By Jen Singh, Solicitor – [SOURCE]
Key Takeaways
- In accordance with Section 91 of the Corporations Act 2001 (Cth) (Act), the relation-back day is the day on which the Provisional Liquidator applied for the winding-up order.
- Whenever acting for a creditor in seeking the winding up of a debtor company, be especially careful to the file the application to wind up the company within six months of any transactions that the creditor might wish to have set-aside in favour of another creditor in order to set aside that transaction, replenish the funds in the liquidation and redistribute those funds on pari-passu basis in accordance with section 555 of the Act.
Overview
On 28 June 2022, 52 The Esplanade Pty Ltd (Company) was wound up by Court order. Mr David James Hambleton and Ms Kaily Lyn Chua (Liquidators) were appointed as the Company’s joint and several liquidatorsas a result of the application.
One of the Company’s creditors, being the Commissioner of Taxation (ATO) and the Liquidators dispute the relation-back day for the winding up, with each contending that a different application to the Court constitutes the date that an application for a winding up order was filed.
The Liquidators’ view was that the date of the originating application, being 17 September 2021, is the relation-back day. Mr Terrence Rose (Provisional Liquidator) was appointed as the Company’s provisional liquidator as a result of this application.
The Provisional Liquidator filed an interlocutory application on 3 June 2022 which sought that the Company be wound up in insolvency (Provisional Liquidator’s Application). As a result of the Provisional Liquidator’s Application, the Court ordered on 28 June 2022 that the Company be wound up in insolvency.
The ATO maintained the view that the date of the Provisional Liquidator’s Application was the relation-back day. As such, the Liquidators made an application for declaratory relief in order to resolve the dispute with the ATO.
Submissions of the Parties
In their submission, which put forward that there were, in essence, two applications filed (being the originating application and the Provisional Liquidator’s Application) which resulted in the Court ordering that the Company be wound up in insolvency.
The Liquidators submitted that the originating application was a necessary pre-requisite for the appointment of the Provisional Liquidator, and the Provisional Liquidator could only be appointed after the filing of a winding up application and before the making of a winding up order. The Liquidators further submitted that the winding up order made by the Court on 28 June 2022 was an order made as a result of the originating application.
The ATO’s submission was that the only matter before the Court on 28 June 2022 was the Provisional Liquidator’s Application, and not the originating application. The ATO submitted that the Provisional Liquidator’s Application was a separate application which sought, amongst other things, that the Company be wound up on the grounds of insolvency and was not a continuation or expansion of the originating application.
Consideration by the Court
In considering this matter, the Court took note of the fact that the Provisional Liquidator was not a party to the proceeding commenced by the originating application and determined that this did not preclude the Provisional Liquidator from filing an interlocutory application in that proceeding. The Court found that the Provisional Liquidator was permitted at law to make an application for final relief in the proceeding commenced by way of the originating application.
The Provisional Liquidator’s Application sought that the company be wound up in insolvency pursuant to section 459A and 459P of the Act. The Provisional Liquidator’s Application also referred to sections 461 and 462 of the Act which do not provide for winding up in insolvency. Despite the erroneous references to sections 461 and 462, the Court determined that this did not detract from the fact that the Provisional Liquidator sought that the Company be wound up on the ground of insolvency.
The Court considered that when the Provisional Liquidator’s Application was heard, the proceeding started by the originating application was not being actively conducted or progressed by either the applicant or respondence, was only concerned with the issue of oppression and whether the Company should be wound up on the just and equitable ground and did not involve any application by the applicant that the Company be wound up on the ground of insolvency.
The Court considered that the Liquidators’ submission, to the effect that it contemplated that there was more than one application, was uncommercial as it suggested that there could be more than one relation-back day for a winding up.
The winding up order granted by the Court on 28 June 2022, resulting from the Provisional Liquidator’s Application, was made on the basis that the Company was insolvent, and not as a result of any findings made in relation to issues raised by the pleadings in the originating application. The issues raised in the originating application were not for determination by the Court in the hearing of the Provisional Liquidator’s Application. The winding up order was granted as the Provisional Liquidator had established that the Company should be wound up on the grounds of insolvency, and not as a result of the originating application. This was further supported by the fact that the winding up order of 28 June only dealt with costs related to the Provisional Liquidator’s Application.
The Court observed that there was feint reliance on the slip rule by the Liquidators as a basis for correcting the winding up order. The Liquidators had suggested that the correction was to replace the identification of the initiating document as the Provisional Liquidator’s Application with a reference to the originating application. The Court found that this ‘correction’ could not be supported by the slip rule as the slip rule could not be used as a method to distort the true position or reality of procedural steps. It was further observed that it was clear that the Court was aware that, at the time the winding up order was made, it was hearing only one application – being the Provisional Liquidator’s Application.
Decision
The Court found:
- The application for the winding up order is the Provisional Liquidator’s Application, and not the originating application; and
- Accordingly, the relation-back day is the date the Provisional Liquidator’s Application was filed (3 June 2022).
