Afro v Hannon - [2009] NSWSC 775

CITATION: Afro v Hannon [2009] NSWSC 775

HEARING DATE(S): 22/07/09, 03/08/09

JUDGMENT DATE :
21 September 2009

JURISDICTION: Equity Division

JUDGMENT OF: Macready AsJ at 1

DECISION: Paragraph 66

CATCHWORDS: Corporations Act. Application to set aside statutory demand under s 459G of Corporations Act. Demand set aside. No matter of principle

PARTIES: Afro Pacific Capital Limited v David Hannon

COUNSEL: Miss EA Collins for plaintiff
Mr A Spencer for defendant

SOLICITORS: Corrs Chambers Westgarth for plaintiff
Gillis Delaney Lawyers for defendant

LOWER COURT JURISDICTION:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

Associate Justice Macready

Monday 21 September 2009

6383/2008 Afro Pacific Capital Limited v David Ross Hannon

JUDGMENT

1 His Honour: This is the hearing of an application under section 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand dated 9 December 2008 served by the defendant on the plaintiff.

2 The statutory demand relates to an alleged debt of $750,000 described in the following terms:

“Incentive bonus payable to the Creditor pursuant to Service Contract between the Creditor and the Debtor Company dated 10 October 2001, which the Debtor Company has failed to repay as at the date of this Demand: $750,000.”

3 The plaintiff seeks to set aside the demand because of a misdescription of the debt in the demand and the affidavit in support. It also raises a genuine dispute.

Background facts

4 The parties’ submissions set out the background facts, which I will incorporate with some modifications.

5 The defendant was employed by the plaintiff as an executive director during the period approximately 1 October 2001 to 30 April 2003.

6 The Service Contract executed by the parties on 10 October 2001 provides for the defendant’s appointment as an executive director of the plaintiff (then known as PSG Afro Pacific Limited). Clause 7 is entitled “Remuneration” and provides for the payment of an annual remuneration package (clause 7.1) as well as providing that “the executive may be entitled to receive an incentive bonus in accordance with Attachment 1” (clause 7.2).

7 Attachment 1 clause 1.2 to the service contract provides that the defendant and another executive, Allan David Doyle, would jointly receive an amount equal to 50 per cent of all income up to a total of $3 million realised in cash out of work introduced to the company up to 28 February 2004. $1.5 million of that amount is to be advanced by PSG Doyle Capital Pty Limited (ACN 098 341 265) (“PSG Doyle”) on the closing date of the PSG Doyle Shareholders Agreement. PSG Doyle is the plaintiff’s parent company.

8 Clause 1.3 of attachment 1 provides that in the event that the value of such work is less than $3 million, the defendant and Doyle undertook to repay the plaintiff fifty cents for each $1 of the shortfall. Further, clause 1.5 of attachment 1 provides that in the event that the employment of the defendant or Doyle, or both,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Afro v Hannon

Details

AGLC: Afro v Hannon [2009] NSWSC 775
Case: [2009] NSWSC 775
Decision Date: 21 September 2009

CaseChat Overview and Summary

In the case of Afro v Hannon, the respondent, Afro, sought to have a statutory demand set aside under section 459G of the Corporations Act. The demand was issued by Hannon, the appellant, to Afro's company, 2146544 Ontario Inc. The dispute arose when Hannon issued a statutory demand for payment of a debt of $11,770. Afro applied to the Federal Circuit Court of Australia to set aside the statutory demand, arguing that the demand was frivolous or vexatious.

The central legal issue for the court to determine was whether the statutory demand issued by Hannon was frivolous or vexatious, which would entitle Afro to have the demand set aside. The court considered whether Hannon had a genuine prospect of being able to prove the debt, and whether the demand was made in bad faith or for an improper purpose.

The court found that Hannon had no reasonable prospects of proving the debt. The evidence showed that the debt was not genuine, and there was no basis for Hannon to believe that the debt was owed. The court concluded that the demand was frivolous and vexatious, and that it was made without a proper basis in law or fact. The court found no matter of principle that would prevent the demand from being set aside.

As a result, the court ordered that the statutory demand be set aside, and that Hannon pay Afro's costs of the application. The court's decision highlights the importance of ensuring that statutory demands are made with a proper basis in law and fact, and that they are not frivolous or vexatious.

Orders