Does section 459S apply?
13 In terms, s 459S applies to prevent a party opposing a winding up application on a ground that the company could have relied upon for the purposes of setting aside a statutory demand but did not so rely. The meaning of that provision has been the subject of some consideration by the courts. Effectively, it has been interpreted to mean that the ground must be such that it was actually available to be asserted according to the facts and circumstances existing at the time of the winding up: see Perpetual Nominees Ltd v Masri Apartments Pty Ltd (2004) 49 ACSR 719 at 722-723 [9] per Austin J.
14 I accept that as a correct interpretation of s 459S(1). The question devolves therefore to one of whether it can be said as a matter of fact that the ground now sought to be relied upon by the defendant in opposing the winding up is a ground which was not, in fact, available. As Masri demonstrates at 723 [12], where there has been a change of premises without a corresponding alteration in the registered office, that test will ultimately require an examination of the issue of the reasonableness of the superintendence by the applicant of its registered office.
15 That is, one needs to ask whether the defendant applicant took reasonable steps to check its mail. Mr Stowe has submitted that the fact that the plaintiff was aware the defendant had moved its business premises is not material to what he submitted was an objective test. On the other hand, Mr Davidson submitted that knowledge by the plaintiff was significant for the purposes of the Masri test. I think that the submissions of Mr Stowe are to be preferred. The question posed by s 459S, it is to be borne constantly in mind, is a question of fact as to whether a particular ground was actually available. It seems to me that the subjective state of mind of the plaintiff, or its knowledge, simply does not go to that question.
16 Brought down to the level of how that applies when there has been a change of business premises without a corresponding alteration of a registered office, that seems to me to require an analysis which focuses simply on the reasonableness of the steps taken by the defendant company to check its mail. The knowledge of the plaintiff is irrelevant. That being so, it is pertinent to note that the evidence suggests that the defendant would have, if it had read its email, been aware that demands for moneys had been made upon the registered address. It certainly knew that after the statutory demand was served that the registered office still remained at its original location.
17 Mr Stowe submitted that, once one accepted that Mr Dwyer was so aware, it followed that he should have checked the registered office to see what had arrived. Had he done so, he would have discovered the statutory demand and that in that circumstance, s 459S could not apply. I accept that submission. Upon Mr Dwyer becoming aware in the terms to which he deposed in paragraph 11 of his affidavit, it was reasonable to expect of him that he would at least check to see what mail had arrived at that office; more is that so when, as Mr Stowe correctly submitted, the plaintiff was required by law to serve the statutory demand at that office.
18 In that circumstance, the submission that s 459S has no application to the present proceedings must be rejected. I then turn to the question of whether leave should be granted under s 459S. The parties in this afternoon's application ran the case in an efficient fashion and they agreed that the sole question which arose on the question of whether leave should be granted was whether the defendant satisfied the materiality requirements in subsection (2). There has been some, although I would not say a lot, of disputation about the meaning of materiality in s 459S(2).
19 However, it seems to me that I should accept that the authorities show that "material" means that an applicant, under s 459S, must show that the debt in respect of which it is seeking leave is pivotal to the question of solvency. That is, the defendant must demonstrate that if the debt exists then the company will be insolvent and if the debt does not exist, then the company will be solvent. In my opinion, that is the better reading of the reasons of Spigelman CJ in Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 at 674 [56]. I accept that, at first blush, paragraph [53] can be read the other way, however, for two reasons I do not think that passage should be so interpreted.
20 First, it is apparent, for the reasons given by the Chief Justice in that judgment at 673-674 [47]-[51] that the evident statutory intention which underpins s 459S is very much directed to diminishing, rather than expanding, the circumstances in which debts are to be debated. Put another way, as the Chief Justice demonstrated in that case, the previous situation which obtained prior to the introduction of the predecessor to s 459S, where it was common, frequent and unwelcome for debates about debts to take place at the time of the winding up petition, was to be expunged by that provision. It is consistent with that interpretation, or that understanding, of the intention underpinning 459S to interpret materiality in a way which is circumscribed.
21 Secondly, the learned Chief Justice indicated at 671 [36] that he did not propose to follow the decision of the Full Court of the Supreme Court of Western Australia in Bayview Holdings Pty Ltd (in liq) v Zan Holdings Pty Ltd (unreported, Supreme Court of Western Australia, Ipp, Wallwork and Steytler JJ, 19 October 1998). The Full Court had there adopted a somewhat liberal approach to materiality. It seems to me that a fair reading of the reasons of the Chief Justice is that the proper approach to materiality is the narrow one. For completeness, it should be noted that in my opinion two justices of this Court have approached the matter on the more narrow view and have certainly thought themselves to be implementing the position in Switz: see HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd (2002) 44 ACSR 169 at 184 [53] per French J; Web Wealth Pty Ltd v Helimount Pty Ltd [2006] FCA 1376 at [43]-[45] per Besanko J. That would be sufficient for me to feel obliged to approach the matter on the same basis.
22 Mr Davidson drew my attention to a decision of White J in Radiancy (Sales) Pty Ltd v Bimat Pty Ltd (2007) 25 ACLC 1216 where at 1226 [64] his Honour said this:
The question is not whether the debt demanded by Radiancy (Sales) is determinative of Bimat's insolvency. The question is whether it is material to proving the company is solvent. If the debt is owed, the company is undoubtedly insolvent. If it is not owed, the company may be solvent if Mr Colosimo's evidence as to the payment of creditors is accepted. Accordingly, s 459S(2) is satisfied in relation to the grounds that Radiancy (Sales) is not a creditor, or that the alleged debt is genuinely disputed.
(Emphasis added.)
23 Mr Davidson says that this paragraph is an acceptance of the more liberal view. I accept that is a construction which may be open. However, looking at the balance of his Honour's reasons, it does not appear to me that his Honour was turning his mind in explicit terms to that question. I doubt therefore, whether White J, actually intended to say that. Even if his Honour had, however, the decision of the Court of Appeal and the two decisions of the Judges of this Court to which I have referred make it appropriate that I adopt the narrow approach to materiality.
24 Before me this afternoon, Mr Davidson proffered a concession that, at least on the materials which were before the Court today, the existence of the debt was pivotal to its success. The defendant did not proffer that undertaking in a qualified sense: that is, the defendant did not submit in terms of s 459S that the ground was material to proving that the company was solvent. Rather, it was a hedged concession that for the purposes of the present application, the company was insolvent if the debt existed. It seems to me that when one has regard to the matters to which Spigelman CJ adverted in Switz that to permit such a concession to be sufficient for s 459S(2) purposes would be to contradict the apparent aim underpinning the legislation, namely, the ending so far as possible, of debates about the existence or otherwise of debts during the course of winding up proceedings.
25 In those circumstances, I do not regard that concession as making out materiality in the relevant sense. Against that possibility, Mr Davidson proffered what was termed in the course of argument, a conditional concession. The conditional concession was to the effect that if I came to a view that the reasoning in Switz meant that I had to take a narrow view of the meaning of materiality, and if I was of the view that the concession that had been proffered was not sufficient to make out that materiality, the defendant would concede that the existence or otherwise of the debt was pivotal to its solvency.
[ There was brief discussion with counsel. ]
26 During the course of the delivery of my reasons for judgment, Mr Davidson proffered a concession that the debt in question was pivotal, in the sense I have just discussed, to the question of solvency of the defendant. It seems to me to follow that the test under s 459S(2) is satisfied. There were no other bases upon which it was said that leave should not be granted. In that circumstance it seems to follow from what has been conceded that the defendant should be granted leave.