Plaintiff v Defendant

2 The plaintiff, Platinum Construction (VIC) Pty Ltd (ACN 095 739 012), is a building company for residential and commercial projects. The defendant, Lin Tiger Plastering Pty Ltd (ACN 131 565 494), is a plastering company and has performed various subcontracting works for the plaintiff for approximately nine years. Relevant to this proceeding are the following six agreements:

(a) 23 August 2012 - Subcontract works at 1 High Street, Preston (quote no. 534 for $611,599.00)('Primary Preston Agreement');

(b) About 6 February 2013 - Rectification works at 1 High Street, Preston (quote no. 651 for $26,235.00)('Secondary Preston Agreement')'

(c) 23 April 2013 - Subcontract works at 231 Bridge Road, Richmond (quote no. 591 for $458,663.00)('Primary Richmond Agreement');

(d) About 8 August 2013 - Rectification works at 231 Bridge Road, Richmond (quote no. 738 for $9,680.00)('Secondary Richmond Agreement');

(e) About 22 September 2015 - Subcontract works at 79 Market Street, South Melbourne ('South Melbourne Site'); and

(f) About 22 September 2015 - Subcontract works at 5-7 Montrose Street, Hawthorn East ('Hawthorn East Site').

3 In 2018 a dispute arose between the plaintiff and defendant with regards to the South Melbourne and the Hawthorn East sites. The dispute was arbitrated and on 15 August 2018 the plaintiff was awarded two interim Arbitration Awards totalling $16,808.34 (the 'Interim Awards'). The defendant alleges that the arbitration is ongoing and no final determination has been made.

4 The plaintiff served a creditor's statutory demand on the defendant in respect of the Interim Awards on 24 August 2018. The statutory demand was for the sum of $16,628.34, an amount less than the Interim Awards.

5 On 6 September 2018 the defendant's solicitors wrote to the plaintiff's solicitors requesting that the statutory demand be withdrawn. The defendant claimed that it had a genuine offsetting claim in respect of unpaid works performed by the defendant according to the Secondary Preston Agreement and the Secondary Richmond Agreement.

6 On 12 September 2018, the plaintiff's solicitors confirmed that it would withdraw the statutory demand, but also threatened that it would take enforcement actions if the Interim Awards were not paid without delay. By email they advised the defendant's solicitors as follows:

Dear Madam,

We refer to your letter of 6th September.

Whilst we regard alleged debts dating from over 5 years ago on which your client has apparently taken no enforcement action in all that time as likely to be bogus, we do not see the point of having an argument about the matter in the Corporations List.

Our client therefore hereby withdraws its statutory demand.

However, we recommenced your client take prompt action to pay the costs ordered by the arbitrator which are now due and payable, as our client will be taking enforcement action in respect of same without delay. Even if your client chooses to prosecute the long-dormant claims foreshadowed in your correspondence, it will not obtain an enforcement judgment prior to our client's enforcement actions coming into effect.

7 On 22 September 2018 the defendant issued two invoices. The first invoice was for $26,235.00 per the Secondary Preston Agreement and the second was for $9,680.00 per the Secondary Richmond Agreement. These two invoices exceed the amount claimed by the plaintiff pursuant to the Interim Awards.

8 On 27 September 2018 the plaintiff was successful in obtaining orders in Supreme Court Proceeding S ECI 2018 01336 for the enforcement of the Interim Awards ('the Orders').

9 On or about 8 October 2019 the plaintiff issue a Warrant of Seizure and Sale against the defendant at the home of the Director, Mr Bo Lin, pursuant to the Orders ('the Warrant'). The Sheriff asked Mr Lin if the defendant could pay the debt of $16,808.34 on that day, to which Mr Lin answered in the negative. Mr Lin alleges that the Sheriff did not ask why or whether the defendant had the funds to pay the debt. The Sheriff returned the Warrant unsatisfied on 27 November 2018.

10 On or about 31 October 2018 the defendant commenced proceedings against the plaintiff in the Victoria Civil and Administrative Tribunal, proceeding number BP1652/18, for the payment of the Secondary Preston and Secondary Richmond Agreements ('the VCAT Proceeding'). The amount pursued was $39,785.41 plus interests and costs. The VCAT proceeding is listed for hearing on 6 June 2019.

11 The plaintiff now seeks to wind up the defendant in this proceeding pursuant to s 459P of the Act.

12 Section 459P of the Act states:

S 459P Who may apply for order under section 459A

(1) Any one or more of the following may apply to the Court for a company to be wound up in insolvency:

...

