FEDERAL COURT OF AUSTRALIA
Web Wealth Pty Ltd (ACN 096 047 022) v Helimount Pty Ltd (ACN 006 818 917) [2006] FCA 1376
CORPORATIONS – insolvency – winding up application – failure to comply with statutory demand – application for review of order of Registrar of Federal Court that company be wound up – where no application made to set aside statutory demand within prescribed period – where company presumed to be insolvent – whether approval to cause company to bring application for review should be granted pursuant to s 471A of the Corporations Act 2001 (Cth) – whether sufficient evidence to rebut presumption of insolvency – whether leave should be granted pursuant to s 459S of the Corporations Act 2001 (Cth) to raise ground opposing winding up which could have been relied on in application to set aside statutory demand – relevant considerations for granting of leave under s 459S.
Held – approval to cause company to bring application pursuant to s 471A not granted – insufficient evidence to rebut presumption of insolvency – explanation of failure to apply to set aside statutory demand unsatisfactory – ground material to proving solvency not established pursuant to s 459S – leave to raise ground pursuant to s 459S refused – application for review of Registrar’s decision dismissed.
Federal Court of Australia Act 1976 (Cth) s 35A
Corporations Act 2001 (Cth) ss 459G, 459S, 588FB, 588FDA
Trade Practices Act 1974 (Cth) s 51AB
Evidence Act 1995 (Cth) s 75ACE Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728 referred to
Chief Commissioner of Stamp Duties v Paliflex Pty Ltd (1999) 47 NSWLR 382 referred to
Commonwealth Bank of Australia v Begonia Pty Ltd (1993) 11 ACLC 1075 referred to
Expile Pty Ltd v Jabb’s Excavations Pty Ltd (2003) 45 ACSR 711 referred to
HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd (2002) 44 ACSR 169 referred to
Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) (2002) 167 FLR 175 referred to
Lightburn Pty Ltd v Kama Power Products Pty Ltd (2003) 226 LSJS 61 referred to
Shakespeares Pie Co Australia Pty Ltd v Multipye Pty Ltd [2005] NSWSC 1338 referred to
Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 referred toWEB WEALTH PROPRIETARY LIMITED (ACN 096 047 022) v HELIMOUNT PTY LTD (ACN 006 818 917)
SAD 19 OF 2006BESANKO J
23 OCTOBER 2006
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SAD 19 OF 2006
BETWEEN:
WEB WEALTH PROPRIETARY LIMITED (ACN 096 047 022)
ApplicantAND:
HELIMOUNT PTY LTD (ACN 006 818 917)
Respondent
JUDGE:
BESANKO J
DATE OF ORDER:
23 OCTOBER 2006
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The application for review be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SAD 19 OF 2006
BETWEEN:
WEB WEALTH PROPRIETARY LIMITED…
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- Case
- [2006] FCA 1376
- Decision Date
CaseChat Overview and Summary
The court examined the evidence presented regarding Helimount's financial status. Helimount argued that the debt in question was not material to its solvency. The court considered the three-part test established in Chief Commissioner of Stamp Duties v Paliflex Pty Ltd, which included an investigation into whether the debt dispute was material to proving solvency. The court also referred to the decision in Switz Pty Ltd v Glowbind Pty Ltd, where the New South Wales Court of Appeal held that for leave to be granted, the disputed debt must make the difference between a finding of solvency and insolvency. The court concluded that Helimount had not met its burden of proving solvency, as it could not establish that the debt dispute was material to its solvency.
In light of the evidence and the legal principles applied, the court dismissed Helimount's application for review. The court was not satisfied that Helimount had discharged the onus of proving its solvency, thus it was not appropriate to grant the leave under section 459A(1A)(d). The court's decision was based on the insufficiency of evidence to demonstrate Helimount's solvency, in line with the statutory requirements and the judicial precedents.
Orders
Orders of the court
1. The application for review be dismissed.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Established by: BESANKO J
In this case no application was brought by either party which might have led to the question of whether approval should be granted being determined before the hearing of the substantive proceeding, that is, the application for review. I have heard all the arguments together and, for reasons I will give, I am not satisfied that Helimount has discharged the onus of proving its solvency. In those circumstances, it is not appropriate to grant approval under s 471A(1A)(d) for Mr Callipari to bring the application for review.Leave under s 459S of the Corporations Act Section 459S of the Corporations Law is in the following terms:‘459S(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).459S(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.’ In Chief Commissioner of Stamp Duties v Paliflex Pty Ltd (1999) 47 NSWLR 382 at [49] Austin J identified three matters relevant to whether leave should be granted under s 459S. They are as follows:‘(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 matter referred to in (iii) is an express limit on the power to grant leave (s 459S(2)) and its scope and operation have been considered in later cases. The issue which has arisen is whether s 459S(2) means that the debt must on the company’s case make the difference between a finding of solvency and a finding of insolvency, or is it sufficient that depending on what other findings are made it may be relevant to the question of solvency? The New South Wales Court of Appeal in Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 favoured the former interpretation. Spigelman CJ (with whom Handley and Giles JJA agreed) said (at 674 [53]-[54]):‘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.If, as here, the company intends to prove that it is solvent whether or not a debt is payable, then with respect to a ground based on dispute about the debt, the test of materiality to it “proving” its solvency, cannot be satisfied.’