Asia Pacific Glass Pty Ltd v Sindea Trading Co Pty Ltd (No 2)

[2003] NSWSC 845

Reported Decision: 47 ACSR 737

Supreme Court

CITATION:	Asia Pacific Glass v Sindea Trading Co (No 2) [2003] NSWSC 845
HEARING DATE(S):	10/09/03
JUDGMENT DATE:	12 September 2003
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Interlocutory process dismissed with costs
CATCHWORDS:	CORPORATIONS - winding up - earlier order setting aside statutory demand subject to condition - condition not fulfilled - whether earlier order may be varied to overcome non-fulfilment
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.459H, 459M Supreme Court Rules, Part 40 rule 9(1), Part 42 rule 11
CASES CITED:	Australian Vineyard Management Ltd v Madden [1998] NSWSC 84 City of Westminster Assurance Co Ltd v Ainis (1975) 29 P&CR 469 David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 McIvor v Donald [1984] 2 NZLR 487 Natcraft Pty Ltd v WIN Television Pty Ltd [2003] 1 QdR 196 Talbot v Blindell [1908] 2 KB 114 Wickman Machine Tool Sales Ltd v Schuler [1972] 2 All ER 1173
PARTIES :	Asia Pacific Glass Pty Ltd - Plaintiff Sindea Trading Co Pty Ltd - Defendant
FILE NUMBER(S):	SC 6098/02
COUNSEL:	Mr J.T. Johnson - Plaintiff Mr A.J. Abadee - Defendant
SOLICITORS:	Macedone Christie Willis - Plaintiff Hunt & Hunt - Defendant

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

BARRETT J

FRIDAY, 12 SEPTEMBER 2003

6098/02 – ASIA PACIFIC GLASS PTY LIMITED v SINDEA TRADING CO PTY LTD (NO 2)

JUDGMENT

1 On 23 April 2003, I made an order in these proceedings as follows:

“Order that the statutory demand a copy of which is the annexure B to the affidavit of Brett Mace affirmed 19 December 2002 and filed 23 December 2002 be set aside on condition that the plaintiff, not later than 31 May 2003, commence in a court of competent jurisdiction (and file and serve originating process containing or accompanied by particulars of claim and of damages in respect of) the legal proceedings described in the first three sentences of paragraph 26 of that affidavit.”

2 The foundation for this order was ss.459H and 459M of the Corporations Act 2001 (Cth). Section 459H(3) compels the court to set aside a statutory demand where it concludes that the “substantiated amount” is less than the “statutory minimum”. Such a conclusion must, of course, be reached on the balance of probabilities. Section 459M says that an order under s.459H “may be made subject to conditions”. The conditional form of the order of 23 April 2003 derives from s.459M.

3 The considerations that led to the conditional form of order were referred to in my reasons for judgment. I concluded that the plaintiff had shown to the requisite level the existence of an offsetting claim for the purposes of s.459H(1)(b) and had ascribed to it a monetary value that had what I described as “at least some basis in logic sufficient to be accepted for the purposes of the assessment the court is called upon to under at this stage”, that is, the s.459G stage. I added, however, that the quantification was “of a broad-brush kind that might not in the fullness of time withstand detailed scrutiny”; also that it was noteworthy that the plaintiff had not, as at April 2003, acted upon the intention stated in an affidavit sworn by its director on 19 December 2002 “to file a claim for damages in early January 2003” in respect of the defendant’s alleged breaches of contract and unconscionable conduct. The nature of the damages intended to be claimed was also stated in the affidavit.

4 By an interlocutory process filed in court when the matter came back before me on 10 September 2003, the plaintiff seeks variation of the order made on 23 April 2003 and, in doing so, relies on Part 40 rule 9(1) of the Supreme Court Rules:

“The Court may set aside or vary a judgment where notice of motion for the setting aside or variation is filed before entry of the judgment.”

5 It is said by the plaintiff and, as I understand it, not disputed by the defendant that the order of 23 April 2003 has not been entered. The plaintiff therefore submits that Part 40 rule 9(1) is available as a source of jurisdiction to vary the order. The precise order the plaintiff seeks is:

“An order varying the terms of order 1 made by the Court on 23 April 2003 to the extent that the time within which the condition attaching to the order is required to be satisfied be extended from 31 May 2003 until 20 June 2003.”

