In the matter of Wise and Young Pty Ltd; In the matter of Wyse Partners Pty Ltd; In the matter of Wolgan Consulting Pty Ltd; In the matter of Defined Property Group Pty Ltd (No 2)

Case •

[2019] NSWSC 1093

•

15 August 2019

No judgment structure available for this case.

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: In the matter of Wise & Young Pty Ltd; In the matter of Wyse Partners Pty Ltd; In the matter of Wolgan Consulting Pty Ltd; In the matter of Defined Property Group Pty Ltd (No 2) [2019] NSWSC 1093
Hearing dates: 30 July; 15 August 2019
Date of orders: 15 August 2019
Decision date: 15 August 2019
Jurisdiction:Equity - Corporations List
Before: Rees J
Decision:

Matter adjourned at request of parties: see [55]–[56].

Catchwords:

CORPORATIONS — Winding up — Statutory demands — Service by post — Change of registered office not notified to ASIC — Registered office also defendant’s solicitor — Service also by email —Statutory presumptions not displaced — Service validly effected.

CORPORATIONS — Winding up — Presumption of insolvency — Failure to comply with statutory demand — No s 459G application brought — Whether leave should be granted under s 459S — No evidence as to solvency — Statutory test in s 459S(2) not satisfied — Insufficient evidence of genuine dispute in any case — No evidence of solvency — Appropriate that companies be wound up.
Legislation Cited: Acts Interpretation Act 1901 (Cth), s 29
Corporations Act 2001 (Cth), ss 5C, 95A, 109X, 459A, 459C, 459G, 459S.
Evidence Act 1995 (Cth), s 160
Evidence Act 1995 (NSW), s 160
Cases Cited: Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463
Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344
Chief Commissioner of Stamp Duties v Paliflex Pty Ltd (1999) 149 FLR 179; [1999] NSWSC 15
Commonwealth Bank of Australia v Begonia Pty Ltd (1993) 11 ACLC 1,075
Dwyer v Canon Australia Pty Ltd (2007) 247 LSJS 438; [2007] SASC 100
Ewen Stewart & Associates Pty Ltd v Blue Mountains Expile Pty Limited v Jabb’s Excavations Pty Ltd (2003) 45 ACSR 711; [2003] NSWCA 163
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Virtual Air Helitours Pty Ltd (No 2) [2011] NSWSC 113
Hadley v BetHQ Pty Limited [2016] FCA 1263
In the matter of Vangory Holdings Pty Limited [2015] NSWSC 546
In the matter of Wise & Young Pty Ltd; In the matter of Wyse Partners Pty Ltd; In the matter of Wolgan Consulting Pty Ltd; In the matter of Defined Property Group Pty Ltd [2019] NSWSC 1092
LSI Australia Pty Ltd v LSI Holdings Ltd (2007) 25 ACLC 1,602; [2007] NSWSC 1406
Nick Scali Limited v JSK Logistics Pty Limited [2008] NSWSC 597
Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601
Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 904
TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; [2008] VSCA 70
Category:Principal judgment
Parties:

In each proceeding:
Commissioner of Fines Administration (Plaintiff)

 

In proceeding no. 166258 of 2019:
Wise & Young Pty Ltd (Defendant)

 

In proceeding no. 166271 of 2019:
Wyse Partners Pty Ltd (Defendant)

 

In proceeding no. 166277 of 2019:
Wolgan Consulting Pty Ltd (Defendant)
LCT MRE Pty Ltd (Supporting Creditor)
WSO Co Pty Limited (Supporting Creditor)
The Hills Motorway Limited (Supporting Creditor)

  In proceeding no. 166283 of 2019:
Defined Property Group Pty Ltd (Defendant)
Representation:

Counsel:
Mr JR Brown, solicitor (Plaintiff)
Mr S Doupe (Defendants)
Mr DA Wilkinson (Supporting Creditors)

  Solicitors:
Matthew Folbigg Pty Ltd (Plaintiff)
Grays Legal (Defendants)
CLI Lawyers (Supporting Creditors)
File Number(s): 2019/166258; 2019/166271; 2019/166277; 2019/166283

