave to the claimed contingent or prospective creditor to make a winding up application. In PMC (supra) Williams J in the Supreme Court of Queensland permitted a company claiming status as a contingent creditor, claiming to be entitled to substantial damages for breach of contract by the company sought to be wound up, to apply to wind up the company. Williams J also made the point that the Court in Engwirda was responding to the particular circumstances, rather than seeking to formulate an all embracing definition of the concept of 'contingent or prospective creditor'. He shared R D Nicholson J's view that an entity showing an arguable claim for unliquidated damages may qualify as a contingent or prospective creditor. He referred to Re Community Development Pty Ltd [1969] Qd.R. 1 as supporting that view. Of course, status does not ensure outcome. Leave may be refused under s459P(2). A company will rarely, if ever, be wound up on the basis of a debt which is bona fide disputed: eg Re K.L. Tractors Ltd [1954] VLR 505.

On the other hand, in Thomas (supra), Owen J in the Supreme Court of Western Australia determined that an asserted contingent creditor did not have standing to make a winding up application. The circumstances of that case are, however, somewhat special. The applicant claimed status as a continent creditor because he had been promised by contract 25% of the gross profit of the company on its share trading upon termination of its share trading activities; those activities had ceased. Owen J (at 299) found that, in effect, there was no real prospect of the applicant being, or becoming entitled, to any money under that arrangement in the light of the share trading of the company, and concluded therefore that he was not a contingent creditor "in the relevant sense". His decision does not suggest that, if the share trading had been profitable, he would have reached the same conclusion.

Santow J in the Supreme Court of New South Wales in Roy Morgan (supra) reached a different view. Roy Morgan Research Centre Pty Ltd ("Morgan") had purchased the business of Wilson Market Research Pty Ltd ("Wilson"), but Wilson had purported to terminate that sale on the grounds of Morgan's breaches of obligations under the sale and purchase agreement. Morgan then applied to wind up Wilson, claiming standing (inter alia) as a contingent creditor and separately brought an action against Wilson for unliquidated damages for its alleged breaches of the contract. Santow J held that Morgan was not a contingent or prospective creditor of Wilson, simply on the basis of an untried claim for unliquidated damages, and in doing so he expressly declined to follow the decision of R D Nicholson J in Gasbourne (supra). He commented as to that (at 930, and see also at 932):

"The potentially fatal power to trigger winding up was not intended to be vested in those with merely arguable claims. Such claims might well turn out eventually to be without foundation, yet the company may have been destroyed or injured with no redress."

I interpose that, as I read the facts in Engwirda (above), that was the factual situation which there obtained because it was unclear that, by the processes under the contract, any amount would actually become payable under it. His Honour referred to several authorities on one side or the other of the point presently under consideration, which I have not specifically referred to in this judgment. He expressed the view (at 933) that there is no compelling logic in making the class of those who can prove in a liquidation identical with those who can trigger a liquidation (his emphasis). If a person can prove in a liquidation, I do not think that there is any especial reason why that person's claim may not be relevant to determining if a company is solvent in the first place, under s459D of the Law. It is then but a short step to include such persons in the classes of those who may, by leave, make an application to wind up a company (my emphasis). There are safeguards against the consequences feared by Santow J: s459P(2) - the need for leave; the power of the court to stay or dismiss the application if the debt is bona fide disputed: General Welding & Construction Co. (Qld) Pty Ltd v International Rigging (Aust) Pty Ltd (1983) 2 Qd.R. 568; Stonegate Securities Ltd v Gregory [1980] Ch. 576, and in certain circumstances to treat the presentation of the application itself as an abuse of the process of the Court: L & D Audio Acoustics Pty Ltd v Pioneer Electronics Australia Pty Ltd (1982) 1 ACLC 536.

It may be that the expression adopted in Engwirda of 'existing obligation' in the judgment of Kitto J was appropriate to describe the circumstances of that case, where the status was said to arise under contract; there was of course no certainty that, under the contract, any amount would ever be determined as liable to the applicant either by architect's certificate or arbitrator's determination. There is no reason apparent to me why, if uncertainty as to whether any entitlement to money may ever arise, it is necessary to confine the circumstances which might give rise to a liability to those which might arise from an existing contract, or certain types of transaction, as distinct from some other types of transaction. The focus is on the potential liability, not the source of the potential liability. The expression 'existing obligation' may carry with it no more than the concept of a transaction, or set of facts, which are already in existence upon which some future adjudication or other event may give rise to an actual liability. The source of the potential liability will be likely in many cases to be relevant to whether the potential liability will come into existence, so as to be taken into account eg when considering whether leave under s459P(2) of the Law to that claimed contingent creditor should be given. It is not necessary to determine whether "prospective liability" has a wider scope, except perhaps to observe that it may encompass the circumstance where the liability will, not may, arise at some uncertain time in the future from an existing set of circumstances.

