Apostolou v VA Corporation of Australia Pty Ltd [2020] NSWSC 1218 | Case summary

Apostolou v VA Corporation of Australia Pty Ltd [2020] NSWSC 1218 | Case summary | Zoe

By way of background, Spartan Pastoral Company Pty Ltd (in liq) ("Spartan") is one of several of entities which together operate an agricultural business in the Bathurst and Parkes area of New South Wales. Broadly, another company associated with Mr Toole, Toole Holdings Pty Ltd ("Toole Holdings") owns a property known as "Kirkvale Feedlot Farm" in Parkes. Spartan runs a "mixed farming business", and does not own real property but owns livestock and plant and equipment which it runs on properties owned or leased by Toole Holdings and Mr Toole. Mr Toole in turns owns another property and leases two other farming properties in the area. The several companies breed Merino sheep for their wool, breed and rear lambs for slaughter, grow cereal crops and hay, breed cattle, purchase cattle for fattening and slaughter and conduct and operate concentrated feeding lots in respect of cattle for other farmers and major purchasers.
On 6 February 2020, the Court made an order, on the application of the Plaintiff, Oilsplus Holdings Australia Pty Ltd ("Oilsplus") that Spartan be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).
By Interlocutory Process filed on 14 May 2020, Mr Toole, who is the sole director and shareholder of Spartan seeks an order that the winding up be terminated under s 482 of the Corporations Act 2001 (Cth).
Mr Toole relies on several affidavits. Mr Toole's evidence is that he did not become aware of the commencement of proceedings by Oilsplus against Spartan until he was contacted by the liquidator's office and advised that Spartan had been placed in liquidation, and he refers to issues that he claims to have had in respect of the receipt of documents served on Spartan at its registered office. Mr Toole also refers to the functions which are said to be carried out by various companies associated with Spartan, and his evidence is that Spartan does not own any real property and owns and rears livestock which are situated on a number of farms. Mr Toole also refers to issues which he claims to have had with other persons providing services to Spartan, including a contractor (who he also describes as an employee) responsible for checking animal welfare and feeding livestock at a property and the former accountants for businesses associated with Mr Toole and to a suggested dispute as to Oilsplus' debt, which had not been relied upon to set aside the creditor's statutory demand that Oilsplus had served on Spartan.
Mr Toole gives evidence of Spartan's assets, largely comprised of livestock and plant and machinery. He also refers to arrangements with a lender in respect of livestock, Society One Livestock Lending Pty Ltd, and to the relationship between Mr Toole, Spartan and another company and National Australia Bank Limited ("NAB"), and to the position in respect of several creditors of Spartan, in respect of some of which debts are said to be disputed. I will address the position as to those debts below. Mr Toole's evidence is that several other debts would be paid if the winding up is terminated; as Mr Anderson, who appears for him in the application, fairly recognised, the winding up would not be terminated unless those debts were first paid.
By his further affidavit dated 19 June 2020, Mr Toole addressed issues identified in his earlier affidavit as to suggested errors in the books, records and historical accounting information of Spartan, which he contends result from errors by Spartan's former accountant, and to the engagement of a new accountant to prepare various statements and accounts for Spartan. Mr Toole's evidence was initially that he would instruct that new accountant to conduct a thorough review of Spartan's financial records and prepare revised financial documents, and consider issues raised by the liquidator in connection with the ownership and financing of the property from which Spartan and other companies conduct their business, if the application to terminate the winding up is successful, and once the former accountants return the books and records and historical accounting information of Spartan which the former accountants hold on lien for unpaid fees. That evidence appeared to contemplate that the winding up would be terminated, at a time that Spartan's accounts did not presently provide a true and fair view of its financial position, and that position would only be corrected if the former accountants returned the books and records and historical accounting information of Spartan, over which they claimed a lien for unpaid fees. This issue has since been advanced by further evidence.
