Woodgate v Garard Pty Ltd

Woodgate v Garard Pty Ltd - [2010] NSWSC 508 - NSWSC 2010 case summary — Zoe

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Allianz Australia Workers' Compensation (NSW) Ltd v Woodfast Joinery (Aust) Pty Ltd [2003] NSWSC 587 - Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd (2008) 243 ALR 207 - Austar Finance Group Pty Ltd v Campbell [2007] NSWSC 1493 - Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) (1996) 69 FCR 531 - Career Training on Line Pty Ltd v BES Training Solutions Pty Ltd [2010] NSWSC 460 - Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139 - Cornick Pty Ltd v Brains Master Corporation (1995) 60 FCR 565 - David Grant & Co Pty Ltd (rec apptd) v Westpac Banking Corporation (1995) 184 CLR 265 - Dwyer v Canon Australia Pty Ltd [2007] SASC 100 - Eagles v Eagles [1960] VR 400 - Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305 - Faji (Australia) Constructions Pty Ltd v AC Professional Accounting Pty Ltd [2009] NSWSC 180 - Fingalbay Pty Ltd v Rengay Nominees Pty Ltd (1997) 142 FLR 340 - Forza Finance Pty Ltd v Vergepoint Sales & Management Pty Ltd [2010] QSC 46 - FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136 - Future Life Enterprises Pty Ltd, Re (1994) 33 NSWLR 559 - Grey v Pearson (1857) 6 HL Cas 61; 10 ER 1216 - Griffith Producers Co-operative Co Ltd v Calabria (1996) 15 ACLC 19 - Gryst v Dromana Estate Ltd, re Dromana Estate Ltd [2008] FCA 1148 - Howship Holdings Pty Ltd v Leslie (No 2) (1996) 41 NSWLR 542 CASES CITED : - Italiano v Carbone [2005] NSWCA 177 - James v Ash Electrical Services Pty Ltd (2008) 73 NSWLR 95 - Joe Mangraviti Pty Ltd v Lumley Finance Ltd [2010] NSWSC 61 - Ketrim Pty Ltd v AS&L Pty Ltd (2004) 52 ACSR 252 - Millerview Constructions Pty Ltd v Palmer Plumbing Pty Ltd [2008] QSC 3 - Missing Link Network Integration Pty Ltd v Keene Consulting International Pty Ltd [2007] NSWSC 1377 - Nutri-Care Ltd v ACN 080 633 754 Pty Ltd [2009] SASC 72 - Pacific Mobile Phones Pty Ltd, Re [2008] QSC 210 - Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 Qd R 140 - Pearlburst Pty Ltd v Summers Resort Group Pty Ltd [2007] NSWSC 1126 - Peters v Oscar Mayer Pty Ltd [1963] VR 390 - Pinn v Barroleg Pty Ltd (1997) 23 ACSR 541 - Players Pty Ltd v Interior Projects (1996) 20 ACSR 189 - Polstar Pty Ltd v Agnew (2007) 208 FLR 226 - R v Bolton; Ex parte Beane (1987) 162 CLR 514 - Racecourse Totalisators Pty Ltd v Hartley Cyber Engineering Pty Ltd (1989) 15 ACLR 457 - Rochester Communications Group Pty Ltd v Lader Pty Ltd (1997) 143 ALR 648 - Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd (unrep VSC, Chernov J, 24 April 1998) - Sheslow v Diamond Rose NL (2005) 54 ACSR 376 - Sim v Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) [2003] WASC 121 - SV Steel Supplies Pty Ltd v Palwizat [2009] QSC 24 - Telstra Corporation Ltd v Ivory [2008] QSC 123

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1 This is an application to wind up the Defendant ("Garard") in insolvency pursuant to s 459A, s 459C and s 459P of the Corporations Act 2001 (Cth) ("Corporations Act"). The Plaintiff, Mr Woodgate, relies upon the presumption of insolvency arising under s 459C(2)(a) consequent upon the failure of Garard to comply with a Statutory Demand. 2 The application raises a number of points of law as to the service of a document on a company and as to the construction of those sections of the Corporations Act which afford a presumption of insolvency. 3 Mr Woodgate is the trustee of Mr Athol Fenton's bankrupt estate. Mr Fenton was an electrical contractor who carried out work for Garard. 4 On 31 July 2009 Mr Woodgate sent to Garard a Statutory Demand claiming a debt of $15,400 in respect of work which had been carried out by Mr Fenton. The Demand was sent by registered post to an address which, only a month before, had ceased to be Garard's registered office. Mr Woodgate, apparently, was unaware of the change. One of Garard's two directors, Mr Szkirpan, collected the registered letter containing the Demand from an Australia Post Office and, by letter to Mr Woodgate dated 14 August 2009, he acknowledged that he had received the Demand on 13 August. 5 Mr Woodgate concedes that the Demand has never been served at Garard's registered office or in any other manner authorised by s 109X for service of documents upon a company. Nevertheless, he says that the Demand was served upon Garard, within the meaning and for the purpose of s 459E(1) and s 459F(2)(b), because it was actually and effectively received by Garard. 