Deputy Commissioner of Taxation v Apollo Kitchens [2024] FCA 282 | Case summary | Zoe

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Deputy Commissioner of Taxation v Apollo Kitchens

[2024] FCA 282

Federal Court of Australia|2024-03-07|Before: Lee J

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At a glance

AI case summary

Result

plaintiff. Interlocutory application dated 7 March 2024 dismissed (Reasons [26]; Orders made 7 March 2024).

Key principles

A person who was not a party to the proceedings before a Registrar cannot seek review of the Registrar's exercise of power under ss 35A(5) and (6) of the Federal Court of...
In the exercise of the Court's discretionary power under s 482(1) of the Corporations Act to stay or terminate a winding up, the applicant bears the onus of making out a positive...

Issues before the court

Can a director who was not a party to the Registrar's proceedings seek review of the Registrar's winding up orders under ss 35A(5) and (6) of the...
Should the Court stay the Registrar's winding up order under s 482(1) of the Corporations Act pending the director's attempt to remedy the debt?
Was there sufficient evidence of solvency or a credible plan to discharge the tax debt to justify an interim stay?

Cited legislation

3 cited instruments linked from this judgment.

Plain English Summary

The Court dismissed Apollo Kitchens' urgent application to stay a Registrar's winding up order. The director, Mr Bader, was not a party to the Registrar proceeding and therefore could not seek review under the Federal Court Act provisions cited; the correct route was an application to the Court under s 482 of the Corporations Act. Applying the established discretionary factors for stays of winding up, the Court found the company effectively insolvent, the major creditor (the DCT) opposed any stay, and the director had not proved imminent, reliable funding. The Court refused to stay the winding up and dismissed the application.

AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.

What happened

This was an urgent interlocutory application heard by Lee J in the Federal Court (Commercial and Corporations list) arising from a Registrar's winding up order against Apollo Kitchens (NSW) Pty Limited (Apollo). The critical chronology in the Reasons is:

11 July 2023: the Deputy Commissioner of Taxation (DCT) served a creditor statutory demand on Apollo for $7,802,543.48, composed of income tax liabilities, superannuation guarantee charge assessments and penalties reaching back to FY2015 (Reasons [8]–[10]).
Apollo did not comply with the demand within 21 days (Reasons [10]).
7 September 2023: the DCT filed an originating process under ss 459A and 459P seeking winding up for non‑compliance (Reasons [11]).
7 March 2024 (c. 10:30am): Registrar Colbran made orders winding up Apollo and appointed joint and several liquidators, with a short stay of operation to midday (Reasons [2]).
Apollo, through its director Mr Peter Bader, brought an urgent interlocutory application seeking interim relief including leave for Mr Bader to make the application under s 198G(3)(b), orders to return the application instanter, joinder of Mr Bader, a stay of the winding up (r 41.03 FCR invoked), and undertakings as to damages (Reasons [3]).
Lee J identified a threshold procedural problem: ss 35A(5) and (6) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) permit review only by a party to the Registrar proceedings (Reasons [6], [12]); Mr Bader had not been a party.
The Court extended the temporary stay to 2pm to enable the DCT to be notified and to consider consenting to a stay under s 482 of the Corporations Act (Reasons [5], [24]).
The DCT did not consent. Applying the discretionary factors for a stay under s 482, and on the evidence of insolvency and the applicant's conduct, the Court dismissed the interlocutory application (Reasons [24]–[26]).

The net practical result: the interlocutory application was dismissed (Orders, Reasons [26]); the Registrar's winding up stands unless the company or director successfully applies under s 482 to the Court with the required procedural steps and persuades the Court to exercise its discretion.

Why the court decided this way

Two legal foundations drove the decision.