(b) a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor)

...

13 Section 459C(2)(b) of the Act states:

S 459C Presumptions to be made in certain proceedings

...

(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:

...

(b) execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied; or

...

14 The plaintiff alleges that the plaintiff's Warrant upon the defendant was returned unsatisfied on 27 November 2018, giving rise to a presumption of insolvency under s 459C(2). The Warrant was returned to the Court unsatisfied after the proceedings to wind up the defendant had been issued. The defendant has conceded that this does not invalidate the wind up proceedings.

15 The elements of what constitutes 'returned' and 'unsatisfied' were discussed in Guss v Deputy Commissioner of Taxation[1] ('Guss'). Guss requires that the warrant be sent back unsatisfied. In the present case, the Warrant was returned to the plaintiff unsatisfied on 27 November 2018 and returned to the Court unsatisfied on 21 January 2019.

16 The plaintiff alleges that the presumption of insolvency has arisen and argues that the matter involves a simple analysis of whether or not the defendant can rebut the presumption of insolvency. The defendant does not challenge the presumption of insolvency based on the Warrant, which was returned wholly unsatisfied.

17 The defendant submits that the application should be dismissed for the following reasons:

- there is an abuse of process because the plaintiff is using the application as a debt collection tool and that the plaintiff brought its claim when it was aware there was an offsetting claim;

- there is an offsetting claim which exceeds the amount that is owing to the plaintiff by the defendant and the plaintiff is therefore not a creditor and has no standing to bring the application ; and

- the defendant is solvent.

18 The defendant relies on Equity Australia Corporation Pty Ltd v Falgat Constructions Pty Ltd[2] ('Equity Australia Corporation') in support of its submission that there has been an abuse of process.

19 In Equity Australia Corporation, Macready JA dismissed an application which constituted an abuse of process by the plaintiff. The plaintiff obtained a judgment against the defendant for an amount of $13,606.84. The defendant was presumed insolvent because a writ of execution against it was returned unsatisfied. The defendant opposed the winding up application on the basis that it was solvent, that it was an abuse of process and that the plaintiff was not a creditor because the defendant was entitled to a set-off judgment of $81,998.89 in its favour against the plaintiff.

20 In that case there was extensive litigation in the District Court of New South Wales between the parties. Macready JA gave the following reasons for dismissing the application:

When these proceedings were commenced on 2 August 2005 the defendant already had the benefit of costs order in its favour in the Court of Appeal against the plaintiff. The demand proceedings had been running their course and were set down for hearing before McLaughlin JA on 13 September 2005. The District Court proceedings at that stage were listed for hearing on 10 August 2005. Absent any evidence by the plaintiff in this matter touching on whether there might be an abuse of process, such as obvious faults in the defendant's case in the District Court, it would seem to me that the plaintiff is using these proceedings to achieve ends other than that to which this process is directed. If one puts to one side the assets and liabilities arising out of the litigation between the parties, in my view the defendant is solvent, although only just, and, accordingly, both on the ground of solvency and on the grounds that I think the present proceedings are an abuse of process, I dismiss the proceedings and order the plaintiff to pay the defendant's costs. I order the exhibits be returned.[3]

21 The defendant here submits that there has also been extensive litigation between the parties. Mr Lin deposes that between December 2016 and November 2017 four disputes arose between the plaintiff and the defendant. They arose because the plaintiff refused to release retention monies due to the defendant for works performed at the South Melbourne site and the Hawthorn site totalling a total sum of $92,474.10. The defendant commenced four successful separate adjudication proceedings against the plaintiff for the release of the retention monies.

22 In or about December 2017, the plaintiff commenced arbitration proceedings against the defendant in respect of those sites. From the onset of the arbitration proceedings, the defendant disputed the arbitrator's jurisdiction, and on 10 May 2018 Croft J made a judgment in favour of the plaintiff. On or about 15 August 2018, the Interim Awards were issued by the arbitrator awarding the plaintiff costs in respect of the jurisdictional challenge by the defendant. The Interim Awards form the basis of the debt claimed by the plaintiff against the defendant in this application.

23 The other matters between the parties include the statutory demand issued on 24 August 2018 (which was abandoned by the plaintiff in mid-September) and the defendant's proceeding against the plaintiff in VCAT. An unsuccessful mediation was held in that matter on 14 February 2019 and that matter remains listed for 6 June 2019.