6 Garard did not file and serve an application under s 459G to set aside the Demand within twenty-one days from 13 August 2009. At some time between 24 and 30 September 2009, Mr Szkirpan asked his co-director, Mr James, to take over dealing with the Demand. There is no evidence that Mr James was aware of the Demand before that time. 7 Mr Woodgate filed an Originating Process to wind up Garard on 13 October 2009. Mr Szkirpan had pointed out to Mr Woodgate that the Demand had not been served at Garard's registered office. Accordingly, Mr Woodgate's Originating Process sought, in addition to an order for the winding up of Garard, "a declaration pursuant to s 109X(6)(b) of the Corporations Act that Garard is deemed served with the [Demand] … on 13 August 2009". 8 On 2 December 2009, Garard filed an Interlocutory Process seeking leave, pursuant to s 459S, to oppose the Originating Process, presumably upon the ground that the debt was genuinely disputed: s 459S(1)(b). The application came before Austin J on 7 December 2009. Mr James appeared, unrepresented, and tendered evidence as to solvency. Austin J rejected the evidence as inadmissible and adjourned Mr Woodgate's winding up application and Garard's s 459S application to 1 March 2010. His Honour directed Garard to file and serve on or before 29 January 2010 the evidence upon which it wished to rely in support of its s 459S application and in opposition to the winding up application. Such evidence should have included admissible evidence of solvency, if Garard wished to oppose the winding up application on the ground that it was solvent. 9 Garard filed and served no evidence in compliance with his Honour's direction. Instead, when the winding up application came on for hearing on 1 March 2010, Garard filed in Court an Amended Interlocutory Process which abandoned the application for leave under s 459S and sought only a declaration that Garard was not duly served with the Statutory Demand and a consequential order that the winding up application be dismissed. At the conclusion of argument, Mr Crossland of Counsel, who appeared for Garard, informed me that he had to obtain Garard's instructions as to whether to seek leave to file evidence of solvency if his submissions as to invalid service of the Demand failed. Leave to file that evidence would be required because Garard had failed to comply with the directions of Austin J in that regard. On 3 March, Mr Crossland gave notice that he was instructed to seek leave to file evidence of solvency. That application remains to be determined. Issues

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28 The contest between the parties has focussed on whether the Court should hold that receipt of the Demand by Mr Szkirpan on 13 August 2009 was, although informal, nevertheless good service on Garard. Mr Crossland, in submitting that it was not, relies heavily on the decision of the Full Federal Court in Rochester Communications (supra) and upon the authorities discussed therein by Beaumont J. For the contrary proposition, Mr Golledge relies upon the decision of Young J (as his Honour then was) in Howship Holdings Pty Ltd v Leslie (No 2) (1996) 41 NSWLR 542, and upon later cases which have followed that decision. 29 In Rochester Communications, the creditor had served a Statutory Demand in which, in accordance with the prescribed form, it had given its solicitors' office address as the address for service of "any application". The debtor filed a s 459G application within the prescribed time but did not serve it either at the address stated in the Statutory Demand or at the creditor's registered office. Rather, the application was served at the office of one of the directors of the creditor. The primary judge held that the application had not been served on the creditor within the prescribed time so that the Court had no jurisdiction to entertain it. 30 The debtor appealed. Section 220 of the Corporations Law 1996 (Cth), which then applied, provided that a company "may be served" by leaving the document at, or sending it to, the registered office of the company. The debtor submitted that s 220 was facultative, not mandatory, and that, in the particular circumstances of the case, service on the director of the creditor was effective to bring the application to the attention of the creditor itself. 31 The principal judgment was given by Beaumont J. His Honour reviewed a number of English cases in which it was held that the precursor of s 220 was, in fact, mandatory and that service other than at the registered office of a company was not valid. His Honour also referred to Eagles v Eagles [1960] VR 400 in which Pape J had held that a writ delivered to a bank at one of its branch offices, rather than at its registered office, was not validly served even though the branch manager had brought the writ to the attention of the bank's head office. 