Judgment

  1. HER HONOUR: Before the Court are four applications by the Commissioner of Fines Administration, Revenue NSW (Revenue NSW) to appoint a liquidator to four companies in respect of unpaid traffic fines totally some $301,213 arising from 276 traffic fines issued since 2015. Four issues arise:

(a)   whether the companies were properly served with the statutory demands;

(b) whether leave should be granted under section 459S of the Corporations Act 2001 (Cth) to oppose the application on the basis of the existence of a genuine dispute as to the underlying debts in circumstances where the companies did not apply to set aside the statutory demands;

(c)   if leave is granted, whether there is such a genuine dispute; and

(d)   whether the companies are, in fact, solvent.

facts

  1. In October 2011, Wise & Young Pty Limited was incorporated. It carried on business as a corporate lender of finance. Since incorporation, George Dimitriou has been the sole director and secretary of the company. His address as notified to the Australian Securities and Investments Commission (ASIC), was in Kenthurst, New South Wales. At the time of the hearing, Wise & Young had 100 ordinary shares issued for $100,000, held by Mr Dimitriou (two shares) and Wyse Partners Pty Limited (98 shares).

  2. In December 2011, Mr Dimitriou became the sole director, secretary and shareholder of Wolgan Consulting Pty Limited. The company has issued share capital of $2. Mr Dimitriou’s address, as notified to ASIC, was in Bella Vista, New South Wales.

  3. In October 2012, Defined Property Group Pty Limited was incorporated. Since incorporation, Mr Dimitriou has been the sole director and secretary of the company. Mr Dimitriou’s address, as notified to ASIC, was the same address in Bella Vista. The company had 100 shares issued at $100 of which two shares are held by Mr Dimitriou and 98 shares by Wyse Partners Pty Limited.

  4. In October 2013, Wyse Partners Pty Limited was incorporated. Mr Dimitriou was appointed the sole director and secretary. His address as notified to ASIC was the Kenthurst address. The company has 100 shares issued at $100 which are held by Mr Dimitriou.

  5. The four companies were issued with a large number of traffic fines, as I understand it, because the traffic fines were issued to motor vehicles registered by the companies with Roads and Maritime Services (RMS) or its statutory predecessors. A Senior Adviser of Debt Resolution Targeted Team at Revenue NSW has supervised the efforts to recover these fines.

  1. In respect of Defined Property Group, 77 sanctions have been carried out by RMS since 18 August 2015, resulting in Defined Property Group entering into a payment plan. Three of the 77 sanctions were also lifted. Some explanation of what is meant by a “sanction” is warranted. RMS can send a notice to a company advising that the registration of its vehicle will be cancelled within 14 days unless the outstanding fine is paid. If the fine is not paid, RMS automatically suspends the vehicle’s registration and imposes a “Customer Business Restriction”. This prevents a range of activities being conducted with RMS, including the transfer of the vehicle registration to another person.

  2. A further 56 sanctions have been carried out by RMS in respect of vehicles registered by Wise & Young. One of these sanctions was successful and resulted in Wise & Young entering into a payment plan with Revenue NSW.

  3. A further 18 sanctions were carried out by RMS in respect of Wolgan Consulting. One of those sanctions was successful and resulted in the company entering into a payment plan with Revenue NSW.

  4. A further 59 sanctions were carried out by RMS in respect of Wyse Partners. Four of the sanctions were successful and resulted in that company entering into a payment plan with Revenue NSW.

  1. In October 2016, a Property Seizure Order was issued against a motor vehicle registered to Defined Property Group, being a black coupe Lamborghini. According to the Revenue NSW officer, this “was unsuccessful and completed on 21 December 2016”, from which I take it that the Property Seizure Order lapsed on that date without acquiring the Lamborghini.

  2. In May 2017, a garnishee order was issued to Westpac Banking Corporation in respect of debts owed by the four companies to Revenue NSW, but it was unsuccessful. This suggests that the companies had no funds in any bank accounts at Westpac at that time.

  3. On 11 April 2018, Mr Dimitriou says that the Bella Vista office was vacated. Mr Dimitriou gives no evidence of any steps which he took to make arrangements for mail sent to that office to be forwarded to another address or to be collected from time to time. The companies having their registered office at Bella Vista did not notify any change to ASIC.

