In a case recently handed down 1 the Court wound up a company on "just and equitable" grounds. A Court can wind up a company for reasons other than it being insolvent if there are compelling reasons to do so. In this case of the J Park Australia play centre in Oakleigh South, the Court found ample reason to wind up the company.
What were the safety and management issues?
In this case, brought by a minority shareholder, it was alleged (amongst other matters) that:
a) There were a high rate of injuries sustained by children including:
- a boy requiring hospitalisation after sustaining a concussion, inflammation and swelling after hitting his head on an inadequately padded fixed object after jumping from a trampoline;
- a child requiring hospitalisation suffering concussion and a fractured leg after a staff member failed to catch him as he came off a zip line; and
- a child falling 2 metres from a net and landing on steps and injuring his back.
b) Operating for 13 months (and at the time of those injuries) without public liability insurance and the company did not have the financial capacity to meet a claim brought on behalf of an injured child.
c) The workmanship of the play equipment did not meet Australian standards - eg the padding around steel poles being half of the required thickness, the inability to produce electrical certificates for high voltage wiring installed, fault fire alarm monitoring system.
d) There was no planning permit to trade granted by the Council.
e) There were inadequate staff supervising the play centre.
The Court
The Court found that:
- Many of the Defendant's responses to the allegations were insufficient and vague.
- The fact that the director allowed the company to operate a large indoor play centre for 13 months without public liability insurance was "simply breathtaking".
- The director's conduct with respect to safety and insurance was inconsistent with his director's duties and commercial morality more generally.
- The company's financial statements were unreliable and the shares of the company had no commercial value according to an independent expert.
Lessons
A company can be wound up for reasons other than its insolvency.
In this case the failure by the management of the company to provide for the safety of the community when visiting the play centre was a key reason for the company's winding up on just and equitable grounds.
See my article here about the various basis for winding up on just and equitable grounds.
Footnote
1Re JSSP Holdings Pty Ltd [2021] VSC 33
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. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.
