In a recent Federal Court of Australia matter, our litigation team was faced with the very real possibility of the Defendant company harming others in the same way as it is alleged they have harmed the Plaintiff.

Rather than wait for the hearing itself, our civil litigation team filed an Interlocutory Application to have a provisional liquidator put into place, and successfully argued the reasons why it was appropriate for the Federal Court to both hear and accept that application.

At Johannessen Legal, we pride ourselves on our commitment to our greater community; not only could the company have attempted to divest itself of its assets, harming our client’s potential ability to recover the debt owed to them, as well as damages, the company could also potentially be putting others in the same position as our client.  For the greater good of the community, or to use legal lingo, in the “public interest”, it was important to make the application to preserve the company without further interference.

Considerations relevant to the appointment of a provisional liquidator were summarised by Tamberlin J in Australian Securities Commission v Solomon (1996) 19 ACSR 73 (at 80), and recently relied upon in Australian Securities and Investments Commission v Diploma Group Limited [2017] FCA 549, and include:

1. whether there is a valid and duly authorised winding up application with a reasonable prospect that a winding up order will be made (see also Debelle J in Re J N Taylor Holdings Ltd; Zempilas v J N Taylor Holdings Ltd (1991) 3 ACSR 600 (at 614));
2. whether the assets of the corporation may be at risk;
3. whether a provisional liquidator is required in order to preserve the status quo until the Court can decide, after a further examination, whether the company should be wound up (see Re Carapark Industries Pty Ltd (in liq) (1966) 9 FLR 297 (at [303]));
4. whether there is a degree of urgency (see Re Club Mediterranean Pty Ltd (1975) 11 SASR 481 (at 484));
5. whether it is in the public interest for there to be an independent examination of the accounts of the corporation by someone other than just the directors (Tickle v Crest Insurance Co of Australia Ltd (1984) 2 ACLC 493 (at 497)); and
6. whether the affairs of the company have been carried on casually and without due regard to legal requirements (Montgomery Windsor (NSW) Pty Ltd v Ilopa Pty Ltd (1984) 2 ACLC 224 (at 228)).

In a hearing held by videoconference at the Melbourne, Canberra and Sydney Registries of the Federal Court of Australia, simultaneously, our Litigation Team succeeded in their argument in favour of a provisional liquidator.