New South Wales Supreme Court CITATION : Aust Yieh Stainless Pty Limited v Horans Steel Pty Limited [2000] NSWSC 244 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4173/99 HEARING DATE(S) : 28/03/00 JUDGMENT DATE : 28 March 2000 PARTIES : Aust Yieh Stainless Pty Limited (ACN 076 379 587) (Plaintiff/Appellant) Horans Steel Pty Limited (ACN 000 048 233) (Defendant/Respondent) JUDGMENT OF : Santow J COUNSEL : P A Beale (Plaintiff/Appellant) T G R Parker (Defendant/Respondent) SOLICITORS : McGrath Dicembre & Co (Plaintiff/Appellant) Allen Allen & Hemsley (Defendant/Respondent) CATCHWORDS : CORPORATIONS — General solvency argued at winding up stage — No leave required under s459S of Corporations Law — Not in dispute that company had failed to set aside statutory demand but was solvent even if debt was paid in full — Registrar's order declining to wind up confirmed. LEGISLATION CITED : Corporations Law, s459S Alcatel Australia Ltd v P R B Holdings Pty Ltd (1998) 27 ACSR 708 Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1995) 13 ACLC 229 Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 14 ACLC 1759 CASES CITED : Kekatos v Holmark Construction Co Pty Ltd (1995) 13 ACLC 1581 Liverpool Cement Renderers (Aust) Pty Ltd v Landmarks Constructions (NSW) Pty Ltd (1996) 19 ACSR 411 Mandarin International Developments Pty Ltd v Growthcorp (Australia) Pty Ltd (Santow J, 23 March 1998 unreported) Master Paving Pty Ltd v Heading Contractors Pty Ltd (1997) 15 ACLC 1025 Switz v Glowbind ([2000] NSWCA 37, 10 March 2000, unreported) DECISION : Plaintiff's Motion dismissed with costs. REVISED — 29 March, 2000 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY SANTOW J No. 4173/99 AUST YIEH STAINLESS PTY LIMITED (ACN 076 379 587) Plaintiff HORANS STEEL PTY LIMITED (ACN 000 048 233) Defendant JUDGMENT — ex tempore 28 March 2000 1 The Plaintiff applies by Notice of Motion for the substitution of contrary orders to those made by the Registrar on 2 November 1999. Essentially, the Registrar declined to wind-up the First Defendant and the Plaintiff presses the Court to substitute orders which would have the effect that the First Defendant would be wound up. 2 This is in circumstances where: (a) The Defendant did not apply to set the Plaintiff's Statutory Demand aside and in particular did not contend that the Defendant was solvent, and (b) Where it is common ground that even if the Defendant were to pay the whole amount of the Statutory Demand the Defendant would be solvent. 3 The Plaintiff's argument depends upon the incorrect proposition that the Defendant should have applied for leave of the Court under s459S(1) of the Corporations Law as a mandatory pre-condition to opposing the application for winding up. Then it is said, correctly that the Defendant has not done so; it is also said that the Defendant could not have got this leave in any event. This, it is said, is because the Defendant necessarily would be relying on a ground which, in the words of s459S(1), "(a) that the company relied on for the purposes of an application by it for the demand to be said 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)." 4 In a context where general solvency is now relied upon to resist winding up, that proposition is based upon the premise that a corporation could have raised general solvency earlier in support of an application for a demand to be set aside. 5 There is clear authority refuting that premise, holding that solvency is not a ground on which a statutory demand may be set aside: Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1995) 13 ACLC 229 at 240-243; Liverpool Cement Renderers (Aust) Pty Ltd v Landmarks Constructions (NSW) Pty Ltd (1996) 19 ACSR 411 at 418; Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 14 ACLC 1759 at 1762-1763; Master Paving Pty Ltd v Heading Contractors Pty Ltd (1997) 15 ACLC 1025 at 1031-1032; Mandarin International Developments Pty Ltd v Growthcorp (Australia) Pty Ltd (Santow J, 23 March 1998 unreported). It follows that a defendant company is not prevented by s459S from raising general solvency as a defence at the hearing of the application; indeed that is the proper course. 6 It should be mentioned that Young J in Kekatos v Holmark Construction Co Pty Ltd (1995) 13 ACLC 1581 purported to grant leave to a defendant company under s459S to adduce, at the hearing of the winding up application, evidence that it was solvent. The grant of such leave was also assumed to be possible by me in Alcatel Australia Ltd v P R B Holdings Pty Ltd (1998) 27 ACSR 708 at 713; see also McPherson, The Law of Company Liquidation (4th edition, 1999) at page 83. However, in Kekatos the point does not seem to have been debated and the Chippendale decision was not cited. In Alcatel the relevant statement by me was obiter, but at the same time I reaffirmed the line of authority which has been set out above: see at 712. That line of authority should be followed and applied by the Court in this case. In any event, if the Defendant had required leave under s459S to prove its solvency contrary to my conclusion that it did not, then it would clearly have been appropriate to grant such leave: compare Kekatos at 1582. 7 There is nothing in the Court of Appeal's recent decision in Switz v Glowbind ([2000] NSWCA 37, 10 March 2000, unreported) in any way contradicting these propositions. That judgment bears rather upon the implications of the presumption of insolvency following the failure to meet a statutory demand or set it aside. It is for the company concerned to establish solvency, the onus being squarely upon it to do so, unaffected by how the party with the statutory demand chooses to argue solvency at the s459S application stage. Those issues do not arise here. 8 It follows that the Registrar's decision was correct and the Plaintiff's motion should be dismissed with costs. ********** Last Modified: 09/25/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.