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Changes to the application of Section 459S – Each case to be considered on its merits

A new approach to the application of section 459S: In the matter of Garslev Holdings Pty Ltd [2023] NSWSC 609

 

The Supreme Court of New South Wales’ matter of Garsley Holdings concerned an application by Garlsey Holdings Pty Ltd to oppose winding up pursuant to section 459S of the Corporations Act 2001 (Cth) (“the Act”).

 

Background

Section 459S states a company cannot, without leave of the Court, oppose an application for its winding up proceeding on a ground that the company could have relied on, but did not rely on, in an application to set aside a statutory demand. Section 459S(2) continues such that the Court cannot grant leave unless it is satisfied the ground relied on by the company is material to proving it is solvent. The section is rigid and emphasises the importance of a debtor to respond to a statutory demand in a timely manner, being before it lapses.

Historically, judges have commented that the section serves as a presumption of caution that Courts should apply when considering applications to oppose a winding up, and that onus is placed on the debtor company to bring a timely opposition to a statutory demand.

 

The Facts

However, on 8 June 2023, Hammerschlag CJ in Equity determined that the approach in previous authorities was incorrect. The Court held it is not incumbent upon the defendant in these proceedings to displace any presumption of caution or reluctance and that the opposition of an application should be considered on the merits of each case.

Hammerschlag CJ continued in his judgment that application under those authorities is too constrictive upon the Court’s discretion and there is no warrant “to cut down… that discretion… or… to confine it within a straight jacket’” (citing English Court of Appeal in Re Atlantic Computer Systems PLC [1992] Ch 505 at 541). The commentary of his Honour serves as a reminder that the Court’s wielding of discretion is to be exercised on a case-by-case basis, and not blanketly applied.

 

The Decision

Despite the above, Garslev Holdings Pty Ltd was unsuccessful in its seeking leave to oppose the winding up application, and the Court made orders for the winding up of Garsely Holdings Pty Ltd. Whilst the move away from previous authorities did not alter the result of the case, it opens the door for greater discretion in future applications pertaining to section 459S of the Act.

 

A copy of the judgment can be found here.

 

Do you need advice or representation?

If you have received a statutory demand or winding up application, and require advice or representation, we invite you to contact our Sydney Lawyers at (02) 9307 8900 or by email at [email protected], or our Brisbane Lawyers at (07) 3009 8444 or by email at [email protected].

 

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog published. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

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