32 His Honour noted that Eagles had been distinguished in Peters v Oscar Mayer Pty Ltd [1963] VR 390, at 395, on the ground that service of the writ in Eagles had to be effected in accordance with the rules of court, whereas service of a document on a company generally could be effected in accordance with the precursor of s 220 although that provision was not "an exclusive mode of effecting service on a company. It provides what will be sufficient leaving other methods open of proving effective service". However, Beaumont J distinguished Peters on the ground that it was concerned with proceedings under the Health Act 1958. 33 At 670, Beaumont J referred to the observations of Young J in Howship, upon which Mr Golledge now relies, to the effect that s 109X is facultative, not mandatory. Beaumont J said, by way of distinction, that those observations "were made in the context of service on an individual". He continued: "…the later course of authority previously mentioned now makes it clear that the 'actual notice' principle must be viewed in the light of specific statutory provision to the contrary, in particular the relevant provisions of the Law, and regulations, viz s 220(1) and the 'address for service' provisions of Form 509H …" 34 Beaumont J was of the view that, as the s 459G application had not been served in accordance with the statutory provisions, there was no valid service and the appeal should be dismissed. Whitlam and Moore JJ agreed in that result but gave their own reasons. 35 The reasoning of Whitlam J seems to be that:

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in the factual circumstances of the case, such dispensation, or validation, should not be granted. 37 It will be seen that there is considerable divergence in the paths which led their Honours to dismiss the appeal. In attempting to distil a ratio from the judgments, the headnote of the case in the Australian Law Reports ventures only: "Although not a complete code, s 220 of the Corporations Law generally governs service on a company" - which is not a very useful statement of principle in an area of the law replete with technicality and variety of factual circumstance. 38 The apparent view of Beaumont J that the modes of service permitted by s 220 Corporations Law (now s 109X Corporations Act) are an exclusive code finds some support in the decision of McLelland CJ in Eq in Griffith Producers Co-operative Co Ltd v Calabria (1996) 15 ACLC 19. His Honour there held that a Statutory Demand is analogous to initiating proceedings and "must in my view be effected formally in accordance with the applicable statutory procedure". His Honour did not undertake any extensive review of the legislation or of the authorities in arriving at that conclusion. 39 That approach has not been taken up in subsequent decisions. Rather, the pragmatic concept of effective service, as explained by Young J in Howship (supra) has carried the day, although only in first instance decisions, no authoritative pronouncement having been made by an appellate court. 40 In Howship, the creditors, a firm of solicitors, had served a Statutory Demand and the debtor had, within the stipulated time, filed a Summons to set it aside under s 459G Corporations Law. The Summons was posted to the creditor's Document Exchange box, not to the address specified in the Statutory Demand. There was no issue that the documents had been delivered to the Document Exchange box on a certain day and that, some time later, the creditors had actually received them, but there was no evidence as to when they had actually received them. 41 The creditors submitted that the manner of service on a company prescribed by s 109X Corporations Law was mandatory because the scheme of Pt 5.4 required certainty both of the fact and of the time of service of a document on a company. His Honour held that the section is facultative, not mandatory. As to other modes of service, his Honour said at 544B-D, in a frequently quoted passage: "Section 459G itself does not deal with what is service. The ordinary meaning of 'service' is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope (1854) 4 De GM & G 328 at 341-345; 43 ER 534 at 539-540; R v Heron; Ex parte Mulder (1884) 10 VLR 314 at 315; Pino v Prosser [1967] VR 835 at 838. Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them.

