FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v Pacific Islands Express Pty Ltd, In the matter of Pacific Islands Express Pty Ltd [2014] FCA 211 Citation: Deputy Commissioner of Taxation v Pacific Islands Express Pty Ltd, In the matter of Pacific Islands Express Pty Ltd [2014] FCA 211 Parties: DEPUTY COMMISSIONER OF TAXATION v PACIFIC ISLANDS EXPRESS PTY LIMITED ACN 080 511 600 File number: NSD 904 of 2013 Judge: FOSTER J Date of judgment: 10 March 2014 Catchwords: CORPORATIONS – whether the defendant in a winding up application based upon its alleged insolvency (both deemed and actual) should be granted a further adjournment of the winding up hearing – whether the winding up application should be dismissed in the exercise of the Court's residual discretion – defendant part of a group of companies in receivership attempting to refinance its debt to its secured creditor and to pay the debt due to the applicant. Legislation: Corporations Act 2001 (Cth), ss459A, 459C, 459G, 459P, 459R, and 465A Income Tax Assessment Act 1997 (Cth), subs 995.1(1) Corporations Regulations, 2001 reg 5.6.75 Cases cited: Ace Contractors & Staff Proprietary Limited v Westgarth Development Proprietary Limited (1999) FCA 728 cited Crema (Vic) Pty Limited v Landmark Property Developments (Vic) Pty Limited (2006) VSC 338 cited Date of hearing: 4 March 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 73 Solicitor for the Plaintiff: Craddock Murray Neumann Lawyers Counsel for the Defendant: Ms B K Nolan Solicitor for the Defendant: JHK Legal IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 904 of 2013 IN THE MATTER OF PACIFIC ISLANDS EXPRESS PTY LIMITED ACN 080 511 600 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: PACIFIC ISLANDS EXPRESS PTY LIMITED ACN 080 511 600 Defendant JUDGE: FOSTER J DATE OF ORDER: 10 MARCH 2014 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 459A and s 459B of the Corporations Act 2001, the defendant be wound up in insolvency. 2. Scott Pascoe, of PPB Advisory, Level 46, MLC Centre, 19 Martin Place, Sydney, NSW, 2000 be appointed Official Liquidator of the defendant. 3. The costs of the plaintiff be paid out of the assets of the defendant. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 904 of 2013 IN THE MATTER OF PACIFIC ISLANDS EXPRESS PTY LIMITED ACN 080 511 600 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: PACIFIC ISLANDS EXPRESS PTY LIMITED ACN 080 511 600 Defendant JUDGE: FOSTER J DATE: 10 MARCH 2014 PLACE: SYDNEY REASONS FOR JUDGMENT 1 In this proceeding, the plaintiff, Deputy Commissioner of Taxation (the Commissioner) seeks an order winding up the defendant in insolvency and consequential relief. 2 The Commissioner relies upon s 459A and s 459P of the Corporations Act 2001 (Cth) (the Act) as the source of the Court's power to make the orders which he seeks. It is not now disputed that the Commissioner is a creditor of the defendant. 3 In addition, the Commissioner relies upon the presumption of insolvency created in his favour by the circumstance that, during or after the three months ending on the day when the application was made, the defendant failed to comply with a statutory demand served upon it by the Commissioner (see s 459C(1) and s 459C(2)(a) of the Act). The presumption for which s 459C provides operates except insofar as the contrary is proved for the purposes of the application in which the presumption is relied upon (see s 459C(3)). 4 On 6 February 2013, the Commissioner served a Creditor's Statutory Demand for Payment of Debt (the Demand) upon the defendant at its registered office. The amount claimed in the Demand was $348,255.78. That amount was said to be the amount due to the Commissioner as at 6 February 2013 in respect of amounts due and payable under the BAS provisions (as defined in subs 995-1(1) of the Income Tax Assessment Act 1997 (Cth)). By the Demand, the Commissioner demanded payment of the said amount of $348,255.78 within 21 days after service of the Demand upon the defendant, that is to say, by 27 February 2013. This proceeding was commenced on 23 May 2013. Thus, the defendant failed to pay the amount demanded by the Commissioner in the Demand within the three (3) month period provided for in s 459C(2) of the Act with the consequence that, subject to the defendant discharging the burden of proving that it is solvent, the presumption of insolvency provided for in that section will have arisen. 5 I am satisfied that the Originating Application, supporting affidavits and Consent of Liquidator were duly served upon the defendant on 23 May 2013. I am also satisfied that the Commissioner has proved that notice of the filing of his Application to wind up the defendant was duly given to Australian Securities and Investments Commission (ASIC) and published on the ASIC Insolvency Notices website (as to which see s 465A of the Act and reg 5.6.75 of the Corporations Regulations 2001). The Commissioner has also procured an appropriate consent from an official liquidator (Scott Pascoe of PPB Advisory). 