  4. On 1 June 2018, a member of the Targeted Team, Fines Debt at Revenue NSW sent an email to Mr Dimitriou at Defined Property Group, referring to a telephone request that day in respect of overdue fines owed by himself and his companies, advising that the total balance owing was $274,627. The officer set out the outstanding balance owed by each of the four companies and an additional amount owed by Mr Dimitriou personally. The officer added:

I have arranged for full Client Statement Summaries to be issued to you in relation to all balances outstanding, these will be sent to you in a separate email.

The officer requested a response in relation to payment by 5.00 pm that day “otherwise further enforcement action will commence”.

  1. Mr Dimitriou replied to Revenue NSW on 4 June 2018:

I refer to your discussion with me Friday last and inform you that I intend to review all and refer back to your office within seven days after receiving the breakup of costs for which then a suitable arrangement will be made.

The significance of the email is twofold: at this point in time, Mr Dimitriou used the email address in question; and, Mr Dimitriou was aware of the outstanding fines and proposed to make a suitable payment arrangement.

  1. On 5 October 2018, Wise & Young and Wyse Partners changed their registered offices to an address in Parramatta, being the office of the defendants’ solicitor.

  2. On 30 October 2014, Wise & Young had advanced $1.07 million to Kathleen and Mark Leishman who own a property at The Hill, a suburb of Newcastle. On 15 November 2015, Wise & Young was sued by the borrowers in this Court in Furlong v Wise & Young Pty Limited, proceedings number 2015/326698, apparently in respect of a caveat registered by Wise & Young over the property at The Hill. The proceedings have been listed before Sackar J at least 64 times since commencement. On 8 November 2018, Sackar J made orders by consent in the proceedings as follows:

1.   Judgment in favour of the First Defendant, Wise & Young Pty Ltd ACN 153 905 910 over the land … [at] THE HILL in the State of New South Wales 2300 to secure the repayment of $1,070,000, plus interest computed from 30 October 2014 until repayment.

2.   The Land … a[t] THE HILL in the State of New South Wales 2300 is subject to an Equitable Mortgage in favour of Wise & Young Pty Limited ACN: 153 905 901.

Whether Wise & Young’s equitable charge over the property is worth ‘pound and shot’ depends upon whether there any registered mortgages on the property having priority over the equitable charge. Wise & Young did not tender a title search of the property, although it would have been easy to do so, and I therefore infer that the property is not unencumbered by prior ranking legal interests. The extent to which Wise & Young’s loan of $1.07 million is recoverable is otherwise unknown.

  1. On 12 December 2018, Mr Dimitriou sent an email to Revenue NSW, using the same email address at Defined Property Group, referred to at [11], in respect of fines owed by the four companies. Mr Dimitriou sought until March 2019 to pay the outstanding fines:

I have spoken to Daniel from your team and I write to you in this compassionate nature.

I have endured since late 2014 hardship due to two court cases that involve the above. I have been successful in those cases and there was an award of Judgment in my companies favor only last month.

The court was informed that the Judgment debtor has placed the[i]r house to Auction and the auction date is February. My company that was awarded the judgement is secured over that land.

I was hoping that I may be afforded a stay on the fines for a duration to March 2019 so that I am able to then make payment.

I would be ever so grateful if you may afford me this opportunity. In any event I will pay what I can to the debts for as much as I can from time to time.

If you may inform me as to whether the stay of the fines is acceptable I would be grateful.

  1. Revenue NSW replied the same day, advising that it was unable to place any of the matters on hold given the significant balance owing, set out the outstanding balance owed by each company and, further, the information which it required in respect of each company before agreeing to any payment plan:

-   Current profit and loss statement

-   Last 3 months bank statements for each company

-   Evidence of any large debts that you are currently paying (Mortgage, lease contracts, credit cards, ATO)

In the event that this information was not provided by 27 December 2018, the officer advised that Revenue NSW would commence enforcement action to collect the outstanding balance. Again, this email from Mr Dimitriou is relevant for two purposes: it indicates that the email address remained in use by him at that time and, further, that he was aware of the amounts of the outstanding fines and proposed to pay them when he was able. There is no evidence of any reply to this email, nor of any of the financial information sought by Revenue NSW.