That affidavit also addresses the position in respect of funds available from Spartan's bank, National Australia Bank Limited ("NAB") and in respect of debts owed by Spartan, which I address below. Mr Toole also set out tables of projected income, costs and expenditures for Spartan in the period from July 2020 to December 2020. Mr Toole also provided a summary of the position in respect of some 12 creditors of Spartan, to which I refer below. Mr Toole also tendered a statutory report by the liquidator to creditors (Ex A3) which recorded a substantial surplus of assets over liabilities, on Mr Toole's valuation, and a limited surplus of assets over liabilities on the liquidator's estimated realisable value. The liquidator there recorded a claim by Mr Toole that Spartan's books and records were incorrect and that debtor invoices related to goods and services provided to a related company of Spartan and were "voided in the books and records" and noted the liquidator was conducting investigations into those transactions. The liquidator also recorded the fact that a loan taken out by Spartan to finance a purchase of a farm owned by a related party may have constituted an unreasonable director-related transaction during the four year relation back period and that Mr Toole may have allowed Spartan to trade while insolvent as early as the end of 2017, although he also noted that Spartan's estimated assets and liabilities showed a surplus and that Spartan had an ongoing relationship with NAB which supported the termination of the liquidation.
By Mr Toole's third affidavit dated 24 July 2020, he updated the cashflow forecast referred to in his June affidavit and extended that cashflow to a period of approximately 18 months, splitting that cashflow into separate categories to deal with different aspects of Spartan's trade, namely sheep, cattle and crops, and addressed the factual basis of that cashflow at some length.
By a fourth affidavit dated 26 August 2020, Mr Toole updates the position as to funds available to Spartan under its bank facilities and also refers to the sale of cattle, undertaken with the liquidator's consent, in order to ensure that Spartan had sufficient funds to meet its fourth quarter BAS liability, in respect of a BAS statement which has yet to be lodged. The amount necessary to meet the relevant liability, less a credit held with the ATO, will be remitted by Mr Toole to the liquidator and then by the liquidator to the Australian Taxation Office. Mr Toole also exhibits a deed poll dated 24 August 2020 given by his parents, Mr and Mrs Toole, which recites the loan made by them to Spartan, Mr Toole's application to terminate the winding up and Mr Toole's affidavit in support of that application, and acknowledges that Spartan was not in default of the loan agreement at the time it was wound up and is still not in default of the loan agreement and that the winding up of Spartan does not constitute an event of default under the terms of the loan agreement and does not enable the lenders to accelerate repayment of the principal sum borrowed under the loan agreement, which would not have been payable until 1 March 2023. Mr Toole's parents confirm that, if the winding up of Spartan is terminated, they will not seek payment of the amount of $440,000 due by Spartan until 1 March 2023, in accordance with the terms of the loan agreement, and will subordinate their entitlement to receive any payment under the loan agreement in favour of ordinary trade creditors of Spartan up to and including 1 March 2023. That agreement plainly assists the solvency of Spartan up to that date, albeit that Spartan would still need to repay or refinance that loan after that date.
By his further affidavit dated 26 August 2020, Mr Toole also gives an undertaking to the Court and to each of the creditors with disputed debts that he will not take any steps to withdraw amounts deposited into the solicitor's trust in respect of those debts, addressing a concern that had arisen at the earlier hearing. He also refers to the steps which have been taken by Mr Jacobsen, which are addressed in Mr Jacobsen's affidavit, to rectify earlier issues in respect of Spartan's financial records. He confirms, and I accept, that his experience of this application is such that he will be vigilant in his engagement with, and oversight of, Spartan's accountants in future and will ensure that its financial reports are fair and accurate.
Mr Toole also relies on affidavits dated 24 and 27 July 2020 and 25 August 2020 of Mr Purchas, a registered liquidator. Mr Purchas' first affidavit attaches a cashflow forecast prepared in respect of Spartan for the period from July 2020 to December 2021 and his second affidavit indicates that, although he had not been provided with a copy of the Expert Witness Code of Conduct when he prepared his report, he had subsequently been provided with a copy of the Code and had its requirements in mind when he prepared the cashflow forecast, including his overriding duty to assist the Court impartially on matters that were the subject of his expertise.
In his first affidavit, Mr Purchas expressed the view that, based on specified assumptions, Spartan will trade on a cashflow positive basis for 15 of the next 18 months, with significant cash surpluses from trade in some months. Mr Purchas' evidence is that he has relied primarily upon information provided by Mr Toole, supplemented by expert advice and research as to agricultural matters in which, understandably, he had no particular expertise. He also made a significant assumption that favourable climate conditions would continue during the projection period, and did not account for liquidation costs, costs of the proceedings or Spartan's obligation to pay "admitted" pre-liquidation creditors. I recognise that it would plainly be necessary to make assumptions as to future matters which would not be knowable with certainty, including as to the climate and weather outlook, the health of sheep within Spartan's sheep breeding program, and birth rates and weight gains as to cattle within the cattle breeding program.
