Cadura Investments v Rototek Pty Ltd
[2004] WASC 249
CADURA INVESTMENTS -v- ROTOTEK PTY LTD [2004] WASC 249
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 249 | |
| Case No: | COR:215/2004 | 3 NOVEMBER 2004 | |
| Coram: | MASTER SANDERSON | 24/11/04 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | CADURA INVESTMENTS ROTOTEK PTY LTD (ACN 097 944 164) |
Catchwords: | Corporations Act Application for substitution of plaintiff in winding-up application Turns on own facts |
Legislation: | Bankruptcy Act 1966 (Cth), s 49 Corporations Act 2001 (Cth), s 465B(1) Taxation Administration Act 1953 (Cth), s 8AAZI |
Case References: | Dean v QUF Industries Ltd (1981) 51 FLR 317 McNamara v Langford (1931) 45 CLR 267 Re Tait; Ex parte Commissioner of Taxation (1996) 65 FCR 592 Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (In Liq) (2004) ACLC 955 Wisewould v Allcorp Pty Ltd [2004] WASC 184 Beverage Holdings Pty Ltd v Greater Pacific Investments Pty Ltd (1990) 3 ACSR 743 Kelvingrove (1993) Pty Ltd v Paratoo Pty Ltd (1998) 16 ACLC 964 South East Water Ltd v Kitoria Pty Ltd (1996) 14 ACLC 1328 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Proposed Substituted Plaintiff
AND
ROTOTEK PTY LTD (ACN 097 944 164)
Defendant
Catchwords:
Corporations Act - Application for substitution of plaintiff in winding-up application - Turns on own facts
Legislation:
Bankruptcy Act 1966 (Cth), s 49
Corporations Act 2001 (Cth), s 465B(1)
Taxation Administration Act 1953 (Cth), s 8AAZI
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Proposed Substituted Plaintiff : Mr L A Tsaknis
Defendant : Mr J Finucane
Solicitors:
Proposed Substituted Plaintiff : Deputy Commissioner of Taxation
Defendant : Holborn Lenhoff Massey
Case(s) referred to in judgment(s):
Dean v QUF Industries Ltd (1981) 51 FLR 317
McNamara v Langford (1931) 45 CLR 267
Re Tait; Ex parte Commissioner of Taxation (1996) 65 FCR 592
Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (In Liq) (2004) ACLC 955
Wisewould v Allcorp Pty Ltd [2004] WASC 184
Case(s) also cited:
Beverage Holdings Pty Ltd v Greater Pacific Investments Pty Ltd (1990) 3 ACSR 743
Kelvingrove (1993) Pty Ltd v Paratoo Pty Ltd (1998) 16 ACLC 964
South East Water Ltd v Kitoria Pty Ltd (1996) 14 ACLC 1328
(Page 3)
1 MASTER SANDERSON: This is the return of an application by the Deputy Commissioner of Taxation to be substituted as a plaintiff in these proceedings. The application is brought under s 465B(1) of the Corporations Act2001 (Cth) and falls to be determined under s 465B(2). So far as the present plaintiff is concerned, the debt the subject of the statutory demand which gave rise to the winding-up application has been paid. The plaintiff has no interest in pursuing the application. The Deputy Commissioner of Taxation ("DCT") says that the defendant is indebted to him in the sum of $209,644.17, plus interest which has accrued on that amount since 12 August 2004. The defendant opposes the substitution. Among other things, it says that there is a genuine dispute about the indebtedness of the defendant to the DCT and that being the case no substitution should be permitted.
2 There was no dispute between counsel as to the principles applicable to an application such as this. If a debt relied upon by the person seeking to be substituted as petitioning creditor is bona fide disputed on substantial grounds, substitution should not be ordered. This principle has been enunciated in a number of cases, including most recently Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (In Liq) (2004) ACLC 955 and Wisewould v Allcorp Pty Ltd [2004] WASC 184 at [11].
3 So the question, then, is whether or not there is a genuine dispute between the defendant and the DCT about the existence or the amount of the debt which is said to be owing. The test here is the same as the test for determining whether there is a genuine dispute between a plaintiff and a defendant in an application to set aside a statutory demand under s 459G. Without going through the numerous authorities which bear on this question, it is enough for present purposes to say that there must be a serious question to be tried. It is not a function of the Court in an application such as this to determine finally whether or not the debt is owed. The question is whether there is a genuine, real or actual dispute about the existence of the debt.
4 Turning to the evidence, the DCT relies on two affidavits of Deborah Jayne Thiele, the first sworn 12 August 2004 and the second affirmed 28 September 2004. Ms Thiele identifies herself as an employee of the Australian Tax Office. She says that, as at 11 August 2004, the defendant had a Running Balance Account deficit for amounts due under the Income Tax Assessment Act 1997 (Cth) of $209,640.78. Ms Thiele refers to s 8AAZI of the Taxation Administration Act 1953 (Cth) and says that the production of a Running Balance Account statement is prima facie
(Page 4)
- evidence that the Running Balance Account was duly kept and the amounts and particulars in the statement are correct. It is important to note that Ms Thiele's evidence is as to the alleged indebtedness of the defendant to the DCT as at 11 August 2004.
5 The second affidavit of Ms Thiele does not take the matter much further. She confirms the alleged indebtedness and gives further details of the Running Balance Account. She also deals with matters raised in affidavits filed in opposition to the DCT's application. None of these matters is directly relevant to the matters in issue between the parties. Ms Thiele also affirms that she believes that the defendant is insolvent. Presumably, she makes this statement in answer to claims put on behalf of the defendant that it is, in fact, solvent. This is a matter about which further comment is required.