  1. On 21 December 2018, RMS placed a manual vehicle block on a motor vehicle registered with Wise & Young. A manual vehicle block involves an individual direction from Revenue NSW to RMS that a vehicle which has had its registration cancelled under a sanction should not be allowed to be transferred to another person unless approved by Revenue NSW, and has the effect that a “Customer Business Restriction” should apply.

  2. On 6 March 2019, Revenue NSW issued a garnishee order to the National Australia Bank in respect of debts owed by the four companies, but the garnishee order was unsuccessful. This suggests that the companies had no funds in bank accounts at the National Australia Bank at that time.

  3. On 11 April 2019, Revenue NSW issued a statutory demand to each of the companies.

  1. In respect of the statutory demands issued to Wolgan Consulting and Defined Property Group, the demands were served by express post to the Bella Vista address which, at that date, remained the registered office for these companies as it had been since the companies were incorporated in 2011 and 2012 respectively. As already mentioned, Mr Dimitriou says that the companies had vacated that address some years earlier.

  2. In respect of the statutory demands issued to Wise & Young and Wyse Partners, the demands were served by express post to the Parramatta address, which, at that date, remained the registered office of these companies as it had been since 5 October 2018, and the office of the defendants’ solicitors.

In addition to postal service, Revenue NSW emailed the statutory demand to the email address at Defined Property Group to which I have already referred. The officer did not receive a response from Microsoft Outlook or otherwise to indicate that the email had not been delivered. Mr Dimitriou did not put on any evidence in these proceedings to suggest that he ceased to use that email address at some point in time.

  1. It should be noted that a further 44 traffic fines have been issued by Revenue NSW to Wise & Young since the service of the statutory demand, such that the amount now owed by that company increased from $26,982 to $40,060.

  2. These proceedings were commenced on 28 May 2019. On 4 and 5 June 2019, the Originating Processes and supporting affidavits were served on the respective registered offices in Bella Vista and Parramatta. On 5 June 2019, the Originating Processes and supporting affidavits were served by express post on Mr Dimitriou at the Kenthurst address. The records of Australia Post indicate that these letters were delivered at that address on 7 June 2019. Mr Dimitriou says that he has not resided at the Kenthurst address since January 2019.

  3. On 24 June 2019, a notice of appearance was filed by three supporting creditors in relation to Wolgan Consulting, being The Hills Motorway Limited, WSO Co Pty Limited and LCT-MRE Pty Limited. The same day, Mr Dimitriou says that he became aware of these proceedings by coincidence when conducting a search of the online court list in respect of other proceedings. On 25 June 2019, Mr Dimitriou obtained a copy of the Originating Processes from the plaintiff’s solicitors.

  4. On 1 July 2019, the proceedings came before Registrar Walton for directions. The same day, Wise & Young issued a Statement to “Kathleen Leishman and Mark Leishman (a bankrupt)”, noting a balance due of $1,402,991.68. On 9 July 2019, Mr Dimitriou obtained a real estate appraisal from McGrath estate agents in respect of their property at The Hill, indicating a selling price in the vicinity of $2 million to $2.2 million. Again, there is no title search to indicate whether any proceeds of sale may be expected to come to an equitable chargee.

  5. In October 2014, Wise & Young had advanced $424,000 to Darren Culley. In 2018, Wise & Young commenced proceedings against Mr Culley: Wise & Young Pty Limited v Culley, proceedings number 2018/117026. Mr Culley sought and obtained an order for security for costs. On 9 July 2019, Registrar Walton extended the time for Wise & Young to pay security until 4.00 pm on 16 July 2019, failing which the proceedings would be dismissed. On 16 July 2019, a bank cheque was obtained in the amount of $70,000. Mr Dimitriou says that, with this cheque, Wise & Young paid security for costs into court. At 4.50 pm on 16 July 2019, Mr Dimitriou sent an email to Registrar Walton confirming that security had been paid at the Supreme Court Registry and providing a receipt number, adding:

The plaintiffs require an order for future conduct of the proceedings and in particular orders for the filing of evidence and a [sic] in particular the statement of defence to the first cross claim.

