Accordent Pty Ltd v RMBL Investments Ltd - [2009] SASC 248

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
ACCORDENT PTY LTD v RMBL INVESTMENTS LTD
[2009] SASC 248
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Bleby and The Honourable Justice Kelly)
21 August 2009
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - FOR DEFECT OR SOME OTHER REASON - SOME OTHER REASON
Respondent served a statutory demand on the appellant in respect of a debt that was secured by a mortgage – appellant sought order setting aside the demand – Master dismissed application – single Judge dismissed appeal against decision of Master – appeal against decision of single Judge – whether compliance with a statutory demand can amount to ‘some other reason’ to set aside the demand for the purposes of s 459J(1)(b) of the Corporations Act 2001 (Cth) – whether security provided prior to the service of a demand can provide a basis for a finding that the demand has been complied with – whether the fact that the relevant debt is secured amounts to ‘some other reason’ to set aside the demand pursuant to s 459J(1)(b).
HELD: compliance with a statutory demand cannot provide a basis for setting aside the demand pursuant to s 459J(1)(b) – security provided prior to the service of a statutory demand cannot provide a basis for a finding that the demand has been complied with – of itself, the fact that the debt the subject of the demand is secured does not give rise to ‘some other reason’ to set a statutory demand aside – concept of impropriety of purpose is relevant to the application of s 459J(1)(b) – value of the mortgaged premises did not clearly exceed the amount of the debt or the substantiated amount of the demand – no reason to conclude that respondent was using the statutory demand procedure for an improper purpose – appeal dismissed.
Corporations Act 2001 (Cth) s 420A, s 459A, s 459C, s 459C(2)(a), s 459E, s 459E(2)(c), s 459F, s 459F(1), s 459G, s 459H, s 459J, s 459J(1)(b), s 459P, s 459S, referred to.
David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314; Creatac Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, discussed.
Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 82 ALJR 1411; Commonwealth Bank of Australia v Quade (1991) 178 CLR 134; Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 135 ALR 677; Scope Data Systems v BDO Nelson Parkhill (2003) 199 ALR 56; Tatlers.com.au Pty Ltd v Davis (2006) 203 FLR 473; Ventura v Sustek (1976) 14 SASR 395, considered.

ACCORDENT PTY LTD v RMBL INVESTMENTS LTD
[2009] SASC 248
Full Court: Doyle CJ, Bleby and Kelly JJ

DOYLE CJ: This is an appeal by permission against a decision by a Judge of this Court. The Judge dismissed an appeal against a decision by a Master, refusing to set aside a statutory demand served on Accordent Pty Ltd (“Accordent”) under s 459E of the Corporations Act 2001 (Cth) (“the CA”).
Permission to appeal was originally limited to the following ground:
The learned judge erred in failing to find that the amount of the debt had been secured to the creditor’s reasonable satisfaction within 21 days after the demand was served on the company.
This ground raises two questions.
First, can a debtor who claims to have complied with a statutory demand apply to the court under s 459G(1) of the CA for an order setting aside the demand on that basis? Or, must the debtor wait until the creditor applies under s 459P for the debtor to be wound up in insolvency, relying on presumed insolvency by application of s 459C(2)(a) arising from a failure to comply with a statutory demand, and then deny that the debtor has failed to comply with the statutory demand?
If compliance with a statutory demand is not a basis for setting aside a demand under s 459G and s 459J, but a matter to be raised only on an application for a winding up order, then the appeal on this ground must fail because Accordent has asserted compliance with the demand in question to support an order setting aside the demand.
Second, can a debtor on whom a statutory demand is served rely on security provided by the debtor to the creditor before the demand is served, to obtain a finding for the purposes of s 459F of the CA that the debtor has not failed to comply with the demand, or is it the case that for this purpose the debtor can rely only on security provided after the demand is served? A statutory demand must require the debtor, relevantly, “to secure or compound” for the amount of the debt “within 21 days after the demand is served …”: s 459E(2)(c).
If the security on which the debtor relies must be provided after the demand is served, then as no such security was provided by Accordent, the appeal on this ground must fail.
Accordent claims an order under s 459G and s 459J setting aside a statutory demand served on it by RMBL Investments Limited (“RMBL”) because, Accordent claims, security held by RMBL before the demand was issued, and still held by RMBL, leads to the conclusion that Accordent has secured the debt in question to RMBL’s reasonable satisfaction, and so Accordent has complied with the demand.
