Expile Pty Ltd v Jabb's Excavations Pty Ltd

Expile Pty Ltd (the appellant) appealed to the Court of Appeal of New South Wales against orders made by the primary judge winding up Jabb's Excavations Pty Ltd (the respondent) on the basis of an unpaid statutory demand. The respondent had issued a statutory demand to the appellant for an alleged debt, and the appellant had failed to apply to set aside the demand within the prescribed time. This failure gave rise to a presumption of insolvency under section 459E of the *Corporations Act 1989* (Cth).

The central legal issues before the Court of Appeal were whether the primary judge had erred in finding that the appellant had failed to rebut the presumption of insolvency. Specifically, the court had to consider whether the appellant had demonstrated that it had sufficient borrowing capacity to meet its current liabilities, and whether the primary judge had correctly characterised certain bank loans as either current or non-current liabilities. The court also considered the sufficiency of the appellant's accounting records and the role of independent accountants in verifying its assets.

The Court of Appeal found that the primary judge had erred in his assessment of the evidence presented by the appellant. The court accepted that the appellant had demonstrated a substantial borrowing capacity with its bank, which was sufficient to cover its current liabilities. Furthermore, the court re-characterised certain bank loans as non-current liabilities, which had the effect of improving the appellant's liquidity position. The court also found that the appellant's accounting records, while not perfect, were sufficient to provide a reliable picture of its financial position, and that the evidence of independent accountants supported this conclusion.

Consequently, the Court of Appeal allowed the appeal, set aside the winding-up orders made by the primary judge, and ordered that the appellant's costs both at trial and on appeal be paid out of the assets of the respondent. The matter was then listed for mention before Santow JA.