The plaintiff requires a further week to do so.

Accordingly if Registrar is minded to list the matter on short notice in the Registrars equity list as soon as possible I would be most grateful.

On 17 July 2019, the Registrar replied to the parties that, as it was a Real Property List matter, any application to re-list would need to be made to the Chambers of Darke J.

  1. On 18 July 2019, Mr Dimitriou instructed a valuer to value both the property at The Hill and a property owned by Mr Culley at Cessnock. He deposed:

After receiving the indicative realization value of the Newcastle Property, I made contact with Rony Rahme solicitor acting in the interests of the bankrupt estate of Mark Leishman. I was informed that the trustee in bankruptcy is also realising the asset and expects to make his application today to appoint himself as the trustee for the sale.

It would appear from this that the trustee in bankruptcy of Mark Leishman also intends to realise the property at The Hill. It is reasonable to infer that the bankrupt estate contains a number of debts which the trustee may propose to pay using the proceeds of sale of this property.

  1. It would appear that no steps were taken to progress Wise & Young Pty Limited v Culley further and on 23 July 2019, Registrar Walton made the following orders:

1.   The proceedings are dismissed.

2.   The plaintiff is to pay the defendant’s costs of the proceedings.

3.   These orders take effect from 4:01 pm, 16 July 2019.

Those proceedings stand dismissed. Notwithstanding that dismissal, on 24 July 2019, Wise & Young issued a statement to Mr Culley in the amount of $442,888.77. The recoverability of this loan is unclear.

  1. On 30 July 2019, the four proceedings were listed for hearing before me, but the defendants sought an adjournment at the hearing to allow them to file an expert report as to solvency by no later than 12 August 2019. I granted that adjournment, but commenced the hearing in respect of the other three issues before the Court and stood the matter over, part-heard, until 2.00 pm on 15 August 2019 when any expert report as to solvency might be tendered and any further submissions in respect of it might be made; In the matter of Wise & Young Pty Ltd; In the matter of Wyse Partners Pty Ltd; In the matter of Wolgan Consulting Pty Ltd; In the matter of Defined Property Group Pty Ltd [2019] NSWSC 1092.

  1. No solvency report was served. Instead, at 12.37 pm, 12.38 pm and 12.46 pm on 15 August 2019, Mr Dimitriou filed affidavits online annexing bank cheques obtained from Westpac that day in favour of Revenue NSW in the sums of $26,982 and $71,696. The amount of $26,982 corresponds to the amount in the statutory demand in the Wise & Young proceedings but does not cover the further 44 traffic fines issued to that company since the statutory demand was served. The amount of $71,696 corresponds to the statutory demand in the Wyse Partners proceedings. The source of the funds is not stated in Mr Dimitriou’s affidavits: there is no evidence that the bank cheques were issued from the funds of the companies the subject of these proceedings; nor that the bank cheques were issued from Mr Dimitriou’s funds; nor that the bank cheques were issued from funds which Mr Dimitriou had authority to deploy in payment of the companies’ debts: cf. Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 904.

  2. No bank cheque was tendered in respect of the statutory demand addressed to Wolgan Consulting. Mr Dimitriou deposed that he was waiting on invoices to be paid to Wolgan Consulting and gave an undertaking to meet the plaintiff’s legal costs if the proceedings against Wolgan Consulting were dismissed.

  3. No bank cheque was tendered in respect of the statutory demand addressed to Defined Property Group. Mr Dimitriou deposed that invoices were expected to be paid to Defined Property Group on 23 August 2019 after which time he said that the company would have a surplus of $185,000.

  4. That is the extent of the evidence by the defendants as to the position of solvency of each company.

Service

  1. Section 109X(1)(a) of the Corporations Act provides that a document may be served on a company by posting to the company’s registered office. The Acts Interpretation Act 1909 (Cth) applies to the Corporations Act: section 5C of the Corporations Act. Section 29 of that Act provides that, “unless the contrary is proved”, service by post is effected at the time at which the letter would be delivered in the ordinary course of post. Section 29(2) notes that the section does not affect the operation of section 160 of the Evidence Act 1995 (Cth). The identical section 160 of the Evidence Act 1995 (NSW), which applies to proceedings in this Court, provides that it is presumed “unless evidence sufficient to raise doubt about the presumption is adduced” that an article sent by post was received on the seventh working day after having been posted. As 19 and 22 April 2019 were public holidays, the companies are presumed to have received the statutory demands on 24 April 2019.