The view I have come to, therefore, is to the same effect as that of R D Nicholson J in Gasbourne and Williams J in PMC. So long as there is a claim made arising from facts, events or circumstances, including but not limited to contractual arrangements which existed prior to the winding up proceeding, that claim may qualify the claimant as a contingent or prospective creditor. The Court has control over whether such a claimant may make a winding up application under s459P(2) of the Law, and over whether to take account of it for the purposes of determining solvency under the discretion in s459D of the Law. Similar controls are available in relation to the ability of a liquidator, and on appeal the Court, to reject a 'contingent' debt sought to be proved in a winding up: ss553, 554A and Corporations Regulations reg5.6.54(2). It is a consequence of that conclusion that the term 'contingent and prospective creditor' is used consistently in those two sections in Part 5.4 of the Law, and also accords with the scope of persons who may prove in a winding up; see the conclusion in McPherson B H, The Law of Company Liquidation, 3rd ed LBC 1987 at 45.

It will, in my view, then be a matter for the Court to determine whether, and if so to what extent, regard is had to the contingent or prospective liability in the particular circumstances, whether for the purposes of s459D or for the purposes of s459P(2) of the Law. That will not generally involve the determination of matters in dispute, as many authorities make it clear that the winding up process is not the appropriate vehicle for that course of action. I suspect that, in many instances, at least for the purposes of s459D, the Court will not have regard to the disputed liability. It is neither appropriate, nor possible, to suggest any firm criteria for reaching a decision. It will depend on all the circumstances of the case.

In the present circumstances, I do intend to have regard to the contingent liability of $3.3 million which may arise out of the Supreme Court action. The onus of proving solvency is on the respondent. It is a very substantial claim. The respondent acknowledged the claim is neither frivolous nor vexatious. It has produced no evidence at all to identify even what its defence is. It acknowledges the claim relates to all the assets of itself and the Supreme Court defendants. There is evidence before me tending to show the receipt of $3.3 million by the respondent from a financier and tending to show the respondent on lent that sum, or much of it, to the other Supreme Court defendants and to show that the real property assets of the Supreme Court defendants then reflect the allegations as to how that money was then applied. None of that is gainsaid. There is no specific evidence from the respondent to show that that claim is bona fide disputed, other than Mr Simionato's unexplained assertion.

In the particular circumstances, especially bearing in mind the onus which lies on the respondent, I would if necessary have had regard to that contingent liability in adding to the picture which would lead to the conclusion of the respondent's insolvency. That should not lead to any suggestion that if the Emanuel Group itself were to seek leave under s459P(2) to seek to wind up the respondent, such leave would be given. The relevant consideration to such an application would be different. Accordingly, that contingent liability fortifies my conclusion on the question of insolvency.

The 'admissions'

The applicant sought to further advance its case by relying upon statements made by counsel for the Supreme Court defendants including the respondent in the Supreme Court action during various interlocutory steps as admissions of insolvency. The transcript covering such steps for the period 12 September 1995 to 26 November 1996 was tendered before me. Its use for the purpose of providing information about the general course of events in the conduct of that proceeding, including the ongoing requests for detailed financial information, was not opposed. Its use for the specific purpose of being evidence establishing insolvency by admissions of counsel from time to time was opposed.

In view of my decision on this application reached without recourse to that material, it is unnecessary to deal at any length with this topic. Section 87(1) of the Evidence Act 1995 provides:

"For the purpose of determining whether a previous representation made by a person is also taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that:

(a) when the representation was made, the person had authority to make statements on behalf of the party in relation to the matter with respect to which the representation was made; or

(b) when the representation was made, the person was an employee of the party, or had authority otherwise to act for the party, and the representation related to a matter within the scope of the person's employment or authority; or

(c) the representation was made by the person in furtherance of a common purpose (whether lawful or not) that the person had with the party or one or more persons including the party."

and "previous representation" is defined to mean a representation made otherwise than in the course of giving evidence in the proceeding in which evidence of the representation was sought to be adduced. Thus the issue is whether it is reasonably open to find that counsel had the authority in the Supreme Court proceedings on behalf of the respondent to have made the statements as to the respondent's solvency proposed to be relied upon (subclause (a)) or whether such statements related to matters within the scope of counsel's authority (subclause (b)). It is not necessary to determine whether that statutory expression widens the common law, and if so to what extent (see the remarks of Byrne and Heyden in Cross on Evidence, looseleaf, Australian Edition, Vol 1, para 35640). Franki J in Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647 at 663-665 was confronted with just such an issue as presently arises. His Honour referred to the authorities, and concluded (at 663):

"In general, the passages sought to be tendered as admissions are statements made by counsel appearing in interlocutory matters and intended to be acted upon by the judge. I can see no reason why they should not be regarded as prima facie evidence against the client on whose behalf counsel was addressing the court."

See also H Clark (Doncaster) Ltd v Wilkinson [1965] Ch. 694.

