The Federal Court in Lucas, in the matter of Queensland Maintenance Services Pty Ltd (in liq) (Receivers and Managers appointed [2012] FCA 1451, has held that voluntary liquidators (previously administrators) applying to wind the company up in insolvency and be appointed as liquidators did not create ‘cause’ for disqualifying them from appointment by their dealings with the Australian Taxation Office (ATO), the largest creditor of the company.  

The application involved the peculiar circumstance of the liquidators of a voluntary liquidation applying to have the liquidation converted to a liquidation in insolvency and subsequently be appointed as liquidators of that entity.  

The respondent Receivers and secured creditor sought to oppose, amongst other things, the liquidators’ appointment by submitting that the liquidators had created apprehended bias towards the ATO in:

  • Receiving funding from the ATO to apply to the court to wind up the company in insolvency; and
  • Failing to adequately pursue objections to a taxation ruling in respect of the company during the administration and voluntary liquidation.

The Court held that the funding arrangement was not in itself enough to provide legitimate apprehension of bias. It was held further that there was no substance to the assertion that the liquidators had not adequately progressed the tax objections and in fact, the reverse position was true.  

The Court also rejected the Respondents’ submission that the company was not insolvent if the debt owing to the ATO was disregarded due to the ongoing tax assessment objections.  

The court stated that the tax debt owed to the ATO was a debt presently due and payable for the purposes of assessing solvency and that even if it was not, the company was insolvent in any event.