  2. The question is whether the defendants have proved to the contrary or adduced evidence sufficient to raise doubt about the presumption. The defendants submit that I should accept the evidence of Mr Dimitriou that these proceedings did not come to his attention until 24 June 2019 as sufficient to prove that the statutory demands were not received at either of the addresses to which they were sent.

  3. I am not inclined to accept Mr Dimitriou’s evidence in circumstances where the statutory demands were also emailed to Mr Dimitriou at an apparently current and working email address, nor where one of the registered offices was that of the defendants’ solicitors. But even if I did accept his evidence, it does not prove that the statutory demands did not arrive in the post in the usual way at the registered offices in Bella Vista and Parramatta. Where Mr Dimitriou says he vacated the Bella Vista property but does not say that arrangements were put in place to bring any mail received at the address to his attention, it is entirely consistent with post arriving in the ordinary course of mail. As Debelle J explained in Dwyer v Canon Australia Pty Ltd (2007) 247 LSJS 438; [2007] SASC 100 at [9]:

… Thus, it is not sufficient to prove non-receipt if it is intended to seek to establish that service by post has not been effected. It is necessary to establish a more than positive fact than mere non-receipt by proving, say, that the post office has returned the documents: FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136 at 138. In Fancourt, a demand was sent to a postal box. Although the addressee claimed not have received the demand, it was held that service had been effected because there was no proof of non-delivery. Other decisions which illustrate the difference between non-delivery and non-receipt are FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd and Perpetual Nominees Ltd v Masri Apartments Pty Ltd (2004) 49 ACSR 714.

  1. If companies implement a method of monitoring and superintending the collection of mail from their registered office which leaves open the prospect of mail not coming to the attention of the companies, that non-receipt cannot enliven the granting of leave under section 459S of the Corporations Act: Nick Scali Limited v JSK Logistics Pty Limited [2008] NSWSC 597 per Rein J, cited with approval by Farrell J in Hadley v BetHQ Pty Limited [2016] FCA 1263 at [41]. On Mr Dimitriou’s own admission, these companies failed to maintain a system whereby mail addressed to their registered office would be properly attended to. This failure has the consequence described by Black J In the matter of Vangory Holdings Pty Limited [2015] NSWSC 546 at [21]:

… inattention and inactivity cannot provide a satisfactory explanation for a failure to comply with or set aside a statutory demand, since otherwise the statutory scheme in relation to statutory demands would be significantly undermined.

  1. For these reasons, I am satisfied that the statutory demands were served on 24 April 2019.

Leave

  1. Section 459G of the Corporations Act provides that a company may apply to the Court to set aside a statutory demand, but only if the application is made within 21 days of service. No application was made. As such, the defendants need leave under section 459S(1) to oppose the application on the basis of a genuine dispute. The Court must not grant leave unless it is satisfied that the existence of a genuine dispute concerning the debt is material to proving that the company is solvent: section 459S(2).

  2. The defendants submitted that Austin J in Chief Commissioner of Stamp Duties v Paliflex Pty Ltd (1999) 149 FLR 179; [1999] NSWSC 15 at [49] outlined the three considerations that a Court must take into account when deciding whether to grant leave under section 459S(1). They are:

(i)   a preliminary consideration of the defendant's basis for disputing the debt which was the subject of the demand;

(ii)    an examination of the reason why the issue of indebtedness was not raised in an application to set aside the demand, and the reasonableness of the party's conduct at that time; and

(iii)    an investigation of whether the dispute about the debt is material to proving that the company is solvent.

  1. As to the first matter, the defendants dispute the existence of the debt on the basis that it is unclear as to how the purported debt arose. As to why indebtedness was not raised in an application to set aside the statutory demand, the defendants rely on the suggested fact that Mr Dimitriou did not become aware of the statutory demands until 24 June 2019.

