Cosco Holdings Pty Ltd, Re [1990] QSC 200

IN THE SUPREME COURT OF QUEENSLAND No. 331 of 1990 IN THE MATTER of the Companies (Queensland) Code - and - IN THE MATTER of COSCO HOLDINGS PTY. LIMITED JUDGMENT - MOYNIHAN J. Delivered the 29th day of June, 1990 This is a creditor's petition to wind up Cosco Holdings Pty. Limited ("Cosco") . It is founded on non-compliance with a statutory notice of demand for the payment of instalments due under a contract and notices given to Cosco on 26 April, 1990. The claims against Cosco arise out of the supply to it of plant, machinery and associated items used in the manufacture of I paper products by an Italian entity, Officine Meccaniche Toschi Sp.A. ("Toschi"). The machinery supplied by Toschi was apparently paid for by a series of promissory notes which Toschi accepted and negotiated through the Banco de Napoli. Put succinctly, and hence at the risk of some oversimplification and perhaps inaccuracy, there is a dispute between Cosco and Toschi which arises in the following circumstances. Cosco was dissatisfied as to Toschi' s performance of its obligations to Cosco in respect of the plant and machinery. There was evidence indicating that this dissatisfaction was not unfounded. The difficulties led to meetings on 25 and 26 January, 1988 which, on Toschi's version, culminated in agreement resolving outstanding issues and was reflected in a document which, since it is in Italian, is in -- 1 of 6 -- 2 evidence together with an English translation. On one view of it, it is said to be arguable that the document does not resolve outstanding disputes between Toschi and Cosco in respect of matters associated with the supply of the machinery. In any event, there is dispute as to the terms of the agreement and as to the authenticity of the document evidencing the agreement. It was submitted for Toschi that the dispute is not bona fide. Thus it is said that the authenticity of the document is not bona fide in issue. Certain circumstantial evidence is pointed to in this respect. I should mention that the only evidence before me is that contained in the affidavits read in the proceedings . No witnesses were called and there was no cross-examination of any deponent. The circumstantial evidence relied on as removing the prospect of the dispute being bona fide includes opinion evidence as to the apparent consistency of type characteristics between letters proved to emanate from Cosco and the disputed document. There is objection as to the competence of the particular deponent to offer the opinion relied on. Cosco relies, among other things, on evidence from the then secretary to its Managing Director at the relevant time capable of sustaining an inference that she did not type the agreement to which I have referred in circumstances where one is asked to infer that she might have been expected to type the document. The circumstances, being those I have outlined, are in my view sufficient to indicate that the resolution of the issues bearing on the dispute between Cosco and Toschi and the resolution of the former' s indebtedness to the latter is far from -- 2 of 6 -- 3 easy to decide on the petition and the affidavits in support or in reply; cf. Re O.B.S. Pty. Ltd. (1967) Qd.R. 218 per Gibbs J. at 225, approved in Brinds Ltd. v. Offshore Oil N.L. (1986) 60 A.L.J.R. 185 at 188. Indeed the considerations which I have adverted to in my view are conducive to the view that it is more appropriate to allow the outstanding issues to be determined in other proceedings by a petition for winding up (see the cases just referred to). I am certainly not persuaded to a conclusion that the dispute is not bona fide. There are other considerations militating against granting the relief sought by the petitioner. It is said that Toschi, having endorsed the bills through the Banco de Napoli, has no standing to claim indebtedness and hence petition. Reference was made to Re a Debtor (1908) 1 Q.B. 344 at 350. That case is authority for the proposition that if a person avails himself of the character of a bill as a negotiable instrument and passed it out of possession in the right to possession of it in someone else at the date of dishonour, the suspension of the debt continues just as much as if the bill were not overdue and the party suing on it has it in his possession. The rationale is that otherwise the same party could be liable twice, once in an action for the price of goods supplied and another on the negotiable instrument given for the price and in the possession of someone other than the supplier of the goods. One may doubt the application of the principle to the circumstances of the present case, but it does give rise to factual issues and, in the context of the dispute to which I have already referred, it is in my view best left undetermined. -- 3 of 6 -- 4 The statutory notice relied on as founding the petition is, on any view of it, for an excessive amount on account of failing to give credit for a payment made. I would be inclined to conclude that the making of larger a demand is not necessarily focal to the validity of a statutory notice for the purpose of sustaining a petition and winding up; see Re Great Barrier Reef Flying Boat Pty. Ltd. (1982) 6 A.C.L.R. 820 and cases cited at 822 and Re Fabro Pty. Ltd. (1989) V.R. 432, although it may bear on discretionary consideration; see Re Great Barrier Reef Flying Boat Pty. Ltd. (ante) at 820. In the present circumstances it is unnecessary to determine this aspect. The financial position of Cosco, as disclosed by the material, is by no means uncontentious. The evidence shows that Cosco's banker has made funds available to it and is opposed to its being wound up. There is evidence that for the period from 1 July, 1989 to 5 May, 1990 Cosco had a net profit of $2,957,754.70 and that as at the latter date it had a net surplus of assets over liabilities of $24,107,574.30 and current assets of $10,251,948.54 and that it is paying its trade creditors according to trading terms and other creditors in accordance with arrangements with them. There was criticism that, for example, the accounts do not disclose liability in respect of sales tax. It was contended from the Bar table that this is appropriately reflected. I find it unnecessary to resolve these matters although it may be said that the evidence is such that it is by no means clear that Cosco is in fact unable to repay its debts as they fall due. -- 4 of 6 -- 5 The Deputy Commissioner of Taxation was represented at the hearing of the petition and asked that, in the event I was of the view that Toschi's petition ought not to be acceded to, the matter be adjourned for the purpose of the Deputy Commissioner being substituted as a petitioner. There is evidence that the Commonwealth claims that Cosco is indebted to it in a substantial amount made up of taxation assessments and associated penalties. Insofar as the components are in respect of assessments for income tax for each of the years ended 30 June, 1987 and 30 June, 1988 there are as yet undetermined objections. The evidence does not reveal that there is any objection in respect of the year ending 30 June, 1989 although, given the history of the matter as disclosed by the material, it would be one's expectation that there would be. The material shows a history of assessments, amended assessments, adjustments, objection and negotiations with a view to obtaining extensions of time for payment and for payment arrangements involving the Deputy Commissioner of Taxation and accountants for Cosco and its Managing Director. The material is indicative of disputes between the Deputy Commissioner of Taxation and Cosco as to the company's liability which are inapposi te to the resolution other than by the processes provided for by the legislation and by litigation. Coupling this with a conclusion that the petition was originally based on a debt, the existence of which was disputed on bona fide grounds (as to the consequences of this see Re Calsil Ltd. (1982) 6 A.C.L.R. 515), leads me to a conclusion that the appropriate course is to refus·e -- 5 of 6 -- 6 the application for adjournment for the purpose of substitution and to dismiss the petition. -- 6 of 6 --