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If this were not so, one would get the absurd situation referred to by McInerney J in Pino v Prosser (at 837), that the conclusion would be one which is: ' … remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ … should be held not to have been served.' " 42 His Honour's pragmatic approach - what might be called "the effective informal service rule" - has been applied in many subsequent decisions concerning service of a Statutory Demand and other documents on a company, even though Howship was concerned only with service of a s 459G application on natural persons: see e.g. Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd (unrep VSC, Chernov J, 24 April 1998); Players Pty Ltd v Interior Projects (1996) 20 ACSR 189, at 193 per Lander J; Ketrim Pty Ltd v AS&L Pty Ltd (2004) 52 ACSR 252; Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 Qd R 140, at 143 per Helman J; Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139, at [6]-[13] per Barrett J; Emhill Pty Ltd v Bonsoc Pty Ltd (supra) at 312 per Mandie J; Italiano v Carbone [2005] NSWCA 177, at [58]-[61] per Basten JA; Austar Finance Group Pty Ltd v Campbell [2007] NSWSC 1493, at [36] per Austin J; Dwyer v Canon Australia Pty Ltd [2007] SASC 100, at [27] per Debelle J; Polstar Pty Ltd v Agnew (2007) 208 FLR 226, at [24]-[25]; Pearlburst Pty Ltd v Summers Resort Group Pty Ltd [2007] NSWSC 1126 per Barrett J at [26]; James v Ash Electrical Services Pty Ltd (2008) 73 NSWLR 95, at [26] per Barrett J. 43 As I have noted, there is no authoritative decision of an appellate Court confirming the "effective informal service rule": the discussion of the point by Basten J in Italiano v Carbone (supra) was not referred to by the other members of the Court. Further, there is conflict in the first instance decisions as to whether particular modes of informal service on a company are valid even for the purpose of the "effective informal service rule": e.g. whether good service of a Statutory Demand or a s 459G application can ever be effected by e-mail or facsimile. 44 Inconsistency and uncertainty in an area of the law which is of everyday application merely multiply occasions for dispute. It may, therefore, be useful to summarise the principles which are supported by the preponderance of authority, as follows:

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(3) A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application." 52 A difficult problem arises in applying to the provisions of subsection (2)(a) the introductory words of the subsection - "… if, during or after, the 3 months ending on the day when the [winding up] application was made …". There is no difficulty if the debtor has failed to comply with a Statutory Demand "during the three months ending on the day when the application was made": if the creditor serves a Statutory Demand, waits until time for payment or the making of a s 459G application has expired and then files a winding up application not later three months after the expiry date, it can rely on the presumption of insolvency. However, if the creditor waits longer than three months from the expiry date before making the winding up application, then the presumption grows "stale" and cannot be invoked. This is in accordance with the intention of the Harmer Report (Law Reform Commission, Report No 45, General Insolvency Inquiry). Volume 1, para 154 of the Report, which is the origin of s 459C, states: "The Commission proposed … that no presumption of insolvency should arise if more than three months has elapsed after the last day for compliance with a statutory demand and no application for the winding-up of the company based upon that non-compliance has been filed. … Views were put to the Commission that three months was too short … The Commission is not convinced that the time limits put forward in DP 32 should be changed. Non-compliance with a statutory demand is supposed to provide contemporaneous evidence of insolvency at the time of or within a reasonably short time after non-compliance - not up to six months after that event." 53 But how can the Court, consistently with the policy of the presumption of insolvency growing "stale" three months after non-compliance with a Statutory Demand, presume insolvency if non-compliance occurs "after the three months ending on the day when the application was made"? 54 In such a case, the three months "limitation period" has no meaning because nothing is required to happen within it and no specific consequence relating to a Statutory Demand or presumed insolvency will occur when the three month period ends. The whole phrase can, therefore, only mean "at any time after the application was made the company failed to comply with the Statutory Demand". Bearing in mind that, under s 459R(1) a winding up application can be heard up to six months after it is made - and even later if an extension of time is granted under s 459R(2) - one can see that a literal reading of s 459C(2)(a) could produce the result that a winding up application could be filed, the creditor could then serve a Statutory Demand and six months or more after the company fails to pay, the creditor can rely upon presumed insolvency at the hearing. 55 Such a result is inconsistent with the recommendations in the Harmer Report. Even more importantly, however, it is repugnant to s 459Q, which provides: " Application relying on failure to comply with statutory demand

