Kemp Strang acted for the Liquidator in an application in the
Supreme Court by the director of Westside Sugar Cane Juicery Pty
Limited (Company) that the order for the
winding-up of the Company made on 4 June 2015 be either set aside
The parties to the Application were the director, the Company by
the Liquidator and the Deputy Commissioner of Taxation, who was the
applicant in the original winding up proceedings.
The matter was heard by Justice Black on 6 July 2015. His
Honour's judgment sets out a helpful summary of the principles
associated with an application to terminate the winding-up of a
His Honour identified the two avenues available for reversing a
The first avenue is the Uniform Civil
Procedure Rules (UCPR) Rule 36.16 which empowers
the Court to set aside or vary an existing order. An application
may only proceed under this rule if the Company was not present at
the time the winding up order was made. If so, by establishing that
the Company was (and remains) solvent will provide grounds to set
aside a winding-up order under that rule.
The second avenue is Section 482 of
the Corporations Act which provides for the termination of
a winding up order if it can be established that the termination is
"appropriate" in the circumstances. A number of factors
must be established to succeed under this section including whether
the Company's debts have been discharged, its trading position
and general solvency and the circumstances leading to the
The Company was absent when the winding-up order was made as the
director had failed to notify the Australian Securities and
Investments Commission that the Company's registered address
(and business premises) had changed in March 2010. Accordingly,
Justice Black determined that if the company could establish
solvency the application could proceed pursuant to UCPR 36.16.
Justice Black found that the evidence of solvency
"...could have been led in better form" and that it
"...was not the strongest case for termination of a winding
up". Despite this he ordered that the winding up be
In doing so his Honour referred to the relatively small scope of
the business and the significant effort and commitment of those
people involved with the Company to discharge its existing debts.
However of greatest significance to the Court was the fact that the
Liquidator consented to the application:
"The Company's position is
also strengthened by the fact that the liquidator, who has had an
opportunity to become familiar with the business while it was in
liquidation, consents to the termination of the winding up.
I have noted above the liquidator's position in respect
of an application of the this kind has significant
Prior to the application the Liquidator had been placed in funds
to discharge the remaining debts of the Company. As the Liquidator
would, upon the termination becoming effective, lose capacity to
use those funds to discharge the Company's debts, Justice Black
ordered that termination order take effect three days' from the
judgment dater to enable the payments to be made.
The ATO's more aggressive approach in pursuing outstanding
tax liabilities of small and medium sized companies is likely to
lead to an increase in the incidence of applications to terminate
winding-up orders. The sometimes complex and technical issues
involved in establishing solvency will provide a significant cost
hurdle for smaller businesses. In those circumstances it will be
imperative for the director to obtain the support of the liquidator
in making such an application.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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A recent NSW decision has implications for liquidators of trustee companies dealing with trust funds and priority debts.
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