Anchez Pty Ltd v Dragon Corporation Pty Ltd, Stegman and Stegman

[1997] QCA 254

IN THE COURT OF APPEAL	[1997] QCA 254
SUPREME COURT OF QUEENSLAND

Appeal No. 9706 of 1996

Brisbane

[Anchez P/L v. Dragon Corp P/L & Ors.]

BETWEEN:

ANCHEZ PTY LTD ACN 056 124 102

(Defendant/ Applicant) Appellant

AND:

DRAGON CORPORATION PTY LTD ACN 010 969 258

(First Plaintiff) First Respondent

AND:

DEIRDRE ELLEN STEGMAN and GREGORY NORMAN STEGMAN

(Second Plaintiffs ) Second Respondents

Davies J.A. Moynihan J. de Jersey J.

Judgment delivered 15 August 1997

Joint reasons for judgment of Davies J.A. and Moynihan J.; separate reasons of de Jersey J., concurring as to the orders made.

APPEAL DISMISSED WITH COSTS.

CATCHWORDS:	CORPORATIONS LAW - Statutory Demand - Appeal against order to set aside statutory demand on conditions.
Counsel:	Ms Cheryl Knight (not of counsel) for the appellant. Mr F.L. Harrison Q.C. with Mr C.L. Francis for the first and second respondents.
Solicitors:	Ms Cheryl Knight (not a solicitor) for the appellant. F.G. Forde Knapp & Marshall for the first and second respondents.

Hearing Date: 22 May 1997

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 9706 of 1996

Brisbane

Before Davies J.A. Moynihan J. de Jersey J.

[Anchez P/L v. Dragon Corp P/L & Ors.]

BETWEEN:

ANCHEZ PTY LTD ACN 056 124 102

(Defendant/Applicant) Appellant

AND:

DRAGON CORPORATION PTY LTD ACN 010 969 258

(First Plaintiff) First Respondent

AND:

DEIRDRE ELLEN STEGMAN and GREGORY NORMAN STEGMAN

(Second Plaintiffs ) Second Respondents

JOINT REASONS FOR JUDGMENT - DAVIES J.A. AND MOYNIHAN J.

Judgment delivered 15 August 1997

Anchez Pty Ltd appeals against an order of a chamber judge setting aside a statutory

demand under the Corporations Law served on it by the respondents which was made conditional

upon it paying the respondents $36,500.

The statutory notice was founded on a summary judgment obtained by the respondents

against the appellant and the $36,500, the subject of the conditional order to set aside, was the

discounted balance of money due under that judgment.

The litigation between the parties arises out of transactions involving land at Proserpine and

the Proserpine Motor Lodge which is erected on it. It is sufficient for present purposes to note that

the appellant entered into a lease of the motor lodge dated 24 May 1993. The lease provided for an annual rental of $200,000 for the first four years and for three renewal options each for a period

of five years. Rent was to be varied in line with the C.P.I. index from the beginning of the fifth year

of each lease period.

The appellant entered into possession, conducted the business and paid the rent until the

December 1994 instalment fell due. By this time the business was in financial difficulties essentially

because the rent was far in excess of that which could be paid given the gross turnover of the motor

lodge business. Put shortly the business was not economically viable if the rent remained at

$200,000 per year.

The appellant was unsuccessful in renegotiating the terms of the lease, particularly the rent

with the respondents and ceased to pay the rent. The respondents brought the action in which the

summary judgment, previously referred to, was obtained. The appellant brought a cross-claim in

that action to have the lease varied and the rent reduced pursuant to the Trade Practices Act 1974

(Cth). The cross-claim was based on allegations of false and misleading statements about the motor

lodge business which induced the appellant to acquire the business and enter into the lease.

The respondents brought an application for summary judgment and the appellant appeared

to show cause against that. It was given leave to defend on terms which the appellant did not

comply with and the respondents obtained the judgment on which the statutory notice was founded.

The leave to defend the summary judgment application on terms reflected an evaluation by

the judge who heard it that it was "possibly unlikely" but "not unconceivable" that the appellant

would succeed in its cross-claim and that "stringent conditions" were warranted if leave to defend

was given. There was no appeal from the decision.

The conditions on the setting aside of the statutory notice imposed by the judge below

reflect a conclusion that the respondents had an arguable claim to recover a total of $227,500 from

the appellant. The appellant relied on its cross-claim to argue that it had an offsetting claim,

essentially the cross-claim earlier referred to. The judge was not persuaded that the appellant had a "serious sustainable off-setting claim". This was essentially because of reservations he had about a

valuation of the motel business which was relied on by the appellant. The judge below effectively

took the view that a valuation should reflect the lease as it presently stands rather than treating it as

having been set aside (or at least the rent reduced) as a result of the successful outcome of the

appellant's cross-claim. There is little attraction in purchasing a business which can only be

conducted at a substantial loss with its current rental obligation. This has the consequences that the

furniture in the lodge is of value to someone who can operate it profitably, but that is dependent on a

rent reduction which in turn depends on a successful cross-claim by the appellant. The judge below

took account of the evaluation of that occurring arrived at by the judge who heard the summary

judgment application. The amount ordered to be paid into court is a 15% discount on the summary

judgment debt and reflects the judge below's evaluation of the position. This appeal is not the place

to deal with the issues raised by the cross-claim which remains to be pursued by the appellant. If it

goes into liquidation, it will be for the receiver to determine whether it should be pursued.

It has not been demonstrated that the judge below erred and the appeal should be

dismissed.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 9706 of 1996

Brisbane

Before Davies JA

Moynihan J de Jersey J

[Anchez P/L v. Dragon Corp P/L & Ors]

BETWEEN:

ANCHEZ PTY LTD ACN 056 124 102

(Defendant/Applicant) Appellant

AND:

DRAGON CORPORATION PTY LTD ACN 010 969 258

(First Plaintiff) First Respondent

AND:

DEIRDRE ELLEN STEGMAN and GREGORY NORMAN STEGMAN

(Second Plaintiffs) Second Respondents

REASONS FOR JUDGMENT - de JERSEY J

Judgment delivered 15 August 1997

I agree that the appeal should be dismissed, and with the joint reasons given by Davies JA and

Moynihan J.