  2. But the obstacle to the grant of leave is whether the existence of a genuine dispute about the debt is material to proving that the companies are solvent. Revenue NSW submitted that, even if one adopts the broader interpretation of the meaning of the expression “material to proving solvency” espoused in Ewen Stewart & Associates Pty Ltd v Blue Mountains Virtual Air Helitours Pty Ltd (No 2) [2011] NSWSC 113 per White J at [35]–[48], it is nevertheless necessary to establish a nexus between the grounds for a genuine dispute and its likely impact upon an examination of the company’s overall solvency. The defendants have made no attempt to do this.

  3. I agree. I have no financial picture of the defendant companies. As such, it is not possible to say whether the amount of the traffic fines is such that the fines would tip a solvent company into insolvency, or whether the fines have no material effect on the financial position of each of the companies. There is no evidence which would enable me to conclude that the existence of a genuine dispute as to the debt is material to proving the solvency of any of the four companies. In the circumstances, section 459S(2) provides that I must not grant leave.

Genuine dispute

  1. If I am wrong about this, then it seems to me in any event there is no evidence of a genuine dispute that would meet the admittedly very low threshold which is set by the authorities in this area. In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [31], the Court of Appeal approved McLelland CJ in Eq’s consideration of a “genuine dispute” in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 as involving a plausible contention requiring investigation, raising much the same sort of considerations as the “serious question to be tried” criterion that applies in the case of an interlocutory injunction. As McLelland CJ in Eq stated in Eyota v Hanave at 787:

This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth”, or “a patently feeble legal argument or an assertion of facts unsupported by evidence”.

  1. The Court, at [48], also approved the following statement of Thomas J in Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605:

There is little doubt that Div 3 … prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court’s examination are the ascertainment of whether there is a ‘genuine dispute’ and whether there is a ‘genuine claim’.

It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simple — to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).

  1. The characteristics of a “genuine dispute” were described in similar terms in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; [2008] VSCA 70, by Dodds-Streeton JA (with whom Neave and Kellam JJA agreed), at [71]:

The dispute … should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. … Something “between mere assertion and the proof that would be necessary in a court of law” may suffice.

  1. The defendants rely on LSI Australia Pty Ltd v LSI Holdings Ltd (2007) 25 ACLC 1,602; [2007] NSWSC 1406, where Austin J held, at [54], that:

If the demand is so vague or ambiguous that it fails to identify, to a reasonable person in the shoes of a director of the debtor company, the general nature of the debt to a sufficient degree that the director can assess whether there is a genuine dispute as to the existence or amount of the debt or an offsetting claim, then there is a lack of something necessary for completeness, and therefore a defect in the demand.

  1. The defendants submitted that the companies were only sent two documents on which to assess the existence of the debts: the statutory demands and the affidavits accompanying them. The defendants submitted that the statutory demands and their schedules did not contain vital information on which the director could assess the existence of the debts. It is said that the schedules should have referred to the vehicle in respect of which the enforcement order was issued, whether the defendants were the registered owner of the vehicle, the date when, and location where, the enforcement orders were issued and whether the defendants knew that the enforcement orders existed. I am not sure how Revenue NSW could ever have provided the last item of information, and the submission seems perhaps better directed to an application under section 459J than section 459H.

  2. However, each statutory demand was accompanied by a detailed schedule — running for pages — entitled “Description of debt — debts due in respect of the enforcement orders particulars of which are set out below”. Each schedule contained six columns which listed, for each traffic fine: the enforcement order number, the due date for payment of the fine, a description of the fine, the original fine, any amounts paid, and the amount outstanding. The schedule concluded with a total. Revenue NSW submitted, and I agree, that the information presented in the schedule was more than sufficient to accurately identify to a reasonable person in the shoes of Mr Dimitriou the general nature of the debt to a sufficient degree that he could assess whether there was a genuine dispute as to the existence of the amount of the debt or any offsetting claim.