6 By the Affidavit of Nehemias Javier affirmed on 18 February 2014, the Commissioner brought up to date the amount currently due from the defendant to him ($282,346.12) and otherwise updated the position of the defendant insofar as its obligations to lodge BASs and Income Tax Returns are concerned. I shall return to other evidence given by the deponent of this affidavit later in these Reasons. 7 By Order made by me on 15 November 2013 pursuant to s 459R(2) of the Act, the period within which the Commissioner's Application for the winding up of the defendant must be determined was extended for six (6) months from 22 November 2013. That is to say, the Commissioner's Application must now be determined by 22 May 2014. 8 The hearing of the Commissioner's Application has been adjourned on a number of occasions. I shall refer to these adjournments in detail below. 9 The last adjournment was granted on 19 February 2014 for a period of thirteen (13) days. That adjournment was granted over the objection of the Commissioner. However, the defendant was informed that it was very likely that no further adjournments of the hearing would be granted. 10 When the proceedings were called on for hearing on 4 March 2014, Counsel for the defendant sought a further adjournment of the hearing of the Commissioner's winding up Application. On that occasion, she asked for six (6) weeks. I refused that adjournment. I then proceeded to hear the Commissioner's Application. These Reasons for Judgment determine that Application. I will also include some brief reasons as to why I refused the further adjournment sought by the defendant. 11 By Amended Notice of Appearance filed on 4 March 2014 (with leave), the defendant specified only one ground upon which it proposed to oppose the making of a winding up order. That ground was expressed in the following terms: The Defendant company, Pacific Islands Express Pty Limited ACN 080 511 600 is solvent and is able to pay its debts including the Plaintiff's debt, upon a refinance taking place. 12 During the course of argument, it became apparent that, in addition to the single ground specified in its Amended Notice of Appearance, the defendant also wished to contend that the Court ought not make a winding up order against it on discretionary grounds. To some extent, these grounds included the circumstance that, according to the defendant, it is solvent. However, Counsel for the defendant submitted that, even if I were to conclude that the defendant had not displaced the presumption of insolvency, I ought nonetheless not make a winding up order in the exercise of the Court's discretion to decline to do so. Counsel went so far as to submit that the appropriate order in the present case was to dismiss the Commissioner's Application. 13 In order to explain why I refused the defendant's application for a further adjournment on 4 March 2014 and why I intend to make an order winding up the defendant, it is necessary to set out some matters of history which relate to endeavours on the part of the defendant and the group of companies of which it is part to refinance a significant debt owed by that Group to National Australia Bank Limited (NAB) and which, to some extent, relate to the course of events in the proceeding itself. THE RELEVANT FACTS 14 The proceeding was first returned before the Court in the District Registrar's list on 28 June 2013. On that occasion, the Application was adjourned to the Registrar's List on 5 July 2013. It appears that that adjournment was by consent. 15 The day before (27 June 2013), NAB appointed Gregory Winfield Hall and Sam Andrew Marsden as Receivers and Managers (Receivers) of the defendant and of two other associated corporations. They were also appointed Receivers pursuant to a mortgage of certain real property owned by one of the companies associated with the defendant, Dagher. A Family Co Pty Limited, at West Gosford. 16 On 5 July 2013, the proceeding was again adjourned, on this occasion to the Registrar's List on 16 August 2013. On 5 July 2013, the Registrar ordered that any Notice of Grounds of Opposition was to be filed and served by 14 August 2013 and that any further request for an adjournment was to be supported by an affidavit setting out the facts and circumstances relied upon. That affidavit was to be filed and served by 4.00 pm on 14 August 2013. 17 The defendant filed in Court on 5 July 2013 an affidavit sworn by Marcel Dagher on 4 July 2013. That affidavit was read and relied upon by the defendant in support of its adjournment application made and determined on 5 July 2013. 