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(c) unless the debt, or each of the debts, to which the demand relates is a judgment debt - must be accompanied by an affidavit that: (i) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (ii) complies with the rules." 56 The requirements of s 459Q are mandatory, not permissive, facultative or discretionary - "must" must mean "must". It is impossible for a creditor to file an application relying upon s 459C(2)(a) which complies with s 459Q(a) by setting out "particulars of the failure to comply with the demand" if the creditor serves the Demand after the winding up application is filed or if the time for compliance with the Demand has not already expired. 57 How, then, does one read s 459C(2), according to Lord Wensleydale's "golden rule", in a manner which is consistent with, rather than repugnant to, s 459Q: Grey v Pearson (1857) 6 HL Cas 61, at 106; 10 ER 1216, at 1234; R v Bolton; Ex parte Beane (1987) 162 CLR 514, at 546. 58 One can only make consistent sense of s 459C and s 459Q if one reads s 459C, which deals with an evidentiary presumption in a variety of different circumstances, as qualified by, and subject to, s 459Q, which deals with a particular matter of procedure in one of those circumstances. One then reads the phrase "during or after" in subsection (2) distributively amongst the six events that follow, so that "during or after" does not apply to all six events equally but, rather, "during" and "after" apply respectively only to such of those events as can be relied upon having regard to the provisions of s 459Q. 59 The result is that, consistently with s 459Q, one can rely upon failure to comply with a Statutory Demand only if time for compliance has expired during the three months ending on the day when the application was made, but one can rely on any one of the other five insolvency events specified in s 459C(2)(b)-(f) if the event has occurred either during the three month period before the winding up application is filed or after filing and before the hearing. 60 Such a result does no violence to the words of s 459C(2) and it is in conformity with the recommendations in the Harmer Report. Further, it avoids absurdity and inconvenience. If time for compliance with a Statutory Demand could expire after filing of the winding up application, a creditor who is "in a hurry" could first file a winding up application relying upon failure to comply with a Statutory Demand, then serve the Statutory Demand and set the twenty-one day period running, in the expectation that the winding up application would not come on for hearing in less than twenty-one days. The debtor would then immediately move to have the application summarily dismissed because, at the date of filing and at the date of hearing of the Motion, no presumption of insolvency could possibly be available. The creditor would respond with an application for an adjournment of the Motion to a day after the twenty-one day period had expired. This kind of manoeuvring - at great expense to the parties and placing pressure on the resources of the Court to deal with the spate of urgent applications - is inimical to the ordered and predictable regime of dealing with Statutory Demands contemplated in Pt 5.4: see generally David Grant & Co Pty Ltd (rec apptd) v Westpac Banking Corporation (1995) 184 CLR 265; Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd (2008) 243 ALR 207. 61 In support of the construction of s 459C(2) which I favour, I observe that the events of presumed insolvency stipulated in s 459C(2) can be relied upon in winding up applications made under s 234 (oppressive conduct), s 459P (general insolvency), s 462 (grounds under s 461 other than insolvency including the just and equitable ground) and s 464 (applications by ASIC under s 462): s 459C(1). Obviously, many of the grounds for winding up under those sections may have nothing to do with insolvency - e.g. s 234 or s 461(1)(a)-(g), (h)(ii), (k) - so that an application to wind up on those grounds would not be application "for a company to be wound up in insolvency" to which s 459Q applies. 62 In my opinion, s 459C is intended to operate so that if a person with standing under any of the sections stipulated in s 459C(1) files an application for winding up on any of the grounds of those sections - including the general insolvency ground in s 459P - that person may take advantage of the presumption of insolvency afforded by s 459C(2) if the insolvency event occurs within three months before the application. So, for example, if a member of a company files a winding up application on the ground of oppression or the just and equitable ground, he may also rely upon presumed insolvency in support of the discretionary remedy if any of the six presumed insolvency events in s 459C(2) occurs in the three months before the application is filed. If the insolvency event relied upon is failure to comply with a Statutory Demand, he will be able to, and must, include in his application at the time of filing the particulars and attachments required by s 459Q - which means that the time for compliance with the Statutory Demand must have expired before filing of the application. 63 However, if the presumed insolvency event is one specified in s 459C(2)(b)-(f) the applicant may rely upon it not only if it occurs during the three months before the winding up application is filed but also if it occurs after filing and before the hearing because the application, not relying upon non-compliance with the Statutory Demand, is not caught by s 459Q. A consideration of the authorities

