SY Financial Services Pty Ltd v Risk Business Pty Ltd
[2015] VSC 421
•14 August 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 2213
| SY FINANCIAL SERVICES PTY LTD (ACN 112 934 719) | Plaintiff |
| v | |
| RISK BUSINESS PTY LTD (ACN 073 286 978) | Defendant |
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JUDGE: | RANDALL As J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 October 2014 |
DATE OF JUDGMENT: | 14 August 2015 |
CASE MAY BE CITED AS: | SY Financial Services Pty Ltd v Risk Business Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2015] VSC 421 |
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CORPORATIONS – Corporations Act 2001 (Cth) – s 459P winding up application – Failure to serve s 459G application within time – s 459S application.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | A M J Meagher | Clamenz Evans Ellis Lawyers |
| For the Defendant | C R Brown | Behan Legal |
HIS HONOUR:
By originating process filed 8 May 2014, the plaintiff applied pursuant to s 459P of the Corporations Act 2001 (Cth) (‘Act’) to wind up the defendant. The presumption of insolvency relied upon pursuant to s 459C of the Act was the failure to comply with the statutory demand dated 29 January 2014.
The defendant had applied to set aside a statutory demand pursuant to ss 459G and 459J of the Act but had failed to serve such application within the time limited. By orders obtained by consent on 19 March 2014, the defendant withdrew its application to set aside a statutory demand and agreed to pay the plaintiff indemnity costs.
On the return of this originating process on 11 June 2014, the defendant informed the Court that it intended to file a further application in relation to the statutory demand. Procedural orders were made for the filing of material which were extended to 22 August 2014. Notwithstanding the extension, the defendant did not comply with the orders and on 26 August 2014 and 5 September 2014 it filed affidavits. The interlocutory process pursuant to s 459S was filed on 8 September 2014.
The notice of appearance filed 5 June 2014 sets out the grounds of opposition as:
1. The Defendant Company is solvent;
2.There is a genuine dispute in relation to the debt alleged to be owed by the Defendant to the Plaintiff.
The defendant sought leave to oppose the plaintiff’s application on the ground that there is a dispute in relation to the debt. Section 459S of the Act provides as follows:
Company may not oppose application on certain grounds
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 application or not).
2.The court is not to grant leave under subsection (1) unless it is satisfied that the ground is material in proving that the company is solvent.
In Chief Commissioner of Stamp Duties v Paliflex Pty Ltd[1], Austin J said as follows:
[1][1999] NSWSC 15, [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.
The statutory demand sought the payment of the amount of $139,253.52 being the total of the amounts of debts described in the schedule, which set out a description of debt as follows: ‘Commission payments properly owing to the Creditor from the Debtor Company. Please refer to the spread sheet annexed to the Affidavit in Support’.
The affidavit in support was sworn by Robert David Cochran (‘Cochran’) on 29 January 2014. That affidavit relevantly set out:
3.Between July 2011 and February 2013 (‘the Period’), the Creditor and Debtor work collaboratively to provide financial services to both independent and mutual clients.
4.Throughout the Period, commission and costs due and payable to the Creditor have been incorrectly paid to the Debtor.
5.On or about 15 April 2013, Susan Kielt (‘Kielt’), Business Manager of ‘the Advice Exchange’, a third party financial services firm that is unrelated to the Creditor and defendant company, finalised, inter alia, an independent analysis and reconciliation of commissions paid to the Creditor and Debtor (‘the reconciliation’).
The reconciliation spread sheets were annexed thereto. The reconciliation did not include GST which the creditor would be obliged to remit to the Australian Taxation Office upon receipt of the debt. Accordingly, it was set out that the creditor’s statutory demand was inclusive of GST.
The dispute
Marcus Scott (‘Scott’) is the sole director of the defendant. From February 2005 until 1 August 2012, Scott was a director of both the plaintiff and the defendant. The plaintiff and the defendant carried on a business providing financial services to their respective clientele and each was conducted as a separate business. However, confusion arose with respect to payment of commission by fund managers with the result that commissions which should have been paid to plaintiff were paid to the defendant, and commissions which should have been paid to the defendant were paid to the plaintiff.
