2020 Construction Systems Pty Ltd v Dryka & Associates Pty Ltd
[2010] WASC 31
•14 JANUARY 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: 2020 CONSTRUCTION SYSTEMS PTY LTD -v- DRYKA & ASSOCIATES PTY LTD [2010] WASC 31
CORAM: SIMMONDS J
HEARD: 14 JANUARY 2010
DELIVERED : 14 JANUARY 2010
FILE NO/S: COR 193 of 2009
BETWEEN: 2020 CONSTRUCTION SYSTEMS PTY LTD
Plaintiff
AND
DRYKA & ASSOCIATES PTY LTD
Defendant
Catchwords:
Corporations - Application to set aside - Statutory demand - Application out of time - Other proceedings in respect of demand
Legislation:
Corporations Act 2001 (Cth), s 459F(2), s 459G, s 459J(1)(b)
Result:
Application dismissed
Costs order in favour of defendant made
Category: B
Representation:
Counsel:
Plaintiff: Ms K E Roach
Defendant: Mr A Metaxas
Solicitors:
Plaintiff: Park Legal Solutions
Defendant: Metaxas & Hager
Case(s) referred to in judgment(s):
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85
David Grant & Co Pty Ltd (Receiver Appointed) v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265
Dromore Fresh Produce Pty Ltd v W Paton (Fertilizers) Pty Ltd (1997) 137 FLR 307; (1997) 23 ACSR 230
Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322
Noy's Works Pty Ltd (Formerly Noy's Castings Pty Ltd) v Allcast Pty Ltd [2005] WASC 185
SIMMONDS J: (This judgment was delivered at the hearing and is edited from the transcript).
These are the reasons for orders I made this morning, principally dismissing proceedings to set aside a statutory demand made under the Corporations Act 2001 (Cth) (Corporations Act).
Dryka and Associates Pty Ltd, so far as the material indicates to me, is a firm of architects which served what on its face was a statutory demand under the Corporations Act accompanied by what appeared to be a supporting affidavit; and this was served, it is not in contest in these proceedings, on 2020 Construction Systems Pty Ltd, a company in the construction industry.
It is further not in contest for the purposes of these proceedings that that service occurred on 14 September 2009. I will from now on call the documents so served the 'statutory declaration and supporting affidavit' for convenience.
I make no determination whether or not those documents were in fact properly to be so described and are properly to be so described for the purposes of the Corporations Act provisions concerning statutory demands. Those provisions, of course, allow for a creditor seeking to have a corporate debtor wound up in insolvency to invoke noncompliance with a statutory demand as proof of insolvency with the effect of putting the burden on the corporate debtor of showing solvency.
The corporate entity in this case, 2020 Constructions, by originating motion in COR 193 of 2009 filed on 6 October 2009, sought to commence proceedings under s 459G of the Corporations Act to set aside the statutory demand. That filing was beyond the 21 days allowed for under that provision for such an application. Lateness in filing, indeed filing and service, is fatal to the application, the authority for that, well understood, being David Grant & Co Pty Ltd (Receiver Appointed) v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265.
Thus there can be no setting aside of the statutory declaration under a s 459G process. However, as indicated in David Grant (297) (Gummow J), (269) (Brennan CJ, Dawson, Gaudron and McHugh JJ), a passage quoted with approval in Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 [48] in the judgment of his Honour the Chief Justice, with whom the other members of the court agreed, this does not prevent other remedies being invoked in respect of insolvency process; and his Honour Gummow J instanced a restraint of a winding up application where such would be an abuse of the winding up process.
In Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322 [12], Mandie J drew attention to other possibilities, including a declaration, in his case that a statutory demand had or had not been effectively served. He also drew attention to the possibility of raising a matter of that kind in the winding up process itself.
In my view, this body of authority allows for the possibility that a declaration might be sought, or its equivalent contended for in winding up proceedings, that what purported to be a statutory demand was not in fact a statutory demand properly to be so considered for the purposes of the Corporations Act that I have referred to, that is, on the possibility that a document that appears on its face to be a statutory demand is not appropriately to be so treated: see Dromore Fresh Produce Pty Ltd v W Paton (Fertilizers) Pty Ltd (1997) 137 FLR 307; (1997) 23 ACSR 230, judgment of his Honour Young J of the New South Wales Supreme Court, a judgment frequently cited in this connection including in a recent judgment of Master Newnes in this court in Noy's Works Pty Ltd (Formerly Noy's Castings Pty Ltd) v Allcast Pty Ltd [2005] WASC 185 [16].
