Soundwave Festival Pty Ltd v Altered State (WA) Pty Ltd (No 1)

Soundwave Festival Pty Limited (Soundwave) applied to the Federal Court for an order that Altered State (W.A.) Pty Limited (Altered State) be wound up under the Corporations Act 2001 (the Act). Soundwave's application relied on Altered State's failure to comply with a statutory demand for $340,690.46 dated 14 June 2013. Altered State opposed the application and sought leave under s 459S of the Act to rely on a ground that there is a genuine dispute between it and Soundwave about the existence of the debt referred to in the statutory demand. The Court held that leave under s 459S should be dealt with as a preliminary issue, as dealing with the leave application at the same time as the winding up application would be contrary to Part VB of the Federal Court of Australia Act 1976. The Court found that there was a seriously arguable case that there was a genuine dispute concerning the debt in the statutory demand. However, the Court found that there was no satisfactory explanation for why no application was made to set aside the statutory demand and that Altered State's conduct was not reasonable. The Court also found that the dispute concerning the debt was not material to Altered State's solvency, as Altered State intended to prove that it was solvent whether or not the debt was payable. Therefore, leave under s 459S to rely on the alleged dispute concerning the debt was refused with costs.