The claim upon which the statutory demand relied resulted from a reconciliation prepared by the plaintiff. That amount is in dispute.
Further, the defendant contends that from June 2012 to October 2012, Scott had discussions with Cochran which culminated in an agreement being reached between the plaintiff and the defendant that Scott would resign as a director of the plaintiff and transfer the shareholding of the defendant and McGain Scott Pty Ltd to entities nominated by Cochran in consideration of the plaintiff’s forgiveness of all claims or debts owed to it.
Scott had sworn an affidavit in support of the application to set aside the statutory demand within the 21 day period. That affidavit raised the issue of the reconciliation and set out that the reconciliation carried out by Kielt did not take into account some payments and failed to attribute commissions to the defendant. With respect to the agreement to transfer to shareholding, Scott deposed that on 1 November 2012 he met with Cochran to sign share transfers. That meeting occurred after the October meeting at which time the documents, which contained errors, were taken away by Cochran to be amended.
Scott deposed as follows:
(a)All shareholdings in any companies associated with the Plaintiff held by any entities owned or controlled by [Scott} would be transferred back to the Plaintiff. I believe that I already signed those documents at our meeting in October and that the transfers were dated as having occurred at the October meeting;
(b)The Plaintiff would prepare and lodge, at its expense, all tax returns required for the 2011 financial year for the Defendant, myself and all our related entities, including my super fund;
(c)[Scott] would arrange to pay on behalf of the Plaintiff, the debt owed to Holman Fenwick William for legal fees. [Scott] agreed to this, even though the debt was owed by the Plaintiff, in order to placate the other owners of the Plaintiff;
(d)In consideration of transfers referred to in (a) above, the Plaintiff would not take any action against the Defendant relating to any alleged outstanding commissions, if the foregoing conditions were met;
(e)The Plaintiff would forward all files, either held electronically, or in hard copy, in relation to the Defendant’s clients to The Advice Exchange;
(f)The Plaintiff would forward all communications, whether they are emails, telephone calls, faxes and physical mail addressed to the Defendant, to The Advice Exchange; and
(g)The Defendant performed and carried out its obligations in the agreement and [Scott] signed all share transfers, provided the Plaintiff with all that was necessary to complete the tax returns and paid [100 per cent] of the Plaintiff’s legal fees payable to Holman Fenwick William.
The defendant sought to set off or cross-claim accounting fees from clients introduced by it and losses suffered as a result of communications not being forwarded to the defendant together with fines and penalties issued by the ATO. However, there was no sufficient detail referred to for me to properly consider the same.
However, Scott deposed to payments not taken into account in the reconciliation statement attached to the statutory demand as follows:
6 May 2012 $30,000
5 June 2012 $56,500
29 June 2012 $17,500
29 June 2012 $10,235
29 June 2012 $12,251
$10,750Reimbursement paid by the plaintiff for the legal fees paid by the defendant.
Those payments, together with the reimbursements sought, total $137,236.
Kielt swore an affidavit on 4 September 2014. Kielt supplied the information for the reconciliations. She concedes that three payments made on 29 June 2012 were not taken into account in the reconciliation. Those payments were $17,500, $12,251 and $10,235.04.
The plaintiff did not file any material other than the formal material in support of the application to wind up. Instead, reliance is placed upon the grounds not being raised within the 21 day period of service of the statutory demand. That submission was misconceived in the context of determining whether leave ought to be granted pursuant to s 459S of the Act. The gravamen of the plaintiff’s submissions is that leave ought not to be given under s 459S of the Act.
The issue of indebtedness
The issue of indebtedness was not raised in an application to set aside the demand and the reasonableness of the parties’ conduct at the time.
Scott swore an affidavit in support of an application to set aside the statutory demand within the 21 days. Previously on 13 February 2014, the defendant’s solicitors wrote to the plaintiff’s solicitors. That letter set out the failure to take into account the following repaid commissions:
18 June 2010 $56,500 29 October 2008 $24,741 1 May 2012 $30,000 TOTAL: $111,241
The letter also set out the agreement contended for by Scott in relation to the transfer of the shareholding.
