Tipsy Cake was wound up on 12 February 2020, having had provisional liquidators appointed on 20 December 2019, who then became the liquidators. The company carried on a restaurant business under the name “Dinner by Heston Blumenthal”, a well known cook, in the Crown Casino complex in Melbourne.
It is a Part 5.7 body under the Corporations Act and a foreign company registered under Pt 5B.2, Div 2 of the Act. Practitioners should be aware that particular provisions apply to their appointments to foreign companies.
Before the Judge hearing the winding up application, the provisional liquidators initially estimated a deficiency of around $10.8 million including a debt to Crown of approximately $1.1 million; a debt to the plaintiff’s principals of approximately $1.885 million; and moneys owed to employees in excess of $4.4 million; with subsequent assessments suggesting these liabilities were understated.
The Judge held that company was insolvent – it had ceased trading, its lease terminated, it was unable to pay its debts and it was not in a position to generate further income.
The ground for winding up is not s 459A of the Corporations Act, which applies to companies registered in Australia, but s 583, which provides that a ‘Part 5.7 body’ may be wound up under Pt 5.7 on various grounds, including that the body is “unable to pay its debts”.
Those words differ from the s 95 definition of insolvency and are defined in s 585 in different terms – for example, through non-compliance with a ‘demand … requiring the body to pay the sum so due and the body has, for 3 weeks after the service of the demand, failed to pay the sum or to secure or compound for it to the satisfaction of the creditor’: Peninsular Group Ltd v Kintsu Co Ltd (1998) 44 NSWLR 534; Re Reef Cove Resort Limited [2009] QSC 378.
Section 582 allows the Court and the liquidator to exercise all the powers in relation to a Part 5.7 body that are generally available in the winding up of companies under the Act. Also, a Part 5.7 body can be wound up even though it is being wound up or has been deregistered or otherwise ceased to exist under the laws of its incorporation.
While no other information came from the judgment – Tipsy Cake Pty Ltd [2020] FCA 190 – it seems like there is much for the liquidators and others to investigate.
Foreign companies
Care should be taken in identifying the type of company to which a liquidator or administrator is appointed.
Voluntary administrators were appointed to a Part 5.7 body and the creditors had then resolved that they be appointed as liquidators. Both appointments were invalid: Kreab Gavin Anderson (Australia) Ltd [2017] FCA 300. Part 5.3A did not apply to it: Re Reef Cove Resort. Further, their appointment as liquidators on a creditors’ resolution was not possible in light of s 583(b): Peninsula Group.
Given that the work done by the practitioners ‘conferred incontrovertible benefit on the company’, despite their invalid appointments, it would have been unconscionable for the company to retain the benefit of their work without paying reasonable remuneration, which was approved. Kreab Gavin Anderson (Australia) Ltd (No 3) [2017] FCA 1473.
