Case: Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661
Outcome: followed
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. 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. 27 The decision in Switz that materiality is established by showing that the contested debt is pivotal was supported by at least two Judges of this Court. Against that there was a Full Court decision in Western Australia which suggested to the contrary. But in the circumstances, it seems to me that the authorities were clearly in one direction on this issue and that had the concession been made at an earlier time the plaintiff would have, for obvious reasons, consented to a grant of leave. This means that this afternoon's hearing has been an escapade which has taken place as a result of the defendant not proffering the concession at an earlier time. 28 I will make orders accordingly. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 28 November 2008 Counsel for the Plaintiff: Mr HWD Stowe Solicitors for the Plaintiff: Brown Wright Stein Lawyers Counsel for the Defendant: Mr IE Davidson Solicitors for the Defendant: W Lawyers Date of Hearing: 7 November 2008 Date of Judgment: 7 November 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/1777.html