By response dated 19 February 2014, the plaintiff contended that the payments referred to did not relate to the debt sought. Further, regard must be had to the Kielt affidavit. Kielt does not refer to any deficiencies with respect to her reconciliation other than the omission of the three cheques provided in June 2012. I am not convinced that the plaintiff’s statutory demand would have been reduced much below $100,000 based upon a dispute about the efficacy of the reconciliation alone. With respect to the transfer of the shares, it was put:
The transfer:
(a)enabled our client to continue to run the business without the involvement of Mr Scott; and
(b)was not executed in full and final settlement of all claims between Risk and our client (the alleged settlement).
We note that the parties did not execute an agreement evidencing the alleged settlement.
Having raised the issues in dispute by letter of 13 February 2014, having procured Scott to swear the affidavit in support of the s 459G application and filing the same apparently within time, it is inescapable that the failure to serve the affidavit within time arose through the neglect of the defendant’s solicitors. Mr Ruggiero, of the defendant’s solicitors, deposed to the difficulties in obtaining instructions due to Scott’s illness. However, such difficulties did not excuse the failure to serve the s 459G application within time given that it was filed appropriately.
Scott is suffering from cancer. He seems to have been diagnosed and first treated in February 2014 with a continuing onerous treatment regime. Hence, the hearing of the winding up application was delayed to enable him to provide instructions.
The plaintiff contends that the defendant could not rely upon the failure of its solicitors to file and serve the requisite affidavit material within the 21 day period. Reliance was placed upon Consolidated Constructions Pty Ltd; In the matter of The Satellite Group Limited (‘Satellite Group’).[2] In Satellite Group, the application pursuant to s 459S of the Act was dismissed. Santow J found that the defendant had received the statutory demand on 14 July 2000 and faxed a copy to its solicitors on 18 July. However, no application to set aside the demand was made within time. Santow J said:
[16] Taking the first issue, what reason does the Defendant company give for why these grounds are only now raised … ? They go to whether the demand would have been set aside, if raised on the basis of a genuine dispute. That reason given is that the Defendant company’s solicitors … who were charged with the responsibility of dealing with the statutory demand failed in their performance of that task.
[17] While I will accept that proposition as having been advanced as an explanation for the purposes of the present proceedings I emphasise that I make no finding to that effect. This is in fairness to [the company’s solicitors] who have been given no opportunity to deal with that allegation and give no evidence confirming it.
[18] I do not in any event consider that the explanation greatly assists the Defendant company’s application. But I do not consider it so deficient an explanation as to disqualify the Defendant company at the threshold. However, its lack of cogency, weighed with other factors, tells against the application [emphasis added].
[19] It lacks cogency, because even believing it, it is not to be assumed that companies can simply ignore a perfectly comprehensible statutory demand requiring action within twenty-one days on the basis that this has been left to the solicitor to worry about.
[2][2000] NSWSC 984 (Santow J).
In Perpetual Nominee Ltd v NA Investment Holdings Pty Ltd,[3] Ward J considered Satellite Group in dismissing an application pursuant to s 459S of the Act. Her Honour said:
[41]There has been little judicial attention given to what a 'sufficient explanation' would be in circumstances such as the present, where a s
459G application was earlier made (invoking the ground later sought to be raised with leave under s 459S) and dismissed (on two occasions) for failure to adduce the necessary evidence to sustain that ground at the stage of the s 459G application.
[42]It seems to me that an analogy might usefully be drawn with the situation where a company's solicitor had been charged with the responsibility of dealing with the demand and had failed to do so adequately. That has been held not to be an adequate explanation for the purposes of an application for leave under s 459S ([Satellite Group]).
[3][2011] NSWSC 282.
Each of Satellite Group and Perpetual Nominee was considered in Re Vangory Holdings Pty Ltd[4] where Black J again dismissed an application pursuant to s 459S of the Act. The company had adduced evidence that the director was unable to address the demand by reason of ill health, depression or the demands of the proceedings. The company had received another demand at the same time. In Vangory Holdings Black J noted the inconsistency with the apparent ability to respond to the other demand and the position put in relation to the subject demand. Black J said:
[19]… I consider it preferable not to determine this matter, in an interlocutory application of this kind, where it can readily be determined on the other grounds to which I refer below.
