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Stability in a Pandemic: Supreme Court appoints Receiver to Deadlocked Business

 

Luke Livingston recently appeared, successfully, in an urgent interlocutory application in the Corporations List seeking the appointment of a receiver and manager to the assets of a company which operates the International Hotel Wagga Wagga: In the matter of Crow Inn Pty Limited [2020] NSWSC 601. The case is the first occasion in which an Australian court has relied, in part, upon the trading conditions created by the COVID-19 pandemic as a reason favouring the appointment of a receiver and manager in order to introduce stability in a situation of deadlock between directors, pending the final determination of a claim for a winding up on the “just and equitable” ground under s 461(1)(k) of the Corporations Act 2001 (Cth). Justice Rees noted that, by reason of the pandemic, the hotel business is operating in trying and changeable times and it is likely that decisions of a substantial nature would need to be made frequently.

 

Her Honour was satisfied that “the deadlock between the directors evidenced over a substantial period of time, combined with the loss of a General Manager, a proposed arrangement going forward which effectively excludes the majority shareholder, and substantial demands being made for payment of back-pay during a pandemic, amount to special circumstances.” Her Honour concluded that it was in the interests of both directors that an independent and qualified receiver and manager take over responsibility for the company, in circumstances where “the impasse in the management and stewardship of the company means that there is a need for the installation of an external official to take matters in hand and to introduce some stability”.

 

Here is a link to the judgment: https://www.caselaw.nsw.gov.au/decision/17231e70d8031d1fd427131f.

 

 

 

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