6 It is important to remember that this is an application by the DCT to be substituted as a plaintiff in a winding-up application. When a statutory demand is served on a corporation, the corporation can apply to have the statutory demand set aside. If no such application is made, a presumption of insolvency arises. Armed with that presumption of insolvency, the party serving the statutory demand can then issue winding-up proceedings. The question at issue in the winding-up proceedings is whether or not the company, the defendant to the winding-up application, is or is not insolvent. Although the company is presumed to be insolvent, it is not precluded from producing evidence to establish that, in fact, it is solvent. There are some restrictions on the nature of the evidence it can lead: see, for example, s 459S. The fact remains that what is in issue is the solvency of the defendant company.
7 In a substitution application, the party applying to be substituted is applying in the context of the winding-up application. If substitution is ordered, it then has the benefit of the presumption of insolvency. The solvency or otherwise of the defendant corporation cannot be a factor in determining whether or not substitution ought be ordered. A substitution application has more in common with an application to set aside a statutory demand where the solvency of the company applying to set aside the demand is not a relevant consideration. So the evidence of solvency, both that offered by the defendant and that offered by the DCT, can for the present be put to one side. Such evidence only becomes relevant if the order for substitution is made and the question is whether or not the company ought be wound up on the grounds of insolvency.
(Page 5)
8 In opposition to the DCT's application, the defendant relies upon an affidavit of Mark James Pallister, sworn 10 September 2004. Mr Pallister identifies himself as a director of the defendant. He says that by a partnership agreement dated 4 April 2003 between Rototek Pty Ltd and City Bright Pty Ltd the defendant entered into a partnership known as Concept Boats Partnership with City Bright Pty Ltd. By notice dated 2 September 2003, the defendant was "expelled" from the partnership. As a consequence of this expulsion from the partnership, Mr Pallister and other officers of the defendant were denied access to the partnership premises in Bibra Lake. Mr Pallister says that at that time all the records of the defendant were kept at the offices of the Concept Boats partnership as it was the principal place of business of the defendant. So he was in a position where he had to prepare his affidavit in answer to the application without the relevant books and records of the defendant.
9 Mr Pallister notes that in Ms Thiele's affidavit of 12 August 2004 no allowance is made in the running accounts balance for input credits subsequent to 28 November 2003. Mr Pallister then goes on (at par 14):
"Accordingly, whilst the defendant may have accrued GST of $209,640.78 in the period under review by the Australian Taxation Office, it is not true to say that that amount is the BAS liability. The first defendant has been unable to complete any new BAS statements since its expulsion from the partnership, or provide substantiating documentation to the ATO since that date, because of the inability to access the books and records which were at the office of Rototek access to which has been unlawfully denied since Rototek was expelled from the partnership. …"
10 The question, then, is whether in these circumstances it can be said that there is a genuine dispute with respect to this debt. On balance, I am satisfied that it can. There is no doubt that, pursuant to s 8AAZI of the Taxation Administration Act 1953, there is prima facie evidence that the Running Balance Account was correct. In other words, there is prima facie evidence that the defendant was indebted to the DCT. Indeed, that is not actually disputed by the defendant. But there is also no doubt that a corporation in the defendant's position is entitled to set off against its liability for tax so-called input credits to which it is entitled. Neither the DCT nor the defendant is able to quantify what those credits might be. That does not mean that there is no entitlement to offset anything. It simply means that there is a genuine dispute in relation to the debt. That being so, the application for substitution ought be dismissed.
(Page 6)
11 There are two other matters which were raised in argument and with which I should deal. The first is an allegation referred to in Ms Thiele's second affidavit that Mr Pallister is not a director of the defendant and is not in a position to swear an affidavit on its behalf. This issue is deal with in an affidavit of Mr Pallister sworn 17 October 2004. It would seem that he was a director of the defendant from 1 March 2004 onwards. However, the proper form was not lodged with the Australian Securities and Investments Commission. That should be enough to dispose of the DCT's complaint. But even if it were not, there is no requirement that an affidavit in opposition to an application for substitution must be sworn by a director of the defendant. So long as the deponent is authorised by the company to swear the affidavit and to speak on its behalf, the evidence given in the affidavit is admissible. Thus, there is no substance in the DCT's complaint.
12 That leaves one final point which was raised by the defendant. The DCT relies on two other affidavits, one affirmed by Gary David Cobby on 20 July 2004 and the other sworn by Jeff Leo Hillman on 20 July 2004 (filed by the plaintiff in the application wind up). Both of these affidavits refer to the act of insolvency by the defendant being a failure to comply with a statutory demand served by the present plaintiff on 13 July 2004. The DCT's evidence deposes to the defendant being indebted to it as at 11 August 2004. It does not depose that the defendant was indebted at any previous time. It was submitted on behalf of the defendant that, as there was no evidence that the debt (which it describes as the disputed debt) was in existence at the time of the act of insolvency relied on, it cannot be the basis of an order for substitution.
13 In making this submission, counsel relied upon a number of authorities, including McNamara v Langford (1931) 45 CLR 267, Dean v QUF Industries Ltd (1981) 51 FLR 317 and Re Tait; Ex parte Commissioner of Taxation (1996) 65 FCR 592. Each of these cases deal with the Bankruptcy Act 1966 (Cth). It is true that in each case the Court held that for a party to be substituted as petitioner on a bankruptcy petition, the debt said to be owing must have been in existence at the time the bankruptcy petition was issued. By analogy, then, it is strongly arguable that in this case to be substituted the DCT would need to establish that as at the date the statutory demand was served, the defendant was indebted to the DCT. As there is no evidence on this point, the application would then fail. However, this was not a matter that was fully argued. There appears to be no authority directly on point. On that basis, and given the conclusion that I have reached, I would prefer to leave this point for another day.
(Page 7)
14 The application to be substituted as a creditor ought be dismissed. I will hear the parties with respect to costs.
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