24 In Equity Australia Corporation, Macready JA referred to Roberts v Wayne Roberts Concrete Constructions Pty Ltd[4] where Barrett J summarised the principles relating to an abuse of process as follows:

This conclusion makes it necessary to deal with the possibility that pursuit of the winding-up application by the plaintiff may constitute an abuse of process, that being ground of resistance that the High Court left open in the David Grant case, above, despite the strictures of Pt 5.4 and the general rule that disputes about the founding debt and the plaintiff's creditor status in a case where non-compliance with a statutory demand is relied upon should be fully played out within the confines of the system for challenging statutory demands. When referring to the exception, Gummow J spoke, at 279, of winding-up proceedings initiated or pursued "for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz".

In Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509; 107 ALR 635, Mason CJ, Dawson, Toohey and McHugh JJ emphasised that, unless the interests of the justice demand otherwise, it is the duty of courts to exercise jurisdiction rather that refusing to do so. But, at the same time, a court must preserve its process from being employed for ulterior purposes - that is, purposes beyond those that the process itself offers. The focus is upon the purposes of the party initiating the proceeding. One relevant description is to be found in the judgment of Isaacs J in Varawa v Howard Smith Co Ltd [1911] HCA 46; (1911) 13 CLR 35:

"If the proceedings are merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the court is asked to adjudicate they are regarded as an abuse of process for this purpose."

The existence of an unworthy motive is not enough. It is the purpose sought to be effected by the initiating party that is to be considered. The purpose will be improper if it is a purpose of achieving ends other than to which the process is directed.

In the kind of company law context with which I am here concerned, it was, before the advent of Pt 5.4, an abuse of process to initiate winding-up proceedings as a means of attempting to enforce payment of a disputed debt. An early decision to that effect was Cercle Restaurant Castiglione Co v Lavery (1881) 18 Ch D 555 the report of which contains, as a footnote, the judgment of Jessel MR in Niger Merchants Company v Capper (1877) 18 ChD 557n where reference was made to an earlier decision of Malins VC in Cadiz Waterworks Co v Barnett (1874) LR 19 Eq 182 in which the pursuant of winding up proceedings was enjoined "on the ground that it is the object of the Court to restrain the assertion of doubtful rights in a manner productive of irreparable damage". The principle was stated in these terms by Vaughan Williams J in Re a Company [1894] 2 Ch 349:

"In my judgment, if I am satisfied that a petition is not presented in good faith and for the legitimate purposes of obtaining a winding up order, but for other purposes, such as putting pressure on the company, I ought to stop it if its continuance is likely to cause damage to the company."

25 To find that there has been an abuse of process, I would need to be satisfied that the plaintiff has pursued the winding up proceeding for an improper purpose. The existence of an unworthy motive is not sufficient to constitute an abuse of process.

26 Here, as in Equity Australia Pty Ltd, there has been considerable litigation between the parties, being the defendant's four adjudication applications, the two VCAT proceedings and this current application. When successful in the first VCAT proceeding, the plaintiff issued the Warrant for the payment of the Interim Awards. As the Warrant was returned unsatisfied, the plaintiff relies on this as an act of insolvency.

27 Further, when the statutory demand was withdrawn, the plaintiff's solicitors made it clear that they regarded the off-setting claim as bogus and advised that unless prompt action was taken to pay the costs ordered by the arbitrator, enforcement action would be taken.

28 The plaintiff was aware of the potential offsetting claim when it issued the Warrant and knew that the defendant had filed the VCAT claim when it brought the present wind-up proceedings. Despite knowledge of the potential offset claim, which had not been pursued for some five years by the defendant, the plaintiff was the recipient of a court order and had every right to issue enforcement proceedings. When the Warrant was returned unsatisfied, the defendant was deemed to be insolvent pursuant to s 459C(2)(b) of the Act, which allowed the plaintiff to pursue this wind-up proceeding. Accordingly, the facts of this case are different to the facts in Equity Australia Pty Ltd.

29 On the facts before me, I cannot say the plaintiff has acted with an improper purpose. It has been said for some time now that winding up proceedings should not be used for debt collection. Where a plaintiff is owed a debt and a statutory demand has been served and not satisfied under the Act_,_ a winding up application is made. Without a debt due, there would be no application. The position is that in most cases, if not in all, the plaintiff is seeking to recover its debt. Here, the plaintiff choose to execute its debt by way of warrant of seizure and sale and was entitled to bring this application when the Warrant was returned unsatisfied. Accordingly, there is no abuse of process. I also note that in AG Coombes Pty Ltd v M&V Consultants,[5] Sloss J held that reliance on a presumption of insolvency cannot amount to an abuse of process.

