Case: Commonwealth Bank of Australia v Begonia Pty Ltd (1993) 11 ACLC 1075
Outcome: referred to
are three aspects to this topic. The first aspect is the evidence that relates to Helimount's profit and loss and trading performance. The second aspect is the quality of the evidence put forward by Helimount and, in particular, whether it was the 'fullest and best' evidence: Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075 at 1085 per Hayne J. The third aspect is the evidence as to the assets and liabilities of Helimount and this is relevant for the purposes of considering its ability to borrow funds to overcome any temporary cashflow or liquidity problems. I start with Helimount's profit and loss and trading performance. The liquidator has deposed to Helimount's profit and loss and trading performance over certain years. His evidence is to the effect that in 2003 Helimount earned $78,916 from the sale of wine grapes and made a profit of $1,510. In 2004 the company earned $105,000 from the sale of wine grapes and $124,228 as a profit on the sale of property and made a profit of $150,623. In 2005 Helimount made sales of $472,015 and made a profit of $159,247. In 2006 Helimount could not sell its wine grapes. The liquidator states that no financial statements have been prepared for the last year, which I assume to be the financial year ended 30 June 2006. The liquidator does not reveal the source of these figures. In ACE Contractors &amp; Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728 Weinberg J set out a number of principles which he considered to be relevant on an application of this nature. His Honour said: 'The authorities which govern the operation of s 459G of the Corporations Law seem to me to establish the following propositions: &#61863; The respondent is presumed to be insolvent and as such bears the onus of proving its solvency: s 459C(2) and (3); Elite Motor Campers Australia v Leisureport Pty Ltd (1996) 22 ACSR 235 per Spender J; Commissioner of Taxation v Simionato Holdings Pty Ltd . (1997) 15 ACLC 477 per Mansfield J. &#61863; 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: Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075 at 1081 per Hayne J. &#61863; 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: Simionato Holdings Pty Ltd ( supra); Re Citic Commodity Trading Pty Ltd v JBL Enterprises (WA) Pty Ltd [1998] FCA 232 per Heerey J; Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459 at 463 per Sackville J. &#61863; There is a distinction between solvency and a surplus of assets. A company may be at the same time insolvent and wealthy. The nature of a company's assets, and its ability to convert those assets into cash within a relatively short time, at least to the extent of meeting all its debts as and when they fall due, must be considered in determining solvency: Rees v Bank of New South Wales [1964] HCA 47 ; (1964) 111 CLR 210; Re Tweeds Garages Ltd [1962] Ch 406 at 410 per Plowman J; Simionato Holdings Pty Ltd (supra); Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 13 ACLC 823 at 832 per Lindgren J; Leslie v Howship Holdings Pty Ltd (supra) at 465-466. &#61863; The adoption of a cash flow test for solvency does not mean that the extent of the company's assets is irrelevant to the inquiry. The credit resources available to the company must also be taken into account: Sandell v Porter [1966] HCA 28 ; (1966) 115 CLR 666 at 671 per Barwick CJ (with whom McTiernan and Windeyer JJ agreed); Leslie v Howship Holdings Pty Ltd (supra) at 466; Taylor v ANZ Banking Group Ltd (1988) 6 ACLC 808 at 812 per McGarvie J. &#61863; The question of solvency must be assessed at the date of the hearing. However, this does not mean that future events are to be ignored: Leslie v Howship Holdings Pty Ltd (supra) at 466-467. &#61863; It is no abuse of process for an applicant to seek to wind up a company presumed to be insolvent by reason of its failure to comply with a statutory demand merely because that company contends that it is solvent, or because there may be alternative means available to the applicant to vindicate its rights : Elite Motor Campers Australia v Leisureport Pty Ltd (supra).'