[20]FDL submits, and I accept, that the reasonableness of Vangory’s conduct can be taken into account in assessing the sufficiency of the explanation to raise a ground of opposition to the Demand in time and that leave is less likely to be granted where there is some default on the part of Vangory or its advisers in that regard: [Satellite Group; Perpetual Nominee] …
[4][2015] NSWSC 546.
While I accept the general proposition that abdication of the responsibility to deal with a statutory demand will not afford the company an adequate explanation for the purposes of an application for leave under s 459S of the Act, Santow J in Satellite Group did not exclude a failure on behalf of the company’s solicitors as a grounds for the application. After all, His Honour said, ‘I do not consider it so deficient an explanation as to disqualify the Defendant company at the threshold’.[5]
[5]At [18].
In Vangory Holdings, Black J found it unnecessary to decide the question given the other circumstances germane to the application, and Ward J in Perpetual Nominee dealt with an application where there had been two prior s 459G applications.
In this application instructions were provided, an affidavit in support was sworn and the application pursuant to s 459G of the Act was filed within time. The s 459G application was not ventilated as it was not served within the 21 day period. In Satellite Group, Santow J declined to consider the explanation further as the company’s then solicitors were not afforded the opportunity to respond to the company’s contentions.[6]
[6]At [17].
In this application the company’s solicitors have continued to be retained by the company. Affidavits have been sworn by the solicitors dealing with the difficulty in obtaining instructions but the issue of late service has not been addressed by the firm. As I noted before, it is an inescapable conclusion that there was a failure by the firm to adhere to the temporal limits set out in s 459G of the Act. Alternatively, the rhetorical question that I pose to myself, ‘what more could the company have done?’, must be answered in the negative. In those circumstances, I have regard to the proposition put in Kostokanellis v Allen,[7] which, although in a setting aside judgment context, is of assistance. The Full Court said, with respect to the failure to appear which led to judgment:
Secondly, it was argued that, even if as a general rule the client is to be answerable for the default of his solicitor, the omission of the solicitors to do that which he was employed to do, namely attend at or arrange for an attendance on the return of the summons, was an omission beyond the course and scope of the retainer and so was an omission for which the appellant should not have to bear the consequences.[8]
[7][1974] VR 596.
[8]At 608.
The first relevant consideration in determining an application for leave under s 459S of the Act is whether there is a serious question to be tried on the ground now sought to be raised by the defendant. This consideration is directed to whether the defendant has a seriously arguable case that the debt is the subject of a genuine dispute. I am not required to make a final determination with respect to the dispute. It is sufficient that I identify whether or not the defendant has a seriously arguable case at this juncture: Vangory Holdings; D.A.G. International Pty Ltd v D.A.G. International Group Pty Ltd;[9] Soundwave Festival Pty Ltd v Altered State (WA) Pty Ltd (No 1).[10]
[9][2005] NSWSC 1036.
[10][2014] FCA 466.
It is clear that the plaintiff accepts that the three payments of 29 June 2012 were not taken into account in the reconciliation. It is less clear if there is an acceptance that further sums of $56,500 and $10,750 are conceded. That acceptance reduces the debt claimed by the plaintiff by $39,986 without provision for GST.
Putting that to one side, the plaintiff has simply not addressed the transfer agreement as alleged by Scott. I have made reference to the letter of 19 February 2014. The explanation set out therein does not gel. Albeit, that it might be appropriate for Scott to resign as a director in the event that he was no longer able to devote himself to the business, it simply does not address the issue of the transfer of shares. The searches provided with respect to the plaintiff are corroborative of the contention put by Scott. The plaintiff has not filed any material addressing that issue or explaining why it was necessary to transfer the shares and why the debt claimed by it had not been pursued after the November 2012 meeting. The issue of the shareholding was raised in Scott’s letter of 15 June 2012. There were meetings in October and November 2012. The shares were transferred. The reconciliation was prepared in June 2012 although it is referred to as being finalised in April 2013. I am satisfied that there is a seriously arguable case that the plaintiff’s claim has been extinguished. I am also satisfied that the failure to make the s 459G application has been appropriately explained.
Solvency
Financial statements for the defendant were produced. They were not audited.