  3. Mr Dimitriou says he is unaware of how the debt arose and has not seen a penalty notice or enforcement notice addressed to the company. He contends that the schedule annexed to the statutory demands does not provide him with any information that demonstrates when he received the enforcement orders and the address to which they were sent. He says he intends to have all of the enforcement orders referred to in the schedule reviewed to determine the validity of the claims once he has received them. He has requested his solicitors to issue a notice to produce for the enforcement orders and penalty notices, although I note that no such notice to produce has been issued.

  4. That is the extent of the evidence of Mr Dimitriou as to the suggested genuine dispute. It falls well short of the standard of proof required to satisfy the Court that there is a genuine dispute. Further, it is abundantly clear from the history of the matter that Mr Dimitriou has communicated with Revenue NSW in relation to the traffic fines and the amounts owing to Revenue NSW at length over a substantial period of time. The matters which he now says should be set out in the statutory demand are matters which, it is apparent from the history of this matter, have been within his knowledge for some time.

Solvency

  1. I have already set out the evidence going to solvency. As matters stand, there is a presumption of insolvency by reason of the companies’ failure to comply with the statutory demand. In the substantive proceedings, therefore, the onus is on the defendants to prove that the company is solvent: section 459C(3). Section 95A(1) of the Corporations Act provides:

A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.

  1. To discharge that onus the Court should ordinarily be presented with the “fullest and best” evidence of its financial position: Commonwealth Bank of Australia v Begonia Pty Ltd (1993) 11 ACLC 1,075 at 1,081 per Hayne J. As Santow JA (with whom Meagher and Handley JJA agreed) explained in Expile Pty Limited v Jabb’s Excavations Pty Ltd (2003) 45 ACSR 711; [2003] NSWCA 163 at [16]:

However, it must be emphasised that proper verification of assets and liabilities is critical to rebut the presumption of insolvency. What occurred fell well short of that … [A]dopt[ing] … Weinberg J in Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728 …:

Unaudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency. Nor are bald assertions of solvency arising from a general review of the accounts, even if made by qualified accountants who have detailed knowledge of how those accounts were prepared: Simionato Holdings Pty Ltd (supra); Re Citic Commodity Trading Pty Ltd v JBL Enterprises (WA) Pty Ltd [1998] FCA 232 per Heerey J; Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459 at 463 per Sackville J.

  1. To the extent that Wise & Young is said to have an equitable charge over the property at The Hill, there is no evidence to indicate that there is likely to be any moneys coming to the equitable chargee should that property be sold. Indeed, there is evidence that there are other claims on that property, including by the trustee in bankruptcy of Mark Leishman. It is also reasonable to infer that there is a secured mortgage on that property given the absence of any title search tendered to the Court to prove that the property is otherwise unencumbered.

  2. To the extent that Wise & Young is said to have a valuable chose of action against Mr Culley, the proceedings brought by Wise & Young against Mr Culley stand dismissed. There is no evidence that Wise & Young is entitled to recover its debt against Mr Culley’s property, nor that it stands to receive any of the proceeds of sale of Mr Culley’s property.

  3. There is no evidence as to the assets or liabilities, income or expenses of Wolgan Consulting or Defined Property Group.

  4. The defendants frankly concede that they have failed to put before the Court the “fullest and best” evidence as to solvency as contemplated by the authorities. The position before the Court is that there is a presumption of insolvency by reason of the defendants’ failure to comply with the statutory demands which were properly served in accordance with the Corporations Act. The evidence, to the extent there was any, that the defendants sought to bring before the Court, did nothing to displace the presumption of insolvency. In all of the circumstances the presumption of insolvency stands.

  5. For these reasons, I proposed to make orders under section 459A of the Act, winding up the defendant companies in insolvency and appointing a liquidator to each. However, I have, at the request of the parties, stood the matter over as Mr Dimitriou proffered bank cheques and a signed undertaking to the pay Revenue NSW’s costs of these proceedings in an extraordinary adjournment application by the defendants as I was part-way through delivery of this oral judgment.

ORDERS

  1. Accordingly, I make the following orders:

  1. Stand the matter over to 9.30 am on 29 August 2019 for final orders.

  2. Grant liberty to apply.

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Amendments

06 September 2019 - Para numbers in Decision on coversheet.

Decision last updated: 06 September 2019

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