Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd [2011] HCA 18 | Case summary

What happened

Lanepoint Enterprises Pty Ltd was a property developer within the Westpoint Group. Its activities were funded by loans from Suncorp-Metway Limited and from Westpoint Management Ltd as responsible entity for the Westpoint Income Fund (WIF). Both loans were secured by floating charges. In late 2005 ASIC issued interim and then final stop orders preventing Westpoint Management from raising further funds from the WIF. Provisional liquidators were appointed to Westpoint Management in February 2006. In March 2006 both Suncorp and the provisional liquidator of Westpoint Management appointed receivers and managers to Lanepoint. The appointment of receivers under the floating charges triggered the statutory presumption of insolvency in s 459C(2)(c) of the Corporations Act 2001 (Cth).

On 2 June 2006 ASIC applied under s 459P for leave to seek, and for an order that Lanepoint be wound up in insolvency. The application relied squarely on the presumption. Lanepoint filed a notice of opposition asserting it was solvent. The critical factual contest concerned the extent of Lanepoint's indebtedness to the WIF. The receivers had calculated that, as at 9 March 2006, Lanepoint owed the WIF $6,607,978.41. Lanepoint contended that accounting adjustments made after the receivers' appointment—the so-called "Kingdream transfer" of $2 million and the "$2M run-around" involving round-robin entries with Bowesco Pty Ltd and Goldtag Pty Ltd—reflected the true position and reduced its net liability by approximately $5 million. If those adjustments were accepted, Lanepoint's assets exceeded its liabilities and it was arguably solvent within the s 95A definition.

The matter was heard by Gilmour J over three days in 2008. Lanepoint called Mr Norman Carey (a director and the moving mind of the Westpoint Group) and Mr Gregory Nairn (Group Financial Controller) to explain why the original ledger entries recording advances from the WIF to Lanepoint required "correction". Other accountants who had been involved in the original entries were not called. Gilmour J found the explanations unsatisfactory. He concluded that the adjustments had been made with knowledge that ASIC's stop order was imminent, that they had the effect of diminishing the WIF's ability to meet its obligations to investors, and that the substituted debtors (Kingdream and Goldtag) were not realistically able to repay. His Honour described the transactions as improper and ineffective for the purpose of reducing Lanepoint's liability and noted they would be liable to be set aside by the WIF liquidator under s 588FF, although no such application was before him. Accordingly, he found that Lanepoint had failed to rebut the presumption and was unable to pay its debts as and when they fell due. Orders for winding up were made on 14 May 2009.

A majority of the Full Court of the Federal Court (North and Siopis JJ, Buchanan J dissenting) allowed Lanepoint's appeal. Their Honours held that the primary judge had erred in exercising his discretion to determine the solvency question within the winding-up proceeding rather than staying it pending separate proceedings by the WIF liquidator to determine the true extent of the debt. They characterised the dispute as analogous to the pre-1993 "disputed debt" cases and considered that the legislative policy of the 1993 reforms favoured resolution of such disputes outside the winding-up process. They ordered a stay until the liquidator had determined the WIF liability, even though no such proceedings had been commenced or foreshadowed by the liquidator. ASIC was granted special leave and appealed to the High Court.

The High Court (Gummow, Heydon, Crennan, Kiefel and Bell JJ) unanimously allowed the appeal. The Court held that the pre-1993 principle had no application to an application by ASIC relying on the statutory presumption, that the onus was on Lanepoint to prove solvency, that the primary judge's discretion had not miscarried, and that there was no warrant for joinder of other parties or for awaiting liquidator proceedings. The Full Court's orders were set aside and Lanepoint's appeal to that Court was dismissed with costs. The practical effect was to restore the winding-up order.

Why the court decided this way

The High Court's reasoning begins from the statutory text and the deliberate changes introduced by the Corporate Law Reform Act 1992 (Cth) which took effect in 1993. The new Pt 5.4 created a presumption of insolvency in defined circumstances, including the appointment of receivers under a floating charge (s 459C(2)(c)). Subsection (3) expressly provides that the presumption "operates except so far as the contrary is proved". Once the presumption arose, the onus shifted to Lanepoint to prove, on the balance of probabilities, that it was solvent within the s 95A meaning—able to pay all its debts as and when they become due and payable.

The Court emphasised that the pre-1993 principle that a winding-up order would not ordinarily be made on a debt that was bona fide disputed on substantial grounds was developed in a different statutory context. That principle served two related purposes: to prevent a creditor from using the winding-up jurisdiction to pressure a solvent company into paying a contested sum, and to recognise that the petitioner might not be a creditor at all if the dispute was genuine. Neither rationale applied to ASIC, which does not claim as a creditor and does not seek to recover a debt. More fundamentally, the principle had no operation where the company was in fact insolvent. Under the new regime the presumption itself treats the company as insolvent unless the contrary is proved. Therefore the old principle could not be transposed so as to create an assumption in favour of a stay or dismissal whenever a debt was disputed.

