Point 2 Point Logistics Pty Ltd v Beingkool Transport Pty Ltd

[2011] VSC 601

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

S CI 2011 01499

POINT 2 POINT LOGISTICS PTY LIMITED (ACN 106 698 757)	Plaintiff
v
BEINGKOOL TRANSPORT PTY LTD (ACN 140 137 202)	Defendant

JUDGE:	Efthim AsJ
WHERE HELD:	Melbourne
FINAL SUBMISSIONS RECEIVED:	31 July 2011
DATE OF JUDGMENT:	26 August 2011
CASE MAY BE CITED AS:	Point 2 Point Logistics Pty Ltd v Beingkool Transport Pty Ltd
MEDIUM NEUTRAL CITATION:	[2011] VSC 601

---

CORPORATIONS – Section 459 Corporations Act2001 – Wind up – Section 459 S Corporations Act 2001 – Solvency – Section 467 - Discretion to not wind up company.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M. Dean	MSB Lawyers
For the Defendant	Mr T. Mullen	Slater & Gordon

HIS HONOUR:

1. The plaintiff, Point 2 Point Logistics Pty Limited applies under s 459P of the Corporations Act2001 (“the Act”) to wind up the defendant, Beingkool Transport Pty Ltd.  The plaintiff relies on a presumption in insolvency created by the failure of the defendant t o comply with a statutory demand. 

1. The defendant opposes the plaintiff’s application on two grounds.

-the defendant is solvent; and

-the plaintiff should be estopped from relying on the presumption of insolvency.

Solvency

1. In order to establish solvency the defendant seeks leave under s 459S of the Act to rely on an offsetting claim, which was not raised in the application to set aside the statutory demand.

1. Section 459S of the Act provides:

(1)In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:

(a)that the company relied on for the purposes of an application by it for the demand to be set aside; or

(b)that the company could have so relied on, but did not so rely on (whether it made such an application or not).

(2)The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.

1. The New South Wales Court of Appeal considered the operation of s 459S of the Act in Switz Pty Ltd v Glowbind Pty Ltd.[1] Spigelman J referred to how s 459S should be interpreted. His Honour said:

51.The 1992 reforms were intended to minimise the opportunity for delay by ensuring that disputes as to debts are determined at an early stage and do not delay or prolong the hearing of the issue of solvency. The strict requirements of s 459G are subject only to s 459S, which Hayne J has called the “only safety net”. (Texel Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACLC 1,059 at 1,061-1,062; [1994] 2 VR 298 at 300-301). However, the scheme did not confer on the Court a general discretion. A mandatory precondition was introduced in s 459S(2). The purpose of the legislative scheme is best served by giving that subsection a strict construction.

…

53.By the time an application under s 459S is made, the company will be presumed to be insolvent and will have the burden of proving that it is not. In my opinion s 459S(2) directs attention, in part, to what it is that the company intends to prove and how it intends to prove it. If the company is not prepared to contemplate the possibility that its assertion of solvency is subject to qualification, then the Court cannot be “satisfied’ of the mandatory precondition in s 459S(2). An objective element is introduced by the word “material” but that can only be determined after identifying the company’s contentions.

[1](2000) 48 NSWLR 661 at [51].

1. In the Chief Commissioner of Stamp Duties v Paliflex Pty Ltd,[2] Austin J referred to three factors that need to be met before leave is granted under s 459S. His Honour stated:

49.In my opinion the exercise of the discretion to grant leave under s 459S(1) involves three considerations, namely:

(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. 

[2][1999] 17 ACLC 467.

The reason why no application was made to set aside the statutory demand

1. Ms Kim Francis, the director of the defendant, swore an affidavit in this proceeding.  She deposes that on 18 January 2011 she received a letter from Bugden Lawyers demanding the payment of the amount of $98,195.68.  On 25 January 2011 she sent a letter to Bugden Lawyers advising the claim was incorrect and that the plaintiff owed the defendant an amount of $146,222.50.

