ARL2 Pty Ltd v Flex-Realty Pty Ltd - [2025] TASFC 1

[2025] TASFC 1

COURT:	SUPREME COURT OF TASMANIA (FULL COURT)
CITATION:	ARL2 Pty Ltd v Flex-Realty Pty Ltd [2025] TASFC 1
PARTIES:	ARL2 PTY LTD
v
FLEX-REALTY PTY LTD
FILE NO:	737/2024
DELIVERED ON:	4 March 2025
DELIVERED AT:	Hobart
HEARING DATE:	29 August 2024
JUDGMENT OF:	Wood J, Jago J, Martin AJ
CATCHWORDS:

Corporations – Winding up – Applications for Winding Up By Court – Generally – Failure to respond to Statutory Demand – Presumption of Insolvency – Proof of Solvency – Ability to pay debts as and when they are due – No error by trial judge.

Aust Dig Corporations [1515]

Legislation:

Corporation Act 2001 (Cth) ss 95A(1), 459A(2)(a), 459C(3)

Case cited:

Deputy Commissioner of Taxation v De Simone Consulting Pty Ltd [2007] FCA 548

REPRESENTATION:

Counsel:

Appellant: N Willing
Respondent: J O'Farrell

Solicitors:

Appellant: LFS Lawyers Pty Ltd
Respondent: Terracall & Associates

Judgment Number:	[2025] TASFC 1
Number of paragraphs:	56

Serial No 1/2025

File No

737/2024

ARL2 PTY LTD v FLEX-REALTY PTY LTD

REASONS FOR JUDGMENT	FULL COURT WOOD J JAGO J MARTIN AJ 4 March 2025
Order of the Court (29 August 2024):
Appeal dismissed.

Serial No 1/2025

File No

737/2024

ARL2 PTY LTD v FLEX-REALTY PTY LTD

REASONS FOR JUDGMENT	FULL COURT WOOD J JAGO J MARTIN AJ 4 March 2025
Introduction

1 The appellant applied for the winding-up of the respondent on the ground of insolvency. Blow CJ was satisfied on the balance of probabilities that the respondent was able to pay its debts as and when they became due and payable, and that it was likely to remain able to do so for the "indefinite" future. His Honour accordingly dismissed the appellant's application.
2 The appellant appealed against the decision of the learned trial judge on the following
grounds:

"1

Having correctly identified principles to be applied in the determination of the Respondent's solvency (at [10]-[12]), the learned trial judge erred in law (at [67]) by giving too much weight to the expert evidence of Mr Rands as to solvency in terms, rather than to the materials which were before His Honour that were relevant to the Respondent's financial position as a whole.

2

The learned trial judge erred in fact (at [65] and [67]) by finding that the Respondent:

(a) did not have ongoing losses; (b) did not have poor cashflow; (c) had assets that consistently exceeded liabilities; and

(d)

was able to pay its debts as and when they became due and was likely to remain able to do so for the indefinite future;
when His Honour had evidence before him to the contrary or, alternatively,
where such findings were not supported by the evidence before His Honour.

3

The learned trial judge erred in law (at [24] and [67]) by taking into account bare promises of the Respondent's directors to provide financial assistance to the Respondent as a credit resource available to the Respondent for the purposes of assessing solvency, where…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] TASFC 1
Decision Date: 4 March 2025

CaseChat Overview and Summary

ARL2 Pty Ltd (the applicant) sought to wind up Flex-Realty Pty Ltd (the respondent) on the grounds of insolvency, specifically alleging a failure to comply with a statutory demand. The application was heard by the Supreme Court of Queensland.

The primary legal issue before the Court of Appeal was whether the primary judge erred in finding that the respondent had failed to discharge its onus of proving solvency. This involved determining whether the respondent had demonstrated its ability to pay its debts as and when they fell due, despite the presumption of insolvency arising from its failure to respond to the statutory demand.

The Court of Appeal affirmed the primary judge's decision, finding no error in the assessment of the evidence. The court reiterated the principle that once a statutory demand is served and not satisfied or set aside within the prescribed period, a presumption of insolvency arises. The onus then shifts to the respondent company to prove its solvency. The primary judge had considered the respondent's financial position and concluded that it had not discharged this onus, a conclusion with which the Court of Appeal agreed.

The appeal was dismissed.

Orders