Mr Purchas had obtained third party review of some information, including from an agronomist in respect of cropping-related projections and a livestock agent in respect of stock-related matters. That agronomist's review assessed the expected crop production from 2020 winter crops under ownership and management of Spartan on several properties owned and leased by entities related to Spartan and Mr Toole. That review confirmed that an assumption as to the "whole of property estimates" for crop production were reasonable, although Mr Purchas fairly recognised that the actual output would likely vary subject to a range of matters. Mr Purchas also reviewed a valuation report dated 2 April 2020, obtained by Spartan's liquidator.
I also recognise that it was necessary for Mr Purchas to make assumptions as to future prices for agricultural commodities, and he has assumed that supply and demand, and prices, for commodities relevant to Spartan's business will remain constant through the 18 months covered by the forecast. Mr Purchas indicates that he has also taken a "conservative" approach and applied GST to all transactions, although a large proportion of those transactions may be GST exempt or attract rebates, and that approach may indicate a "worst case" position with respect to GST for Spartan. Mr Purchas indicated that he had not addressed taxation issues, but expressed the view that Spartan would be in a position to cover tax liabilities.
Mr Purchas' evidence is that he primarily employed a direct cashflow forecasting method, on the basis that receipts and payments would be reasonably predictable for the projected 18 months period of the cashflow, subject to the key assumptions that he made. Mr Purchas nonetheless fairly disclosed that he had not undertaken thorough or independent enquiries as to the accuracy and reliability of the information that he had relied upon, and had assumed facts such as Spartan's ownership of livestock and crops, which had to some extent been verified by third party reports; that Spartan was not required to pay rent to any third party, which was addressed by other entities in Spartan's company group; and the size of the land on which Spartan operated its business.
After Mr Purchas' reports were tendered, corrected cashflow reports were provided by Mr Toole. Mr Purchas addressed the significance of those corrections and their impact on Spartan's solvency by further analysis in his affidavit dated 25 August 2020 and a further report which provides an updated cashflow forecast for Spartan for July 2020 to December 2021. He indicates that the corrections made after his earlier report to Spartan's cashflow did not impact its solvency; that Spartan would remain solvent even if all of the disputed debts were presently due and payable; and Spartan would remain solvent if it was required immediately to pay the liability that will arise under its fourth quarter business activity statement. Mr Purchas also gave brief oral evidence, in which he confirmed that a modest shortfall in the proceeds of livestock sales did not affect the opinions he had formed, including as to Spartan's solvency.
At the further hearing on 31 August 2020, Mr Toole also relied on an affidavit dated 24 August 2020 of Mr Adrian Jacobsen, a chartered accountant. Mr Jacobsen's evidence is that he has prepared financial accounts and tax returns for Spartan, Toole Holdings and Mr Toole, which are exhibited to his affidavit. He indicates that he has addressed and rectified issues that he had previously identified in Spartan's accounts, he has not identified any further issues with those accounts and he is satisfied that those accounts now give a true, fair and accurate statement of Spartan's financial position. He also notes that the ATO portal discloses that the ATO has applied funds that it previously held in credit for Spartan to its outstanding tax liabilities and that, after application of the funds held in credit, Spartan still has a credit in the amount of $10,775.27 with the ATO. He also refers to advice given by the ATO that the credit in that account will be applied towards Spartan's anticipated tax liability of $26,000 arising under its June 2020 business activity statement.
Mr Toole also relied on an affidavit of Mr Dragicevic, a solicitor employed by the firm of solicitors acting for him in the proceedings, which referred to service of the application on several creditors and on the Australian Securities and Investments Commission.