18 Because the affidavit sworn by Mr Dagher on 4 July 2013 was also relied upon before me both in support of the defendant's application for a further adjournment and in support of its opposition to the making of a winding up order, it is convenient to extract from Mr Dagher's affidavit that material which remains arguably relevant. In that affidavit, Mr Dagher said that: (a) The defendant's principal source of income is from property rentals. It had previously been involved in property development but now focusses on property investment. (b) Mr Dagher is the Financial Manager of the defendant. (c) The defendant is a member of a group of companies known as the Dagher Group of Companies. The Dagher Group comprises the following companies: (i) The defendant. (ii) Dagher. A Family Co Pty Limited (ACN 088 109 246); and (iii) 10 Out of 10 Pty Limited (ACN 116 277 500). (d) The Dagher Group owns a number of properties. (e) In Mr Dagher's opinion, the Dagher Group has a positive cash flow. In order to make good that proposition, Mr Dagher attached to his affidavit a spreadsheet described as Estimated Cash Flow which appeared to have been prepared in early June 2013 and related to the period from June 2013 to end May 2016. That Estimated Cash Flow was based upon a number of unsupported assumptions. It was also based upon the proposition that Suncorp-Metway Limited would provide finance to the Dagher Group in the amount of $15m and that that finance would be available immediately. (f) The Dagher Group had a finance facility with NAB under which, as at 4 July 2013, the Dagher Group had drawn down $17.3m. He did not make clear whether the defendant is liable to the full extent of that facility but I infer that it is. (g) As at 4 July 2013, the Dagher Group was in the process of refinancing the NAB facility with Suncorp-Metway Limited to the extent of $15m. Attached to Mr Dagher's affidavit were offers of finance dated 29 May 2013 made to each member of the Dagher Group. Mr Dagher said that Suncorp-Metway Limited had executed and was satisfied with, the loan documents required by the offers made to the Dagher Group and was then ready and willing to complete the refinance. (h) The shortfall between the amount due to NAB and the amount to be refinanced by Suncorp-Metway Limited (approx. $2.3m) was to be made up, as to $300,000, through cash reserves and as to the balance by the sale of two properties to individuals associated with the Dagher Group. (i) The refinancing had originally been planned to be put in place during the week commencing 1 July 2013 but had had to be rescheduled. As at 4 July 2013, it was expected to be completed by the end of July 2013. (j) The defendant would be in a position, upon completion of the refinancing, to pay the outstanding debt due to the Commissioner in full. (k) There was a dispute concerning the debt due to the Commissioner. (l) The defendant was solvent as at 4 July 2013. In this regard, at par 22 of his affidavit, Mr Dagher said: I say that the Defendant is solvent on the basis of its cash flow and properties/assets owned by the Defendant and the Dagher Group. I say that the evidence of the Refinance outlined above is to indicate that provisions are in place for the debt to be paid to the Plaintiff in full, and to reduce costs payable by the Defendant and the Dagher Group for its finance facility. 19 On 16 August 2013, the Commissioner's Application was again adjourned. On this occasion to the Registrar's List on 6 September 2013. The defendant's application for an adjournment on 16 August 2013 was opposed by the Commissioner. 20 The defendant's adjournment application made and determined on 16 August 2013 was supported by an affidavit of Claudia Boustany affirmed on 15 August 2013. 21 In that affidavit, Ms Boustany said the following: (a) Marcel Dagher is her brother and was currently in Lebanon. She confirmed that she was the sole director of the defendant. (b) The refinancing by Suncorp-Metway Limited was being delayed by proceedings brought by a finance broker against the defendant and others. (c) Marcel Dagher had made arrangements to borrow $410,000 to pay the Commissioner's debt but that payment of that debt was being delayed by the delay in the refinancing. 22 On 6 September 2013, the proceeding was adjourned by consent to the Registrar's List on 4 October 2013. On this occasion the Commissioner was informed that the proposed refinancing was no longer to be done with Suncorp-Metway Limited and that a new financier was involved (viz Ashe Morgan). Once again, an order was made that any further request for an adjournment had to be supported by an affidavit setting out the facts and circumstances relied upon, such affidavit to be filed and served by 4.00 pm on 2 October 2013. 23 On 4 October 2013, the proceeding was allocated to my docket, with a list date of 23 October 2013. On 4 October 2013, the Commissioner was told that Ashe Morgan was no longer involved and that ACM Finance & Advisory Service (NSW) Pty Limited (ACM) on behalf of a private equity fund was to be the refinancing entity. 