30 The defendant alleges that it has an offsetting claim against the plaintiff, which is the subject of the VCAT proceedings to be heard on 6 June 2019. The amount, being for $39,785.41 (plus interests and costs), exceeds the plaintiff's claim.

31 If the application to wind up the defendant was based on the failure to comply with a statutory demand, the defendant would not get leave to raise the offsetting claim, unless it satisfied the requirements of s 459S of the Act. Section 459S provides:

S 459S Company may not oppose application on certain grounds

(1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:

(a) that the company relied on for the purposes of an application by it for the demand to be set aside; or

(b) that the company could have so relied on, but did not so rely on (whether it made such an application or not).

(2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.

32 Here, the plaintiff does not rely on a statutory demand and therefore s 459S does not apply. Accordingly, the defendant can raise an offsetting claim. If there is a genuine offsetting claim, the plaintiff will not be a creditor as the amount of the offsetting claim exceeds the debt claimed. If it is not a creditor then it cannot bring an application to wind up the defendant.

33 The plaintiff submits that it is a creditor simply because there is a judgment debt in its favour. Applications to set aside a statutory demand based on a judgment debt on the grounds that it has an offsetting claim are common. If the courts find that there is an offsetting claim exceeding the judgment debt claimed in the statutory demand, then the demand will be set aside. Here the fact that the plaintiff has obtained a court order in its favour does not preclude the defendant from asserting that the plaintiff is not a creditor because there is an offsetting claim.

34 The threshold required to establish an offsetting claim is not high. In First Equilibrium Pty Ltd v Bluestone Property Services Pty Ltd (In Liq)[6] the Full Court of the Federal Court had before it an application to wind up the defendant on the grounds of insolvency. The defendant claimed that it had an offsetting claim and that the plaintiff was not a creditor. It adopted the same test applied as is applied in the context of a statutory demand. It said:

Before turning to consider the "counter-claim" relied upon by Equilibrium, it is important to understand the context in which that "counter-claim" is to be considered. Mere assertion of a claim or counterclaim is not sufficient. The claim or counterclaim must raise a bona fide or genuine dispute on substantial grounds as to the whole of the judgment debt: Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527 at [72] and CVC Investments Pty Ltd v P & T Aviation Pty Ltd (1989) 18 NSWLR 295 at 301-2. That enquiry is not inconsistent with the statutory question posed by s 459H of the Act which, in the context of statutory demands, defines an "offsetting claim" to mean "a genuine claim that the company [Equilibrium] has against the respondent [Bluestone] by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances ...)": s 495H(5) of the Act...[7]

35 The Court of Appeal in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings[8] laid out the test to be applied when considering an offsetting claim under s 459G and said:

... the Court's function is to identify whether a genuine dispute or offsetting claim exists, not to determine any such dispute or claim. This means that the applicant under s 459G is required only to establish a 'plausible contention requiring investigation' of the existence of a genuine dispute or claim. The application will fail only if the contended dispute or claim is 'so devoid of substance that no further investigation is warranted'. The resolution of the application should generally not involve the deciding of disputed questions of fact, but might require determination of short points of law.

36 The defendant alleges that the plaintiff does not dispute the existence of the VCAT Proceeding debt, as evidenced through the withdrawal of the statutory demand. The defendant further alleges that the plaintiff acknowledged the defendant's genuine claim, and used an alternative process under s 459C(2)(b) to prevent the defendant from making a defence of genuine dispute in a s 459G application. I do not agree with those submissions. The fact that the plaintiff decided to use an alternative procedure to enforce its debt should not create any inferences against the plaintiff.

37 The plaintiff submits that the Court should reject the defendant's off setting claim as it is inherently unreliable. I note, however, that there has been no application to strike it out. The claim is listed for hearing on 6 June 2019 at VCAT and will proceed. If it has no merit, an application should have been made to strike it out.

38 The plaintiff submits that the Court should reject the offsetting claim as it is inherently unreliable. The plaintiff relies on the fact that the offsetting claim was filed at VCAT some six weeks after the plaintiff informed the defendant of its intention to commence enforcement proceedings. Further, it is a claim that is based on invoices that were raised some five years ago.

39 The defendant's intention may have been to bring an offsetting claim to stifle the plaintiff's enforcement proceeding but that does not mean that the claim is not capable of succeeding. It is not statute barred. There is a valid claim on foot which has not been struck out by the plaintiff. If it was not genuine and had no merit, there should have been an application to have it struck out at VCAT. Instead the plaintiff will oppose that application at the trial which is listed for hearing in June.

