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Judgment - EX TEMPORE

1. By Originating Process filed on 26 August 2014, the Deputy Commissioner of Taxation brings an application under ss 459A and 459P of the Corporations Act 2001 (Cth) to wind up Best and Solid International Pty Ltd ("Company") on the grounds of insolvency. Section 459A of the Corporations Act permits the Court to order that an insolvent company be wound up in insolvency. Section 459P specifies the persons who may make such an application, which include a creditor of the company. The application is based on a creditor's statutory demand for payment dated 12 June 2014 which claimed an amount said to be due to the Deputy Commissioner of Taxation in the amount of $82,161.16, made up of an amount claimed to be a running balance account deficit debt as at 12 June 2014 in respect of amounts due under the business activity statement provisions of the Income Tax Assessment Act 1997 (Cth)and a further amount of $65,656.22 said to be referrable to the superannuation guarantee charge as at 12 June 2014. The statutory demand was in turn supported by an affidavit of Mr Gordon Rogers dated 12 June 2014 which deposed to Mr Rogers' access to the Australian Taxation Office's computer system and deposed that the total of the amounts was due and payable by the Company.
2. There is evidence of service of the creditor's statutory demand upon the Company by post, and there has been no suggestion that such service was not effective. It appears that the creditor's statutory demand was not sought to be set aside and was not complied with. As I noted above, on 25 August 2014 the Deputy Commissioner of Taxation commenced proceedings to wind up the company and there is evidence of service of the Originating Process, the affidavit in support and affidavit of service of the statutory demand and a consent of liquidator upon the Company by post, in Ms Calleja's affidavit dated 18 September 2014.
3. There is a further affidavit dated 3 November 2014 by Mr Mohiuddin which deposes to the maintenance of records by the Australian Taxation Office in respect of recovery action and confirms that the amount of $82,161.16 is due and unsatisfied as at 20 November 2014. There is also evidence of lodgement of notice of the application with the Australian Securities and Investments Commission and publication on its insolvency notices website.
4. I granted leave to Mr Tian, a director of the Company, to be heard on behalf of the Company in opposition to the application, and Mr Tian was also assisted, and matters were translated for him, by his accountant, Mr Cao. Mr Tian refers in his affidavit dated 23 October 2014 to matters which caused difficulty for the Company, including that the Company stopped operating in June 2011, but he says his previous accountant did not tell the Australian Taxation Office of his decision and he did not receive correspondence from the Australian Taxation Office. Mr Tian says he paid all necessary superannuation for company employees and his affidavit annexes voluminous documentation which suggests that the Company paid at least some superannuation payments for some employees. A difficulty arises, however, that first, the question what was all necessary superannuation for the Company's employees may be a matter of dispute, where it appears the assessment in this matter results from an audit undertaken by the Australian Taxation Office and, second, that this is not an application to set aside a statutory demand, but instead an application to wind up the Company whether there is an unsatisfied statutory demand. I will refer to that matter further below.
5. Mr Tian indicates that he hopes that the Australian Taxation Office will withdraw the proceedings, because he wants to keep the Company, and he will "do the right thing" (in his words) and pay all Australian Taxation Office fees in time. I should note, however, that the Court's jurisdiction to wind up companies is directed, not only to the position of the creditor which served a creditor's statutory demand, but to the public interest that an insolvent company ought not be permitted to incur further debts which, by definition, it will be unable to meet as and when they fall due. Mr Tian's further affidavit dated 30 October 2014 refers to discussions with the Australian Taxation Office which have not led to fruition and to claims that his Company paid $22,945.39, which is more, he contends, than was due, but significantly less than the Australian Taxation Office claims by way of the superannuation guarantee charge.
6. Mr Tian also relies on a final statement, which indicates that he has suffered tragic events over the last 2 years, including the loss of two family members, who are employees who worked for him in China, and who were close members of his family, and has also lost his other property, other than the Company, because of resultant hardship. These are matters which ought to be the subject of sympathy. However, in exercising a jurisdiction to wind up a company, the Court must direct its attention to the matters which are the subject of its statutory jurisdiction to wind up companies, and in particular to the question whether the Company has established its solvency.
7. I should now return to the nature of the jurisdiction which the Court exercises. In the present case, this is an application to wind up a company based on an unsatisfied statutory demand, which was neither set aside nor satisfied within 21 days, and which gives rise to a presumption of insolvency. Section 459S of the Corporations Act in turn provides that, where an application for a company to be wound up in insolvency relies on a failure to comply with the statutory demand, the company may not oppose the application on a ground that it could have relied on for the purposes of an application to set aside the demand, or could have, but did not rely on. In the present case, it is not open to the Company, in this application, to contend that the debt owed to the Australian Taxation Office is disputed, because it did not advance that case in any application to set aside the creditor's statutory demand. The section may operate in a way that is individually harsh to a particular defendant, but that operation is necessary, in the public interest, to achieve the statutory purpose that disputes as to the validity of a statutory demand be determined at an early stage, and not on winding up applications. The Court is in turn not permitted to grant leave to lead evidence in an application under s 459S of the Corporations Act, unless it is satisfied that the ground of application is material to proving that the company is solvent.
8. This approach reflects a legislative policy that was recognised by Gleeson CJ, Hayne, Crennan and Kiefel JJ in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314 at [14] in a passage that is in turn cited by the High Court in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473 at [15] where Gummow ACJ, Heydon, Crennan and Kiefel JJ emphasised that the purpose of Part 5.4 of the Corporations Act was to bring about speedy resolution of applications to wind up companies in insolvency, and it did so by focussing attention at the hearing of the winding up application upon whether the company was insolvent rather than upon defects in the procedures that preceded the institution of the application for the winding up. Their Honours in turn pointed to s 459S of the Corporations Act, as limiting the grounds on which a company may oppose a winding up application which is founded on failure to comply with a statutory demand.
9. At its highest, the evidence led by Mr Tian in this case suggests that there may be a dispute as to the amount of the creditor's statutory demand, in respect of the superannuation guarantee charge, so far as Mr Tian considers that that charge is higher than he expected it to be. The evidence does not suggest, as far as I can tell, that there is a dispute that is to the running balance, although there may be a suggestion that that reflects the fact that the Company had not advised the Australian Taxation Office, or its former accountant had not advised the Australian Taxation Office, that it was ceasing to trade. In any event, the difficulty facing the Company is that s 459S of the Corporations Act makes clear that, in this application, it is not open to the Company to challenge the accuracy of the creditor's statutory demand, where it could have sought to establish, but did not seek to establish, that the debt was genuinely disputed in seeking to set aside that demand. The evidence on which Mr Tian relies does not establish that the Company is solvent. Indeed, Mr Tian's evidence seems to go no further than an indication that he hopes that the Company might be permitted to continue in business, and that he would seek to comply with tax obligations going forward. There is no suggestion that the Company can now meet the debt, or part of the debt, claimed by the Australian Taxation Office and, more importantly, there is no evidence of the Company's solvency generally, by way of the kind of information which would be necessary to establish solvency, such as a cashflow of the Company going forward which established that its income was sufficient to meet its debts as and when they fell due. The Company has therefore not discharged the onus that rests upon it, in an application of this kind, in establishing solvency so as to rebut the resumption of insolvency which arises from the unsatisfied statutory demand.
10. One can have sympathy for Mr Tian's misfortune, as I do, without reaching the result that the Corporations Act should not be applied, in accordance with its terms, so that a company which is presumed to be insolvent, by reason of the unsatisfied statutory demand, should be wound up on that basis. The Court does not have a jurisdiction or power to exercise any discretion, contrary to the statute, not to take that course where its grounds are otherwise established. For these reasons, I am satisfied that an order must be made winding up the Company. As I have noted, there is a consent to the appointment of a liquidator, namely Mr David Kerr of RMS Bird Cameron Partners. I make orders in accordance with paragraphs 1 and 2 of the short minutes of order initialled by me and placed in the file. Costs
11. The Deputy Commissioner of Taxation seeks an order for costs of the proceedings, as against the Company only, in the amount of $2,471.61. The Deputy Commissioner of Taxation and his solicitors have, responsibly and appropriately, not sought an order for costs against Mr Tian personally, notwithstanding that it is possible that the application took somewhat longer than it might have done because of his involvement. The application for costs includes the filing fee, publication fees and other fees associated with a winding up application, and a modest allowance for professional fees in the amount of $1,195 which is plainly a modest claim in respect of what has ultimately been a contested winding up application.
12. The Court has often recognised the desirability of making lump sum costs orders in winding up applications, where there is a real question as to whether those orders will ultimately be satisfied, and the costs of an assessment may be wasted. I am satisfied that an order for costs on a lump sum basis should be made for the amount claimed by the Plaintiff and that I therefore also make order 3 in the form of the order sought by the Plaintiff, such that the Plaintiff's costs of the proceedings be fixed in the specified amount, which will be costs in the winding up. I direct that the Court seal be applied to the notice to liquidator of appointment.