24 Marcel Dagher affirmed a further affidavit on 3 October 2013 which was filed in Court on 4 October 2013. 25 In that affidavit, Mr Dagher said: (a) Suncorp-Metway Limited had now withdrawn its refinancing offer. (b) A potential replacement refinancing proposal had not been pursued. As at 3 October 2013, the solicitors for the defendant were investigating further opportunities for refinancing and had some level of interest in that regard. In particular, ACM was mentioned as a potential source of finance. (c) The defendant was still hopeful that it would be in a position to pay out the Commissioner in full once appropriate refinancing had been secured. 26 The matter came before me for the first time on 23 October 2013. On that occasion, the defendant was represented by Senior Counsel and the Commissioner by his solicitor. Senior Counsel for the defendant informed me that his expectation was that the matter would be settled by the end of that week (i.e. by 25 October 2013). For that reason, the defendant sought a further adjournment. That adjournment was consented to by the Commissioner, but only on the basis that the matter would be allocated a hearing date in the near future. 27 I therefore fixed the matter for hearing before me on 15 November 2013 with liberty to apply should the matter be resolved earlier. There was no appearance before me on 23 October 2013 either by or on behalf of the Receivers. That was consistent with the position which the Receivers had adopted at the listings before the Registrar. At the listing on 23 October 2013, the proceeding was called outside the Courtroom in order to ascertain whether there were any other interested creditors. There was no appearance either by or on behalf of any other person on that occasion. 28 On 15 November 2013 the matter was again adjourned, effectively by consent. Payments totalling $100,000 were expected to be made by the defendant to the Commissioner on that day with a promise to pay the balance by further agreed instalments. $50,000 had, by then, been paid to the Commissioner by the defendant. It was agreed that the next listing should be for mention only. That listing was fixed for 20 November 2013. 29 On 14 November 2013, Marcel Dagher swore a further affidavit which was filed in Court on 15 November 2013. In that affidavit, Mr Dagher said: (a) The debt then due to NAB was $17,800,000. In this affidavit, Mr Dagher made clear that the defendant was liable for the full amount of that debt. (b) The value of the Dagher Group's property portfolio was $23,045,000. (c) The defendant had unsecured creditors totalling $401,748.87 and the other two corporations comprising the Dagher Group had total unsecured debts of a little over $401,000. (d) The Dagher Group had secured yet another financier (MFH Australia Pty Limited (MFH)) which was prepared to refinance the Group's debt to NAB and the payment of the defendant's debt to the Commissioner. (e) A total of $150,000 had been paid by the defendant to the Commissioner. A further $75,000 was expected to be paid by 22 November 2013. 30 On 20 November 2013, proceedings were again adjourned, on this occasion again by consent. The principal reason was that the promised additional payments totalling $100,000 had been made as agreed and there was, in the perception of the Commissioner, a real prospect that the balance of the debt due to him would be paid. Accordingly, on 20 November 2013, the proceeding was adjourned to 13 December 2013. 31 As was the case with previous listings before me, on both 15 November 2013 and on 20 November 2013, the matter was called outside the Courtroom to ascertain whether any other creditors of the defendant were interested in the proceeding. No other persons appeared on either of those occasions. The Receivers maintained the position previously adopted by them of informed disinterest in the proceeding. 32 On 13 December 2013, the proceeding was again adjourned, by consent, on this occasion, to 19 February 2014, for mention only. The Commissioner's consent was forthcoming on this occasion because the Dagher Group had persuaded him that it had, by 13 December 2013, obtained an unconditional offer of refinancing which would not only permit it to pay out NAB but also to pay the defendant's debt due to the Commissioner. This latest offer of refinancing was from MFH and was placed in evidence by the defendant's solicitor as part of an affidavit sworn by him on 12 December 2013 and filed in court on 13 December 2013. 33 On 19 February 2014, the defendant sought yet another adjournment. This adjournment was opposed by the Commissioner. 