40 The plaintiff maintains that it is a creditor due to ongoing arbitration proceedings but no evidence was filed as to the scope of the proceedings, the quantum claimed or the likelihood of success. That does not assist the plaintiff as there is no material upon which the Court can assess whether there are further amounts owed to the plaintiff other than that contained in the court order.

41 The plaintiff also submits that there is no claim as a consequence of a Deed of Release entered into between the parties on 14 December 2015 ('the Release'). Paragraph 4 of the Release provides:

1. The Subcontractor indemnifies Platinum Construction (VIC) Pty Ltd, its employees, officers, servants and agents, from and against all claims, demands, debts, accounts, expenses, costs, liens, actions and proceedings of any and every kind, name and nature and description, whether known or unknown, by any person, corporation or firm arising from, incidental to, or by virtue of the Subcontractor out of its performance.

42 The important words of the Release are 'arising from or incidental to, or by virtue of the Subcontract or out of its performance'. The question raised by this Release is whether those words encompass the work done under the Subcontract under what the defendant says is a separate agreement. There is no evidence before me upon which I can determine that question. It is a matter requiring further investigation and a matter for VCAT.

43 In my view, the defendant has a genuine offsetting claim which exceeds the amount claimed by the plaintiff under the Warrant. Based on the information before me, I do not believe that the plaintiff is a creditor. Therefore, the plaintiff has no standing to bring this application to wind-up the defendant.

44 Although I have determined that the plaintiff is not a creditor, I will still consider the question of solvency.

45 Solvency is defined under s 95A(1) of the Act, which provides**:**

S 95A Solvency and insolvency

(1) 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.

(2) A person who is not solvent is insolvent.

46 The plaintiff relies on the following principles relating to the presumption of insolvency.[9] These are:

(a) the onus for establishing solvency rests on the company;[10]

(b) in rebutting the presumption of insolvency, the company must put forward the 'fullest and best' evidence as to its financial position;[11]

(c) the company should do its utmost to present a convincing case to the Court;

(d) the Court will adopt a highly critical view of the material presented before it in assessing whether a company is solvent;.[12]

(e) a proper verification of assets and liabilities is usually critical to rebut the presumption of insolvency;[13] and

(f) unaudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency.[14]

47 Accordingly, the plaintiff alleges that the presumption of insolvency has not been rebutted because:

- the defendant has not filed audited accounts and only relies on an affidavit from Mr Peng which only exhibits management accounts. There is a complete disclaimer of the accounts and the bank statements referred to are not exhibited;

- the defendant asserts that it constantly has an average amount in its Commonwealth Bank of Australia bank account ('CBA Account'), but exhibited only one account. The lack of transparency of all bank accounts calls into question whether there have been transfers outside the ordinary course of business;

- there are a series of unexplained transactions in the defendant's transaction history, including $45,000.00 from what appears to be a related party. Without those payments, the defendant would not have been able to make its tax payments;

- there is no amount reserved to cover the plaintiff's taxed order for costs of $17,200.00;

- over half of the assets in the balance sheet are trade debtors. Nothing evidences the recoverability of those debtors; and

- Mr Lin indicates that he is intent to recover the director's loans. The Court should not consider any financial accommodation that may occur later.

- the defendant has made significant net profits over the last three years. The profits for 2017 were $227,342.60, for 2018 were $234,085.10 and for the 2019 year through to 25 February 2019 are $86,625.00;[15]

- the defendant had current assets of $127,050.00 as at 25 February 2019. This includes $49,931.00 in the CBA Account, trade debtors of $67,754.00 and current liabilities of $28,502.00. After this, the net asset is $37,588.00;

- as at 25 March 2019 the defendant's Integrated Client Account and Income Tax Account with the Australian Taxation Office ('ATO') had zero balances, confirm that the defendant is up to date with all GST, PAYG and Income Tax payments;

- although Mr Peng's Management Reports may not be audited accounts, they are supported by information provided by independent third parties, namely the Commonwealth Bank of Australia and the ATO;

- its liquidity ratio is greater than 1.0; and

- there are no supporting creditors to the plaintiff's application.

49 The defendant produced unaudited accounts to prove that it is solvent and relies on Deputy Commissioner of Taxation v De Simone Consulting Pty Ltd[16] ('Di Simone'), where Finkelstein J considered whether a company wishing to prove its solvency must produce audited accounts as evidence. His Honour said:

... The practice is said to flow from the cases referred to by Weinberg J in Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728, a decision that has been cited with approval in Expile Pty Ltd v Jabb's Excavations Pty Ltd (2003) 45 ACSR 711, a decision of the Court of Appeal of New South Wales.

