Australian Foods Company Pty Ltd v Harvest Grain Pty Ltd
[2003] WASC 227
AUSTRALIAN FOODS COMPANY PTY LTD -v- HARVEST GRAIN PTY LTD [2003] WASC 227
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 227 | |
| Case No: | COR:256/2003 | 3 NOVEMBER 2003 | |
| Coram: | MASTER NEWNES | 14/11/03 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Application to set aside demand dismissed | ||
| B | |||
| PDF Version |
| Parties: | AUSTRALIAN FOODS COMPANY PTY LTD (ABN 69 081 404 686) HARVEST GRAIN PTY LTD (ACN 073 722 933) |
Catchwords: | Corporations Act Setting aside statutory demand based on judgment debt Effect of subsisting application to set aside judgment Section 459H Section 459J(a)(a) Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 459H, s 459J(1)(a) |
Case References: | Barclays Australia (Finance) v Mike Gaffikin Marine (1996) 21 ACSR 235 Bayston Pty Ltd v Metway Leasing Ltd, unreported; SCt of NSW (McLaughlin M); 28 July 1994 Eagle Homes Pty Ltd v LED Builders Pty Ltd [1999] NSWSC 1049 Eumina Investments Pty Ltd v Westpac (1998) 16 ACLC 1440 Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 Palmbay Nominees Pty Ltd v Fowler [2003] WASCA 217 Sajepe Pty Ltd v Lawler [2000] NSWSC 262 Scope Data Systems v BDO Nelson Park hill [2003] NSWSC 137 Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039 Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1994) 2 VR 290 Transfloors Pty Ltd v SWF Hoists Industrial Equipment Pty (1985) 3 ACLC 66 Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
HARVEST GRAIN PTY LTD (ACN 073 722 933)
Defendant
Catchwords:
Corporations Act - Setting aside statutory demand based on judgment debt - Effect of subsisting application to set aside judgment - Section 459H - Section 459J(a)(a) - Turns on own facts
Legislation:
Corporations Act2001 (Cth), s 459H, s 459J(1)(a)
Result:
Application to set aside demand dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr G G Wells
Defendant : Mr D J Miller
Solicitors:
Plaintiff : Gavin Wells
Defendant : Marks & Sands
Case(s) referred to in judgment(s):
Barclays Australia (Finance) v Mike Gaffikin Marine (1996) 21 ACSR 235
Bayston Pty Ltd v Metway Leasing Ltd, unreported; SCt of NSW (McLaughlin M); 28 July 1994
Eagle Homes Pty Ltd v LED Builders Pty Ltd [1999] NSWSC 1049
Eumina Investments Pty Ltd v Westpac (1998) 16 ACLC 1440
Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508
Palmbay Nominees Pty Ltd v Fowler [2003] WASCA 217
Sajepe Pty Ltd v Lawler [2000] NSWSC 262
Scope Data Systems v BDO Nelson Park hill [2003] NSWSC 137
Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039
Case(s) also cited:
Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1994) 2 VR 290
Transfloors Pty Ltd v SWF Hoists Industrial Equipment Pty (1985) 3 ACLC 66
Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294
(Page 3)
1 MASTER NEWNES: This is an application by the plaintiff to set aside a statutory demand served by the defendant on 18 July 2003. In order to understand the basis of the application, it is necessary to go into some of the background to it.
2 It appears from an affidavit of Pavan Shivnani, sworn on 8 August 2003 in support of the application, that the plaintiff entered into a contract with the defendant in March 2001 for the supply by the plaintiff of a quantity of Faba beans for the sum of $18,400. The beans were to be delivered by the plaintiff to the port of Aqaba in Jordan. The defendant subsequently claimed that the beans were substandard. It commenced proceedings against the plaintiff in the Magistrates' Court of Victoria at Horsham to recover the difference between the amount of the purchase price and what it said was the true value of the beans. The plaintiff filed a defence in which it denied that the beans were of inferior quality.