34 The defendant's adjournment application of 19 February 2014 was based upon the evidence of its solicitor given in an affidavit sworn by him on 18 February 2014 and subsequently filed by him on 24 February 2014. In that Affidavit, the defendant's solicitor said: (a) The defendant still had an unconditional loan approval from MFH in excess of $17m. (b) Refinancing to be provided by MFH had not proceeded on 31 January 2014, as planned. Apparently, this was because of some difficulties involving the sale of properties under the control of the Receivers. (c) The defendant had contracted to sell a property at Wilberforce to a company associated with the defendant and its principals, Beechwood Fields Pty Limited, which purchase was being financed by a company called Winchester O'Rourke. The defendant intended to pay the remainder of the debt due to the Commissioner out of the proceeds of sale of the Wilberforce property. The settlement of that sale was expected to take place on 26 February 2014. 35 In light of the evidence given by the solicitor for the defendant, I adjourned the proceeding for a short time in order to enable the sale of the Wilberforce property to be completed. The proceeding was adjourned to 4 March 2014 before me. 36 On 19 February 2014, during the course of argument, I made clear to Counsel for the defendant that, more than likely, the adjournment which I proposed to grant on that occasion would be the last adjournment which the defendant could expect to obtain. In particular, I made very clear to Counsel that, if the defendant intended to apply for any further adjournments, there would need to be evidence which addressed the solvency of the defendant, its defaults in filing its Income Tax Returns and its defaults in filing its BASs, as well as any other matter that might be of relevance. 37 As had been the case in respect of previous listings, the Receivers chose not to appear before me on 13 December 2013, 19 February 2014 and 4 March 2014. There was no appearance on any of those occasions by any other creditor of the defendant. 38 As I have already mentioned (at [10] above) when the matter was called on before me on 4 March 2014, the defendant sought yet another adjournment. That adjournment was refused. 39 Before explaining in a more detail why I refused that adjournment, it is necessary to say a little more about the events that were playing out in the period from early November 2013 to February 2014 concerning the Dagher Group's attempts to refinance its debt to NAB. 40 By letter dated 19 November 2013, the Receivers offered to hold off completing the sale of various properties owned by the members of the Dagher Group until 2 December 2013 in order to allow the Dagher Group time to negotiate a settlement with NAB. That offer was subject to a number of conditions. At that time, the Receivers intended to sell all of the properties owned by the Dagher Group as soon as possible unless a satisfactory accommodation could be reached between NAB and the Dagher Group. 41 After further negotiations, NAB made a "Without Prejudice" offer by way of email sent at 10.56 on 6 December 2013 by Mr Hatter, an officer of NAB, to the solicitor for the Dagher Group, Mr Mahony. That offer was in the following terms: Dear Mr Mahony. We refer to your attached letter, together with your subsequent letter to PwC of 3 December 2013. On a strictly without prejudice basis, the Bank is prepared to settle this matter on the following basis: ▪ NAB to receive $16,500,000 within 21 days of your clients acceptance of the finance approval from MFH Australia, but not later than 15 January 2014. ▪ The Dagher Group agree to pay an additional $500,000 to NAB by 30 November 2014. This $500,000 to be secured by all existing borrowers and guarantors, the tenant of the Wilberforce property and a first registered mortgage over real estate. ▪ The above to be documented in a Deed to be executed by not later than 13 December 2014. ▪ Receiver & Manger will retire on settlement of the $16,500,000. ▪ Your clients will agree to comply with any requests, including provision of financial information, lease documentation or other such requests a Receiver & Manager is entitled to. ▪ Terms of the Deed will include all standard Bank terms and conditions together with an agreement by your clients and the tenant of the Wilberforce property that if settlement is not completed by 15 January 2014 the Wilberforce tenant acknowledges any existing lease in respect of that property is immediately terminated and vacant possession will be immediately handed to the appointed Receiver & Manager. ▪ If a Deed is not executed by close of business 13 December 2014, the Bank will request the Receiver & Manager to proceed with their sale campaign. The above offer remains open for your clients acceptance until 5PM Monday 8 December 2014. 42 Later that day (6 December 2013), Mr Mahony, on behalf of the Dagher Group, accepted NAB's offer. 