Hume vs. Carey

Australia

09.08.2022

Insolvency

There must be some valid reason for the discretion to be exercised under Section 482(1) of the Corporations Act, 2001

The Plaintiff by originating process seeks orders pursuant to Section 482(1) and Section 482(1A) of the Corporations Act, 2001 for the winding up of HHA Architects Pty Ltd (HHA Architects) to be terminated. The grounds include that HHA Architects has no debt and no contingent creditors and does not have any current PI insurance cover.

Pursuant to Section 482 of the Act, at any time during the winding up of the company, the court may make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order. The application may be made by a contributory of the company. There are no criteria specified in the Act to indicate when an application to terminate a winding up will be granted. The power to make an order under Section 482(1) is discretionary. While the court does not have to find special reasons for granting an application to terminate a winding up, there must be some valid reason for the discretion to be exercised in favour of the applicant, taking into account the interests of the creditors, the liquidator, the members of the company and weighing in the balance the public interest.

To be a contingent creditor, 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. A 'prospective creditor' is a creditor in respect of a debt which will certainly become due in the future, either on some date already determined or on some date determinable by reference to future events. In either case, there must be an existing obligation, and out of that existing obligation a liability on the part of a company to pay a sum of money which will arise on a future event, whether it be one which must happen or only one which may happen.

The first and second defendants have commenced proceedings against HHA Architects for breach of contract and negligence. The claim is disputed. In these circumstances, present Court do not accept that the first and second defendants are a creditor, prospective creditor, or contingent creditor of HHA Architects. On this basis, the first and second defendants did not have standing to bring the application to wind up HHA Architects and the order to wind up this company should not have been made.

In this case, HHA Architects was not wound up because of insolvency. It was wound up in circumstances where it should not have been. While I do not consider that the plaintiff is entitled to have the winding up set aside as of right, present Court consider the fact that HHA Architects should not have been wound up at all to be a relevant discretionary factor that weighs very heavily in favour of the application to terminate the winding up. Present Court propose to stay the winding up until further order.

Tags : Winding up Stay Entitlement

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