After the Court had reserved its decision, it occurred to the members of the Court that it might be artificial to exclude a further ground of appeal, closely related to the first. The Court reconvened and invited the parties to put further submissions.
Mr Rochow SC, counsel for Accordent, applied for permission to appeal on a further ground, namely:
The learned judge failed to find that the fact and value of the security held by the Respondent amounted to some other reason why the demand should be set aside pursuant to Section 459J(1)(b).
The Court reserved its decision on that application, but heard submissions from Mr Rochow and Mr Keen, counsel for RMBL, on the proposed further ground.
Facts
I take the facts mainly from the reasons of the Judge.
In August 2005 RMBL entered into a loan agreement with Accordent. RMBL advanced to Accordent a total of $12,408,000 pursuant to the agreement. Those advances are secured by, among other things, a mortgage by Accordent in favour of RMBL over property known as Windsor Park Shopping Centre (“the Centre”).
On 26 February 2008 RMBL gave to Accordent notice of default under the loan agreement. The default was a failure to pay interest. The whole amount of the loan became due. At the same time RMBL entered into possession of the Centre as mortgagee. It remains in possession of the Centre.
On 11 September 2008 RMBL offered the Centre for sale by auction, exercising its powers as mortgagee. The highest bid, which was not accepted, was $11,750,000.
On 12 September 2008 RMBL served on Accordent a demand under s 459E of the CA. The demand related to the debt of $12,408,000. The debt specified in the notice of demand does not include interest and costs that might be payable to RMBL under the agreement.
There was no suggestion before the Master or before the Judge that Accordent had paid the amount of the principal, or that after service of the demand Accordent had offered to RMBL to pay the debt or to secure the debt in any way.
Before the Master, Accordent argued that RMBL had failed to take reasonable care to sell the Centre for its market value, as required by s 420A of the CA. That is not a matter that can be raised under the ground of appeal on which permission to appeal was granted.
The Master found that Accordent had established a genuine dispute as to part of the debt claimed, and an offsetting claim, together amounting to $2,326,075.05. Acting under s 459H the Master calculated the substantiated amount of the demand to be $10,081,924.95. RMBL does not challenge that finding.
Before the Master, Accordent tendered an affidavit sworn by a solicitor to which was exhibited a valuation of the Centre, the valuation having been prepared by a certified practising valuer. The written valuation stated that the market value of the Centre, as at 23 September 2008, was $16,500,000 or $14,500,000, the difference depending upon the assumptions made as to the income that could be earned from the Centre. I gather that the valuation was admitted into evidence before the Master. RMBL did not tender any valuation of the Centre, but made two points about the valuation tendered by Accordent. The first is that the valuation makes no reference to the auction or attempted auction by RMBL. The second is that the letter of instructions to the valuer had not been produced. On the hearing of the appeal Mr Rochow told us that these criticisms were raised for the first time before the Judge. That led to an application by Mr Rochow to tender further evidence on the hearing of the appeal, a matter to which I will come in due course.
The Judge’s decision
There are only three aspects of the Judge’s decision to which I need refer.
First, it does not appear to have been argued before the Judge that the issue of compliance with the demand could not be raised on an application under s 459G to set aside the demand and could be raised only on an application for an order that Accordent be wound up.
Second, the Judge appears to have held that in support of the application for an order setting aside the demand, Accordent could rely only upon security provided after the demand was served. It is not completely clear that the Judge so decided, but this is what the Master held, and if the Judge had intended to differ from the Master it is likely that he would have said so.
Third, the Judge was not prepared to find that the market value of the Centre was the amount stated in the valuation. The Judge accordingly was not prepared to find that RMBL held more than adequate security for the debt claimed by it. These conclusions by the Judge were made in answer to a submission that for the purposes of s 459J there was “some other reason why the demand should be set aside”, namely, the value of the security held by RMBL. It must follow, I consider, that the Judge was not prepared to find that the security held by RMBL was such that, were it to be taken into account, it would have led to a finding that Accordent had secured the amount of the debt to RMBL’s reasonable satisfaction.
The statutory scheme
Part 5.4 of the CA is headed “Winding up in insolvency”. Part 5.4 comprises four Divisions. The provisions relating to statutory demands are found in these Divisions.
The issues that arise on appeal are to be considered in light of the purpose of Part 5.4.