43 On 10 December 2013, Mr Mahony wrote to the Receivers. The letter was lengthy. It contained a revised proposal. The proposal was variously described as a "counter offer", an "alteration", a "revised proposal" and a "proposed offer". It is not necessary to set out the terms of Mr Mahony's letter. There is no doubt that it constituted an attempt by the Dagher Group to renegotiate the terms of the in-principle arrangement struck by it with NAB on 6 December 2013. 44 The Receivers responded to Mr Mahony's letter of 10 December 2013 by email sent at 9.49 am on 12 December 2013. By that response, the Receivers (on behalf of NAB) made clear that, while NAB might be prepared to extend to 31 January 2014 the time for settling the planned refinancing in accordance with the arrangement made on 6 December 2013, all other terms provided for under that arrangement were not negotiable and had to be strictly met. 45 It appears that, on 13 December 2013, the Dagher Group agreed to the terms of the Receivers' email of 12 December 2013. 46 Almost immediately after 13 December 2013, a dispute arose between the Dagher Group and NAB as to the terms of the arrangement apparently agreed between them. 47 By email sent on 19 December 2013, on behalf of the Receivers, to the Dagher Group's external financial adviser, Mr Clark, the Receivers' representative stated that NAB would discharge its mortgages over the Group's properties in exchange for the payment of $16.5m on or before 31 January 2014. 48 The long-awaited refinancing did not take place by 31 January 2014. 49 It appears that, in about mid-December 2013, MFH had withdrawn its offer to refinance most of NAB's debt. 50 From that time, Mr Clark endeavoured to find an alternative financier. In February 2014, he procured an offer of finance from P J Straton, solicitor, acting on behalf of the trustee of a mortgage fund associated with his firm, Driat Pty Limited. That offer was contained in a letter dated 17 February 2014. One of the essential terms of that offer was that Driat Pty Limited would be granted registered first mortgages over all of the real property owned by the Dagher Group. 51 Subsequently, Ms Boustany and Mr Dagher fell out with NAB and the Receivers. 52 On 17 February 2014, Ms Boustany and Mr Dagher lodged caveats against all of the properties owned by the group claiming the following interests on behalf of the relevant company in the Dagher Group in each case: (a) As the counter-party to an agreement said to have been made between the registered proprietor in each case and NAB on 16 December 2013 whereby NAB agreed to discharge its mortgage; and (b) By reason of the fact that the registered proprietor and NAB had reached an agreement on or about 16 December 2013 to discharge NAB's registered first mortgage. 53 On 27 February 2014, the Receivers commenced proceedings in the Supreme Court of New South Wales seeking orders compelling the withdrawal of all of the caveats and compensation for all losses suffered by reason of the lodgment of those caveats. In response, Ms Boustany and Dagher. A Family Company Pty Limited, filed a Cross-Summons against the plaintiffs in those proceedings seeking to enforce the alleged agreement referred to in the caveats and, in the alternative, seeking to give effect to an estoppel by convention to the same effect. There was no claim by or on behalf of the members of the Dagher Group in those proceedings or otherwise for redemption of the NAB mortgages. 54 As a result of these latter events, the director and executives of the companies in the Dagher Group are now embroiled in contested litigation with NAB. That litigation will not be resolved any time soon. 55 Ms Boustany affirmed an affidavit on 3 March 2014 which was read and relied upon at the hearing before me on 4 March 2014. In that affidavit, Ms Boustany said: (a) The defendant is still engaged in litigation with a finance broker which has been ongoing since mid-2013. (b) MFH is no longer prepared to refinance NAB's debt. (c) The Dagher Group has arranged further finance as follows: (i) $14.45m from Driat Pty Limited; and (ii) $2.1m from Winchester O'Rourke. This latter amount is being provided to the purchaser of the defendant's Wilberforce property and is intended to be used to pay out the balance of NAB's debt and the balance due to the Commissioner. (d) The only "aged payables" due from the defendant to its creditors are the current debt owed to the Commissioner and approximately $21,000 payable to Hawkesbury City Council and Sydney Water. (e) The Dagher Group has a positive cash flow from its properties. An Estimated Cash Flow was tendered in evidence. (f) The total value of the Dagher Group's properties exceeds the total amount of its liabilities. (g) The directors of the Dagher Group have not been able to lodge BASs or Income Tax Returns because the Receivers are in control of the books and affairs of the group and the directors do not have the information necessary to complete such returns. Decision 56 The evidence led by the Commissioner proves that the defendant is presently indebted to him in the amount of $282,346.12. This amount comprises the balance of the amount due under the Demand ($196,608.44) and an additional amount of $85,737.68, which has fallen due since the Demand was served. The bulk of this debt has been due since at least February 2013. It is not apparent from the evidence before me how long before that date the bulk of the debt fell due. 57 The Commissioner also proved that the defendant has not lodged BASs for the last quarter of the 2012/2013 Income Tax Year or for the first two quarters of the 2013-2014 Income Tax Year. The defendant has also failed to lodge Income Tax Returns for each of the Income Tax Years ended 30 June 2012 and 30 June 2013. 