Before me at the hearing in COR 193 of 2009, counsel for 2020 Constructions sought to have the originating summons amended to ask for a declaration in respect of the statutory demand to the effect that I have previously referred to, based on Emhill, but resting on what were said to be serious problems with the supporting affidavit.
These problems, in fact, were ones that I accept had, in part at least, been raised for the purpose of the arguments that would have been made under s 459J(1)(b) in the s 459G proceedings; that is to say, they represented other reasons why the statutory demand should be set aside. That argument in that form cannot, as I have indicated, be made because of the lateness of the s 459G process.
I was also told by counsel for 2020 Constructions that the application to amend was simply out of an abundance of caution as the prayer for relief in the originating motion might be taken to allow for an argument to be made of a kind to support the declaration that I have referred to. In my view, a declaration premised on a ground of the kind described here would not fit within the prayer for relief in the originating motion. The prayer for relief flows out of the granting of the setting aside sought. If the s 459G process is incompetent, it seems to me the prayer for relief clause falls away.
Furthermore, it seems to me that leave was required to amend the proceedings in the way requested because of the way in which the arguments to be made, and in all likelihood the matters of supporting evidence and opposing evidence needed to be brought out, were fundamentally changed.
In this regard I note Dromore (234), where Young J refused an application to amend to seek a declaration in respect of proceedings commenced under the then counterpart to s 459G. The court indeed can grant leave to amend in a case such as this, it seems to me, or indeed treat the originating motion as amended, if that were such as not to involve any prejudice to the other side. I note that in Emhill his Honour Mandie J proceeded in that way.
He did so, however, in deference, as he put it, to the arguments put to him, and I would understand that as the acceptance by the parties in those proceedings that argument about whether or not a statutory demand properly to be so treated under the Corporations Act was in fact involved. There was no such concession in this case. Indeed, the matter of the formal argument to take place on s 459G application had not been reached because of the conclusion as to its competency stemming from the lateness of the application that I have described.
The conclusion that I have just rehearsed therefore led me to refuse the application for leave to amend the originating process in this case. However, it of course remains possible for 2020 Constructions to consider other relief that it might wish to seek in respect of the insolvency process generally or the statutory demand in this case in particular.
The matter of relief in respect of insolvency process in general is, it seems to me, the subject of the dictum of his Honour Gummow J in David Grant that I previously referred to. The relief in respect of the statutory demand might, for example, include an application for a declaration in respect of the statutory demand. The counsel for 2020 Constructions, as part of the argument in favour of my granting leave or treating the originating process in this case as if it were so amended, particularly pressed what she said were concerns of her client if the proceedings in COR 193 of 2009 were simply to be dismissed.
My attention was drawn to s 459F, particularly s (2), of the Corporations Act. Section 459F(2)(ii) says, in material part in relation to the circumstances before me, the period for compliance with a statutory demand is, if the company applies in accordance with s 459G, for an order setting aside the demand, the period beginning on the day when the demand is served and ending seven days after the application under s 459G is finally determined or otherwise disposed of.
It was put to me that an amendment, or the treating of the originating process if amended, would mean that until the entirety of the application had been dealt with the period for compliance with the statutory demand would continue to run.
I note first that s 459F(2) does not prevent the commencement of wind up proceedings and it appears that it is the commencement of the winding up proceedings that is the concern that animated the submission put to me by counsel for 2020 Constructions.
In any event, it seems to me that I am not in a position simply on submissions from counsel to grant the leave requested on the basis indicated. Amongst other things, I lack the evidence as to the prejudice to 2020 Constructions that might flow from an application for winding up on the insolvency ground. While it is certainly possible that its debt arrangements would include provisions that would trigger an acceleration of payment for such commencement, I am not in a position, it seems to me, to reach a view on that without evidence being provided.
In any event, I note again the limited effect of s 459F.
It seems to me, at first blush at least ‑ and clearly there is support for this in the dictum of Gummow J that I have now repeatedly referred to ‑ that it may be there is a basis upon which, where an application for a declaration has been made, 2020 Constructions could seek an interlocutory injunction in respect of the commencement of winding up proceedings or equivalent interlocutory relief. I am not, however, in any position to say anything more about the matter than that, and in particular I do not indicate any position that the court might take in respect of any such application.
The matter then having been disposed of on the merits as I have indicated, there would be no reason why the normal orders would not follow on a s 459G application so determined, namely, that the s 459G application be dismissed and the appropriate costs order in favour of the defendant, that is to say, Dryka, in this case, made. There was no contest that the appropriate costs order was costs for Dryka to be taxed if not agreed.
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