Deputy Commissioner of Taxation v Visidet Pty Ltd ACN 003 743 986, in the matter of Visidet Pty Ltd

REASONS FOR JUDGMENT 1 These matters came before me this morning on referral from the Registrar. They are applications to wind up two companies under s 459P of the Corporations Act 2001 (Cth). I will give one set of reasons because the same situation arises in each and indeed one company is a subsidiary of the other. 2 The short facts are that in each case the statutory demand was not met. The plaintiff brought proceedings seeking winding up. They came on before the Registrar this morning. At that time bank cheques for the total amount sworn to be due were tendered to the representatives of the plaintiff but were rejected. That rejection was intended to found an application for dismissal of the proceedings. The defendants offered to submit to an order for costs up to the appearance before the Registrar. The matter was referred to me after an adjournment. Each side is now represented by counsel. The bank cheques in question, the tender having again been made and refused, were admitted into evidence as Exhibit A in these proceedings. 3 Counsel for the defendants submitted that dismissal of each proceeding was then inevitable, even though there is no evidence of solvency, founding upon the decision of the New South Wales Court of Appeal in Australian Mid-Eastern Club Limited v Yassim (1989) 1 ACSR 399, as the admission in evidence of the cheques effectively meant that the applicant was no longer a creditor of either company. (See also Nationwide Produce Holdings Pty Ltd (in liq) v Franklins Limited [2001] NSWSC 1120, particularly at [8].) As a matter of technicality I am not sure that that is correct. The opinion of Meagher JA (at 403) indicates that the refusal to accept a tender, even a refusal without justification, does not eliminate the debt in question. The relationship of creditor and debtor still subsists and the tender is no answer, unless there is a continued readiness to pay coupled with actual payment into court. My doubt arises from the difference between a formal payment into court on the one hand and tender of the bank cheques on the other. Counsel for the defendants submits that there is no distinction in principle, as the bank cheques can be retrieved at any time by the plaintiff and thus it is the equivalent of actual payment. It seems to me that no matter what the strict position is, the availability of those bank cheques is the equivalent, in practical terms, of payment. 4 It is then submitted that, as the plaintiff is not a creditor, the proceeding must be dismissed. Even if it were correct that the plaintiff is not a creditor, I think that the submission goes too far. The most recent discussion I have been able to find in the time available touching on this question is that by Barrett J of the Supreme Court of New South Wales in Bidald Consulting Pty Limited v Miles Special Builders Pty Limited [2005] NSWSC 397. The precise point which arises here did not arise in those proceedings. In that case the execution of a deed of company arrangement intervened and the question was as to the effect of that. However, in the course of his reasons Barrett J said (at [11]): 'I have previously expressed an opinion, by way of obiter dictum, that a plaintiff whose debt has been paid after the time for challenging a s 459E demand based on the debt has expired and before the hearing of the winding up application is no longer able to maintain and pursue that application: see Roberts v Wayne Roberts Concrete Constructions Pty Ltd (2004) 50 ACSR 204 at p 208.' His Honour went on to say: 'That proposition is, on reflection, too broadly expressed. It does not cater for the possibility that the plaintiff may have re-captured the status of creditor by the time the winding up application is heard.' His Honour then went on to refer to a number of authorities, all of which I think in one way or another I have been referred to today by counsel, except for the decision of McLelland J in Deputy Commissioner of Taxation v Sun Heating Pty Limited [1983] 2 NSWLR 78; (1983) 8 ACLR 314 (Sun Heating).

5 I am not persuaded that there is any requirement that a plaintiff continue to be a creditor at the time the winding up application is heard. In my view, the effect of the passage from the judgment of Menzies J is Motor Terms Co Pty Ltd v Liberty Insurance Ltd (1967) 116 CLR 177 at 194-5, which has been reproduced in various of the judgments, does not support that proposition, nor, it seems to me, does the decision of McLelland J in Sun Heating. Nonetheless, it is clear from the decision of Needham J in De Montfort v Southern Cross Exploration NL (1987) 17 NSWLR 468 that payment of the debt claimed to be owing by the creditor prior to the hearing of a winding up petition would be a most material factor in the exercise of the discretion. The statements by his Honour in that case (at 470 and 471) put the matter very highly but I do not think that they establish a principle or proposition of universal application. His Honour said (at 471): 'I should have thought that, while the effect of the s 364 notice undoubtedly continues so as to allow another creditor to become substituted for the original plaintiff, that principle could not possibly apply to a case where it is the plaintiff itself who claims to continue the proceedings after being paid out the only amount which he has claimed in those proceedings. It would, I think, be quite unacceptable for a creditor to serve a notice upon a debtor specifying a sum in that notice, then, when the debtor failed to comply with that notice, take proceedings, be paid the full amount claimed, and then seek to wind the defendant up nonetheless.' 6 I agree with the analysis by Zeeman J of the Supreme Court of Tasmania in Deputy Commissioner of Taxation v Guy Holdings Pty Ltd (1994) 116 FLR 314; (1994) 14 ACSR 580, which gives support to the view that the failure to comply with a statutory demand giving rise to the presumption of insolvency, and the status of the plaintiff as a creditor at the time of the institution of the proceedings would give jurisdiction to make a winding up order, even if payment of the debt had occurred in the meantime. I do not read anything said by Young J in Deputy Commissioner of Taxation v Barroleg Pty Ltd (1997) 25 ACSR 167 to be contrary to that opinion. 7 Counsel for the plaintiff submits that the proceedings should not be dismissed, as there is a positive reason to the contrary arising from the fact that, on the evidence, the defendants have not lodged GST returns which have fallen due and it can thus be assumed that the defendants, in truth, owe GST to the plaintiff. The plaintiff is thus a contingent creditor in that respect. As s 459P(1)(b) was satisfied at the commencement of the proceeding there was no need to seek leave to make the application by virtue of subs (2)(a). However, those provisions indicate that first of all a contingent creditor is a creditor for present purposes and secondly, that it would require leave of the court for such a creditor to commence a proceeding. By analogy, the Court should be cautious in making an order based only upon a contingency. 8 In the present case, whilst I can see that there is a real practical risk that the defendants may owe GST to the plaintiff, I do not think that I can reach that conclusion with a sufficient degree of certainty to permit a winding up proceeding to continue. With trading companies the existence of a winding up proceeding is a very serious inhibition and has very serious impacts. If there is a default in the filing of GST returns, then there are remedies which are available to the plaintiff to deal with that situation. 9 In each case I dismiss the application. Because of the lateness of the tender I order that the respective defendants pay the plaintiff's costs on the basis that there be one set of costs of today. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

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