58 The defendant sought to explain these defaults by asserting that, since the appointment of the Receivers, the directors of the companies in the Dagher group have not had control of the affairs or the books and records of those companies. While this is true, it does not provide an adequate explanation for the defendant's ongoing failure to meet its taxation obligations by lodging BASs and Income Tax Returns. Steps should have been taken by the directors of the defendant to remedy these defaults, but none have been. 59 The defendant endeavoured to establish its solvency by tendering valuations of properties owned by it and by the other companies in the Dagher group, and by tendering estimated cash flows. It did not put forward a comprehensive statement of its financial position. It did not explain why Receivers had been appointed to the Group companies and under the West Gosford mortgage in June 2013. 60 The most recent estimated cash flow tendered in evidence was prepared upon the basis of refinancing assumptions which cannot be made good. The earlier iteration of that estimated cash flow (which was prepared in early June 2013) is not sufficiently current to have any probative value. It must be remembered that the Receivers are collecting the rent from all of the properties owned by the Dagher group, and, presumably, are either holding those rents for the benefit of NAB or accounting to it for those rents. The Receivers control all of the properties owned by the Dagher group and are now proceeding to sell those properties. That process had commenced by November 2013 and was only halted for a short time while negotiations took place between NAB and the director of the companies in the Dagher Group designed to replace NAB with a new lender. 61 The latest refinancing proposal (the offer from Driat Proprietary Limited) requires the Dagher group to provide registered first mortgages over the properties owned by the Group, at settlement of the proposed refinancing. As matters presently stand, because NAB holds registered mortgages over all of those properties, the Dagher group will not be able to fulfil that condition, even if the proposal from Driat Proprietary Limited could be regarded as firm. This is because, by the time the finance becomes available, some or all of the properties will have been sold by the Receivers in the interests of NAB. It is therefore highly unlikely that the Dagher group will be able to refinance NABs debt in time, if at all. 62 The defendant has failed to prove that it will be in a position to refinance NABs debt or to repay the debt due to the Commissioner any time soon. As of 4 March 2014, the defendant was unable to put forward any concrete proposal for the payment of the debt due to the Commissioner. Previous suggestions as to how this would be achieved had, by then, all evaporated. The sale of the Wilberforce property had become stalled as a result of the Supreme Court litigation concerning the caveats. In its Notice of Grounds of Opposition to the making of a winding up order against it, the defendant asserted that its solvency depended upon it being able to refinance those debts. I have concluded that it is not likely to be able to do so or at least not likely to be able to do so in the near future. For these reasons, it has failed to prove that it is, in fact, solvent. Thus, it has failed to displace the presumption of insolvency raised by s 459C of the Act. 63 In any event, it seems to me that it is insolvent, whether or not it may be in a position to refinance the NAB debt at some time in the future. 64 The defendant has been unable to pay its debt to the Commissioner now for a considerable period of time and has other unsecured debts which it apparently cannot pay. It has been unable to secure a firm refinancing proposal which would enable it to discharge its obligations to NAB and to the Commissioner. It seems to me that, on the evidence before me, the defendant is unable to pay its debts as and when they fall due. The mere assertion of solvency by Ms Boustany and by Mr Dagher does not prove solvency. 