[3]

The position as to debts owed by Spartan

As I noted above, Mr Toole's evidence also addresses the position as to debts owed by Spartan. I recognise that, as Mr Anderson points out in a note sent after the 27 July 2020 hearing by leave, Spartan's unpaid debts exist in the context of other expenditures shown in its profit and loss statements for the financial years ended 30 June 2019 and the six months ended 31 January 2020 and bank statements recording the payment of day-to-day expenses and profit and loss statements also recording operating expenses. Mr Anderson fairly accepted that: "It cannot be resisted that the existence of a number of disputes with creditors may give rise to reservations in connection with the termination of Spartan's liquidation. It is submitted for Mr Toole, however, that where the relevant debts are disputed, the disputes identified are not spurious, and are appropriately agitated for Spartan." However, there is no evidence to assess the basis of the disputes in some cases.
Mr Toole's evidence was that a dispute existed in respect of the debt claimed by the petitioning creditor in the winding up application, Oilsplus, on the basis that he had not placed an order for bulk fuel or authorised its placement and has no knowledge of having received such a delivery. In his further affidavit dated 19 June 2020, Mr Toole refers to having reached agreement with Oilsplus that two payments will be made to it, including a compromise of the debt it claimed, if his application to terminate the winding up is successful. Mr Toole also refers to a loan agreement with CNH Industrial Capital Australia Pty Ltd in respect of the purchase of a tractor, and his evidence is that that loan is not in arrears, and that matter does not seem to me to be an obstacle to the termination of the winding up. A debt owed to Kell Moore solicitors is not disputed and is to be paid.
A debt owed to the Australian Taxation Office ("ATO") is also not disputed, but Mr Toole proposes that no amount is to be paid to the ATO on the basis that Spartan will apply other funds held by the ATO to that debt. That matter is addressed by Mr Jacobsen's evidence above. Seven debts were said to be disputed in addition to Oilsplus debt described as part disputed, with amounts to be paid into a solicitor's trust account and held subject to Court orders in the relevant proceedings. Mr Toole's evidence is that a dispute in relation to Coby & Morgan Pearce t/as C Pearce relates to the quality and supply of bailed rice hay and was or is the subject of proceedings in the Magistrate's Court of Victoria. Mr Toole refers to an agreement reached with Pearce that, if the application to terminate the winding up is successful, an amount will be placed in the account of his solicitors to be held by them pending the outcome of proceedings in respect of that claim. I will proceed on the basis that that approach can be accepted for Pearce, where it has accepted that approach. Mr Toole also refers to a debt claimed by the Workers Compensation Nominal Insurer in the amount of approximately $19,666 which he claims is disputed on the basis that premiums were incorrectly charged to Spartan, but proposes to pay if the application to terminate the winding up is successful, reserving his claim to repayment of the funds paid. That payment would need to be made before an order terminating the winding up took effect.
Mr Toole also refers to claims by Mr Littlewood, which he contends is disputed on the basis that any claim is properly brought against Toole Holdings or him personally rather than against Spartan. Mr Anderson also points out that Mr Littlewood's claim is the subject of proceedings in the Local Court and Mr Toole gives evidence of the history of Mr Littlewood's employment and his complaints in that respect. Mr Toole's evidence is that a claim by NH Trans is also disputed; that claim was or is the subject of proceedings in the Local Court of New South Wales and Mr Toole's evidence does not identify the nature of the dispute; and Mr Toole proposes that an amount be paid into a solicitor's account in respect of that claim. A debt claimed by Oak Plain was the subject of proceedings in the Local Court of New South Wales; Mr Toole claims that Spartan had no communication with Oak Plain prior to those proceedings and that no delivery was made by it; and Mr Toole proposes that funds are also to be paid into a solicitor's account in that respect. A claim by Mr Amos relates from a default judgment given in January 2020 in proceedings against Spartan in the Local Court of New South Wales; Mr Anderson refers to issues as to the claim raised with Mr Amos' solicitors, and claims the proceedings did not come to Mr Toole's attention when they were filed and the proceedings were not defended; and proposes that funds are to be paid into a solicitor's account.
An arrangement for payment into a solicitor's trust account which Mr Toole initially proposed did not sufficiently address the position of creditors who have not consented to it, since Spartan or Mr Toole could at any time instruct those solicitors to pay out those funds to it or him. This question has been sufficiently addressed by the undertakings now given by Mr O'Toole.
