Case: Re Gemwood Projects Pty Ltd (in liq) [2025] VSC 819 (19 December 2025)

Link to Decision

Key takeaways

• Assessing solvency through cash flow: Under s 95A of the Corporations Act 2001 (Cth) (the Act), solvency is assessed with reference to ‘commercial realities’. This assessment includes what resources a company realistically has available to pay their debts as they fall due.
• Liquidator removal: This is a possible but uncommon order given by the Court under s 90-15 of the Insolvency Practice Schedule (IPS). The paramount consideration of the Court in exercising this power is that it is in the best interest of the liquidation overall.
• Related-party funding affecting solvency: This determination depends on whether the funding is reliable and on a long-term basis or if it is unreliable and short-term relief. If it is unreliable and short-term, this does not improve solvency; rather, it just substitutes imminent debt for another debt.

Brief facts

Gemwood Projects Pty Ltd (the Company) entered liquidation following voluntary administration.

With funding from the Commonwealth Attorney-General’s Department (Fair Entitlements Guarantee Branch) (FEG), the liquidator, Michael Carrafa, commenced proceedings against the Company's director, Emilios Georgiou, and his related entity E&C Georgiou Nominees Pty Ltd (E&C). The foundation of these proceedings was that the Company was insolvent pursuant to s 95A between its inception and the voluntary administration date.

The liquidator alleged against the director insolvent trading under s 588G of the Act and sought that certain transactions made by the Company be declared void for that reason.

The liquidator also made a series of claims for recovery of unfair preference payments.

The director defended the liquidator’s claims and also pressed that under s 90-15 of the IPS, the liquidator should be removed and his remuneration disallowed.

The facts of this case were centred around the 3 key issues raised, including:

1. Whether the Company was insolvent.
2. How the involvement of the family trust E&C affected the Company’s solvency.
3. Whether the liquidator should be removed under s 90-15 of the IPS.

Judgment

Croft J found that the Company was not insolvent at any point between its inception, in August 2016, and its voluntary administration on 4 July 2019. Most interestingly (and amongst other things), the Court held:

• E&C loan as a non-current liability
  • The loan from E&C was treated correctly as a long-term debt which was not due and payable. His Honour accepted the director’s evidence that since he controlled E&C, he would not demand repayment of the loan in the immediate future.
• Access to E&C funding
  • At all material times, the Company had access to money from E&C, and E&C was always willing and ready to pay the Company’s debts where required.
• Late payment of debts did not establish insolvency
  • The Company did not consistently pay its debts as they fell due. However, the Court observed that delaying payment of debt is common and that fact alone cannot prove insolvency.
• Presumption of insolvency not established
  • The statutory presumption under s 588E(4) that a company is presumed insolvent if it does not maintain and keep proper financial records was not made out, or that it had been rebutted by the defendant’s evidence.

Implications for practitioners

Although cases of this kind depend heavily on their particular facts, this judgment is particularly interesting because it shows that solvency conclusions must focus on the true availability and reliability of related-party funding, not just accounting deficits. It also highlighted the importance of proper documentation of funding support. The case also highlights risks for liquidators, proving that poorly supported claims or errors in pleadings can lead to personal cost consequences and reduced remuneration.

Finally, creditor remedies under s 90-15 of the IPS are broad but must be used to support the reliability of the administration, with expert evidence playing a key role depending on the quality of the underlying records. For reasons that include aspects of the liquidation that are not explored in this paper, the Court ordered the liquidator cease to be the liquidator of the Company and that he not have any of his remuneration and expenses incurred in respect of the proceeding and that he return any remuneration and expenses already paid to him.
 

Co-authored by Zoë Farmer, Lawyer.