65 In Ace Contractors & Staff Proprietary Limited v Westgarth Development Proprietary Limited (1999) FCA 728, Weinberg J said: 43 Westgarth, having failed pursuant to s 459G to set aside the statutory demand served upon it by the applicant, is presumed to be insolvent. In order to avoid an order that it be wound up in insolvency it must either rebut that presumption, and prove that it is solvent, or rely upon the exercise of the discretion of the Court pursuant to s 459A of the Corporations Law to decline to order that it be wound up. 44 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; Commissioner of Taxation v 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 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: 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. • 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) 111 CLR 210; Re Tweeds Garages Ltd [1962] Ch 406 at 410 per Plowman J; 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 465-466. • 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 (1988) 6 ACLC 808 at 812 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 seek 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). 66 I agree with his Honour's summary of the principles which govern the exercise of the Court's power to set aside a statutory demand under s 459G of the Act. Those principles also have relevance to the issues in the present case. 67 A point made by Weinberg J which is of particular relevance in the present case is the requirement that, in order to prove that it is solvent, a company under siege - as is the defendant in the present case – needs to place before the court a full exposition of its financial position. Further, it is a necessary matter for a company in the position of the present defendant to come to grips with the fact that there is a distinction between solvency and a mere surplus of assets over liabilities. Here, the defendant has not provided a complete picture of its financial position. In an attempt to value its assets, it has relied upon property valuations undertaken in May and June 2013 which have not been updated and which are no longer current. 68 Even if, as is contended by the defendant here, there is a surplus of its assets over liabilities (a proposition which is, at best, doubtful), it has been demonstrated very firmly, by reason of the facts and matters to which I have referred, that the defendant is clearly unable to pay its debts as and when they fall due. 69 I refused to adjourn the matter again on 4 March 2014 because I considered that there was no point in doing so. I had previously given the defendant every opportunity to come up with the necessary funds to pay out the Commissioner and to procure the necessary refinancing to pay out NAB. I gave the defendant a number of opportunities to do this, but it was unable to successfully put together a package which would have the necessary result. 70 The defendant relied upon some passages in a judgment of Dodd-Streeton J (when her Honour was a judge of the Supreme Court of Victoria) in Crema (Vic) Pty Limited v Landmark Property Developments (Vic) Pty Limited (2006) VSC 338 at [167]-[173]. At [168], her Honour said that there was a general rule that a creditor will be entitled to a winding up order in circumstances where the debtor has failed to comply with a statutory demand, but that, even in those circumstances, the Court retains a discretion whether to make such an order. Those remarks were made by her Honour in the context of an appeal from a Master's refusal to adjourn a winding up application and from the Master's subsequent decision to make a winding up order. At [172], despite her Honour's earlier reference to the Court's general discretion, her Honour set out a number of reasons why the Master was correct when he refused to grant an adjournment of the case and was also correct when he made the winding up order. 71 In my judgment, her Honour's reasons in Crema do not assist the defendant in the present case. Rather, they assist the Commissioner. 72 I do not think that the present case calls for the exercise of any residual discretion. It is unfortunate that the defendant, along with the other members of the Dagher group, has been unable to refinance the Group's debt to NAB and to pay the amount due to the Commissioner. But, as the above exposition of the history of the matter amply demonstrates, there is little prospect that either of those things will occur in the near future. For those reasons, I propose to grant the relief sought by the Commissioner. 73 I make the following orders: (1) That the defendant be wound up in insolvency pursuant to section 459A and 459P of the Corporations Act 2001 (Cth). (2) That Scott Pascoe of PPB Advisory be appointed as Official Liquidator of the defendant. (3) That the costs of the plaintiff be paid out of the assets of the defendant. I certify that the preceding seventy (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 13 March 2014