3 The matter was listed in the Magistrates' Court on 1 November 2002. Mr Shivnani, who is the sole director of the plaintiff and who was apparently its principal witness in the matter, says he was aware there was to be a hearing on 1 November 2002, but did not realise that his attendance was required to give evidence. He instructed solicitors to attend to seek an adjournment but the adjournment was refused. The plaintiff's (Australian Foods') counsel then withdrew and the defendant (Harvest Grain) proceeded to call its evidence and obtained judgment in its favour.
4 The plaintiff subsequently applied under the rules of the Magistrates' Court for a rehearing of the matter. That application was heard on 19 February 2003. The plaintiff was represented by counsel. After hearing argument, the Court refused the application for a rehearing. The learned Magistrate was not satisfied, among other things, that any good reason had been shown for Mr Shivnani's failure to attend on 1 November 2002 to give evidence at the trial.
5 On 17 April 2003, the plaintiff made an application for review to the Supreme Court of Victoria seeking an order quashing the decision of the Magistrate to dismiss the plaintiff's application for a rehearing and orders directing a rehearing of the matter.
6 On 12 September 2003, the plaintiff applied to the Supreme Court of Victoria for a stay of execution of the judgment of the Magistrates' Court of 1 November 2002. On 8 October 2003, the application for a stay was dismissed with costs.
(Page 4)
7 In the meantime, on 18 July 2003, the respondent served a statutory demand on the applicant requiring payment of the sum of $17,492.07, being the amount of the judgment and costs awarded to the respondent in the Magistrates' Court.
8 The applicant seeks to have the statutory demand set aside on the grounds, first, that the debt is the subject of a genuine dispute within the meaning of s 459H(1)(a) of the Corporations Act2001, or secondly, that the pending application for review before the Supreme Court of Victoria is "some other reason" within the meaning of s 459J(1)(b) of the Act.
9 Alternatively, the applicant seeks to have its application to set aside the statutory demand adjourned until after the determination of its application for review.
10 The primary question that was argued before me was whether either of the grounds relied upon under the Act was available to the applicant in light of the extant judgment of the Magistrates' Court.
11 The respondent contended that they were not. Counsel for the respondent referred to Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039, a decision of Master Adams of this Court. In that case, Greenco had obtained judgment after trial in the District Court against Wilden. Wilden lodged an appeal against the judgment. Greenco then served a statutory demand on Wilden requiring payment of the judgment sum. Wilden applied to have the statutory demand set aside. That application was made at a time when the appeal against the judgment had been heard and but a decision on it had not been delivered. Wilden argued that the appeal evidenced a genuine dispute or that it constituted "some other reason" for setting aside the demand. Both grounds failed.
12 In dismissing the application, Master Adams said that the question whether there was a dispute between the parties had been determined by the decision of the District Court. For the purposes of an application to set aside a statutory demand, it was irrelevant that the judgment was under appeal, albeit that might be a relevant consideration should there subsequently be a winding-up application. Until the judgment was set aside, it concluded the issue of whether there was a genuine dispute. In relation to s 459J(1)(b), Master Adams said that what Wilden was effectively seeking was a de facto stay of execution on the judgment. There were other, more appropriate, courses open to seek such a stay.