The issue of the solvency or insolvency of the respondent has not been directly in issue in the Supreme Court proceedings, in the sense that the statements by counsel sought to be relied upon were made for the purpose of dispensing with proof on that question in a matter being determined by that Court. Consequently, the statements of counsel can only be prima facie evidence only. I am mindful of the nature of the compendious expressions in certain of the statements referred to, and of the context in which they were made. They do not appear to reflect considered and deliberate expressions made after specific instructions. There is of course evidence led by the respondent to the contrary, but on the other hand no evidence to suggest the comments were made without authority; compare Wilkinson's case (above). Consequently, were it necessary to do so, I would make use of those statements as some evidence of insolvency of the respondent at the times these statements were made. I do not need to do so for reasons which have already appeared. I would not attribute much weight to the statements.

The discretion

There were a number of matters raised by counsel for the respondent, upon the basis of which it was submitted that in any event I should dismiss the application.

Generally, where there is a statutory presumption of insolvency, a creditor applying to wind up a company is entitled to a winding up order as of right: Mercantile Credits Ltd v Foster Clark (Aust) Ltd [1964] HCA 66; (1964) 112 CLR 169; Forsayth NL v Juno Securities Ltd (1991) 4 ACSR 281. However, I shall consider this question in relation to the matters raised.

One related to the attitude of the applicant in refusing to accept the cheque of Liddan for $14,600 tendered to the applicant's solicitors. I am not of the view that this is a relevant matter, but in any event I think the applicant's attitude was a proper one.

On 19 July 1996 a cheque in the sum of $14,600 was received by the solicitors for the applicant drawn on Liddan's account with a bank and made payable to the Australian Government Solicitor. It was dated 17 July 1996. That cheque was not accepted in payment of the debt. Solicitors for the applicant requested to ascertain whether the proffered payment by Liddan was from property sought to be recovered in the Supreme Court proceedings, and secondly confirmation that the liquidator of the Emanuel Group in the Supreme Court proceedings if the proceedings are successful will not seek the disgorgement of the amount so tendered. In the absence of appropriate assurances, the applicant was not prepared to accept that payment. It was informed in response that the claim in the Supreme Court proceedings relates to all of the assets of the respondent and of the Supreme Court defendants, including the monies in the account on which the cheque was drawn.

The applicant, through its solicitors, was (quite reasonably in my view) concerned with the risk that the cheque proffered by Liddan was or may be the property of the Emanuel Group, and its receipt could constitute it as a constructive trustee of those moneys, and also that any judgment in favour of the Emanuel Group would lead to the winding up of the Supreme Court defendants and its receipt would constitute an unfair preference.

The liquidator of the Emanuel Group declined to proffer any assurance that, if the Supreme Court proceedings were successful, he would in no circumstances seek to recover from the applicant the amount proffered by Liddan. That was an entirely understandable attitude on his part. The applicant's attitude in the circumstances, is consistent with the conduct approved in Yassim v Australian Mid- Eastern Club Ltd (1988-1989) 15 ACLR 449, and on appeal in Australian Mid-Eastern Club Ltd v Yassim (1989-1990) 1 ACSR 399.

It was also submitted that the making of a winding up order would prevent the respondent from continuing to defend the Supreme Court action. That is not necessarily so at all. If that action is presently being defended for sound reason, and on proper advice, as I assume it is, then a liquidator being informed of the relevant material and advice would be in a position equally to conduct the defence of that action.

One supplementary submission, made I think without any evidentiary foundation, was that a liquidator of the respondent might act other than in the best interests of the respondent, because of closeness to the liquidator of the Emanuel Group, in any resolution of the Supreme Court action. The reason put forward is that the present applicant some time ago applied to wind up the Emanuel Group, but the winding up order in respect of the Emanuel Group was, in circumstances described in Emanuele v Australian Securities Commission (1995) 19 ACSR 1, wound up on the application of the Australian Securities Commission. The liquidator of the respondent, pursuant to the order I propose to make, will not be the same person as the liquidator of the Emanuel Group. They each will have duties clearly defined to the companies of which they are liquidators. I have no reason to conclude that the submission has any factual merit whatsoever. I reject it.

I do not find from the submissions put to me on behalf of the respondent on this aspect, nor from my consideration of the circumstances laid out in evidence, nor from any consideration of the interests of other creditors of the respondent, any reason why I should not make a winding up order in the light of my conclusions above.

Provisional Liquidator

In the circumstances, I do not need to address the motion for the appointment of a provisional liquidator under s472 of the Law.

Order

Accordingly I order that:

1. Simionato Holdings Pty Limited be wound up by this Court under the provisions of the Corporations Law.

2. Anthony Milton Sims of 81 Flinders Street, Adelaide an official liquidator be appointed the liquidator of the company.

3. The applicant's costs (including reserved costs) be taxed and reimbursed out of the property of the company in accordance with s466(2) of the Corporations Law.

I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Mansfield.

Associate:

Dated:

Counsel for the Applicant : Ms S Maharaj

with her

Mr R Chrzaszcz

Solicitors for the Applicant : Australian Government Solicitor

Counsel for the Respondent : Mr J Birrell

with him

Mr O'Doherty

Solicitors for the Respondent : Antonio Tropeano

Counsel for the Interveners : Mr J Marsh

with him

Mr R Switajewski

Solicitors for the Interveners : Fisher Jeffries

Hearing Dates : 19 & 20 December 1996