To put what I am about to say into its proper context I will set out the first three propositions that appear in the relevant part of Weinberg J's reasons. He said (at para 44):

"The authorities which govern the operation of s 459G of the Corporations Law seem to me to establish the following propositions:

- The respondent is presumed to be insolvent and as such bears the onus of proving its solvency: s 459C(2) and (3);

- In order to discharge that onus the Court should ordinarily be presented with the "fullest and best" evidence of the financial position of the respondent.

- Unaudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency. Nor are bald assertions of solvency arising from a general review of the accounts, even if made by qualified accountants who have detailed knowledge of how those accounts were prepared."

(citations omitted)

Let me say at once that I reject as unfounded the proposition that to discharge the onus established by s 459C(3) a company must produce audited accounts to prove solvency. The cases to which Weinberg J referred do not support the existence of such a rule. Nor does his decision.

The question whether a company is solvent involves both a question of law and a question of fact. The legal question, or what may be partly a legal question, is what is meant by the word "insolvent" in s 459A for the purpose of determining what is meant by the opposite. The judge will provide that meaning. He or she may say that the word has a technical meaning and state what that meaning is. Or he or she may say that the word is used in its ordinary sense and go to a dictionary to discover that meaning.[17]

50 In Xu v Megaward Pty Ltd, [18] the Court of Appeal interpreted both Expile Pty Ltd and Di Simone. Their Honours accepted that there was not some flexible rule that was only one way of proving solvency, namely by producing audited accounts, however McColl JA, Meagher JA and Leeming JA said:

That does not stand in the way of the fact that in many and probably most such applications, the company would be well advised to adduce the fullest and best possible evidence. That reflects the qualified force of the proposition that "the Court should ordinarily be presented with the 'fullest and best' evidence of the financial position of the respondent", applied in this Court in Expile Pty Ltd v Jabb's Excavation Pty Ltd [2003] NSWCA 163; 45 ACSR 711, which in turn reflects the qualified language used by Hayne J.[19]

51 The defendant here was reminded at a directions hearing that the fullest and best evidence would be audited accounts and chose not to have the accounts audited. There is also a disclaimer by Mr Peng, the defendant's accountant, of the accounts that have been relied on by the defendant. The disclaimer states:

On or around 4 March 2019, based on Lin Tiger's documents I assessed through Xero and the Australian Tax Office tax portal, Lin Tiger's Business Activity Statements for the financial quarters between 1 July 2018 and 31 December 2018, and the information provided as particularised in paragraphs 5, 6 and 7 herein, I completed the Management Report and provided a copy of same to Bo Lin. I take no responsibility for the reliability, accuracy and completeness of the information provided to me.

52 The disclaimer by the defendant's accountant and the fact that the defendant relies on unaudited accounts is not enough evidence to rebut the presumption of insolvency. I also note that there are problems with some accounts, as identified by the plaintiff. Relevant matters have not been explained such as recovery of trade debtors the balance of an undisclosed bank account and the terms of supply of funds from external sources or the intent of directors recovering loans.

53 There was no abuse of process by the plaintiff in bringing this application to wind up the defendant, but there is an offsetting claim in excess of what is claimed by the plaintiff which leads to the conclusion that the plaintiff is not a creditor. As the plaintiff is not a creditor, it has no standing to bring this application. The application is dismissed.

[1] [2015] FCA 841.

[2] [2005] NSWSC 918.

[4] (2204) [2004] NSWSC 734; 208 ALR 532, [54] - [57].

[5] (2018) 55 VR 513.

[6] [2013] FCAFC 108.

[8] [2017] VSCA 51, [47].

[9] See generally, Assaf F, Statutory Demands and Winding Up in Insolvency (2nd edition), [10.19].

[10] Bibby Financial Services Australia Pty Ltd v Wolf Industries Australia Pty Ltd [2004] NSWSC 134, [21].

[11] Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075, 1091 per Hayne J.

[12] Leveraged Equities Ltd v Hilldale Australia Pty Ltd [2008] NSWSC 190.

[13] TQM Design and Construct Pty Ltd v Golden Plantation Pty Ltd [2001] NSWSC 500, [18].

[14] Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA, [44].

[15] Defendant's Submissions dated 27 March 2019.

[16] [2007] FCA 548.

[18] [2018] NSWCA 232.