The Court carefully distinguished the statutory-demand procedure (Divisions 2 and 3 of Pt 5.4) from an application by ASIC relying on the receiver-appointment presumption. Where a creditor serves a statutory demand, the company must challenge it within 21 days or face the presumption. Disputes are expected to be resolved on the set-aside application, and s 459S restricts the grounds that can be raised at the winding-up hearing. These provisions reinforce the policy of speedy resolution. But they say nothing about the position where, as here, ASIC relies on s 459C(2)(c) rather than a failed statutory demand. In that situation the court must determine whether the company has discharged its onus. Practical convenience remains relevant—echoing Gibbs J in In re QBS Pty Ltd—but is now constrained by the onus, the six-month target in s 459R, and the absence of any identified additional evidence that would justify delay.

Gilmour J had conducted a three-day hearing, received all the evidence Lanepoint wished to lead, and made detailed credit findings. No application for adjournment was pressed at the hearing. Lanepoint pointed to no further evidence that could be called. In those circumstances it was open to the primary judge to resolve the solvency question rather than defer it. The Full Court's view that the winding-up proceeding was an "inappropriate vehicle" for determining the debt question overlooked that the debt question arose only because Lanepoint sought to rebut the presumption. The Court was not being asked to make final orders under s 588FF; the primary judge's observations about the transactions being liable to be set aside were made only to explain why he did not accept the witnesses' accounts. Those observations did not bind the liquidator or create issue estoppels that required other parties to be joined. An order winding Lanepoint up does not directly affect the legal rights of other Westpoint companies or their officers; financial ripple effects are not sufficient to require joinder.

The High Court therefore concluded that the primary judge's discretion had not miscarried. Lanepoint had failed to prove solvency. The appeal was allowed, the Full Court's stay set aside, and the winding-up order restored.

Before and after state of the law

Before the 1993 reforms the Corporations Law (and its predecessor the Companies Code) permitted a winding-up order where the company was "unable to pay its debts" but contained no statutory definition of insolvency. The most common route for creditors was the statutory demand procedure. Non-compliance created a deeming of inability to pay debts, but that deeming was rebutted if the company showed a genuine dispute on substantial grounds. Even where a creditor proved a debt without a statutory demand, courts would ordinarily dismiss the petition if the debt was bona fide disputed on substantial grounds. The rationale was partly jurisdictional (the petitioner might not be a creditor) and partly to prevent abuse of the winding-up process to collect disputed debts. Texts such as the third edition of McPherson's The Law of Company Liquidation (1987) recorded that the principle had no application to an insolvent company. Courts could adjourn or stay proceedings to allow disputed questions to be resolved elsewhere, as Gibbs J illustrated in In re QBS Pty Ltd and the Privy Council applied in Brinds Ltd v Offshore Oil NL.

The 1993 reforms introduced a statutory definition of solvency in s 95A, modelled on the bankruptcy test in Sandell v Porter. Part 5.4 was rewritten to emphasise speed and certainty. The new s 459C created presumptions of insolvency in several situations, including receiver appointment under a floating charge. The presumption operates unless the contrary is proved. The statutory-demand procedure was tightened with strict time limits, mandatory dismissal of late applications to set demands aside, and the leave requirement in s 459S. The explanatory memorandum and second-reading speeches emphasised that winding-up applications should be determined quickly and that disputed-debt questions should, where possible, be resolved on the demand set-aside application rather than at the winding-up hearing.

After the reforms, therefore, the default position where the presumption applies is that the company must affirmatively prove solvency. The old "disputed debt" practice no longer supplies an assumption in favour of dismissal or stay. The court retains discretion under s 467(1) to adjourn, dismiss or make other orders (including stays), but that discretion must now be exercised against the background of the presumption, the onus it imposes, and the legislative policy of timely resolution. The High Court in this case confirmed that the pre-1993 authorities cannot be applied mechanistically. The decision aligns with earlier High Court statements in David Grant & Co Pty Ltd v Westpac Banking Corporation and Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd that Pt 5.4 is intended to produce quick, certain outcomes.

Key passages with plain-English translation

Paragraph [4]: "The statutory presumption of insolvency provided in s 459C was one. It is an important element of the scheme of Pt 5.4 and assumes importance on this appeal."

Plain-English translation: The presumption is not a side issue; it is central to how the new insolvency winding-up regime works. Once it arises, everything changes because the company must prove it is not insolvent.

Paragraph [30]: "The presumption of insolvency provided by s 459C ... operates unless the contrary is proved for the purpose of the application, placing the onus upon the company to establish that it is solvent within the meaning of the Act."

Plain-English translation: The law starts from the position that the company is insolvent. It is up to the company to come forward with evidence that satisfies the court it can pay all debts as they fall due. ASIC does not have to prove insolvency.

Paragraph [43]: "The current statutory scheme provides no basis for an assumption in favour of a dismissal or stay of proceedings where a company disputes the existence or amount of a debt."

Plain-English translation: Judges should not automatically pause or dismiss a winding-up case just because the company says "we dispute the debt". The old rule was designed for creditor disputes and does not fit the new presumption-based system.

Paragraph [48]: "There can be no doubt that the court's power to adjourn or stay proceedings can, and should, be exercised where the interests of justice require. But no application for an adjournment of the proceedings was current when the hearing before Gilmour J commenced. ... no further evidence was pointed to by Lanepoint as necessary ... and his Honour did not identify any gaps in the evidence."

Plain-English translation: Of course a judge can pause a case if justice demands it. But here Lanepoint never asked for an adjournment at the actual hearing, could not identify any missing evidence, and the judge saw a complete evidentiary picture. In those circumstances it was proper to decide the case on what was before the court.

Paragraph [53]: "It is to be emphasised that the issue did not arise because of an allegation by ASIC that Lanepoint owed the WIF $6.6 million. In order to rebut the statutory presumption of insolvency it was necessary for Lanepoint to prove that it did not owe that sum to the WIF."

Plain-English translation: ASIC never had to prove the exact debt figure. The only reason the debt amount mattered was because Lanepoint was trying to use its accounting story to show it was solvent. It failed to persuade the judge that the story was true.

These passages collectively show the Court grounding every conclusion in the statutory language and the deliberate policy shift effected in 1993.

What fact patterns trigger this precedent

This decision is triggered whenever ASIC (or another eligible applicant) seeks to wind up a company in insolvency relying on the s 459C(2)(c) presumption arising from the appointment of a receiver or receiver and manager under a power contained in an instrument relating to a floating charge. The company opposes on the ground of solvency and seeks to explain away apparently insolvent balance-sheet positions by reference to disputed accounting entries, inter-company transactions, or "corrections" that reduce recorded liabilities.

The precedent applies with particular force where:

the company has had an opportunity to lead evidence over several days but the primary judge rejects the credit of its witnesses;
no further concrete evidence is identified that could be called if the matter were adjourned;
no formal adjournment application is made at the hearing itself;
the disputed transactions involve related companies within a group and have the practical effect of diminishing the assets available to external creditors or investors;
a liquidator of a related entity has not commenced, and does not intend to commence, proceedings under s 588FF or otherwise to determine the debt;
the opponent argues that the winding-up proceeding is an "inappropriate vehicle" for determining complex accounting or director-conduct questions.

The decision is not limited to ASIC applications. It applies equally to creditor applications that rely on the presumption rather than a statutory demand, although the policy against using winding-up to collect disputed debts retains greater force where the applicant is a creditor. The key trigger is the engagement of the statutory presumption and the consequent onus on the company. Where that onus is not discharged on the evidence led, the court is not obliged to defer resolution to await separate proceedings.

How later courts have treated it

Subsequent decisions have treated Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) [2011] HCA 18 as authoritative on the interaction between the s 459C presumption and the court's discretion under s 467. In Re Sales Express Pty Ltd [2012] FCA 1344, the Federal Court cited [43] and [53] for the proposition that once the presumption arises the company must prove solvency and that a mere dispute about a debt does not automatically warrant a stay. The court refused to adjourn a winding-up application where the company could point to no additional evidence.

In Australian Securities and Investments Commission v Letten (No 17) [2013] FCA 153, Middleton J referred to the High Court's emphasis on the six-month target in s 459R and the limited circumstances in which a stay should be granted. The decision has been followed in numerous single-judge applications where companies in group structures have attempted to rebut the presumption by reference to intra-group loan recharacterisations; judges routinely cite Lanepoint for the proposition that the court will decide the solvency question on the material before it rather than defer to a liquidator's future claim.

Intermediate appellate courts have also embraced the reasoning. The New South Wales Court of Appeal in In the matter of Moutere Pty Ltd [2015] NSWCA 42 cited the High Court's analysis of the pre- and post-1993 law and its rejection of an automatic "disputed debt" practice under the current regime. The Victorian Court of Appeal in Re Ausam Resources Ltd [2017] VSCA 6 referred to Lanepoint when confirming that the discretion to stay is not engaged merely because related-party transactions might later be challenged under s 588FF.

The decision has not been distinguished on its core ratio. Later courts have, however, noted that it does not remove the discretion entirely; where concrete prejudice or a clear forensic advantage to separate proceedings is shown, a short adjournment may still be granted. Overall, Lanepoint is treated as settling that the 1993 reforms fundamentally altered the approach to disputed debts in the insolvency winding-up context.

