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financial position as a whole. 17 To do so the court must have regard to commercial
realities such as the resources available to the company to meet its liabilities as they
fall due, whether resources other than cash are releasable by sale or borrowing upon
securities and whether such realizations are achievable. 18
To further distinguish whether the company is merely having temporary illiquidity or
endemic illiquidity resulting in insolvency, the court must also have regard to the
commercial reality that creditors do not always insist on payment being made strictly
in accordance with the terms of the contract but allow some latitude in time for
payment. 19 Such leeway, nevertheless, should not be concluded to mean that the
debts are not payable at the time stipulated in the contract and only become payable
when demand is made by creditors. 20 Consequently, it should be implied that the
company has cash or credit resource which can be taken into consideration in
ascertaining its solvency. 21
8.4 Definitions of Insolvency
It is necessary to have an accurate definition of the term „solvent‟ and also definite
guidelines on the components of each test, given that many consequences hinge on
the satisfaction of the tests. All insolvency legislation shares the core concept of the
17 See Southern Cross Interiors Pty Ltd and Anor v Deputy Commissioner of Taxation and ors [2001]
NSWSC 621 at [54] and cases discussed therein.
18 Southern Cross Interiors Pty Ltd and Anor v Deputy Commissioner of Taxation and ors [2001]
NSWSC 621 at [54].
19 Southern Cross Interiors Pty Ltd and Anor v Deputy Commissioner of Taxation and ors [2001]
NSWSC 621 at [54].
20 Southern Cross Interiors Pty Ltd and Anor v Deputy Commissioner of Taxation and ors [2001]
NSWSC 621 at [54].
21 Southern Cross Interiors Pty Ltd and Anor v Deputy Commissioner of Taxation and ors [2001]
NSWSC 621 at [54].
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