In a recent case involving key stakeholders in the ‘Century Mine’ (Mine) – located in the lower Gulf of Carpentaria region in Northwest Queensland – the Supreme Court of Queensland considered an application brought by a liquidator and creditor for the termination of a winding up of pursuant to section 482(1) of the Corporations Act 2001 (Cth) (Application).
The Mine was operated by Century Mining Ltd (formerly Century Zinc Ltd) (Century). It was one of the largest zinc mines in the world.
The company that was the subject of the Application – Gulf Aboriginal Development Company Ltd (Gulf) – received payments from Century, which it then distributed to various parties pursuant to the terms of an agreement known as the Gulf Communities Agreement of 13 February 1997 (Agreement). Those parties included Century, the Queensland government, and four native title groups that Gulf was supposed to represent: the Waanyi People, the Mingginda People, the Gkuthaarn People and the Kukatj People.
Gulf also had cultural, heritage, environmental and lobbying roles, and was registered as a charity. However, in 2016 its status as a registered charity was revoked (after the Australian Charities and Not-for-profits Commission issued a scathing Information Memorandum in December 2015 criticising Gulf for having “a history where people have been able to misuse the organisation’s money“).
By 2019, Gulf had $40,133 worth of assets and debts of approximately $645,000. Moreover, none of the native title groups wanted it to represent them under the Agreement or to receive progress payments on their behalf.
Gulf was then ultimately wound up on 28 November 2019 after failing to comply with a creditor’s statutory demand (CSD) for the amount of $18,373.
Notwithstanding the company’s obvious struggles, Gulf’s liquidator, Todd Kelly (Kelly), and a creditor, GADC No 2 Pty Ltd, applied to have the liquidation terminated pursuant to section 482(1) of the Corporations Act 2001, which provides that:
“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.”
As noted by Freeburn J, the effect of this would have been to resuscitate Gulf as a corporate entity.
There are eight well-established factors relevant to the exercise of a court’s discretion when deciding whether to terminate a winding up under this section, namely:
In considering factors (particularly factors 3 to 8), Justice Freeburn observed that:
Having regard to those factors, Justice Freeburn determined that the applicants had not established that this was an appropriate case for the Court to exercise its discretion to terminate the winding up, and made orders dismissing the appeal. Hence, the Court did not permit the resuscitation of Gulf as a corporate entity.
While the ‘eight factors’ are not intended to be an exhaustive or a rigid set of principles, this decision confirms that courts are unlikely to terminate a winding up unless all relevant factors are fully explored by reference to evidence. In particular, parties seeking to terminate a winding up will be expected to adduce probative evidence of the company’s solvency position and of the circumstances that led to the winding up; it is not a complete response to simply “hang out the ‘under new management’ sign.”
Guy Edgecombe, Partner
Mitchell Byram, Senior Associate