1. She received a statutory demand on 4 March 2011 issued by the plaintiff and a letter dated 2 March 2011.  Upon receipt of that letter she telephoned Mr Matthew Busby, Legal Practitioner, on 8 March 2011 and discussed the letter that she received.  Words to the following effect were said:

Me:	Hi, my name is Kim from BeingKool Transport ringing about the letter that I received in the mail from you referring to Point 2 Point Logistics’ matter.  Do you know both sides of the story?
He:	No I don’t, please explain.
Me:	Scottish Pacific and Bugden Lawyers had tried to resolve the matter.  I have good evidence on my behalf to resolve it.  Would you like me to reply on Form 509H and Form 7?
He:	There is no need to do that.  Just send me through the evidence to show me your side of it, because I don’t understand it, then I will forward it on to my client and will get back to you.
Me:	The client has these details because of Scottish Pacific and Bugden.

1. She deposed that she was under the impression that if she had to reply formally to the statutory demand that she would have to use Form 509H and Form 7 and that is why she referred to the two forms.  On 10 March 2011 she sent a letter to Mr Busby by email and by facsimile transmission again advising that the plaintiff owed the defendant the sum of $146,222.52.  That letter specified the amount due was as a result of loss of income, arrears and damages that the plaintiff caused. 

1. On 10 March 2011 she called Mr Busby to ensure that he received her email and facsimile transmission with the attachments.  She could not talk to him but left a message for him to call her.  Mr Busby sent an email to her on that day advising that he received her email, facsimile and a phone message.  He further advised that he referred the material to his client for consideration. 

1. She did not hear further until the defendant was served with an originating process to wind up the defendant.  She states that Mr Busby created an expectation that he would first revert to her before any further steps would be taken and he acted upon that representation. 

1. Matthew Peter Busby has sworn an affidavit in which he refers to the conversation which Ms Francis says occurred on 8 March 2011.  He has a contemporaneous file note which is dated 7 March 2011.  The file note has not been exhibited to his affidavit.

1. He deposes that the file note reveals the following:

(a)That I believed I was speaking to someone who had introduced herself as Kim Stewart who was the director of the Defendant company;

(b)She confirmed that she had received the Demand but said that my client owed her a sum of $146,000;

(c)She then alleged that my client was in liquidation, and I then explained to her that those proceedings had been resolved and the application to wind up had been dismissed;

(d)She then went on to say that my client had destroyed her trailer;

(e)She said that she had called the police to collect the trailer;

(f)She disputes the debt entirely;

(g)She said that Scottish Pacific knew all about it.

1. He recalls that Ms Francis asked him if she needed to do a Form 509H or an affidavit about her alleged counterclaim and he said words to the effect:  “At this stage just put it in writing to me”.  At no time did they discuss time constraints or what she should or should not do regarding her obligations to comply with the statutory demand for payment.  At no time did he give the impression that putting her alleged dispute in writing to him would be an end to the matter or would resolve the defendant’s obligations regarding the statutory demand. 

1. On 10 March 2011 he received an email from the defendant and forwarded it on to his client for instructions.  He replied to her email at 3.59pm on 10 March 2011 and the contents of his email were as follows: 

“Kim, I received your email, fax and phone message.  I have referred to the material to my client for his consideration.  Do you require a call back or will you simply call in to see if I received the fax/email.”

1. Mr Mullen of Counsel for the defendant submits that the plaintiff and its legal advisers were aware that the defendant alleged that it had an offsetting claim because the director of the plaintiff asked the defendant’s lawyer whether she should file the appropriate paperwork to set aside the statutory demand and was told, in effect, there was no need to do so the action of the plaintiff and its lawyers were at best “not in accordance with good practice and fair dealing”. 

1. If the conversation was that as alleged by Ms Francis then the conduct of Mr Busby would be not in accordance with good practise and fair dealing.  On the other hand, Mr Busby has sworn that at no time did he give the impression to Ms Francis that by putting her alleged dispute in writing to him that it would be an end to the matter or would resolve the defendant’s obligations regarding the demand.  Neither party requested cross‑examination in relation to this issue and without cross‑examination the Court is unable and should not determine such an important issue.  The onus is on the plaintiff to demonstrate why the offsetting claim was not raised in an application to set aside the statutory demand. 

1. The explanation of Ms Francis is that she did not understand that she would need to do so after her conversation with Mr Busby. The statutory demand is clear as to what must be done. However it is possible that there was a misunderstanding and it would not be fair if the company did not get leave under s 459S if it met the other two considerations referred to by Austin J in Chief Commissioner of Stamp Duties v Paliflex Pty Ltd.[3] 

   [3]Supra.

