Westside Sugar Cane Juicery Pty Ltd [2015] NSWSC 1991
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 or terminated.
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 Judgment
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 company.
His Honour identified the two avenues available for reversing a winding-up order.
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 winding-up.
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 terminated.
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 weight".
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.
Conclusion
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.
