Deputy Commissioner of Taxation v Infomatix Solutions Pty Ltd [2025] FCA 1094

1. The plaintiff has applied to set aside a winding up order made against the defendant by a Registrar of this Court on 11 July 2025, which order had been procured on the plaintiff's application.
2. Let me say something about the relevant background.
3. On 17 March 2025 the defendant was indebted in the sum of $266,910.09 which sum was then due by the defendant to the Commonwealth of Australia, and recoverable by the plaintiff under and in pursuance of the provisions of the Taxation Administration Act 1953 (Cth).
4. A statutory demand dated 17 March 2025 in the amount of $266,910.09 was served on the defendant, which demand was not complied with.
5. On 7 May 2025, the plaintiff referred the matter to the plaintiff's present solicitors to make an application that the defendant be wound up in insolvency under s 459P of the Corporations Act 2001 (Cth).
6. On 14 May 2025, the winding up application was filed by the plaintiff. Sealed copies of various documents were then served on the defendant.
7. On 19 May 2025, the sole director and company secretary of the defendant, telephoned the Frontline Compliance Department of the Australian Taxation Office stating that he did not wish for the defendant to be wound up. During this discussion, a public servant advised him to submit a payment arrangement proposal for the plaintiff's consideration.
8. On 5 June 2025, Mr Ben Ghimire of Crowe Partners, the tax agent for the defendant telephoned the ATO Frontline Compliance Department and spoke to an employee in the Frontline Compliance Department. During the telephone discussion Mr Ghimire submitted a payment proposal on behalf of the defendant consisting of an upfront payment of $30,000, and further monthly instalments of $15,000 over the following 21 months, with the payment plan concluding on 19 February 2027. The total amount to be paid to the plaintiff under the payment plan was $321,329.16.
9. It was a condition of the payment plan that the defendant would make the payments required to be made under the payment plan on time and would lodge and pay all its other taxation obligations by the due dates.
10. The defendant's payment plan was accepted by the ATO's employee over the phone. The details and conditions of the payment plan were subsequently recorded in a letter dated 5 June 2025 addressed to the defendant. The payment plan letter was provided to the defendant via post and was also provided to Mr Ghimire through the ATO's tax agent portal. It appears that the officer who agreed to the payment plan did not identify from the ATO records that there was a winding up application on foot.
11. Now in the normal course where a winding up application has been filed, the ATO policy is for the taxpayer to be directed to the law firm that has carriage of the winding up application to submit any payment arrangement proposal rather than corresponding directly with ATO officers. But this did not occur in this matter.
12. Now the defendant's 2024 income tax return was originally due on 15 May 2025, however that due date was extended to 12 June 2025. The defendant's 2024 income tax return was not lodged by the due date of 12 June 2025, which constituted a breach of the terms of the payment plan.
13. But on 18 June 2025, the first payment under the terms of the payment plan was received in the sum of $30,000.00.
14. Now in the normal course where a payment arrangement is agreed between the parties after a winding up application has been commenced, the parties would usually reach a position with respect to the future conduct of the proceeding which would generally include seeking an order to dismiss or adjourn the winding up proceeding following receipt of an initial up-front payment and for the defendant to pay the plaintiff's costs of the proceeding.
15. But on 9 July 2025, K&L Gates was instructed by the plaintiff's representative to seek a winding up order at the return of the application which was listed for hearing on 11 July 2025. Apparently, when providing these instructions to K&L Gates, the person giving the instructions was not aware that a payment plan had been entered into with the defendant with the first payment made thereunder.
16. On 11 July 2025, a Registrar of this Court made orders that the defendant be wound up in insolvency. Two registered liquidators of Cor Cordis were appointed joint and several liquidators of the defendant. There was no appearance on behalf of the defendant at the hearing before the Registrar. Apparently, the defendant elected not to attend the hearing of the winding up proceeding thinking that the matter had been resolved by the entry into of the payment plan.
17. On 4 August 2025, Broadside Lawyers, who act on behalf of the sole director, sent a letter to K&L Gates informing them of the existence of the payment plan.
18. On 8 August 2025, K&L Gates replied to Broadside Lawyers, noting that the defendant had defaulted on the payment plan as a result of the non-lodgement of the defendant's 2024 income tax return.
19. On 13 August 2025, Broadside Lawyers sent an email to K&L Gates stating that the defendant was not aware of any default on the payment plan.
20. The plaintiff accepted before me that the defendant was not formally advised of the default under the payment plan at the time when the winding up order was sought. Moreover, the plaintiff did not terminate the payment plan.
21. Accordingly, in the circumstances, the plaintiff made the present application to set aside the orders made winding up the defendant in insolvency on the basis only of rule 39.05(a) of the Federal Court Rules 2011 (Cth). But as I explained at the hearing this morning, this perspective was too narrow.
22. At this point it is necessary to say something about s 482(1) of the Corporations Act which provides as follows:

(1) At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.

1. Clearly this is a discretionary power which is guided by consideration of the following non-exhaustive factors (Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533 per Master Lee QC) viz: (a) the granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay; (b) there must be service of notice of the application for a stay on all creditors and contributories, and proof of this; (c) the nature and extent of the creditors must be shown, and whether or not all debts have been discharged; (d) the attitude of creditors, contributories and the liquidator is a relevant consideration; (e) the current trading position and general solvency of the company should be demonstrated; solvency is of significance when a stay of proceedings in the winding-up is sought; (f) if there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given; (g) the general background and circumstances which led to the winding-up order should be explained; (h) the nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to commercial morality or the public interest.
2. Of course, where a company has been wound up on insolvency grounds, the question of solvency will be a primary consideration.
3. Now here, the insolvency ground was used by the plaintiff, and strictly the non-compliance with the statutory demand justified such a course in terms of deemed insolvency (see ss 459A, 459C and 459F). But in June 2025 a payment plan had been entered into as I have explained.
4. Now does it necessarily need to be shown that the defendant is now solvent, whether on a commercial/cash flow basis (s 95A) and/or on a balance sheet basis in order to justify a favourable exercise of discretion under s 482(1)? In my view, not necessarily.
5. This question as to the possibility of flexibility on proof of solvency was usefully discussed by White J in Double Bay Newspapers Pty Ltd v The Fitness Lounge Pty Ltd [2006] NSWSC 226; (2006) 57 ACSR 131 at [16] to [37] and by M Osborne J in Re The Thoroughbred Consultants Pty Ltd [2021] VSC 627 at [87] to [95] and [100] to [103].
6. Clearly, if the original order for winding up was obtained through a fundamental irregularity such that it should be set aside ex debito justitiae, that is, as of right rather than as a matter of discretion, then proof of present solvency at the time of the setting aside of the original order and termination of the winding up may not be necessary. But if there is no such fundamental irregularity but there is some irregularity, then it is desirable that some arguable case of solvency be established or at the least that the Court be satisfied that the company is not now hopelessly insolvent in order to justify setting aside the original order and terminating the winding up.
7. With this all in mind, this morning I sought further information from the plaintiff and the liquidator on the solvency question. Further, after I had adjourned, further information was emailed to my chambers in terms of an up to date balance sheet and profit and loss statement for the defendant. It suffices to say that the company is not now hopelessly insolvent on whichever test one applies. Moreover, apart from an employee, the plaintiff is the only major creditor and it is of course the plaintiff that seeks the termination of the winding up. Further, the present net assets of the defendant are substantially positive, albeit that the value of one of the asset classes depends on the recoverability of loans to directors.
8. Finally, I should note that this morning the plaintiff's lawyers provided me with authorities dealing generally with the setting aside of the Court's orders. Indeed, the plaintiff's present application had only sought to invoke rule 39.05(a) of the Rules. But in my view, these authorities did not adequately engage with s 482 and accordingly they were of limited utility given that I was not dealing with an ex debito justitiae scenario. Further, I should also note that with the acquiescence of the plaintiff's lawyers I converted their application to one also made under s 482(1).
9. For the foregoing reasons I made the orders sought but with some modifications to address s 482(1) more directly.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach.