The High Court of Australia released its reasons for decision in Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed)  HCA 18 yesterday. The proceedings concerned the Australian Securities and Investment Commission (ASIC)’s application pursuant to section 459P of the Corporations Act 2001 (Cth) (Act) to wind up Lanepoint Enterprises Pty Ltd (Lanepoint) (the Application).
ASIC relied on the statutory presumption in section 459C(2)(c) that Lanepoint was insolvent by reason of the appointment of receivers and managers to its assets within the three months proceeding the Application.
Lanepoint opposed the Application on the basis that it was solvent and sought a stay of the Application. Lanepoint claimed that the amount it owed the Westpoint Income Fund (a managed investment scheme that financed the operations of Lanepoint) (WIF) was significantly less than the amount the receivers and managers claimed it owed. If the amount that Lanepoint claimed it owed WIF was correct (and not the receivers and managers’ amount) then Lanepoint claimed it would be solvent (as it would be able to pay its debts as and when they were due).
At first instance, Gilmour J was not satisfied that Lanepoint’s evidence established that Lanepoint was solvent and accordingly failed to rebut the statutory presumption.
Appeal to the Federal Court of Appeal
Lanepoint then appealed to the Federal Court of Appeal. The Court of Appeal referred to policy surrounding changes effected to the Corporations Legislation in 1993 that (ordinarily) a company would not be wound-up on the basis of a disputed debt. These changes were introduced to resolve disputes concerning statutory demands, and allowed for debtors to set aside statutory demands on the basis that there was a genuine dispute as to the debt the subject of the demand.
As Lanepoint disputed the underlying amount of its debt to WIF, the Court of Appeal considered that the circumstances of ASIC’s Application were analogous to that of a debtor applying to set aside a statutory demand on the basis of a genuine dispute. The Court of Appeal formed the view that ASIC’s Application was not the appropriate forum to determine the dispute regarding Lanepoint’s debt to WIF.
Accordingly, the majority of the Court of Appeal (North and Siopis JJ, Buchanan J dissenting) allowed the appeal, setting aside the orders of Gilmour J, and ordered a stay of the Application pending the determination of the proceedings to be brought by the liquidators of the responsible entity of WIF. Those foreshadowed proceedings were to determine the extent of Lanepoint’s liability to WIF.
High Court Appeal
ASIC appealed to the High Court. In allowing ASIC’s appeal, the High Court (in a unanimous judgment of Gummow, Heydon, Crennan, Kiefel and Bell JJ) held that:
- the Court of Appeal misapplied the principle regarding disputed debts. ASIC’s Application was not founded on a (disputed) debt, rather it was the appointment of the receivers and managers (which was a fact not in dispute). Accordingly, ASIC was entitled to rely on the statutory presumption afforded by section 459C(2)(c);
- the onus was on Lanepoint to prove that it was solvent in order to rebut that presumption, which it had not done; and
- there was no evident reason to exercise the Court’s discretion to postpone the Application.
Lavan Legal comment
This decision is a significant win for ASIC and is relevant to all persons with standing under section 459P of the Act to apply for an order winding up a company. The decision provides greater certainty for creditors who seek to rely on the statutory presumptions set out in section 459C(2) of the Act. The High Court emphasised the distinction between the principles applicable to disputed debts in the context of an application to set aside a statutory demand as opposed to the manner in which the statutory presumption of insolvency operates in the context of section 459C(2).
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