The purpose of Part 5.4 is summarised as follows by Gummow J (with whom the other members of the High Court agreed) in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 at 270 as follows:
The provisions of the new Pt 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly…
Similarly, in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314 the majority (Gleeson CJ, Hayne, Crennan and Kiefel JJ) said at [14];
[14]The evident purposes of Pt 5.4 of the Act include speedy resolution of applications to wind up companies in insolvency. One particular feature of the way in which that purpose is carried into effect is to focus principal attention at the hearing of the winding up application upon whether a company is insolvent rather than upon defects in the procedures that precede the institution of the application for winding up.
The statutory demand procedure provides a means for a creditor, on application under s 459P and s 459A for a winding up order on grounds of insolvency, to obtain the benefit of a rebuttable presumption of insolvency by virtue of s 459C(2)(a) and s 459C(3). The creditor can do so by making a demand for payment, security or a compounding in relation to a debt, if the debtor fails to have the demand set aside under s 459H or s 459J and if the debtor fails to comply with the demand. Section 459C(2)(a) provides as follows:
(2)The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:
(a) the company failed (as defined by section 459F) to comply with a statutory demand; or
…
Section 459F(1) provides:
(1)If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.
Relevantly, the content of the demand is found in s 459E(2)(c) which provides:
459E Creditor may serve statutory demand on company
…
(2) The demand:
…
(c)must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company; and
…
I need to identify some particular features of the statutory provisions.
One feature is the imposition of relatively short time limits for compliance with a statutory demand; for making an application to have a statutory demand set aside, and for the completion of winding up proceedings, coupled with the presence of specific and limited powers to extend these times. The consequence of this is adverted to by Gummow J in David Grant at 279 where he said:
[R]eference was made to the drastic commercial consequences which may follow the issue of process for winding up and to the inability of a company, which for good reason had been late in filing or serving an application to set aside the statutory demand, to prevent the issue of that winding up process. The damage to the commercial reputation of the company in the meantime might not be answered by the eventual success of the company in defeating the application to wind it up as insolvent. Further, default clauses in securities given by the company may have been so drawn as not to take full account of the new statutory scheme, with the consequence that floating charges may have crystallised and the whole of the principal and interest become payable.
No doubt, in some circumstances, the new Pt 5.4 may appear to operate harshly. But that is a consequence of the legislative scheme which has been adopted to deal with perceived defects in the pre-existing procedure in relation to notices of demand. It also may transpire that a winding up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz. However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction.
Footnotes omitted
Similarly, in Aussie Vic the majority said at [18]:
[18]The emphasis which these provisions give to the speedy resolution of an application to wind up in insolvency is coupled with provisions which seek to focus attention at the hearing of an application to wind up in insolvency upon whether the company is insolvent rather than upon the formal adequacy of steps which have preceded the institution of the application to wind up. Chief among the provisions intended to focus attention upon solvency is s 459S. That section limits the grounds on which a company may oppose a winding up application which is founded on failure to comply with a statutory demand. Section 459S provides:
(1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:
(a)that the company relied on for the purposes of an application by it for the demand to be set aside; or
(b)that the company could have so relied on, but did not so rely on (whether it made such an application or not).
(2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.
The reference in s 459S to grounds that a company relied on or could have relied on in an application to set aside a statutory demand takes its content from s 459J. That section identifies when a Court may set aside a statutory demand. In particular, the Court “must not set aside a statutory demand merely because of a defect”; the defence must be such that “substantial injustice will be caused unless the demand is set aside” (s 459J(1)(a), (2)).
Section 459C(2) is a significant aspect of the provisions relating to statutory demands. The relevant part of that provision is set out above. Referring to s 459C, the majority in Aussie Vic said at [21]-[23]:
[21]The temporal focus of s 459C is upon a period which commences three months before the date of the application for winding up, but the period does not terminate upon the date on which the winding up application commences. The question for a Court is whether any of the identified events has occurred at any time after the commencement of the relevant period. The Act does not require any further consideration of whether the event persists at the date of the application for winding up.
[22]If one of the specified events has occurred at any time during the identified period, the Court must presume that the company is insolvent. But the presumption may be rebutted. Section 459C(3) provides that: “A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application.”
[23]On its face, s 459F(1) is engaged if the time for compliance with a statutory demand expires and the company has not then complied with it. The demand was in force; the time expired; the company did not comply with the demand.
Section 459F(1) is set out above.
A debtor can apply to the court for an order setting aside a statutory demand: s 459G(1). But the debtor must do so within 21 days after the demand is served: s 459G(2). That time cannot be extended: David Grant.
Under s 459H a statutory demand can be set aside because of a genuine dispute about the existence or amount of the debt upon which the demand is based, or because of an offsetting claim by the debtor. In this case it is not necessary to go into the details of s 459H.