Procedural locus for review: ss 35A(5)–(6) FCA Act
- Lee J accepted the submission (and cited Complete Constructions) that ss 35A(5)–(6) permit review by "a party to proceedings in which a Registrar has exercised any of the powers of the Court" (Reasons [12]). The director was not a party to the Registrar proceedings and therefore could not rely on those subsections to obtain interim relief. The judge described the relief as "misconceived" in the form advanced (Reasons [6], [12]).
The correct statutory mechanism: s 482 Corporations Act and the exercise of discretion
- The Court identified s 482(1) as the appropriate statutory source: "At any time during the winding up of a company, the Court may, on application, make an order staying the winding up ..." (Reasons [13]). Lee J referred to the established discretionary factors for granting a stay in winding up (Re Warbler factors as summarised in Jackson Bell [2023]) and applied them to the factual matrix (Reasons [15]).
- On the evidence the Court found the company was insolvent: "It seems to be tolerably plain on the evidence that Apollo is insolvent" (Reasons [20]). The DCT, the moving creditor and apparently the only major creditor, opposed any stay (Reasons [23], [24]). The director had previously provided undertakings that were withdrawn or sought to be changed and had had a long period to procure funds but had not done so (Reasons [16]–[19], [23]).
- The Court concluded that, in the absence of creditor consent and with insolvency established and the director's prior failures, the discretionary relief under s 482 should not be exercised to stay the winding up (Reasons [23]–[26]).

Those two strands, the procedural bar to using ss 35A(5)–(6) by a non‑party, and the discretionary refusal to grant a s 482 stay on facts showing insolvency and creditor opposition, together determined dismissal.

Before and after state of the law

Before this judgment:

It was established that ss 35A(5)–(6) are limited to parties in the Registrar proceedings (Complete Constructions was cited by the Court, Reasons [12]).
The factors guiding exercise of s 482(1) have been long‑standing and were reviewed in recent authority (Jackson Bell [2023], Reasons [15]).

What this decision does:

It applies those existing authorities to the facts: where a director (not a party before the Registrar) seeks relief after a Registrar's winding up, the correct procedural vehicle is s 482 and not ss 35A(5)–(6) (Reasons [6], [13]–[14]).
It underscores that, in contested circumstances where the principal creditor opposes a stay and insolvency is evident, courts will be reluctant to exercise s 482 discretion to preserve the company pending financing assurances that are unproven (Reasons [20]–[24]).

This case does not create new legal tests. Rather it reinforces procedural limits on the use of Federal Court Act review provisions and confirms the established approach to s 482 discretion in the context of tax creditor windings up.

Key passages with plain-English translation

Quoted passage (Reasons [6]): "ss 35A(5) and (6) of the FCA Act presuppose an application made by a party to the proceeding in which the Registrar has exercised the relevant power." Plain English: The Court will only entertain a formal review under those Federal Court Act sections if the person applying was actually a party to the Registrar hearing. If you were not involved in the Registrar matter, you cannot use those subsections to ask for a review.

Quoted passage (Reasons [13]): "Power to stay or terminate winding up (1) At any time during the winding up of a company, the Court may, on application, make an order staying the winding up ..." Plain English: If the company has been wound up, the appropriate statutory tool to pause or end that process is s 482 of the Corporations Act; the Court has a discretionary power to make such an order.

Quoted passage (Reasons [20]): "It seems to be tolerably plain on the evidence that Apollo is insolvent ..." Plain English: On the material before the Court, the company was effectively insolvent; the available evidence did not establish a credible solvency position that would justify preserving the company by way of a stay.

Quoted passage (Reasons [23]): "The fact is that Mr Bader has had a long period to get his house in order and has failed to do so ..." Plain English: The director had time to arrange funds or a plan but did not; the Court treated that failure as a significant negative factor when deciding whether to use its discretion to stay the winding up.

Quoted passage (Reasons [26]): "Accordingly, the application must be dismissed." Plain English: The Court refused the company's urgent application; the Registrar's winding up order was allowed to stand unless and until the company successfully applies under s 482.

What fact patterns trigger this precedent

This judgment is directly engaged where:

A Registrar has wound up a company and appointed liquidators (Registrar decision made), and
A person affected (commonly the director) seeking to restrain, review or set aside that Registrar decision was not a party to the Registrar proceeding, and
The person attempts to use ss 35A(5)–(6) FCA Act to obtain relief, or otherwise seeks an interim stay of winding up without following s 482 procedure, and
There is contested creditor opposition (for example, the DCT as principal creditor) and evidence of insolvency.