The 2012 end of year accounts set out that the gross income was $653,213, net profit was $138,469, and net assets totalled $247,731. The financial statements for the year ending 30 June 2013 set out that gross income was $463,032, net profit as $121,440, and net assets totalled $236,409.
The company’s accountant, Samuel Facy, produced the 2014 financial year statements, together with a statement made up to August 2014 and a letter setting out his understanding of the monthly liabilities and creditors of the defendant.
For the year ending 30 June 2014, the gross income was $401,700, net profit was $156,117, and net assets totalled $121,753.
As at 31 August 2014, the gross income was $49,531, net profit was $43,921, and the net assets totalled $43,941.
In each of the financial years, provision had been made for GST and tax liabilities, and the defendant maintained funds in its bank account. As at 31 August 2014, the sum of $45,345 was so maintained.
The letter dated 26 September 2014 from the company’s accountant to the company’s solicitor sets out that the current monthly obligations as follows:
·Approximately $13,000 per month to The Advice Exchange ‘TAE’ for dealer fees, management fees and other associated charges; and
·Approximately $2,400 per month to service the interest only debt of $400,000.
In addition to the above, we anticipate the following ad hoc obligations ([n]ote this list is not exhaustive):
·Legal fees;
·Accounting fees;
·Additional accounts charged by TAE for further support; and
·Income tax and GST obligations.
The letter sets out that the sundry creditors were for fees payable to the accountants, which had been paid as at the date of the letter. The ATO integrated client account, which included the June 2014 BAS, had been paid. Of note was the failure to lodge income tax returns which was attributed to Scott’s ill health. Provision had been made for income tax but the returns for 30 June 2013 and 30 June 2014 had not as yet been lodged. However, I do not have any misgivings in determining that there has been adequate provision made for the respective tax liabilities.
Kielt produced various bank statements for the company. Those statements demonstrated the cash at bank but, more importantly, access to funds on overdraft, which although fluctuating, was in the vicinity of more than $80,000 in any one month.
What the financial material produced to me demonstrates is that, but for the debt claimed by the plaintiff, the defendant is prima facie solvent. More significantly, is that the defendant has cash at bank and recourse to its overdraft account which is close to sufficient to meet any liability due to the plaintiff.
The plaintiff chose not to file any material apart from the affidavits verifying the originating process. The submissions of the plaintiff with respect to the defendant’s solvency were as follows:
·The defendant must rebut the presumption of insolvency established pursuant to ss 459C(2), (3) of the Act.
·The principles distilled from Weinberg J’s judgment in Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd[11] at [11] include:
(a)The defendant should present the ‘fullest and best evidence’ of its financial position.
(b)‘Unaudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency. Nor are [all] 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’.
(c)‘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’.
[11][1999] FCA 728.
The plaintiff submitted that the defendant’s assertions of solvency were deficient in that:
·There is no evidence of the defendant’s financial position as at the date of the application, the last balance sheet was made up as at 31 August 2014;
·The financial documents are nothing more than assertions as no instructions for the preparation of the accounts was provided;
·There is no explanation as to how the receivables of $617,738 are owing from Scott related entities;
·By reason of the matters referred to, the disputed debt is not relevant to proving solvency of the defendant.
Insofar as Kielt deposed that she had, in the main, provided instructions for the preparation of the accounts, it was submitted:
·Kielt was not an officer of the defendant nor employed by the defendant and that she did not swear as to knowledge of the financial affairs of the defendant nor did she have a responsibility in relation to making up or keeping the proper books of account.
·The reconciliation of Kielt was prepared for commissions owed between the parties, not any other debts or payments and that she did not challenge the reconciliations of commissions owing to the plaintiff.
·She did not set out her knowledge of the defendant’s debts nor the basis of knowledge in relation to those debts nor how it is that she could be certain in the circumstances that the defendant would be able to pay those debts.
I am satisfied that accounts made up to August sufficiently demonstrated the company’s current financial position. I am satisfied that the instructions referred to by Kielt and Facy lend weight to the contention of solvency and assist me more than reliance upon mere assertion by the director or production of the accounts without explanation. In particular, I am assisted by the bank statements and the revenue report which are consistent with what is set out in the accounts and demonstrates sufficient cash to meet liabilities.