As will be seen presently, 20 June 2003 is the day on which, according to the plaintiff, events constituting satisfaction of the condition occurred.

6 The plaintiff’s application is made in circumstances where proceedings in respect of the offsetting claim the existence of which gave rise to the order have been commenced but, on the plaintiff’s view of matters, were commenced outside the time limit specified in the order but otherwise in conformity with it. On the defendant’s view, the aspect as to timing does not represent the only way in which the proceedings actually commenced did not meet the specifications in the condition to which order of 23 April 2003 was made subject. It is appropriate, therefore, to consider the extent to which the steps taken by the defendant constituted fulfilment of the condition to which the order was made subject.

7 On 2 June 2003, the plaintiff filed in this Division a statement of claim by which it claimed, as against the defendant, certain declarations regarding breach of contract and unconscionable conduct contrary to s.51AC of the Trade Practices Act 1974 (Cth) and an order

“that the Defendant pay damages, including but not limited to damages pursuant to section 82 of the Trade Practices Act 1974”.

The statement of claim was verified by the affidavit of the director whose affidavit of 19 December 2002 had been read upon the s.459G application. It also carried a certificate of the plaintiff’s solicitor under s.198L of the Legal Profession Act 1987. The statement of claim consists of eight paragraphs, apart from the prayers for relief. The plaintiff pleads, in essence, the existence and breach of certain contracts (with very brief particulars given). The eighth paragraph reads:

“The initial breach and the continuing breaches of the Distribution Agreement has caused, and will continue to cause, the Plaintiff to suffer loss and damage.”

There are no particulars to this eighth paragraph.

8 The plaintiff’s solicitor deposes that on 3 June 2003 he forwarded a copy of the statement of claim to Messrs Hunt & Hunt at their document exchange box in Brisbane and that that firm declined to accept service on behalf of the defendant. Thereafter, the solicitor says, he effected service by posting a copy to the defendant’s registered office which is in Queensland. Posting occurred on 20 June 2003. A notice of appearance and notice of grounds of defence were subsequently filed by the defendant.

9 Of the competing views as to the extent of the plaintiff’s failure to meet the specifications in the order of 23 April 2003, it is, to my mind, the defendant’s more far-reaching view that is correct. Satisfaction of the condition to which the order was subject required, at the least, that three things occur not later than 31 May 2003: first, commencement of legal proceedings of the relevant description, second, filing and service of an appropriate originating process and, third, the communication (either in the originating process itself or in something accompanying it) of “particulars of claim and of damages” in respect of the proceedings.

10 The fact is that none of these three things occurred on or before 31 May 2003, that two of them (the first and the second) occurred after that date (with commencement and filing taking place on 2 June 2003) and that, to the extent that there was a requirement that “particulars of … damages” be communicated, the third never occurred. In these circumstances, the condition attached to the order of 23 April 2003 was not satisfied according to its terms.

11 There is nothing in the Corporations Act and very little in case law about the effect of non-fulfilment of a condition imposed pursuant to s.459M. The earliest judicial statement directly in point, so far as s.459M is concerned, seems to be an obiter dictum of Young J (as he then was) in Australian Vineyard Management Ltd v Madden [1998] NSWSC 84. His Honour made an order setting aside a statutory demand conditionally on three bills of costs being submitted by the plaintiff to a costs assessor under the Legal Profession Act 1987 on or before 15 April 1998. In the course of discussion on the relief that should be granted, Young J said:

“Of course, if the conditions are not complied with, the statutory demand will continue to stand.”

Implicit in this comment (it can be regarded as no more) is an assumption that non-satisfaction of a condition subject to which relief under s.459H is granted by a court means that the relief is, in the final analysis, denied.

12 The effect of a s.459M condition received some attention in the decision of the Queensland Court of Appeal in Natcraft Pty Ltd v WIN Television Pty Ltd [2003] 1 QdR 196. Muir J, with whom Atkinson J agreed, regarded a s.459H order made subject to a s.459M condition as “conditional” in the sense referred to by Lord Denning MR in Wickman Machine Tool Sales Ltd v Schuler [1972] 2 All ER 1173, that is, so that the legal force or effect of the order is made to depend on fulfilment of the condition. Non-fulfilment has, on this basis, the effect to which Young J referred.

