Background
Robert and Annette Wilson served PUNP1 Pty Ltd with a statutory demand under s 459E of the Corporations Act 2001. The company neither paid nor took steps to challenge the demand within the required 21 days, giving rise to a presumption of insolvency.
The Wilsons then applied to wind up the company. PUNP1 paid the demanded amount in full at 7:33 pm on the evening before the initial hearing date. The applicants nevertheless pressed for a winding-up order, relying on the continuing presumption of insolvency and on $11,104.50 in costs incurred in bringing the application.
The Court’s Holding
Martin J dismissed the winding-up application. Although payment after the 21-day period did not itself remove the statutory presumption of insolvency, the Court retained discretion whether to make a winding-up order.
The applicants’ costs were not a further debt owing by PUNP1. No costs order had yet been made, and any costs ultimately ordered could be disputed through the assessment process. The Court distinguished Deputy Commissioner of Taxation v Swoosh Hand Car Wash Pty Ltd, where an additional, undisputed tax debt remained after payment of the statutory-demand debt.
Applying the reasoning in Braams Group Pty Ltd v Miric and De Montford v Southern Cross Exploration NL, the Court held it was inappropriate for the original petitioning creditors to continue seeking liquidation after being paid the only debt on which their application was based. No other creditor had sought substitution.
Key Takeaways
- Late payment of a statutory demand does not automatically displace the presumption of insolvency.
- That presumption does not require a winding-up order; the Court retains a discretion to refuse one.
- Unordered litigation costs are not a present debt supporting a winding-up application.
Why It Matters
The decision confirms that statutory-demand proceedings are not a mechanism for a fully paid creditor to obtain liquidation merely because payment was late. A creditor may preserve the insolvency presumption after late payment, but must still persuade the Court that a winding-up order is appropriate.
For companies, prompt payment may not cure every consequence of non-compliance with a statutory demand, particularly where another creditor seeks substitution. But where the original creditor has been paid in full and no other creditor intervenes, the Court may decline to wind up the company.