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VCS Holdings (AUST) Pty Ltd. (In Liquidation) vs. KVG Contract Services Pty Ltd. - (01 Jun 2023)

Court must consider the factual matrix of the dispute in order to be satisfied whether sufficient reason exists to wind up the company

Company

Present is an application by the Plaintiff for an order under Section 461(1)(k) of the Corporations Act, 2001 that the first defendant, KVG Contracting Services Pty Ltd (KVG), be wound up. There was no dispute that, as a shareholder of KVG the Plaintiff had standing to bring the application under Section 462(2)(c) and that the relevant formalities had been satisfied. The question is, and the competing contentions concerned, whether the discretion conferred by Section 461(1)(k) should be exercised in the circumstances.

The just and equitable winding up ground embodied in Section 461(1)(k) has its origins in equity. The categories of circumstances which enliven the just and equitable jurisdiction are not closed or rigid. The court must consider the factual matrix of the dispute in order to be satisfied whether sufficient reason exists to wind the company up. The question whether it is just and equitable is a question of fact, in respect of which each case must depend on its own circumstances.

Even if the court is satisfied of circumstances which justify a winding up on the just and equitable ground, Section 467(4) of the Act makes clear that the court must consider whether an alternative and less drastic form of relief is available. The case for winding up the company under Section 461(1)(k) is overwhelming. The company was formed for a purpose that has come to an end and in any event is unable to be maintained. The period of time agreed for the duration of the enterprise is well passed. It was a small company created on the basis of a cooperative relationship between two shareholders participating equally and collaboratively. One shareholder is insolvent and the relationship in any event has broken down entirely. At this point, it matters not who is at fault or whether anyone is at fault. The reality is that the company is redundant, deadlocked and entirely dysfunctional.

The failure to produce accounts or attend to statutory obligations is a powerful consideration in favour of winding up. There is no alternative means to cure or address the company's dysfunction and its symptoms. If the court has determined, as it has, that it is just and equitable to wind the company up it must do so under Section 467(4) unless it considers the applicant has brought the application unreasonably. Orders for the appointment of a liquidator and the winding up of KVG ought to be made. Application allowed.

Tags :   DYSFUNCTION  WINDING UP  DISCRETION

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