Solvency

1. Section 95 of the Act provides that:

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

1. In Expile Pty Ltd v Jabb’s Excavations Pty Ltd,[4] the New South Wales Court of Appeal had before it a question involving whether a company was solvent.  The decision of Weinberg J in Ace Contractors and Staff Pty Ltd v Westgarth Development Pty Ltd,[5] was referred to by approval in a judgment by Santow JA with whom Meagher JA and Handley JA agreed.  Santow JA said:[6]

   [4](2003) 45 ACSR 11.

   [5][1999] FCA 728.

   [6]Ibid 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, as I explain.  The relevant principles requiring proper verification are not in question.  The trial judge expressly adopted the statement of these from the judgment of Weinberg J in Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [19999] FCA 728;BC9902928, which I repeat below.  The first three propositions are of cardinal importance for the present case:

The authorities which govern the operation of s 459G of the Corporations Law seem to me to establish the following propositions:

·     The respondent is presumed to be insolvent and as such bears the onus of proving its solvency: s 459C(2) and (3); Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 22 ACSR 235 per Spender J; In the matter of Simionato Holdings Pty Ltd (1997) 15 ACLC 477 per Mansfield J;

·     In order to discharge that onus the Court should ordinarily be presented with the “fullest and best” evidence of the financial position of the respondent: Commonwealth Bank of Australia v Begonia (1993) 11 ACSR 609; 11 ACLC 1075 at 1081 per Hayne J;

·     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:  In the matter of Simionato Holdings Pty Ltd (above); Re Citic Commodity Trading Pty Ltd v JBL Enterprises (WA) Pty Ltd [1998] 232 FCA (unreported, Fed C of A, Heerey J, No VG3172 of 1997, 16 March 1998, BC980078) per Heerey J; Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459 at 463 per Sackville J;

·     There is a distinction between solvency and a surplus of assets.  A company may be at the same time insolvent and wealthy.  The nature of a company’s assets, and its ability to convert those assets into cash within a relatively short time, at least to the extent of meeting all its debts as and when they fall due, must be considered in determining solvency:  Rees v Bank of New South Wales (1964) 11 CLR 210 [1965] ALR 139; Re Tweeds Garagrages Ltd [1962] Ch 405 at 410 per Plowman J; In the matter of Simionato Holdings Pty Ltd (supra); Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 13 ACLC 823 at 832 per Lindgren J; Leslie v Howship Holdings Pty Ltd (supra) at 465-6;

·     The adoption of a cash flow test for solvency does not mean that the extent of the company’s assets is irrelevant to the inquiry.  The credit resources available to the company must also be taken into account: Sandell v Porter (1966) 115 CLR 666 at 671 per Barwick CJ (with whom McTiernan and Windeyer JJ agreed); Leslie v Howship Holdings Pty Ltd (supra) at 466; Taylor v ANZ Banking Group Ltd (1998) 6 ACLC 808 at 812; 13 ACLR 780 per McGarvie J;

·     The question of solvency must be assessed at the date of the hearing.  However, this does not mean that future events are to be ignored:  Leslie V Howship Holdings Pty Ltd (supra) at 466-467;

·     It is no abuse of process for an applicant to see to wind up a company presumed to be insolvent by reason of its failure to comply with a statutory demand merely because that company contends that it is solvent, or because there may be alternative means available to the applicant to vindicate its rights: Elite Motor Campers Australia v Leisureport Pty Ltd (supra).

1. To demonstrate solvency the defendant relies on the audited accounts of the company prepared by Anthony Ian Hyndman, qualified accountant and principal of Tony Hyndman Accountants and Auditors.  He has sworn that the defendant is solvent.

1. The defendant also relies on an affidavit of Pushpa Kumara Dassanayake, qualified accountant in the employ of Brown Bolan Accountants who prepared the defendant’s accounts and also prepared the Business Activity Statements of the defendant.  He has produced a report which is not based on audited accounts and has been superseded by the report of Mr Hyndman.  The affidavit of Mr Dassanayake is not of assistance in determining whether the defendant is solvent as the accounts have not been audited. 

1. The profit and loss account produced by Mr Hyndman for the year ended 31 March 2011 shows income of $498,993 and expenses of $466,646 leading to a net profit of $32,347.  The operating profit for the year ending 31 March 2011 of $32,347 and retained profits brought forward of $39,545 leaves profits available for appropriation in the sum of $71,892.  The balance sheet as at 31 March 2011 shows fixed assets in the sum of $220,771, non‑current assets of $42,216 and current assets of $11,761, making a total of $276,748.  There are no current liabilities but there are non‑current liabilities in the sum of $204,846.  The net assets are $71,902 ($276,748 - $204,846). 