The only other basis upon which the statutory demand can be set aside is to be found in s 459J, which provides as follows:
459J Setting aside demand on other grounds
(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b) there is some other reason why the demand should be set aside.
(2)Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.
In the present case, the application was made under s 459J(1)(b).
Issues on appeal
The submissions before this Court raise the question of whether a claim that a statutory demand has been complied with can be raised or relied upon on an application under s 459G and s 459J(1)(b). This point was not raised before the Master or before the Judge, notwithstanding that at each previous stage the argument was that Accordent has complied with the statutory demand.

Mr Keen submits that the issue of compliance with the statutory demand is one which can arise only on an application for winding up, if and when the creditor relies upon the statutory presumption of insolvency under s 459C(2)(a), based on a finding that the debtor failed to comply with the statutory demand.
I agree with that submission, for the reasons that follow.
The issue of failure to comply with the statutory demand arises, strictly, “… at the end of the period for compliance with a statutory demand …”: s 459F(1). That is consistent with what the majority said in Aussie Vic at [23] (above).
If an application is made under s 459G for an order setting aside the statutory demand, the period for compliance with the statutory demand will end “… seven days after the application under s 459G is finally determined or otherwise disposed of …” or when the court orders: s 459F(2). Accordingly, if an application is made to set aside a statutory demand, the court will not be able to determine the question of compliance with the demand as at the expiry of the period for complying with the demand.
Also, if the question of compliance with the statutory demand can be raised under s 459G, then the failure to do so will mean that s 459S is engaged (the terms of this provision appear above in the reasons of the majority in Aussie Vic) and the debtor will not be able to raise the issue of compliance on an application to wind the debtor up unless the debtor obtains leave from the court. Yet s 459C(2)(a) suggests that failure to comply with a demand is an issue to be decided on a winding up application.
There is another consideration that points the same way. It is apparent that an application to set aside a statutory demand, made under s 459G of the CA, is to be dealt with expeditiously. An application under s 459G is not an appropriate vehicle for the court to embark upon what might be difficult questions of valuation of property the subject of security held by the creditor who makes the demand, which security is said to establish compliance with the demand. While the CA indicates that a winding up application is to be disposed of promptly, such an application appears to me to be a more appropriate vehicle for the Court to consider disputed questions as to the value of security held by a creditor.
While the present case is an unusual one, I do not agree that the purpose of the statutory scheme points to a conclusion that the issue of compliance with the demand is a matter that can be raised under s 459G and s 459J. To the contrary, the wording of the provisions, especially s 459C(2)(a) and s 459F(1) suggests to me that compliance with a demand is an issue to be raised on a winding up application when the presumption under s 459C(2)(a) is invoked.
For those reasons I favour the conclusion that compliance with the demand was not an issue to be decided on the application by Accordent. I am inclined to decide the first issue in favour of RMBL.
But it is not necessary to decide this point. It is not necessary because I agree with Mr Keen’s second submission that, even if compliance with a demand is an issue to be decided under s 459G and s 459J(1)(b), the debtor must prove that it provided security to the creditor’s reasonable satisfaction after the service of the demand, and this Accordent did not do.
The language of the CA suggests that this is so: s 459E(2)(c). I do not suggest that the language is intractable. It could conceivably, as Mr Rochow submits, be read as requiring compliance with the demand within a period that ends 21 days after the demand is served, but begins before service of the demand. But that is not the apparent meaning of the words used. Also, a demand is made for one of three things – payment, security or compounding. If the company that receives the demand claims that it has paid or compounded for the amount of the debt before the demand is served, that would support an argument that the debt no longer exists, rather than an argument that the company had complied with the demand. Securing the debt is treated in the same way as payment and compounding, and that also suggests that the reference is to an event after the service of the demand.
Mr Rochow points to the difficulty of a debtor, like Accordent, who has given security, and is now faced with a demand that it can comply with only by providing further security. I acknowledge the force of that point. But relevantly, to my mind, the focus of the provisions is on the existence of the debt, and whether there is a genuine dispute as to the existence of the debt or an offsetting claim. If the debt is not, or cannot be disputed, then the demand has effect, whether or not security for the debt is already held.
Security already held by the creditor is no answer to the demand for the debt. It should not be overlooked that a secured creditor can sue for the amount of the debt, assuming there is a covenant to pay, and can recover judgment, regardless of the fact that the creditor holds security.
