In Sevior v Morgan [2012] VSC 480 Sifris J terminated a winding up  under section 482(1) of the Corporations Act 2001 (the “Act”). His Honour undertook a detailed a detailed consideration of public interest and commercial morality in the exercise of the court’s discretion.

FACTS

The company was incorporated on 7 September 1994 to operate the electrical business of Mr Sevior (“Sevior”).  It operated until 25 September 2009 after which time it entered into a license deed with two other companies and then ceased trading [5].  The liquidator, Mr Morgan, raised concerns about alleged Phoenix activity. On 11 December 2009 the company was placed into liquidation [6]. More than two years later Sevior proposed a deed of company arrangement [8].  In his report dated 11 April 2012, under section 439(A) of the Act, Morgan stated:

– there is a potential preference claim against the Deputy Commissioner of Taxation in the amount of $191,415;

– there is a potential claim against Mr Sevior in respect of director related transactions in the amount of $115,923;

– there is a possible claim against Mr Sevior for trading whilst insolvent in the amount of $283,153;

– Mr Sevior may have breached his duties as a director of the Company in various respects; and

– Mr Sevior may have engaged in alleged phoenix activity.

While Morgan referred his concerns about breaches of duty in Phoenix activity to ASIC it took no action and did not oppose the application. Sevior swore an affidavit that the creditors of the company had been paid and had accounted for the assets that he is assigned to another company. He also took steps to deal with the breaches of directors duties and alleged Phoenix activity [11].

DECISION

His Honour reviewed the authorities in summarising the principles applicable in terminating a winding up under section 482 (1) of the Act, which are notably:

1. the solvency of the company Read the rest of this entry »

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