1. The statutory demand claims that the sum of $90,506.83 is owed by the defendant to the defendant.  That sum exceeds the net assets of $71,902.  The defendant claims that there is an offsetting claim in the sum of $235,184 which is in excess of the amount claimed in the statutory demand.  The offsetting claim would clearly be material in proving whether the company is solvent. 

1. Mr Dean of Counsel for the plaintiff refers to the report of Mr Hyndman which discloses that there is:

-cash on hand and at bank totalling $1,309;

-no debtors;

-no creditors; and

-hire purchase creditors in excess of $280,000.

1. He notes that there is no evidence as to:

-the current activities of the company;

-the current payment of debts by the company;

-the payment of drivers’ wages;

-the actual projected cash flow of the company;

-the ability of the company to pay its debts as and when they fall due.

1. Mr Mullen submitted that the auditor was a qualified expert and had all the evidence before him that he needed to provide his report.  If the defendant desired it could have led evidence and sought to cross-examine him. 

1. In my opinion, the report of Mr Hyndman cannot be relied upon.  Mr Hyndman has not prepared an independent auditor’s report as is required.  All he had before him was a ledger report forwarded to him by Brown Bolan Accountants generated, from what I presume is, a computer software programme known as Bamklink up to 31 March 2011.  The accounts have not been audited as is required.  All that has been audited is a ledger report. 

1. Ms Francis has sworn that the company is solvent and trading as a going concern.  It is amazing that as at 31 March 2011 it has no current liabilities.  The debt owed to the plaintiff of $90,506.83 which has been admitted in part is not in the accounts.  Audited accounts should have included this sum. 

1. The non-audited accounts of Mr Dassanayake refer to current liabilities of $6,224 whereas there are none in the accounts prepared by Mr Hyndman.  There are also discrepancies in the total capital reserves, and the net assets are said to be $9,354.  The discrepancies between the reports have not been explained and the evidence of the defendant cannot be relied upon to prove solvency.  There was no need for the plaintiff to seek to cross‑examination Mr Hyndman, nor was it sought. 

The offsetting claim

1. The defendant alleges that it has an offsetting claim in the amount of $235,184.69.  According to Ms Francis the claim is made up as follows:

Lost loads for October 2010 – Invoice BKOOL 0001	$39,067.04
Lost Loads for November 2010 – Invoice BKOOL 002	$47,841.77
Lost Loads for December 2010 – Invoice BKOOL 003	$49,576.54
Lost Loads for January 2010 – Invoice BKOOL 0004	$41,292.84
Lost Load of Ice Cream Fright – Invoice BKOOL 0005	$3,190.00
Damage to Trailer – Invoice BKOOL 0006	$25,000.00
Damage to Trailer – Invoice BKOOL 0007	$7,258.00
Damage to Trailer – Invoice BKOOL 0008	$6,000.00
Maxi Trans damage to Trailer	$11,837.10
Southern States damage to refrigerated unit	$484.17
Total	$235,184.69

1. Ms Francis alleges that she has an offsetting claim because the plaintiff had the control and use of the defendant’s commercial trailer for almost four months.  She alleges that there was an agreement between the plaintiff and the defendant under which the plaintiff would pay the defendant half the revenue it earned from any loads where the defendant’s trailer was used.  Alternatively, the defendant claims failure of the plaintiff to return the trailer to it, caused the defendant loss in the form of lost loads.  Further, there is a claim for damage to the trailer when it was in the possession of the plaintiff. 

1. The plaintiff, despite being given the opportunity to challenge the cross-claim, has not filed any evidence which relates to this issue.  The plaintiff, however, has made submissions in relation to the quantum of the cross-claim based on the evidence filed by the plaintiff.  The defendant has conceded that it has been unable to clearly quantify its offsetting claim because the plaintiff has not disclosed what revenue was earned out of the plaintiff’s trailer.

Loss loads – October 2010 to January 2011

1. The plaintiff claims loss loads in the sum of $177,778.19.  I accept that any claim for damages arising from lost income must be net of GST and expenses so as to be lost profit and not lost gross income inclusive of GST.  The loss gross income in paragraph 2 exclusive of GST is $161,616.37. 