13 A condition of the kind with which I am presently concerned is not, of itself, a source of obligation. The successful plaintiff is not, by the conditional order, directed to do the things that make up the condition. Failure by the plaintiff to do those things does not entail, in any sense, disobedience: Talbot v Blindell [1908] 2 KB 114. It is just that the plaintiff has not done things the doing of which is, by the terms of the order, necessary to secure for the plaintiff the benefit of the order. The concept underlying a conditional order is that the court, by the condition, specifies what the successful party must do in order to have the benefit of the order; and it is then for that party to decide whether he or she will take the specified steps and secure that benefit or not take them and thereby forego it. There has been some discussion of these matters at appellate level in England (City of Westminster Assurance Co Ltd v Ainis (1975) 29 P&CR 469) and New Zealand (McIvor v Donald [1984] 2 NZLR 487).

14 By virtue of Corporations Act Rule 1.3(2), the Supreme Court Rules apply to a proceeding in this court under the Corporations Act so far as relevant and not inconsistent with the Corporations Act Rules. There is nothing in the Corporations Act Rules relevant to the present issue. Even if the application before me is a proceeding under the Corporations Act (which I must say I do not think it is), regard may therefore be had in an unrestricted way to the Supreme Court Rules where Part 42 rule 11 is as follows:

“Where a person is entitled under a judgment subject to the fulfilment of a condition, and there is a failure to fulfil the condition, then, unless the Court otherwise orders:
(a) he shall lose the benefit of the judgment, and
(b) any other person interested may take any steps which:
(i) are warranted by the judgment, or
(ii) might have been taken if the judgment had not been entered or the order had not been made.”

15 It is not altogether clear that this provision applies in this case. The plaintiff, having obtained the order of 23 April 2003, which was, pursuant to s.459M, made subject to a condition, is perhaps not accurately described as “a person … entitled under a judgment subject to the fulfilment of a condition”. But even if that description does not fit precisely, the general message conveyed by the rule is consistent with the position that prevails as a matter of ordinary construction in line with the approach taken in the cases to which I have referred.

16 In the result, therefore, the position now prevailing must be that failure of the plaintiff to comply with the condition subject to which the order of 23 April 2003 was made means that the beneficial effect of that order in favour of the plaintiff has ceased, so that the statutory demand may no longer be regarded as “set aside” and, in the words of Young J in Australian Vineyard Management Ltd v Madden (above), “will continue to stand”.

17 It is against that background that I must consider whether Part 40 rule 9 (being the only source of jurisdiction on which the plaintiff relies) enables the court now to vary the order of 23 April 2003 in such a way as to restore to the plaintiff the benefit of setting aside of the statutory demand despite non-compliance with the condition upon which the order was made and, if so, whether, in the exercise of the discretion conferred by the rule, the court should do so.

18 It is important to recognise the real effect of the order the plaintiff seeks by its interlocutory process of 10 September 2003. As the foregoing analysis shows, the position as it exists today is one in which the statutory demand can no longer be said to be set aside and must be regarded, according to Young J’s dictum, as continuing to stand. It follows that any order made under Part 40 rule 9 ostensibly by way of variation of the earlier order so as to re-cast its condition to fit the events that actually happened would operate afresh to set aside the statutory demand. As a corollary, the application under Part 40 rule 9 for an order varying the terms of the original order amounts to an application for an order setting aside the statutory demand.

19 Section 459G(2) therefore comes to the fore. That section says that an application to the court for an order setting aside a statutory demand “may only be made” within 21 days after the demand is served. The High Court confirmed in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 that the time specification in s.459G(2) – in which the words “may only be made” play a central part – is strict, and that the general provision in s.1322(4) of the Corporations Act cannot be used to enlarge the 21 day period. This is so as a matter of the proper construction of the Corporations Act provisions themselves. A fortiori, a provision of the Supreme Court Rules conferring a general power to vary an order of the court that has not been entered cannot be employed to produce what is in reality an ex post facto extension of the period made mandatory and immutable by s.459G(2). The question whether the discretion conferred by Part 40 rule 9(1) should be exercised in the circumstances does not arise. The discretion is rendered unavailable by the Commonwealth Act. I would add that, even if the discretion was available, the clear purpose underlying s.459G(2) would cause the court, in the exercise of that discretion, to refuse the order.

20 The interlocutory process filed on 10 September 2003 is therefore dismissed with costs.

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Last Modified: 09/15/2003