In those circumstances the key takeaways are:

The applicant should proceed under s 482 and satisfy the procedural and evidentiary expectations that accompany a s 482 application (service/notice to creditors, evidence as to solvency/trading, explanation of background, undertakings, and creditors' attitudes), because the Court will apply the established discretionary factors (Reasons [13]–[16], [24]).

How later courts have treated it

The Reasons do not canvass subsequent treatment of this judgment by later courts. The decision expressly follows and applies earlier authorities (Complete Constructions and Jackson Bell) rather than positioning itself as a departure. The likely immediate effect is to reinforce the established procedural posture identified in those earlier cases: non‑parties should not expect to rely on ss 35A(5)–(6) and should instead bring a s 482 application addressing the enumerated discretionary factors and creditor notice requirements (Reasons [12]–[15]). Any assessment of how later courts treat this case would require citation to later judgments; none are referenced in the Reasons.

Still-open questions

Several practical and legal questions remain for a practitioner to consider (these are observations drawn from the Reasons and not advice):

Joinder to the Registrar proceeding: The judgment treats the director's inability to invoke ss 35A(5)–(6) as a procedural bar. The Reasons do not explore whether and how a director might be joined, before or after a Registrar's decision, as a party to enable a ss 35A application, nor whether prompt steps could or should be taken at the Registrar level to secure party status. The judgment points the reader to s 482 as the appropriate avenue but does not close debate on joinder mechanics (Reasons [6], [13]–[14]).
Weight and sufficiency of solvency evidence: Lee J found insolvency "tolerably plain" (Reasons [20]). The affidavits relied upon included past payments (a $3 million partial payment) and asserted but unfinalised financing arrangements (Reasons [16]–[18]). The judgment illustrates that uncorroborated verbal assurances from financiers and pending approvals may be insufficient; it remains open what precise evidentiary sufficiency would persuade a court to stay a winding up when the major creditor objected.
Undertakings and their withdrawal: The director previously undertook not to oppose an adjournment and later sought to withdraw or modify undertakings when before the Registrar (Reasons [18]–[19]). The impact of earlier undertakings on later discretionary relief remains fact dependent; the judgment treats the director's conduct as adverse to granting relief (Reasons [23]).
Commercial prejudice to third parties: The judge acknowledged the "devastating" potential effect on employees and third parties if winding up proceeded, and recognised that such prejudice can be a powerful consideration favouring a stay (Reasons [22]). The judgment nevertheless held that insolvency and creditor opposition may outweigh that prejudice. How courts balance those competing harms in different factual configurations remains for future cases.
Creditor consent: Lee J noted that the result may have been different if the DCT had consented to a stay (Reasons [23]–[24]). The precise practical and legal implications of creditor consent, and the terms on which a consented stay will be fashioned, remain a live area of practice.

This deep dive has summarised and analysed the Reasons of Lee J in Deputy Commissioner of Taxation v Apollo Kitchens (NSW) Pty Limited [2024] FCA 282. It is based solely on the judgment text cited in the Reasons. This is legal information, not legal advice; I may make mistakes. Before you act on this or rely on any draft or analysis, get a qualified Australian lawyer to check it.

Judgment (7 paragraphs)

[1]

The interlocutory application dated 7 March 2024 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[2]

(Delivered ex tempore, revised from the transcript)

[3]