1. Mr Dean submits that the net profit of the defendant for the year ended 31 March 2011, being its first year of trading as stated in the profit and loss account exhibited to the affidavit of Anthony Hyndman was $32,347 on a gross income net of GST at $498,993.  Net profit as a percentage of gross income net of GST was therefore 6.4%.  Accordingly, the defendant has a claim for lost net profit on loads for the period October 2010 to January 2011 the claim does not exceed $10,343.44, being $161,616.37 multiplied by 6.4%. 

1. The defendant submits that the Court should calculate the likely lost profit by applying a profit margin of 6.4% to income net GST because:

-dividing net profit as a percentage of gross income net of GST is an inappropriate way to determine the likely loss profit on the lost loads, when the context of those transactions within the plaintiff’s business is properly examined; and

-the only expenses which should be deducted are extra variable expenses which the defendant would have incurred in generating the lost income.

1. Mr Mullens submitted that when it commenced business and for most of the first year of trading the defendant acted solely as a loading agency and would receive only $150 per trailer load.  However, the gross income in its books reflects the full value of loads (which range from $1,200 to over $4,000).  The offsetting claim is said to relate to a different part of the business.  In late August 2010 the defendant purchased a trailer to transport loads for itself.  On any loan it prepared and transported using its own trailer it would have received the entire income for the load. 

1. Exhibit KF-9 to the affidavit of Ms Francis demonstrates that the income that would have been received on a load by the defendant would have been between $1,210 and $2,860 per load net of GST.  There is no detailed evidence as to what the defendant’s extra variable expenses would have been on these loads.  Mr Mullen submits it is reasonable to assume that these expenses would have been far less than 93.6% of the extra net income generated by the lost loads. 

1. Mr Mullen further submits that in all the circumstances, including the inability of the defendant to calculate damages for breach of agreement, it would be more appropriate when calculating the quantum of the offsetting claim from lost loads to apply a discount factor of 50% to lost net income to account for the extra variable of expenses which would have been incurred.  Applying such discount factor, this claim would mean that the defendant would owe the plaintiff $80,808.19. 

1. In response, the defendant has again referred to the profit and loss account prepared by Mr Hyndman.  The sub-contractor’s expense as a percentage of gross receipts for the year ended 31 March 2011 was 83.6% being $417,277/$498,993.  In view of the evidence in this case, it is said the Court should apply this discount factor which would allow a total of $26,505.08 ($161,616.37 x 16.4%) owed to the defendant. 

1. It is impossible on the evidence to be certain what would be the level of this claim.  There is no doubt that the defendant does owe the plaintiff for lost loads but further investigation would be required to ascertain the exact mount owed. 

Lost loads – ice cream freight

1. The plaintiff claims $3,190 for lost loads of ice cream freight.  Using a discount factor of 16.4%, the plaintiff asserts that if net profit on this load is claimed it will not exceed $523.16, being $3,190 multiplied by 16.4%.  Using the defendant’s discount factor, of 50%, the sum of this would be $1,595, being $3,190 multiplied by 0.5%. 

1. This item is negligible but again demonstrates that there is a debt owed by the plaintiff to the defendant.

Damage to trailer - $25,000

1. The defendant concedes that that amount should not be allowed in respect of invoice BKOOL006 in the sum of $25,000. 

Damage to trailer

1. The defendant claims that the defendant is owed the sum of $7,258 (inclusive of GST) that has been or will be suffered by the defendant as a result of damage to the defendant’s trailer.  Invoice BKOOL 007 claims 12 tyres, one spare, three rims and a wheel alignment. 

1. The only third party invoice exhibited in respect of tyres is dated 16 March 2011 from Advantage the Tyre Professionals and totals $4,026 inclusive of GST for six tyres, six rims, service and rotation.  There is no evidence that the sum of $7,258 inclusive of GST has been or will be suffered by the defendant as a result of damage to its trailer.  The amount claimed net of GST is $6,574.  The third party invoice net of GST is $3,660. 

1. The plaintiff conceded that after four months daily long haul used by the plaintiff, the other six tyres and the spare also needed to be replaced at a further cost of $2,914 net.  It therefore claims that the sum of $6,574 should be allowed.  Against this demonstrates that there is some amount owed by the plaintiff to the defendant. 