(Page 5)
13 In Barclays Australia (Finance) v Mike Gaffikin Marine (1996) 21 ACSR 235, Gaffikin Marine had obtained a judgment against Barclays and another party in respect of the costs of earlier proceedings between those parties. Barclays paid half of the amount of the judgment into Court. Gaffikin Marine served a statutory demand on Barclays for the full amount of the judgment. At the time the demand was served, an appeal was pending against the judgment in the earlier proceedings. Barclays applied to set aside the statutory demand. It argued, first, that by reason of the appeal there was a genuine dispute, within the meaning of s 459H, as to the existence of the debt to which the demand related and, secondly, that there was "some other reason" within the meaning of s 459J(1)(b) by reason of the appeal and the security provided to Gaffikin Marine by the payment into Court. McLelland CJ in Eq rejected both grounds. His Honour said (at 238):
" … the possibility that a presently existing and enforceable debt may be set aside in the future pursuant to a subsisting appeal does not give rise to a genuine dispute about the existence of the debt within the meaning of section 459H … The position would of course be different if there were a stay of proceedings under, or stay of execution of, the costs order against Barclays, but there is not, and in the absence of any such stay and notwithstanding the pendency of the appeal, the costs order … unless and until set aside on an appeal operates as res judicata determining the matter of Barclay's costs liability to Gaffikin Marine ."
14 His Honour also held that the pendency of an appeal did not constitute "other reasons" under s 459H and rejected the argument that the payment into Court was a sufficient basis to set aside the demand, pointing out that Gaffikin Marine did not have the use and benefit of that money.
15 In Eagle Homes Pty Ltd v LED Builders Pty Ltd [1999] NSWSC 1049, the defendant, LED, had obtained a judgment in the Federal Court against Eagle for the sum of $796,645 on 26 August 1999. On 2 September 1999, LED served a statutory demand on Eagle for that amount. On 14 September 1999, Eagle filed a notice of appeal from the Federal Court judgment and, on 24 September 1999, applied to have the statutory demand set aside. On 6 October 1999, Eagle applied to the Federal Court for a stay of the Federal Court judgment. When that came on for hearing on 14 October 1999, the Federal Court stood it over to the day after the scheduled hearing date of the application to set
(Page 6)
- aside the statutory demand. When the latter came on for hearing, the Supreme Court stood it over until after the adjourned date of the stay application in the Federal Court. When the stay application came on again in the Federal Court, it was stood over generally and leave was granted to Eagle to appeal against that decision, and the earlier decision to stand it over. A notice of appeal was filed by Eagle Homes. The application to set aside the statutory demand then came on for hearing before Hodgson CJ in Eq on 21 October 1999. At [20], his Honour said:
"First it does appear that cases such as [Barclays Australia Ltd v Mike Gaffikin Marine Pty Ltd (supra)] have the consequence that where the Federal Court has given a judgment for a money sum against a company, and that company does not pay or appropriately secure that sum, the obtaining or failure to obtain a stay from the Federal Court will for all practical purposes determine the fate of moves to wind up that company. Barclays shows that, without a stay, there cannot be a genuine dispute as to the existence or amount of the debt within s 459H of the Corporations Law; and also I think that the existence of an appeal against an unstayed judgment cannot be 'some other reason why the demand should be set aside' within the meaning of s 459J of the Corporations Law. … For the Supreme Court to adjourn [a summons to set aside a statutory demand] until after determination of the appeal from the Federal Court judgment would I think be plainly wrong, for two reasons. It would have the effect of precluding the successful party in the Federal Court proceedings from perhaps the most effective means of enforcing its judgment, and thus would in substance amount to a stay of the Federal Court judgment granted by another court. In addition, it would involve the indefinite adjournment of proceedings in which, at the time of commencement and the time of adjournment, the judgment creditor was plainly entitled to succeed, based purely on the possibility that there might in the future be a change of circumstances which would take away that entitlement."
(Page 7)
- rise to a "genuine dispute" under s 459H, referring to Wilden Pty Ltd v Greenco Pty Ltd and Barclays Australia (Finance) v Mike Gaffikin Marine.
17 Counsel for the applicant argued that the distinguishing feature of the present case was that the judgment to which the demand related had been obtained without the applicant being heard. The principle of res judicata did not apply and the judgment did not conclude the question of whether there was a genuine dispute. There was, on the other hand, sufficient in the affidavit of Mr Shivnani to demonstrate that there was a genuine dispute as to the debt. He submitted that either the statutory demand should be set aside, or the current application should be adjourned until after the conclusion of the judicial review proceedings in the Supreme Court of Victoria.