Moreover, there may be reasons why the creditor making a statutory demand does not choose to resort to security that it holds. The security may not be readily saleable. It may not be sufficient to cover the debt. There may be reasons why the creditor legitimately proposes to seek a winding up of the debtor.
For these reasons I agree with Mr Keen that Accordent was unable to prove compliance with the statutory demand, and accordingly to the extent that it is based on the original ground of appeal, the appeal must fail.
The submission on the additional ground is that there is reason to set aside the demand because, prior to the issue of the demand, Accordent had provided to RMBL security for an amount or with a value exceeding the amount of the debt upon which the demand is based. So expressed, the argument by Accordent is not an argument that the demand has been complied with, but that the security provided before the demand was served is a reason for setting the demand aside.
On the resumed hearing Mr Rochow amplified this argument. He submits that s 459J(1)(b) confers a wide power; that the value of the property over which RMBL has security exceeds the amount of the debt the subject of the demand, or at least the substantiated amount of the demand (relying on the bid at auction if the valuation is not accepted as evidence of value); that it is unjust to require a debtor of a secured creditor to provide further security; that it is unjust to require the debtor to wait until winding up proceedings are instituted before the debtor can rely on the fact that security has been provided; that Accordent will in due course be able to establish compliance with the demand, and so should be able to have the demand set aside at this stage.
In considering whether the matter can be approached in this manner, it is relevant to bear in mind that the power conferred by s 459J(1)(b) has been treated as a broad power, which is not surprising having regard to the terms in which it is expressed: see Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 135 ALR 677 at 691 (Full Court of the Federal Court); Scope Data Systems v BDO Nelson Parkhill [2003] NSWSC 137; (2003) 199 ALR 56 at [22]-[26] (Barrett J, Supreme Court of New South Wales); Tatlers.com.au Pty Ltd v Davis [2006] NSWSC 1055; (2006) 203 FLR 473 at [26]-[29] (Barrett J, Supreme Court of New South Wales). In Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 82 ALJR 1411, the majority of the High Court (Gummow ACJ, Heydon, Crennan and Kiefel JJ) referred to s 459J but did so without expressing any opinion on the scope of the discretion relevant to the point now at issue.
The Court of Appeal of the Supreme Court of Western Australia recently considered aspects of Part 5.4 of the CA in Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602. This was an appeal against a decision setting aside a statutory demand. After referring to a number of decisions, and in particular to the decision of the High Court in David Grant, Martin CJ (with whom the other members of the Court agreed) said at [49]-[50]:
[49]Since that decision, it has generally been accepted that the court retains a residual jurisdiction to restrain reliance on the statutory demand procedure on the ground of an abuse of process: see House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 21 ACSR 527 at 528; SMEC at [35]; Roberts at [54]-[58]; and State Bank of New South Wales v Tela Pty Ltd (No 2) (2002) 188 ALR 702; [2002] NSWSC 20 at [5]. In Roberts, the jurisdiction was exercised on the grounds of impropriety of purpose, and a winding-up application was dismissed with costs. Similarly, in Old Kiama Wharf Co Pty Ltd v DCT (2005) 55 ACSR 223; [2005] NSWSC 929, an application to set aside a statutory demand was upheld because the court concluded that the process was being used to “attempt to apply pressure to a taxpayer to force payment of a debt”: at [42].
[50]Adopting the criterion from Williams v Spautz (1992) 174 CLR 509; 107 ALR 635; [1992] HCA 34 (Williams), suggested by Gummow J in David Grant, there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers – such as the application of pressure to compel payment of the disputed debt.
I accept that the power conferred on the Court by s 459J(1)(b) of the CA is widely expressed. No doubt the power is to be exercised taking into account the purposes of Part 5.4 of the CA. However, on an application to set aside a statutory demand it may be that the concept of an abuse of process is relevant only by way of analogy. A creditor who serves a statutory demand does not invoke the process of a court. A debtor who applies to have a statutory demand set aside does invoke the process and powers of a court, but whether in that setting it is appropriate to speak of an abuse of process by the creditor is another thing. A court that considers an application under s 459J(1)(b) must also be careful not to allow the ordinary incidents of the service of a statutory demand, which might sometimes seem to operate harshly, to become a basis for setting aside a statutory demand. Care is also called for in using the notion of “pressure” to recover a debt, because there is no doubt that the service of a statutory demand will put pressure on a debtor company.
Of course, on an application by the creditor to wind up the debtor, the concept of abuse of process is relevant, but once again it is necessary for the court to recognise the manner in which the statutory regime relating to statutory demands operates.