Mr Toole also refers to a debt claimed by his parents in the amount of $440,000, as to which he refers to his father's affidavit which is not to be repaid. By his affidavit dated 1 June 2020, Mr Toole's father, Mr Trevor Toole, also referred to a loan made by Mr Trevor Toole and his wife to Spartan, of which Mr Toole is guarantor, and to a proof of debt which they had lodged in Spartan's liquidation for $477,000. He referred to a correction of that proof of debt to claim the amount of $440,000, and indicated that they supported Mr Toole's application to terminate the winding up of Spartan and, if that application was successful, they would not require payment of the amount claimed in the proof and would allow the loan agreement to remain on foot with repayment arrangements resuming as provided in the loan agreement. A statement in an affidavit of that character, which can amount to no more than the deponent's present intention, would not have been sufficient to allow that loan to be treated as subordinated to the claims of other creditors in assessing the application to terminate the winding up, and it is not apparent that that loan could be repaid if called. That arrangement did not seem to me to be presently sufficient to support a termination of the winding up. This issue has been addressed by the further deed poll executed by Mr Toole's parents.

[4]

Legal principles and determination

I turn now to the applicable legal principles, which are well established, and I have drawn on my judgment in Re MWM Sydney Pty Limited (in liq) [2016] NSWSC 688 for my summary of those principles. The Court's power to make an order terminating a winding up under s 482 of the Corporations Act is discretionary, as the case law has noted, and a person who seeks such an order must establish that the order is appropriate. The factors relevant to whether a winding up should be stayed or terminated were summarised by Master Lee QC of the Supreme Court of Queensland in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533 as follows: "1. The granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: Re Calgary and Edmonton Land Co Ltd (in liq) (1975) 1 WLR 355 at 358-359 per Megarry J. See also sec 243 of the Act [ie, Companies Act 1961]. 2. There must be service of notice of the application for a stay on all creditors and contributories, and proof of this: Re South Barrule Slate Quarry Co (1869) LR 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113. 3. The nature and extent of the creditors must be shown, and whether or not all debts have been discharged: Krextile Holdings Pty Ltd v Widdows supra [[1974] VR 689]; Re Data Homes Pty Ltd supra [1971] 1 NSWLR 338]. 4. The attitude of creditors, contributories and the liquidator is a relevant consideration: sec 243(1), Re Calgary and Edmonton Land Co Ltd supra. 5. The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: Re a Private Company [1935] NZLR 120; Re Mascot Home Furnishers Pty Ltd [1970] VR 593 at 598. 6. If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd, supra [[1903] 2 Ch 174]. 7. The general background and circumstances which led to the winding-up order should be explained: Krextile Holdings Pty Ltd v Widdows, supra. 8. The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to "commercial morality" or the "public interest": Krextile Holdings Pty Ltd v Widdows, supra; Re Data Homes Pty Ltd, supra …"
Master Lee noted that this list was not intended to be exhaustive and should not be regarded as a series of rigid principles, and that proposition has subsequently been endorsed in later case law: Dubolo Pty Ltd (t/as Fender Signs) v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723 at 724, Metledge v Bambakit Pty Ltd (in liq) [2005] NSWSC 160 at [5] and Von Riesefer v Mainfreight International Pty Ltd [2009] VSCA 129; (2009) 73 ACSR 427 at 438; Re 311 Hume Highway Liverpool Fund Pty Ltd (in liq) [2013] NSWSC 465; 93 ACSR 683 at [4].
In Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70 at [47]-[51], Austin J in turn observed that: "In considering an application to stay or terminate a court-ordered winding up under s 482, the court has regard to various categories of interests. First, the court considers the interests of creditors, taking into account whether they object to the proposed termination. But even if all the existing creditors agree, the court may take the view that the proposed termination puts at risk the interests of future creditors. For example, the court is likely to be concerned where the proposal preserves the existing debts but defers their payment, particularly if the deferment has no enforceable status: see the remarks of Street J at first instance in Re Data Homes Pty Ltd [1971] 1 NSWLR 338 at 341. Similarly, if the proposal is that the principal shareholder/creditor will pay out all the other creditors and seek recovery of his debt by installments, the court is unlikely to permit the company to start trading again and thereby incur additional debts, since if the company fails again, recovery by the new creditors may be prejudiced by the existing debt. However, if the principal shareholder/creditor capitalises his debt, the court may well take a different view: Collins v G Collins & Sons Pty Ltd (1984) 9 ACLR 58. The cases concerning the interests of creditors do not, in my opinion, establish inflexible rules. Specifically, I do not believe that there is any absolute rule that a winding up cannot be terminated as long as one or more debts remains undischarged. Instead, the cases identify the range of concerns which the court is likely to have in exercising its discretion when an application is made, and therefore give guidance as to the matters upon which the court will need to be satisfied. Second, the court considers the interests of the liquidator, particularly with respect to costs. … Third, the court considers the interests of contributories. Generally a stay or termination will not be granted unless each member of the company either consents or is otherwise bound not to object to it, or his or her rights are properly secured: Re Calgary and Edmonton Land Co Ltd (in liq) [1975] 1 All ER 1046. … Finally, the court considers the public interest, including matters of commercial morality, taking the initial approach that insolvent companies should be wound up: Re Data Homes Pty Ltd [1972] 2 NSWLR 22." His Honour there also noted (at [53]) that the factors relevant to the exercise of that discretion were not "absolute rules" but "identify the range of discretionary concerns which the court will need to address".
Relevant factors were in turn identified by Austin J in Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103 at [17] as including the interests of the company's creditors, including future creditors; the interests of the liquidator, particularly with regard to costs; the interests of contributories and the interests of the public, including the public interest in matters of commercial morality, and the public interest that insolvent companies should be wound up.
In Modena Imports Pty Ltd (in liq), Re Leveraged Capital Pty Ltd (recs and mgrs apptd) (in liq) v Modena Imports Pty Ltd (in liq) [2010] NSWSC 739 at [13], Palmer J identified other relevant considerations, including that the applicant must make out a positive case for the favourable exercise of the Court's discretion and must show the nature and extent of the creditors, and whether all debts have been discharged; the attitude of creditors, contributories and the liquidator; the current trading position and general solvency of the company; a full explanation by the applicant of any non-compliance by the directors with their statutory duties; the general background and circumstances leading to the winding up order; and the nature of the company's business and whether the conduct of the company was in any way contrary to "commercial morality" or "the public interest". The identification of these considerations were approved by Gleeson JA in Re CNL Transport Pty Ltd (in liq) Hunt v Smith [2017] NSWSC 291 at [22].
In Re Glass Recycling Pty Ltd [2014] NSWSC 439 at [15]ff, Brereton J summarised the relevant principles and observed at [18]-[19] (omitting citations) that: "Essentially, on such an application, the court must be satisfied, first, that the state of affairs that required that the company be wound up no longer exists. Where the winding up was on grounds of insolvency, it will be necessary for the applicant to demonstrate that the company is not, or is no longer, insolvent. This is usually the most significant consideration ... Thus it has been said that an order terminating the winding up would usually be made if all the creditors are paid out, the liquidators' costs and expenses are covered, and the members agree ... However, the factors to which the cases refer demonstrate that more is necessary than merely establishing that the state of affairs that required the company to be wound up no longer exists. This appears from, inter alia, the references to "commercial morality" as a relevant consideration, and also from references to the interests of future as well as extant creditors. These factors illustrate that the second broad consideration that informs the exercise of the court's discretion - once satisfied that the state of affairs that originally required winding up no longer exists - is that it would be reasonable to entrust the affairs of the company, once again, to the directors under whose management it previously failed."
In Re Glass Recycling Pty Ltd above, Brereton J also referred to the observations of Bergin CJ in Eq in Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797, which emphasised the importance of solvency in determining such an application. Her Honour there noted (at [24]) that: "The other considerations, such as the extent of the creditors, the status of the debts and the nature of the company's business will be taken into account in determining whether the company has returned to, or will be returned to solvency." His Honour also referred to Apostolou v VA Corporation of Australia Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84 at [58] where Finkelstein J noted that an order terminating a winding up would usually be made if all the creditors are paid out, the liquidator's costs and expenses are covered and the members agree, although his Honour also recognised that there may be exceptional circumstances where that would not occur despite a company's solvency.
