In the Matter of Fat Dog Slim Pty Ltd [2012] NSWSC 1617

Supreme Court New South Wales

Medium Neutral Citation: In the Matter of Fat Dog Slim Pty Ltd [2012] NSWSC 1617 Hearing dates: 29 October 2012 Decision date: 29 October 2012 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: The defendant be wound up in insolvency Catchwords: CORPORATIONS - creditor's statutory demand - where defendant has not complied with demand - whether defendant has rebutted presumption of insolvency Legislation Cited: (Cth) Corporations Act 2001, s 459P Category: Principal judgment Parties: Dr Neil's Pet and Equine Supplies Pty Limited - Plaintiff Fat Dog Slim Pty Limited - Defendant Representation: Counsel: P Mitchell (Solicitor agent) – Plaintiff S Hughes (Solicitor) – Defendant Solicitors: Peter Winters & Co – Plaintiff Bartier Perry P/L – Defendant File Number(s): 12/ 269578

Judgment (EX TEMPORE) 1HIS HONOUR: By originating process filed on 29 August 2012, the plaintiff Dr Neil's Pet and Equine Supplies Pty Limited claims an order pursuant to (Cth) Corporations Act 2001, s 459P, that the defendant Fat Dog Slim Pty Limited be wound up in insolvency, and that a liquidator be appointed. 2On 21 June 2012, the plaintiff served on the defendant a creditor's statutory demand claiming a sum of $16,361.07, for pet supplies supplied by the creditor to the company during January 2012. Copy invoices were annexed to the creditor's statutory demand. No application was made to set aside or vary the creditor's statutory demand. The defendant did not comply with the demand. As a result, the defendant is presumed to be insolvent. 3The plaintiff filed its originating process for a winding up order on 29 August 2012. The originating process was served on the defendant on 30 August 2012, as appears from the affidavit of Shirley Anne Glover sworn that day. In any event, the defendant has filed a notice of appearance in the proceedings. Notice of the application has been duly lodged with the Australian Securities and Investments Commission ("ASIC"), and published on the ASIC website. David Ian Mansfield, an official liquidator of Moore Stephens Chartered Accountants, has consented to be appointed liquidator. 4The defendant opposes the winding up order, asserting that it is not insolvent. It bears the burden of displacing the presumption of insolvency that arises from non-compliance with a creditor's statutory demand. In order to rebut that presumption, it tenders evidence of its financial position as disclosed in a balance sheet as at 30 June 2012, and more recently as at 26 September 2012. The 30 June 2012 balance sheet discloses total assets of $71,842, including a shareholder receivable of $49,500, and liabilities of $68,849, including secured shareholder loans of $50,000 and trade creditors of $18,849. However, in response to an inquiry from the plaintiff in the course of negotiations that preceded service of the creditor's statutory demand, the defendant, on 30 May 2012, informed the plaintiff that there were 18 unsecured creditors totalling $160,000, of which $85,000 was owed to Mr Van der Burg's wife's accounting practice, and which she had apparently agreed to waive "as long as all unsecured creditors settle." It was alleged that nine had settled at 34 cents in the dollar, and the remaining seven had agreed verbally to do so, but executed deeds were awaited. It is very difficult to see how in those circumstances, trade creditors as at 30 June 2012 could have been only $18,849, when the plaintiff's claim accounts for more than $16,000 on its own. 5The 26 September 2012 balance sheet shows total assets of $41,867, total liabilities of $41,530, and net assets of $337. The liabilities include secured shareholders loans of $25,500, trade creditors of $13,030, and accruals of $3,000. Given that the plaintiff's claim - which is not open to dispute - exceeds $16,000, it is impossible to see how trade creditors could be only $13,030. If they are increased to $16,000 or so dollars, which would cover the plaintiff's claim alone and make no provision for other trade creditors, that would leave an excess of liabilities over assets. 6Strong evidence of insolvency is provided by the circumstance that during May the defendant was endeavouring to settle with all its unsecured creditors for 34 cents in the dollar. That is a powerful indicia of insolvency. 7The defendant relies on an affidavit of Juliette Van der Burg of 27 September 2012, in which she says that she is a director and secretary of Casper Financial Services Pty Limited, which holds $16,867 in trust for the defendant - which sum is said to exceed the full amount of the plaintiff's claim - and deposes that should the defendant require further funding, then to the extent that its other shareholder does not provide it, her company will provide that funding. 8In my view, that is insufficient to remove or displace the evidence of insolvency on the face of the defendant's current balance sheet, and its inability to pay its trade creditors more than 34 cents in the dollar. 9In my view, the presumption of insolvency has not been displaced. 10I order that the defendant, Fat Dog Slim Pty Limited, be wound up in insolvency. 11I appoint David Ian Mansfield liquidator of the defendant.