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Thus - giving practical effect to the words 'or after' - a concerned creditor may immediately lodge an application to wind up the company, knowing the 21 days for compliance with a statutory demand has still to expire, but on the basis that the 21 days will expire after (but before the application is heard). This would give a purpose to the words 'or after' in the clause above. Without those words, an application made before the s 459C(2) event could not satisfy the three months requirement, as it was not made during the three months. The sense of the section is seen more clearly when the syntax is therefore rearranged to read: 'during the three months ending on the date the application was made, or after [the day the application was made]'. Such an interpretation avoids patent absurdity because otherwise the words 'or after', would give no sense to the three months limitation. It would mean that in reality there was no time limitation at all - that a winding up application could be brought even years after the relevant event." 67 For convenience, I will refer to the two propositions advanced by his Honour in paragraphs (a) and (b) above as "proposition (a)" and "proposition (b)". 68 What is remarkable in the judgment is that his Honour's attention obviously was not drawn to s 459Q, which was in force at the time. His Honour does not refer to that section at all in the judgment. For the reasons given above, I am unable to see how his Honour could have reached the conclusion that he did in proposition (b), so far as it relates to reliance upon an unsatisfied Statutory Demand, if his Honour's attention had been drawn to s 459Q. Further, his Honour reaches his conclusions by "rearranging" the words of s 459C(2) in a way which, I would respectfully suggest, does violence to the words used. The construction which I favour does no violence to the words of subsection (2) but simply requires them to be read alongside, and consistently with, s 459Q. 69 The second decision is that of Newnes M in Sim v Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) [2003] WASC 121. There, the creditor sought to wind up the company on two grounds - presumed insolvency under s 459C(2)(c) (appointment of a receiver) and actual insolvency. The receiver had been appointed some six months before the winding up application was filed. The company argued that the appointment could not be relied upon under s 459C(2)(c) because the appointment had not occurred "during" the three months ending on the day when the application was made. The creditor argued, relying upon Pinn, that s 459C(2) meant that the application could be made "after" the three month period had expired, so that the presumption of insolvency could be invoked. 70 The learned Master quoted from the judgment in Pinn the passage which I have set out above. He noted a submission of the company's counsel that Pinn was wrongly decided. However, the Master then, without further exposition of his own reasons, said that he agreed with the reasoning in Pinn and held that the presumption could be invoked in the case before him. 71 With great respect, I am unable to see how the facts of Sim could give rise to the presumption of insolvency under either proposition (a) or proposition (b) in Pinn, even if one accepts those propositions as correct. The appointment of the receiver would be "stale", in accordance with proposition (a) as having occurred more than three months before the winding up application was filed. That "staleness" could not be cured under proposition (b) because that proposition requires the "insolvency event" to occur after the application is filed - which, of course, did not happen in Sim. Accordingly, all one can say about the decision in Sim is that it approves, without discussion, the reasoning in Pinn but only as obiter, because the actual decision in Sim is not in conformity with the reasoning in Pinn. 72 The third decision is that of Barrett J in Sheslow v Diamond Rose NL (2005) 54 ACSR 376. There, the creditor served a document purporting to be a Statutory Demand. More than three months after the time for compliance had expired, he filed a winding up application founded solely upon the presumption of insolvency under s 459C(2)(a). The company argued that the document served was not a Statutory Demand within the meaning of s 459E and that, even if it were, time for compliance had not expired "during the three months" prior to filing of the application. 73 Barrett J held that the document was not, in truth, a Statutory Demand so that the winding up application had to be dismissed. His Honour went on to consider the consequences under s 459C(2)(a) if the document had been a Statutory Demand. His Honour said that the application was "made" - i.e. the Originating Process was filed - on 17 May 2005 so that the three month period referred to in s 459C(2) commenced on 17 February 2005. Time for compliance with the "Demand" - if it had been a Statutory Demand - expired in September 2004. His Honour said at [10]: "The 'day when the application was made' is, in this case, 17 May 2005, being the date of the filing of the plaintiff's originating process. The period of 3 months to which s 459C(2)(a) refers therefore began on 17 February 2005. Failure to comply with a statutory demand could therefore be relied upon for the purposes of the current winding-up application only if the failure - that is, the elapsing of the period of 21 days after service without payment, securing or compounding in conformity with the demand - had occurred on or after 17 February 2005. This demand, as I have said, was served in August 2004 which is well outside the relevant period. The case is accordingly one in which comments by Santow J in Pinn v Barroleg Pty Ltd (1997) 23 ACSR 541 apply. As his Honour there noted, s 459C is intended to confine the applicable time period for the winding-up application so that the evidence relied upon for a presumption of insolvency 'would not go stale'. Statutory staleness of an unsatisfied statutory demand occurs, in this sense, after 3 months and 21 days have passed from its service." 74 It will be seen that in Sheslow:

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because of the facts of the case, his Honour was not called upon to decide the construction of s 459C(2)(a) in the light of s 459Q. 75 Sheslow is, therefore, not authority for proposition (b) in Pinn and I would respectfully agree with the conclusion reached by Barrett J, founded upon proposition (a). 76 The fourth decision is that of White J in Missing Link Network Integration Pty Ltd v Keene Consulting International Pty Ltd [2007] NSWSC 1377. There, the question squarely arose whether a winding up application relying solely on the presumption of insolvency for non-compliance with a Statutory Demand should be dismissed because the time for compliance with the Demand had expired after the filing of the winding up application. 77 White J held, at [19] that "the presumption of insolvency for failure to comply with a statutory demand may arise after the day when the winding-up application is made". In support of that conclusion his Honour quoted the passage from the judgment of Santow in Pinn which I have set out above. His Honour added no reasoning of his own. As in Pinn, his Honour's attention was apparently not drawn to the impact of s 459Q on the construction of s 459C(2)(a) and his Honour makes no mention of s 459Q in his reasons for judgment. 78 The fifth decision is that of Finn J in Gryst v Dromana Estate Ltd, re Dromana Estate Ltd [2008] FCA 1148. There, the time for compliance with a Statutory Demand expired some six months before the creditor filed an application to wind up founded upon the presumption of insolvency under s 459C92)(a). His Honour held that the creditor could not rely upon the presumption because the application had not been made "during the three months ending on the day when the application was filed", relying upon that part of the judgment in Pinn which relates to "staleness" in a Statutory Demand. 79 In short, the judgment in Dromana is to the same effect as the judgment in Sheslow: neither case, while applying proposition (a) in Pinn, is authority for proposition (b), i.e. that the presumption of insolvency can arise by virtue of s 459C(2)(a) if the time for compliance with a Statutory Demand expires after a winding up application is filed. 80 Upon analysis, therefore, it appears that there is only one other decision which directly supports proposition (b) in Pinn, i.e. Missing Link Network. Pinn and Missing Link Network are first instance decisions but I would not depart from them unless I were convinced that the proposition for which they are authority is incorrect. 81 In proposition (a) in Pinn, Santow J refers to a "s 459C(2) event" - i.e., any of the six specified events, including non-compliance with a Statutory Demand. His Honour says that each of such events goes "stale" for the purposes of the presumption of insolvency if a winding up application relying on it is filed more than three months after its occurrence. I respectfully agree with that construction of s 459C(2). 82 In proposition (b), his Honour refers to a winding up application "made at a date preceding the event but based on it". While "event" here could have the same meaning as in proposition (a) - i.e., any of the six specified events, including non-compliance with a Statutory Demand or, for example, the appointment of a receiver or entry into possession - his Honour could not really have intended that meaning. One could not file a winding up application "based on" the appointment of a receiver or the entry into possession when the appointment or entry had not yet occurred. The words of proposition (b) read as a whole and the example of its application which his Honour immediately gives make it clear that his Honour, in proposition (b), was contemplating only a "s 459C(2) event" which has two constituent elements, one of which has occurred before the application is filed and one of which has occurred after filing, so that the application is "based on" the event because the first constituent element occurred before filing and the remaining constituent element occurred after filing. In short, clearly his Honour was contemplating in proposition (b) the case where a Statutory Demand is served before filing the winding up application and time for compliance with it expires after filing. 83 In my opinion, proposition (b) in Pinn applies only to non-compliance with Statutory Demands. For the reasons I have given, I am unable to agree with that proposition. Pinn is the only case which gives reasoned consideration to the proposition and I think that the decision was per incuriam of s 459Q. Accordingly, and with great respect, I decline to follow Pinn and Missing Link Network as authority for proposition (b). 84 Proposition (b), correctly understood, is not intended to refer to a s 459C(2)(b)-(f) event occurring after the filing of a winding up application. As explained in [59], I conclude that if a s 459C(2)(b)-(f) event occurs after filing of a winding up application, it can be relied upon for presumed insolvency at the hearing, even if the hearing occurs more than three months from the event. Section 459C(3) protects against injustice or absurdity in such cases because the presumption cannot be invoked if the s 459C(2)(b)-(f) event is no longer current at the date of the hearing, such as if the company is no longer in receivership, or a mortgagee who has gone into possession has been discharged in full. 85 To summarise: s 459C(2) must be construed consistently with s 459Q, so that:

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