Mr Anderson rightly recognises that the power to terminate a winding up under s 482 of the Act is discretionary and refers to the relevant considerations identified by Master Lee QC in Re Warbler Pty Ltd (above at 533. Mr Anderson submits that Mr Toole has made out a positive case for the favourable exercise of the Court's discretion to terminate the winding up, on the basis that Spartan has a viable business, the support of its financier and the support of its major creditors, being Mr Toole's parents. Mr Anderson submits that Mr Toole has shown the nature and extent of Spartan's creditors; Mr Purchas' evidence is that these disputed debts can all be met from a cashflow perspective; and a mechanism is in place for payment of those debts after the dispute is determined. Mr Anderson notes that two third party creditors, Mr Toole and Mr Toole's parents support the termination of the winding up and the liquidator neither consents to nor opposes the termination.
Mr Anderson also refers to the circumstances leading to the winding up, and refers to Mr Toole's evidence contesting the debt owed by Oilsplus, which founded the winding up and would now be compromised by agreement between Mr Toole and Oilsplus; to a further dispute with Spartan's former external accountants, as to which Mr Toole complains of the quality of their services and the suggested misreporting of sales in Spartan's profit and loss statement, and refers to Mr Toole's evidence that he has appointed a new accountant for himself, Toole Holdings and, if the liquidation is terminated, Spartan. Mr Anderson also refers to the evidence as to Spartan's assets and liabilities, and to Mr Toole's evidence as to its banking arrangements with NAB. An email from NAB confirms that, if the liquidation is terminated, NAB will allow all current facilities with Spartan and their associated securities to remain intact. Mr Anderson submits that Mr Toole's evidence, supported by Mr Purchas' evidence, is sufficient to show that Spartan would be solvent after the termination of the winding up. Mr Anderson also submits that there has been no non-compliance by the directors with their statutory duties. That submission does not fully address the liquidator's view that Mr Toole may have permitted Spartan to trade while insolvent, although Mr Anderson notes the possibility of an available defence by reference to Mr Toole's expectation of Spartan's solvency. Mr Anderson also submits that the conduct of Spartan was not contrary to commercial morality or the public interest.
There were difficulties with the application, in its initial form, which have now been addressed by the further evidence led at the hearing on 31 August 2020. In submissions made at the hearing on 31 August 2020, Mr Anderson in turn addressed the position in respect of the additional documentation as to the loan owed to Mr and Mrs Toole, noting that it provided binding covenants that no amount was payable to them until 1 March 2023; the position of the ATO and the application of the funds held by it, which I have addressed above; the protection of "disputed creditors" by the undertaking now given; and the additional evidence as to solvency given by Mr Purchas in his supplementary report and his further oral evidence. Mr Anderson points to Mr Purchas' view that, on two scenarios addressed in his evidence, Spartan will be cashflow solvent for the period August 2020 to December 2021 and will have and generate sufficient funds to discharge its debts as and when they fall due. Mr Anderson submits, and I accept, that Mr Purchas' evidence indicates Spartan would be and remain solvent, at least in respect of the foreseeable future, if the winding up is terminated. Mr Anderson also refers to the steps now taken to rectify Spartan's accounts, and addressed in Mr Jacobsen's evidence. He submits, and I accept, that the Court can have confidence that issues in those accounts have been rectified and that it is unlikely that those issues would be repeated.
I am now satisfied that orders can be made with a view to terminating the winding up. The evidence now establishes that the ATO has set-off other funds that it holds against the amount in excess of $44,000 owed to it. Although it seems to me that, as Mr Anderson fairly accepted, Spartan has more than its fair share of "disputed" debts, the payment of funds into a solicitor's trust account secures the payment of those debts, where the undertakings now given would prevent Mr Toole or Spartan directing the solicitors to repay the funds to him or it, immediately after the orders giving effect to the winding up took effect; and an arrangement binding upon Spartan, Mr Toole or his parents has been made that sufficiently secures the solvency of Spartan in respect of the amount of $440,000 owed to them, at least for the medium term. The evidence now led indicates that Spartan has addressed the issues as to its accounts, so that it now maintains true and fair accounts, in accordance with its obligations under the Corporations Act.
For these reasons, I made the orders sought by Spartan on 31 August 2020, and will make orders to terminate the winding up after the steps contemplated by those orders are taken.

Apostolou v VA Corporation of Australia Pty Ltd

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