Deputy Commissioner of Taxation v Xpress Resources Pty Ltd

COLVIN J: 1 In this matter, the Commission petitions for a winding-up order in respect of the defendant, Xpress Resources. The petition was brought on 9 January 2018, on the basis of a failure to comply with a statutory demand dated 20 October 2017. Since then there have been a number of adjournments and pursuant to s 459R of the Corporations Act 2001 (Cth) the time in which these proceedings may be determined has been extended to 12 October 2018. 2 Since the accepted failure to meet the statutory demand, Xpress Resources has lodged a number of outstanding BAS returns and it has claimed rebates and made some lump sum payments in respect of taxation liabilities. The BAS returns as lodged have, by a process of self-assessment, established further taxation liabilities on the part of Xpress Resources and to some extent they have been offset by the rebates claimed. 3 The payments that have been received by the Commissioner since the failure to comply with the statutory demand and the offsets have, on the evidence before me, been applied to reduce the amount the subject of the statutory demand. However, there remains an amount of approximately $38,000 that is due in respect of the amount the subject of the statutory demand. 4 For Xpress Resources, it is said that it is in a position today to pay that amount. From the bar table, it is said that an amount of $55,000 is held in a solicitor's trust account and there are instructions to use those funds to pay the outstanding balance of the statutory demand. However, even if this was to be done, there remain issues about whether the presumed insolvency arising from the failure to meet the statutory demand has been rebutted on the evidence. 5 The approach to be adopted in circumstances where the full amount of a statutory demand is paid at or prior to the hearing of the petition for winding up was considered in Deputy Commissioner of Taxation v Visidet Pty Ltd, in the matter of Visidet Pty Ltd [2005] FCA 830. As is apparent from the reasoning in that case, two issues arise, even on the assumption that the amount the subject of the statutory demand were to be paid; firstly, whether there is evidence about a further debt due. 6 In this case, on the affidavit evidence before me, there is a further amount of about $130,000 that remains outstanding to the Commissioner in respect of liabilities that have arisen since the statutory demand. The defendant says that those liabilities are not admitted but there is no affidavit material to challenge the Commissioner's affidavits that establish the existence of that amount. So the issue of presumed insolvency is to be approached on that basis. 7 On the other hand, what is before me in respect to the financial circumstances of Xpress Resources is a statement that it has assets of about $1.2 million, including a prime mover, which, it is said, is worth about $250,000. At some stage, it was indicated to the Court that the prime mover might be sold. However, it appears that there is a reluctance to sell it because it is used in the activities of the company in earning income. 8 Otherwise, there is no indication of any steps that might be taken to realise funds from the sale of the equipment the subject of the asset list. And in a context where there have been a number of adjournments of this matter on the basis of evidence that indicated that Xpress Resources might be able to take some steps to secure funds to meet its liabilities, then little weight can be given to any claimed ability on the part of the company to meet its current liabilities by resort to that equipment. 9 There is also some evidence before me about the debtors of Xpress Resources. However, it was accepted in submissions before me today that a substantial amount of those debtors were owed to a company which is now in liquidation, with no prospect of any distribution. So, in those circumstances, I am of the view that the presumed insolvency arising from the failure to meet the statutory demand has not been rebutted on the evidence before me. 10 The second issue to be considered is whether, nevertheless, in the exercise of discretion, on an application of this kind I ought to decline to make a winding-up order. The approach to be adopted in relation to discretion has been considered in a number of cases. I refer in particular to the decision of Deputy Commissioner of Taxation v T.D. Preece Pty Ltd [2013] FCA 1365 and the decision of Barker J in Deputy Commissioner of Taxation v Soiland Pty Ltd (in liq) (No 2) [2010] FCA 1453. 11 The discretion has to be exercised having regard to the proper objects evident in the provisions in the Corporations Act relating to winding up for insolvency. And this is not a case where, on the evidence before me, there is a suggestion of a real prospect of financial difficulties being overcome in the short term. Indeed, the company has been afforded a number of adjournments in order to put itself in a position where it could meet liabilities if it were able to do so and it has not been able to do so. 12 Taking account, as I must, of the public interest and the evident purpose of the legislation, I am not satisfied that this is a case in which discretion should be exercised against a granting of relief. So, for those reasons, I will make a winding-up order on the Commissioner's petition. I will hear from the parties as to the appropriate form of orders including on the question of costs. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.