Still-open questions

Several questions remain live after Lanepoint. First, the precise boundaries of the residual discretion under s 467(1) in cases where the company can identify specific, readily available evidence that could not reasonably have been called at the initial hearing. The High Court emphasised that no such evidence was identified in this case; it did not foreclose a stay where such evidence is concretely demonstrated.

Second, the interaction with s 588FF claims by a liquidator. The Court made clear that a winding-up judge is not required to await a liquidator's decision to sue, but left open whether, in an appropriate case, the court might grant a temporary stay to allow a liquidator to commence proceedings that could produce a binding determination of the debt before the winding-up order is made final.

Third, the position of non-ASIC applicants who are also creditors and who rely on the presumption rather than a statutory demand. While the Court held the old principle has no application where the presumption operates, it acknowledged that the abuse-of-process rationale retains some force where the applicant stands to gain a direct commercial advantage from the winding up. The extent to which that rationale can still influence the s 467 discretion remains to be fully worked out.

Fourth, the evidentiary standard required to rebut the presumption in complex group structures. Lanepoint confirms that the company must prove it does not owe the disputed sum, but later cases continue to debate how far a judge may go in making findings about the "impropriety" of transactions without pleadings that would be required in a fraudulent conveyance action. The High Court treated such findings as relevant only to credit; the limits of that approach in future cases are not yet settled.

Finally, the decision assumes that the liquidator had no intention of bringing proceedings. Where a liquidator positively indicates an imminent s 588FF application that will bind all parties, a court might take a different view of the balance of convenience. That scenario was not before the High Court and therefore remains open.

These questions illustrate that while Lanepoint provides a clear framework, its application in the increasingly complex insolvency landscape of corporate groups continues to require careful case-by-case analysis. Practising lawyers should pay close attention to whether concrete additional evidence or a realistic prospect of binding third-party determination can be demonstrated before seeking to invoke the residual discretion to stay.

Judgment (74 paragraphs)

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) [2011] HCA 18

(a) paragraphs 1, 2, 3 and 4 of the order of the Full Court of the Federal Court dated 24 May 2010; and

(b) the further order of the Full Court as to costs dated 9 September 2010, as varied by the order of Siopis J dated 1 October 2010;

and in place thereof order that the appeal by Lanepoint Enterprises Pty Ltd to the Full Court be dismissed with costs.

S J Gageler SC, Solicitor-General of the Commonwealth with P D Crutchfield SC and O Bigos for the appellant (instructed by Australian Securities and Investments Commission)

G R Donaldson SC with A J Papamatheos for the respondent (instructed by Mony de Kerloy)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed)

Corporations law - Winding up in insolvency - Application for winding up by Australian Securities and Investments Commission - Where respondent presumed insolvent under s 459C(2)(c) of Corporations Act 2001 (Cth) ("Act") - Where principle applying under former companies legislation that company will not be wound up where debt subject of bona fide dispute on substantial ground - Whether principle applicable to Act in light of presumption of insolvency - Whether respondent solvent - Where primary judge did not accept respondent's explanation for alterations to accounts and no further evidence relevant to solvency could be identified by respondent - Whether primary judge's exercise of discretion miscarried in refusing to dismiss or stay proceedings - Whether necessary to join other parties.

Words and phrases - "except so far as the contrary is proved".

Corporations Act 2001 (Cth), ss 459A, 459C, 459P, 467.

GUMMOW, HEYDON, CRENNAN, KIEFEL AND BELL JJ. The respondent, Lanepoint Enterprises Pty Ltd ("Lanepoint"), is a company within the Westpoint Group of companies and in 2005 was a developer of property. Its operations were financed by loans from Suncorp-Metway Limited ("Suncorp") and from Westpoint Management Ltd ("Westpoint Management"), which was the responsible entity for a managed investment scheme, the Westpoint Income Fund ("the WIF"). The loans were secured by floating charges over the assets of Lanepoint.
On 25 October 2005 the Australian Securities and Investments Commission ("ASIC") issued the first of two interim stop orders, which prevented Westpoint Management from raising funds for the WIF. The final stop order was issued on 23 November 2005. On 9 February 2006 a provisional liquidator was appointed to Westpoint Management. On 3 March 2006 Suncorp appointed receivers and managers to Lanepoint. The provisional liquidator of Westpoint Management did likewise on 9 March 2006.
On 2 June 2006 ASIC applied, pursuant to s 459P of the Corporations Act 2001 (Cth) ("the Act"), to the Federal Court for orders that it have leave to apply for the winding up of Lanepoint in insolvency, for an order that Lanepoint be wound up and for the appointment of liquidators on the ground of Lanepoint's insolvency. In its application ASIC relied upon a statutory presumption of insolvency created by s 459C(2)(c) of the Act.
Section 459C appears in Pt 5.4 of the Act, which is entitled "Winding up in insolvency". Part 5.4 was introduced on 23 June 1993[1] and, together with Pts 5.4A and 5.4B, replaced the existing Pt 5.4 which dealt with orders for the winding up of companies. The provisions for winding up in insolvency which took effect in 1993 effected some significant changes. The statutory presumption of insolvency provided in s 459C was one. It is an important element of the scheme of Pt 5.4[2] and assumes importance on this appeal. The section has effect, inter alia, for the purposes of an application to wind up a company in insolvency brought under s 459P and an application for leave under that section[3]. It provides in relevant part:

"(2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:

(c) a receiver, or receiver and manager, of property of the company was appointed under a power contained in an instrument relating to a floating charge on such property;".

Sub-section (3) of s 459C provides that the presumption for which the section provides "operates except so far as the contrary is proved for the purposes of the application."
Lanepoint filed a notice of opposition to ASIC's application. The ground given for that opposition was that Lanepoint was solvent. If it was able to satisfy the Court of that fact, the statutory presumption would be rebutted.
It was common ground at the hearing of ASIC's application that Lanepoint's assets amounted to $5,729,837. Its liabilities, by way of tax and certain company loans, were of the order of $1.7 million. By the time of the hearing the debt due to Suncorp had been repaid but the liquidator of Westpoint Management had not recovered the debt to the WIF. The extent of that debt was the matter critical to the issue of Lanepoint's solvency. The receivers and managers of Lanepoint had expressed the opinion that the amount due by Lanepoint to the WIF, at 9 March 2006, was $6,607,978.41 and the liquidator of Westpoint Management agreed.
In concluding that Lanepoint owed that amount to the WIF, the receivers and managers did not accept as correct certain changes which had been made to the accounts of Lanepoint and the WIF and which had the effect of reducing Lanepoint's indebtedness to the WIF by some $5 million. One change made to the accounts was referred to in the proceedings as the "Kingdream transfer" and the other, which resulted from two "round robin" transactions, the "$2M run‑around". Lanepoint sought to establish that the changes reflected the true position, which is to say that the transactions in question were bona fide and effective, and that it was therefore solvent.
The hearing of evidence took place over three days in 2008 and Gilmour J made the orders sought by ASIC on 14 May 2009[4]. His Honour did not accept the explanation proffered by the witnesses called by Lanepoint, as to why the original records of monies advanced by the WIF to Lanepoint required correction. His Honour concluded that "Lanepoint has failed to establish its solvency and, thereby, rebut the statutory presumption. It is not able to pay its debts as they fall due and payable."[5]
A majority of a Full Court of the Federal Court (North and Siopis JJ, Buchanan J dissenting) allowed an appeal from his Honour's decision, set aside the orders made by his Honour and ordered a stay of ASIC's application "pending the determination of proceedings brought by the liquidator of Westpoint Management to determine the extent of the WIF liability."[6] Such proceedings had not in fact been brought. Their Honours must be taken to refer to proceedings yet to be initiated for that purpose by the liquidator, although there was no suggestion that the liquidator had the intention of doing so.

"is also to be informed by the legislative policy manifest by the reforms introduced by the Corporate Law Reform Act to the effect that where a disputed debt is relied upon as being demonstrative of insolvency, that dispute should be resolved outside of the winding-up process."[10]

It may be observed at once that their Honours do not appear to distinguish between ASIC and a creditor applying for an order to wind up in insolvency. Their Honours treat the question about the extent of Lanepoint's liability to the WIF as analogous to a dispute about the amount of a debt owed by a company to a creditor who is applying to wind up the company. The "policy" to which their Honours refer must therefore relate to the procedures provided by the 1993 amendments for the resolution of disputes concerning statutory demands by creditors. As will be explained in these reasons, the approach taken by their Honours to the status of ASIC and as to principles affecting the determination of its application is not correct. However, that approach necessitates consideration of the position of creditors as applicants for winding up in insolvency in the current statutory scheme. For present purposes it may be further observed that their Honours considered that the current statutory scheme does not inhibit the application of principles which informed the exercise of the court's discretion in the past. Attention is therefore directed to those principles and the statutory context in which they were applied.

The relevant provisions of the Corporations Law, as it existed prior to the 1993 amendments, were in relevant respects the same as those of the previous Companies Code. The then Australian Securities Commission could bring proceedings for the winding up of a company, in certain circumstances[11]. A circumstance which permitted an order for the winding up of a company to be made was where the company was "unable to pay its debts"[12]. No further definition of insolvency was provided. The most common method used by creditors to establish the fact that a company was unable to pay its debts was the "statutory demand" procedure[13]. The procedure did not require a creditor to have a final judgment for the sum demanded. If the sum the subject of the demand was not paid within the prescribed period, or the company failed otherwise to secure or compound the sum to the reasonable satisfaction of the creditor, the company was "deemed to be unable to pay its debts"[14].
Non-compliance with the demand did not always result in the presumption applying. If the company proved that it had a genuine dispute, on a substantial ground, concerning the existence or amount of the debt, failure to comply with the notice or demand was not considered to give rise to a presumption that the company was unable to pay its debts. In the third edition (1987) of McPherson's The Law of Company Liquidation it is stated that the existence of such a dispute explained why the demand was not complied with "and so rebuts the presumption of insolvency which would otherwise arise."[15]
Where a creditor sought to prove a company's insolvency by relying upon a debt owed by it, but without resort to the procedure of statutory demand, the court, as a general principle, would not order winding up where a debt was bona fide disputed upon some substantial ground[16]. The principle informed the court's discretion whether to dismiss the application. McPherson says that, although the principle may have had some basis in the court's concerns as to the status of the applicant for winding up as a creditor where there was a genuine dispute about the debt, the principal reason for it was that the court would not permit an application for winding up to be used for the improper purpose of compelling a solvent company to pay a disputed debt[17]. It followed that it had no application in the case of an insolvent company.
The power given to the court to order a winding up of a company was expressed in permissive terms[18], as it is now. Subject to two express limitations, the court could dismiss the application[19]. And the court might refuse to make an order for winding up even if a creditor proved a debt, although the discretion to do so was regarded as one to be exercised according to defined principles[20]. More pertinent to the present case was the practice of the court to dismiss an application for winding up where a debt was the subject of a genuine dispute on substantial grounds[21]. The practice is explained by the principles discussed above. An order for dismissal would not be made in the case of an insolvent company.

"In some such cases convenience may require that the court decide the question whether or not a debt exists, but in other such cases it may appear better to allow that question to be determined in other proceedings before the petition for winding up is heard."

The question necessary to be determined in In re QBS Pty Ltd was whether payments made by the company were preferences. Gibbs J considered that that question could conveniently be decided in proceedings which had been brought by the petitioner for that purpose and which were pending. To that end his Honour made an order staying the proceedings on the petition until the determination of the other proceedings. By contrast, in Brinds Ltd v Offshore Oil NL[24] the Privy Council (which cited the observations of Gibbs J in In re QBS Pty Ltd with approval[25]) considered that, having regard to the nature of the dispute and the course the proceedings took, it was almost inevitable that the trial judge should determine the question which there arose, namely whether the debt was repayable on demand or only on 12 months notice. The intermediate appeal court in that case had observed that no evidence, in addition to that which had been tendered, could be identified by the company and it could not be said that the witnesses should have been cross-examined on other topics[26]. Similar observations were made by Gilmour J in this case[27].

Included amongst the amendments effected in 1993 was a definition of insolvency. Pursuant to s 95A, a person is solvent if, and only if, the person is able to pay all the person's debts as and when they become due and payable[28]. A person who is not solvent is insolvent[29]. The words of s 95A are similar to those in s 95 of the Bankruptcy Act 1924 (Cth) ("unable to pay his debts as they become due from his own money") which were discussed by Barwick CJ in Sandell v Porter[30].
The presumption of insolvency provided by s 459C has previously been mentioned. It applies in proceedings brought under s 459P and operates unless the contrary is proved for the purpose of the application, placing the onus upon the company to establish that it is solvent within the meaning of the Act.
Section 459P(1) of the Act lists those persons and entities who may apply for an order that a company be wound up in insolvency. The list includes ASIC, but it is required to obtain the leave of the court to do so[31], which is to be granted only if the court is satisfied that there is a prima facie case that the company is insolvent[32]. However, as previously mentioned the statutory presumption, which arises in the circumstances provided in s 459C, applies on an application for leave.
An application for a company to be wound up in insolvency is required to be determined within six months after it is made, subject to the court extending that time in special circumstances[33]. Orders of this kind were made in the present case.
Section 459A provides that, upon the hearing of an application brought under s 459P, the court "may order that an insolvent company be wound up in insolvency." The extent of the discretion to refuse such an order is put beyond doubt by the terms of s 467(1), which appears in Pt 5.4B and provides that:

"(1) Subject to subsection (2) and section 467A, on hearing a winding up application the Court may:

(a) dismiss the application with or without costs, even if a ground has been proved on which the Court may order the company to be wound up on the application; or

(b) adjourn the hearing conditionally or unconditionally; or

As was the case with respect to the earlier legislation, "other order" is apt to include an order staying the proceedings.

Statutory demands by creditors are dealt with in Divs 2 and 3 of Pt 5.4. A creditor may serve a demand for monies to be paid by a company[34] and then base its application to wind up the company, under s 459P, upon a failure to comply with that demand. The statutory presumption of insolvency applies in the event of failure to comply[35]. Section 459F states what constitutes a failure to comply. It requires that the demand be in effect at the end of the period of compliance and that the company has not complied with it[36]. It is therefore essential to a conclusion of a failure to comply that the demand remains effective.
A statutory demand has no effect while there is in force an order made under ss 459H or 459J setting aside the demand[37]. Those orders may be made on an application for that purpose. The application may only be brought within 21 days after the demand is served[38]. Section 459H is expressed to apply where the court is satisfied that there is a "genuine dispute" about the existence or amount of a debt to which the demand relates[39]. Unless the court makes an order under s 459H, or s 459J which provides for other grounds, the application to set a demand aside is to be dismissed[40].
The evident policy of Pt 5.4 is that there be a speedy resolution of applications to wind up in insolvency[41]. To that end, a challenge to a statutory demand is to be made promptly, before the application for the order for winding up in insolvency is determined and, where possible, disputes are to be resolved on the application to set aside the demand. Section 459S provides that where an application to wind up in insolvency relies upon a failure by the company to comply with a statutory demand, the company may not, without leave, oppose the making of an order on a ground which (a) it relied on in an application to set aside the demand or (b) it could have relied on but did not (whether or not it in fact made the application). That leave is not to be granted unless the court is satisfied that the ground is material to proving that the company is solvent[42]. Thus if leave is sought on the basis that the debt is disputed, the existence or amount of that debt must be relevant to a conclusion as to the company's solvency. This requirement of s 459S is consistent with the operation of the presumption of insolvency under s 459C, which applies even if leave is granted to raise a ground of opposition. It applies because there has been a failure to comply with a demand which remains in effect.

The exercise of the discretion to stay the proceedings in this case

There can be no doubt that the court's power to adjourn or stay proceedings can, and should, be exercised where the interests of justice require. But no application for an adjournment of the proceedings was current when the hearing before Gilmour J commenced. A prior application for adjournment had been dismissed because Lanepoint did not pursue it when the matter was set down for hearing. Further, as Gilmour J observed, no suggestion was made at the hearing that there was other relevant evidence such as might necessitate an adjournment. It was upon this basis that his Honour determined that questions about the transactions should be resolved. In his Honour's view to do otherwise would only add to the costs of the parties and the public.
The submission by Lanepoint to Gilmour J, that the proceedings on ASIC's application were inappropriate to determine the issues arising with respect to the transactions, appears to have been first taken at the conclusion of evidence on the hearing. It was accompanied by the suggestion that the transactions were complex and could warrant further attention over many more days. However, as his Honour observed in his reasons, no further evidence was pointed to by Lanepoint as necessary for the purpose of a determination about them and his Honour did not identify any gaps in the evidence. Moreover, that submission was put in the alternative to one by which Lanepoint asserted that it had "done enough" to demonstrate that its accounts required correction and that it had rebutted the presumption of insolvency.
The majority in the Full Court identified three considerations as relevant to the exercise of his Honour's discretion, which pointed to the need for it to be exercised in favour of a stay of the proceedings. The first was that not all parties necessary to a resolution of the issues raised by ASIC had been joined to the proceedings. In the view of the majority, conclusions about the transactions which were the reason for the corrections to Lanepoint's accounts had the potential to affect other companies in the Westpoint Group and they concerned the conduct of officers or directors of Lanepoint and other Westpoint Group companies. These possible effects were highlighted, in their Honours' view, by findings made by Gilmour J that the transactions were "improper", "ineffective" and liable to be set aside under s 588FF of the Act[44].
The second matter to which the majority referred also concerned s 588FF. Their Honours pointed out that a claim under that section can only be made by the liquidator of Westpoint Management. This called into question the finding of Gilmour J, that the impugned transactions could not be relied upon by Lanepoint to reduce its liability to Westpoint Management and the WIF, and therefore the utility of the proceedings[45]. It will be recalled that the order for a stay, which their Honours considered to be necessary on the re-exercise of the discretion, was made until the determination of proceedings to be brought by the liquidator. It may be that their Honours had in mind an application under s 588FF.