Damage to trailer – Invoice BKOOL 008

1. Invoice BKOOL 008 relates to the period from 7 October 2010 to 31 January 2011 and claims repairs for damage to disc rotors of $2,117.04 plus GST, and Transpec repairs of $2,994.24 plus GST.  No evidence relating to disc rotor repairs has been provided. 

1. If an application was made to set aside a statutory demand on the basis of an offsetting claim, that amount would be allowed. 

Damage to trailer and loss loads invoice BKOOL 008

1. The plaintiff’s claim was for 44,930.07 including GST.  The invoice claimed $11,625 plus GST for repairs to three axles, a Transpec invoice of $2,994.29 plus GST “Repaired First Time”, a Transpec invoice of $1,953.60 plus GST “Repaired Second Time”, two lost loads of $1,107.11 plus GST, 13 days “loss of income off the road” of $22,085.52 plus GST and 12 hours of $1,080 plus GST.  The defendant has reduced its claim to $23,747. 

1. Mr Dean says that this item should be allowed at $16,326.53 being the cost of repairing $11,600.25 plus the labour $1,080 and the sum of $3,621 (the last load income of $23,747.76 which has been discounted by 83.6%).  On the other hand, the defendant claims $23,747.76 with the only difference being the loss of income discounted at 50%. 

1. I repeat that it is impossible on the evidence to calculate a fair discount rate.  Again, it is clear that it is owed a debt for repairs to damage to the trailer. 

Maxitrans damage to the trailer

1. The parties have agreed that the amount which should be allowed there is $10,761. 

Southern States damage to refrigerated unit

1. The parties have agreed that the sum to be allowed for this item is $440.15. 

Summary

1. The defendant alleges that the total debt due to the plaintiff is $126,775.39, whereas the plaintiff alleges that the offsetting claim is $61,210.21. 

1. The plaintiff asserts that the debt owed by the plaintiff is $101,506.83, however a statutory demand was served which claimed a debt of $90,506.03.  The plaintiff does not admit and has never admitted that a debt of $101,406.83 is outstanding.  The defendant is said only to have admitted that the sum of $73,03.27 is outstanding. 

1. On the evidence before the Court it is impossible to be absolutely certain of what is owed by the parties.  This could only be determined after a trial with cross‑examination and evidence being called.  It would be open for a court to find that an offsetting claim could exceed the amount owed to the plaintiff.

Estoppel

1. The defendant relies on the evidence of Ms Francis of the telephone conversation of 8 March 2010 to raise an estoppel.  It is said that the unconscionable behaviour of Mr Busby is the basis of an estoppel which operate to prevent the plaintiff from relying on the statutory demand. 

1. As I have said previously, on the evidence without cross‑examination the Court is unable to determine whether Mr Busby acted unconscionably towards the plaintiff. 

Conclusion

1. Leave will not be given to the plaintiff to rely on s 459S because the evidence filed in relation to solvency cannot be accepted. However, the Court has a wide discretion as to whether the defendant should be wound up.

1. Section 467(1) of the Act provides:

467(1)          [Court’s powers]      Subject to subsection (2) and section 467A, on hearing a winding up application the Court may:

(a)dismiss the application with or without costs, even if a ground has been proved on which the Court may order the company to be wound up on the application; or

(b)adjourn the hearing conditionally or unconditionally; or

(c)make any interim or other order that it thinks fit.

1. In the exercise of my discretion I take into account he following factors:

·The defendant’s explanation for not challenging the statutory demand is plausible.

·If the offsetting claim, which has not been disputed in part by the plaintiff is taken into account the defendant may actually be owed money by the plaintiff and the plaintiff may therefore not be a creditor.  The plaintiff concedes it owes $61,210.21.  That amount could be far greater on the evidence. 

·The statutory demand served on the plaintiff is completely defective in that it does not demonstrate how the debt is calculated.  There is no schedule to the demand.

·There is a further defect with the demand in that the affidavit accompanying the statutory demand is not in accordance with the prescribed form.

·There is no supporting creditor that has come to court seeking to wind up the plaintiff.  I note that the accounts, while unreliable, show that there are very few creditors of this company.  It may not be in the interests of the creditors to wind up the company.[7]

·This is a dispute between two parties that should be litigated in the Magistrates’ Court.  This is not a case which warrants an order winding up the defendant. 

[7]See Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728.

1. The application to wind up the Defendant will be dismissed.

---