A INTRODUCTION 1 This is an urgent interlocutory application which has come before me in my capacity as Commercial and Corporations Duty Judge. 2 This morning, at approximately 10:30am, Registrar Colbran made orders (Orders) winding up the defendant company, Apollo Kitchens (NSW) Pty Limited (Apollo) in insolvency and ordered that Katherine Sozou and Anthony Norman Connelly be appointed as joint and several liquidators of Apollo. The Registrar made a further order staying the operation of the Orders until midday today. 3 Apollo, by its interlocutory application (application) seeks, in summary, interim orders that: (1) Mr Peter Bader, the director of Apollo, be granted leave to make the application, pursuant to s 198G(3)(b) of the Corporations Act; (2) the application be returnable instanter; (3) Mr Bader be joined to the proceeding; (4) the Orders for the winding up of Apollo be stayed, pursuant to r 41.03 of the Federal Court Rules 2011 (Cth) (FCR); and (5) Mr Bader give the usual undertaking as to damages. 4 The interim orders are sought pending an application for review of the Registrar's decision pursuant to ss 35A(5) and (6) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). 5 When the matter came before me (at 11:59am), I indicated to counsel appearing on behalf of Apollo, Mr McDonald, that first, in circumstances where the plaintiff, the Deputy Commissioner of Taxation (DCT), plainly has an interest in the matter as the only major creditor of Apollo and the moving party before the Registrar, it is appropriate that the DCT be notified of this hearing and be given the opportunity to put on any submissions he wishes to make on the application. Accordingly, I made orders, among other things, that the operation of the Orders be temporarily stayed until 2pm today upon Mr Bader giving the usual undertaking as to damages. Following the making of those orders, Mr Caligaris appeared on behalf of the DCT. 6 The second matter I raised is that the relief sought by Apollo seemed to me to misconceived, for this reason: ss 35A(5) and (6) of the FCA Act presuppose an application made by a party to the proceeding in which the Registrar has exercised the relevant power. The difficulty with the relief as framed is that Mr Bader is not a party to the proceeding before the Registrar and, accordingly, the proper procedural mechanism, it seemed to me, would be to seek an order under s 482 of the Corporations Act to stay the winding up. 7 I will return to this issue shortly, but first, it is necessary to canvass briefly some further background to the proceeding.

[4]

B BACKGROUND 8 On 11 July 2023, a creditor statutory demand was served on Apollo on behalf of the DCT (demand). 9 The demand sought payment of a debt in the amount of $7,802,543.48, being income tax liabilities, superannuation guarantee charge assessment debts and penalties, which related to liabilities of Apollo going back to the end of the financial year in 2015: affidavit of Jannatul Ferdush affirmed 6 September 2023 (Ferdush Affidavit) (at JF1, Annexure A). 10 The demand advised that the DCT may rely upon a failure to comply with the demand as grounds for an application pursuant to ss 459A and 459P of the Corporations Act 2001 (Cth) (Corporations Act). Apollo failed to comply with the demand within 21 days after it was served: Ferdush Affidavit (at JF1). 11 On 7 September 2023, the DCT filed an originating process seeking relief under ss 459A and 459P for failing to comply with the demand. As would be apparent from that date, the period in which the winding up application must be determined expires today: s 459R(1) (subject, of course, to any application being made to extend the period pursuant to s 459R(2)).

[5]