The discretion of the primary judge, in considering whether to dismiss or stay the proceedings, did not miscarry. There was no impediment to his Honour proceeding to determine whether Lanepoint could rebut the presumption of insolvency. Lanepoint failed to do so.
Lanepoint submitted, in the event that this Court allowed the appeal, that the matter ought to be remitted to the Federal Court to determine the grounds of appeal which had not been dealt with by the majority in the Full Court. This Court has said on more than a few occasions that it is important for intermediate courts of appeal to deal with all grounds of appeal, not just that which is identified as the decisive ground[60], to overcome the need for remittal where a decision on that ground is the subject of a successful appeal. Fortunately in this case the difficulties presented by other grounds being outstanding may readily be resolved. No remitter will be necessary.
The only grounds which were pursued by Lanepoint on the appeal to the Full Court concerned the question of the compromise of the debt due by Lanepoint to the WIF. It was conceded by Lanepoint that a compromise of the debts was not finalised with the liquidator of Westpoint Management, which removes one ground from further consideration. The remaining ground has no merit. It was that the liquidator's willingness to compromise, evident at some point in the negotiations, was somehow relevant to whether the debt was in fact owed.
The appeal should be allowed with costs. The paragraphs numbered 1-4 inclusive of the order of the Full Court of the Federal Court made on 24 May 2010 and the further order as to costs made on 9 September 2010, as varied by the order of Siopis J made on 1 October 2010, should be set aside. In lieu of those orders it should be ordered that the appeal to that Court be dismissed and that Lanepoint pay the costs of ASIC of the appeal to that Court.

Into the then Corporations Law, on the commencement of the Corporate Law Reform Act 1992 (Cth). ↑

David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 278 per Gummow J; [1995] HCA 43. ↑

[4]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52. ↑

[5]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 65 [93]. ↑

[6]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 499 [75]. ↑

[7]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 493 [36] and 497 [61]-[62]. ↑

[8]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 497 [61]-[62]. ↑

[9]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 493 [37]. ↑

[10]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 497 [59]. ↑

[11]

Corporations Law, s 462(2)(e); Companies Code, s 363(1)(e). ↑

[12]

Corporations Law, s 460(1); Companies Code, s 364(1)(e). ↑

[13]

Corporations Law, s 460(2)(a); Companies Code, s 364(2)(a). ↑

[14]

Corporations Law, s 460(2)(a); Companies Code, s 364(2)(a). ↑

[15]

McPherson, The Law of Company Liquidation, 3rd ed (1987) at 63-64; see also at 53 (referencing the Companies Code). ↑

[16]

Re KL Tractors Ltd [1954] VLR 505 at 512; McPherson, The Law of Company Liquidation, 3rd ed (1987) at 63. ↑

[17]

McPherson, The Law of Company Liquidation, 3rd ed (1987) at 63. ↑

[18]

Corporations Law, s 460(1); Companies Code, s 364(1). ↑

[19]

Corporations Law, s 467(1); Companies Code, s 367(1). ↑

[20]

McPherson, The Law of Company Liquidation, 3rd ed (1987) at 61-62. ↑

[21]

McPherson, The Law of Company Liquidation, 3rd ed (1987) at 67. ↑

[22]

Corporations Law, s 467(1); Companies Code, s 367(1). ↑

Brinds Ltd v Offshore Oil NL (1985) 60 ALJR 185 at 188; 63 ALR 94 at 99. ↑

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 56 [28]. ↑

Corporations Act 2001, s 459P(2)(d). (The order for leave to bring the application was made at the same time as the order for winding up in this case. No argument was made on the appeal as to the correctness of this approach.) ↑

Corporations Act 2001, s 459H(1)(a). See Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473; [2008] HCA 41. ↑

Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314 at 324-325 [17]-[18]; [2008] HCA 9. ↑

[43]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 496 [49]. ↑

[44]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 498 [65]-[66]. ↑

[45]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 498-499 [69]-[71]. ↑

[46]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 499 [73]. ↑

[47]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 65 [90]. ↑

[48]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 59 [40]. ↑

[49]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 61 [52]. ↑

[50]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 61 [56]. ↑

[51]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 62 [62]-[63]. ↑

[52]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 62 [63]. ↑

[53]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 63 [70]. ↑

[54]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 63 [71], 64 [79]. ↑

[55]

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (rec and mgr apptd) (No 2) (2009) 72 ACSR 52 at 63 [72], 64 [79]. ↑

[56]

John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at 46 [131]; [2010] HCA 19; Victoria v Sutton (1998) 195 CLR 291 at 316-318 [76]-[81]; [1998] HCA 56. ↑

[57]

See Blair v Curran (1939) 62 CLR 464 at 531-533; [1939] HCA 23. ↑

[58]

Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 590 [156], 591 [160]; [1999] HCA 27; Kuligowski v Metrobus (2004) 220 CLR 363 at 386 [62]; [2004] HCA 34. ↑

[59]

Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) v Australian Securities and Investments Commission (2010) 78 ACSR 487 at 499 [70]. ↑

[60]

Kuru v New South Wales (2008) 236 CLR 1 at 6 [12]; [2008] HCA 26; Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2004) 217 CLR 274 at 312 [105]; [2004] HCA 58. ↑

Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd

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