Of the submissions made on behalf of the plaintiff, the one of note is the lack of evidence as to the recoverability of the related party liabilities recorded as assets in the balance sheet. However, I note that the major liability is the borrowing from the bank which, by reference to the availability of surplus funds from time to time on the overdraft facility must be within its limits. Otherwise this is a company which relies upon commission trailers as its source of income and has minimal liabilities with respect to the generation of such income. I am satisfied that on a cash flow basis[12] the defendant has sufficient funds to meet its liabilities as and when they fall due. It is strongly arguable that the company is solvent on a cash flow basis irrespective of the debt claimed by the plaintiff. Once that debt is excluded the position is clearer.
[12]Sandell v Porter (1966) 115 CLR 666.
The failure to present audited accounts was much criticised by the plaintiff. However, there is a parallel between this defendant and the defendant in Commonwealth Broadcasting Corp Pty Ltd v Pacific Mobile Phones Pty Ltd Wyatt J at said as follows:
[28]Mr Boulos deposes to the solvency of the respondent. It is a small company. It employs three permanent part-time staff and other staff on an “as needs” basis. Mr Boulos exhibits the respondent’s bank statements, profit and loss statement and balance sheet. The company uses the accounting software MYOB and employs a bookkeeper on a quarterly basis. The respondent has no creditors and is involved in no litigation apart from the dispute with the applicant. It made a net profit after wages last financial year of $38,527.08. The balance sheet shows that it has net assets of approximately $288,000. It has approximately $87,000 in its bank account. There is nothing to suggest it cannot pay all its debts as and when they become due and payable.
[29]Mr Coulsen submitted that on the authority of Expile Pty Ltd v Jabb’s Excavations Pty Ltd, a decision of Barrett J, the respondent ought to have produced the “fullest and best evidence” and that unaudited accounts are not normally probative of solvency. Expile concerned a company with significant indebtedness, deficiencies in its accounts and lack of evidence of realistic borrowing capacity to refund repayments of short term liabilities. It would be oppressive if a small, viable company, with no creditors, in the circumstances in which this application has been brought, were required to expend significant sums to employ an external accountant to analyse its books and records to rebut the presumption of insolvency.
[30] I am satisfied that the respondent is solvent.[13]
[13][2008] QSC 210 (footnotes omitted).
Given the attendant circumstances relating to Mr Scott’s prior equity in the plaintiff, the apparent resolution of a transfer of that equity for consideration, the circumstances of the failure to serve the s 459G application and for the reasons set out in this judgment, it is appropriate that I grant leave pursuant to s 459S.
Weinberg J said in Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd:
There is a general principle that a winding up order will not be made on a debt which is bona fide in dispute, provided that the dispute is based on some substantial grounds: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 293.[14]
[14][1999] FCA 728, [50].
In Chief Commissioner Stamp Duties v Paliflex, Austin J said:
As I have already mentioned, s459S applies, in the circumstances of the present case, to prevent the defendant without the leave of the Court from opposing the plaintiffs application for winding up on a ground that the defendant could have relied on for the purposes of an application to set the demand aside. In the David Grant case[15] (at 229) Gummow J acknowledged the Court’s statutory discretion under this provision, but in a context which implied that the discretion under s4 59S should be used cautiously and even sparingly given the overall policy of Pt 5.4. Nevertheless, as Hayne J observed in Texel Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 535, 537, the discretion under s459S is there as a ‘safety net’ in the sense that there are special cases in which a dispute as to the existence of the debt may be litigated at the time of the application for winding up in insolvency, even if there has been no application under s459G.[16]
[15](1995) 184 CLR 265.
[16][1999] NSWSC 15, [40] (footnote added).
I grant leave pursuant to s 459S of the Act. Notwithstanding leave is granted, it remains incumbent upon the defendant to demonstrate solvency. I will not repeat the solvency analysis I referred to in paragraphs 34 to 48 above. For the reasons set out in those paragraphs based upon a cash flow test, I am satisfied that the defendant has discharged the onus of demonstrating solvency.
The winding up application is dismissed. The plaintiff pay the defendant’s costs, including the costs of the s 459S application, on a standard basis.
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