Be that as it may, I accept that the concept of impropriety of purpose may be relevant to the application of s 459J(1)(b).
On this approach, the question becomes whether the Judge should have found that there was good reason why the demand should be set aside for the purposes of s 459J(1)(b). This issue was considered by the Judge. I am not persuaded that the Judge erred.
No impropriety, in a general sense, on the part of RMBL has been asserted. The argument turns on the security held by RMBL.
For present purposes, it is to be borne in mind that the amount of the debt claimed by RMBL is $12,408,000. It is also to be borne in mind that Accordent satisfied the Master that there was a genuine dispute and an offsetting claim amounting in all to the sum of $2,326,075.05. That, however, remains a dispute and a claim only. There was evidence of a bid at auction for an amount less than the amount of the debt claimed by RMBL. There was the valuation evidence to which I have referred. But, as was pointed out before the Judge and on appeal, the valuation makes no reference to the relevance or significance of the failed auction. On that very limited evidence, one could not say that the Judge erred in failing to find that the security already provided to and held by RMBL clearly exceeded the amount of its debt or the amount of the substantiated amount of the claim.
Nor did the Judge err in failing to hold that the security was of such value that it was unfair to allow the demand to stand, or in failing to hold that RMBL was misusing the statutory demand procedure. There is no reason why, in general, a secured creditor should not be entitled to avail itself of the statutory demand procedure. A secured creditor could, for example, sue the debtor on a covenant to pay (in the security), obtain judgment and enforce the judgment, without relying on its security. The notion that a secured creditor can enforce its debt without relying on its security is not at odds with the statutory scheme or with the concept of fair dealing.
There may be a number of reasons why a secured creditor wishes to make use of the statutory demand procedure. I can think of no reason why it should be permitted to do so only if and to the extent that its security is not sufficient to ensure payment of the debt in question. Nor, as I have remarked earlier, does an application under s 459G appear to me to be an appropriate occasion to determine, in effect, the prospects of the secured creditor obtaining payment by resort to its security. The focus of the procedure for making a statutory demand is on the existence of a debt and on the question of whether there is a genuine dispute as to that debt, or an offsetting claim. That is in the context of the manner in which a statutory demand can be used to assist proof of insolvency on a winding up application. As I have already remarked, that appears to me to be the time to investigate the value of the security.
I am not persuaded that the mattes identified by Mr Rochow are a reason to set aside the demand under s 459J.
Further evidence
As mentioned earlier, at the hearing of the appeal Mr Rochow tendered an affidavit to which was exhibited correspondence between the solicitors for Accordent and the valuer who prepared the valuation in question. Exhibited to the affidavit is the letter of instructions to the valuer which had not previously been tendered. Also annexed to the affidavit is a letter from the solicitor to the valuer informing the valuer of the fact of the auction and that the property had been passed in with the highest bid at $11,750,000. There is also a letter from the valuer stating that when preparing his valuation he had been aware of the auction and of the result of the auction.
However, as Mr Keen pointed out, the further material provides no explanation for the failure to refer to the auction in the valuation, nor does it explain why, if it is the case, the result of the auction has no bearing upon the opinion as to value expressed in the valuation.
Ordinarily, the court will admit further evidence on the hearing of an appeal only if it is shown that the failure to tender the evidence at an earlier stage was not due to a lack of due diligence, and if it is shown further that the evidence is credible and is likely to have a material bearing on the outcome of the appeal: see Ventura v Sustek (1976) 14 SASR 395 at 399-400; Commonwealth Bank of Australia v Quade [1991] HCA 61; (1991) 178 CLR 134 at 140.
In my opinion, the further evidence does not provide a basis, alone or in combination with the other material, for disturbing the Judge’s conclusion about the value of the Centre. I would reject the tender of the further evidence, because it has no material bearing on the outcome.
A further pertinent point was made by Mr Keen. It is that had the letter been tendered before the Judge, he would have applied for permission to cross-examine the valuer, with a view to exploring the reasons why the result of the auction had no bearing upon the valuer’s opinion as to value. If such an application were made, it must have been granted. Accordingly, the admission now of the evidence would prejudice the respondent to the appeal.
For that further reason I would reject the tender of the further evidence.
Conclusion
I would grant permission to appeal on the further ground, but would dismiss the appeal.
BLEBY J. I agree that the appeal should be dismissed. I agree with the reasons of the Chief Justice and have nothing to add.
KELLY J: I agree that the appeal should be dismissed. I agree with the reasons of the Chief Justice.