C THE APPLICATION 12 As noted above, the difficulty with the relief sought by Mr Bader under ss 35A(5) and (6) of the FCA Act is that he is not a party to the proceeding before the Registrar. As Foster J explained in Complete Constructions (Aust) Pty Limited v Jeff Manny Pty Limited (In Liquidation), In the matter of Jeff Manny Pty Limited (In Liquidation) [2014] FCA 293 (at [27]): [27] … Both r 3.11 FCR and s 35A(5) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) refer to "a party". It is only a person or entity who was "a party" in the proceeding before the Registrar who is entitled to seek review of a Registrar's decision. In particular, s 35A(5) provides: A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power. 13 Justice Foster went on to note (at [27]-[31]) that given the applicant in that case was not a party to the proceeding before the Registrar, the appropriate mechanism for the grant of relief sought by the applicant was an order under s 482(1) of the Corporations Act to stay the winding up. That section relevantly provides: Power to stay or terminate winding up (1) At any time during the winding up of a company, the Court may, on application, 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. … 14 After raising this matter with counsel for Apollo this afternoon, Mr McDonald indicated that he does seek a stay pursuant to s 482 of the Corporations Act which, for the reasons outlined by Foster J, is the proper procedural mechanism. Even if there was some sort of implied or other power to grant a stay in these circumstances, it is difficult for me to understand why that power would not be exercised in conformity with the principles that have been applied in the context of the power to order a stay under s 482(1). 15 The relevant principles were outlined by Halley J in Deputy Commissioner of Taxation v Jackson Bell Pty Ltd, in the matter of Jackson Bell Pty Ltd [2023] FCA 916 (at [39]): [39] In considering the exercise of the discretionary power in s 482(1), the following eight factors set out by Master Lee QC of the Supreme Court of Queensland in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533 provide useful guidance: 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 … 16 When it comes to the question of insolvency, I have been taken by Mr McDonald to four affidavits of Mr Bader, affirmed on 8 December 2023, 6 February, 7 February and 7 March 2024. In his first affidavit, Mr Bader deposed to the fact that as a result of funds becoming available to him from the sale of a property owned by Apollo, on 8 December 2023, Mr Bader transferred $3 million to the DCT in partial discharge of the debt owed by Apollo to the DCT. Mr Bader also gave evidence that since November 2023, he has continued to attend upon Apollo's accountant to assist with the preparation of tax returns which, I am told, were lodged in December of that year. 17 On the evidence before me, it appears that the only debt of substance that remains in arrears is the debt owed to the DCT. 18 In his affidavit affirmed on 6 February 2024, Mr Bader gave evidence that he had taken steps to obtain finance to pay the debt owed to the DCT, including "working with four financiers and will proceed with the fastest" and that he had been "provided with verbal assurances, that written approval for at least one of the financiers will be provided … shortly and funding for the payment of the whole of [Apollo's] debts". Indeed, Mr Bader went further, noting (at [12]-[13]): 12. I respectfully seek an adjournment of the proceedings for a period of four (4) weeks in order for the loan to be finalised and debt owed to the Plaintiff, in full. 13. I further state that should the Court be minded to grant an adjournment of the proceedings for four (4) weeks, I undertake not to oppose the application made by the Plaintiff on the next occasion. (Emphasis added) 19 When the matter came before the Registrar today, Mr Bader sought a withdrawal of that undertaking and the provision of different undertakings, by which he sought to provide security for the outstanding debt owed to the DCT. The DCT did not accede to that proposal and opposed the application, hence the Orders.

[6]

D CONSIDERATION 20 It seems to be tolerably plain on the evidence that Apollo is insolvent, and unless sufficient funds are realised by Mr Bader to satisfy the company's liability through refinancing or the sale of assets, it will continue to be insolvent. 21 In the light of the above, one might think the obvious resolution would be to allow the winding up to proceed, and to leave it to Mr Bader, if and when he has raised sufficient funds, to seek an order terminating the winding up in accordance with s 482(1) of the Corporations Act. 22 The point made by Mr McDonald, however, with some force, is that Apollo's business is a kitchen design and supply company. Should the winding up proceed, the prejudice that may be occasioned to a vast number of third parties, including employees of the company, will be significant, and likely to cause a devastating effect on Apollo's ability to continue to procure sales and imperil the ability of Mr Bader to obtain refinancing. 23 The fact is that Mr Bader has had a long period to get his house in order and has failed to do so, including by providing an undertaking to the Court last month. He is, regrettably, the author of his own misfortune in this regard. Everything that could be said on his behalf has been said and I am grateful for the comprehensive and helpful assistance that Mr McDonald provided today, but it would not be in conformity with my obligations under s 482 of the Corporations Act to make an order (unless, perhaps, I was satisfied that it was by the consent of the DCT, who appears to be the only major creditor).

[7]

E CONCLUSION AND ORDERS 24 As noted earlier, I made an order that the stay be extended to 2pm today. Mr Caligaris appeared on behalf of the DCT in the course of delivering these reasons and indicated that he required further time to obtain instructions as to whether or not the DCT would accede to the making of an order under s 482(1) of the Corporations Act to stay the winding up. 25 Ultimately, the DCT did not consent to a stay. It follows that the avenue by which Mr Bader may seek a termination of the winding up is by way of an application under s 482. 26 Accordingly, the application must be dismissed. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.