18 Counsel for the applicant relied upon Sajepe Pty Ltd v Lawler [2000] NSWSC 262 and Bayston Pty Ltd v Metway Leasing Ltd, unreported; SCt of NSW (McLaughlin M); 28 July 1994.
19 I do not consider that either case assists the applicant. In Sajepe, the defendant had obtained a default judgment against the plaintiff in the Local Court of New South Wales. A statutory demand was then served by the defendant requiring payment of the judgment sum. Shortly after service of the demand, the plaintiff applied to set aside the default judgment and obtained an ex parte stay in respect of it. It then applied to set aside the statutory demand. The application to set aside the judgment was subsequently dismissed for lack of a defence on the merits. The plaintiff then applied for a review of that decision and a further stay of proceedings was granted. In setting aside the statutory demand, Macready M noted that, as there had been a stay, it was possible for there to be dispute in respect of the judgment debt, although otherwise the fact of an appeal was not a sufficient ground to give rise to a genuine dispute. He also noted that the defendant's claim against the plaintiff in the Local Court was, in effect, a claim for unliquidated damages and could not found a claim for a debt under a statutory demand.
20 In Bayston v Metway, the statutory demand was not based upon a judgment debt and the circumstances were unusual. In that case, Metway had commenced proceedings against, among others, Bayston in the District Court of New South Wales, claiming an amount of $101,558.79. The claim was based upon a deed of settlement and mortgages. Subsequently, on 26 May 1994, Metway served statutory
(Page 8)
- demands on Bayston, claiming an amount of $102,558.79 on the basis of the same deed of settlement and mortgages. On 17 June 1994, Bayston applied in the District Court to strike out Metway's statement of claim as an abuse of process. On the same day, it filed applications to set aside the statutory demands. In support of the applications to set aside the statutory demands, an affidavit was filed deposing to a dispute as to the liability of Bayston to Metway. On 24 June 1994, Metway obtained default judgment in the District Court against Bayston, apparently on the basis that no defence had been filed. Bayston was unaware of the existence of the default judgment until 22 July 1994, but upon becoming aware of it immediately sought to have it set aside. McLaughlin M was satisfied that there was a genuine dispute as to the debt and set aside the statutory demand. In the course of his judgment, McLaughlin M expressed disquiet that default judgment had been obtained by Metway in the face of an application to strike out its statement of claim.
21 Counsel for the plaintiff also relied on Eumina Investments Pty Ltd v Westpac (1998) 16 ACLC 1440 first, for the proposition that a distinction is to be drawn between judgments where a dispute has been determined on the merits, so that the doctrine of res judicata will apply, and other judgments which have been obtained ex parte or by default of the defendant, and secondly, that in the exercise of the discretion under s 459J(1)(b) it is appropriate to take into account the existence of the appeal, the substance of the appeal and the fact that the money has been paid into Court by the defendant.
22 In that case Westpac had obtained a judgment in the Federal Court against Eumina in the sum of $42,000. Eumina contended that it had a claim against Westpac which greatly exceeded the amount it owed to Westpac. Eumina's claim, which was brought in the New South Wales Supreme Court, was dismissed after trial. An appeal by Eumina to the Court of Appeal was also dismissed and Eumina lodged an application for special leave to appeal to the High Court. In the meantime, Westpac served a statutory demand on Eumina for the amount of the Federal Court judgment. Eumina applied to have it set aside. The first question was whether Eumina had a genuine claim against Westpac within the meaning of s 459H of the Corporations Law.
23 Emmett J concluded that it did not. His Honour referred to Barclays Australia (Finance) v Mike Gaffikin Marine (supra) and concluded that the effect of the judgments at first instance and on appeal dismissing Eumina's claim was that it had been conclusively
(Page 9)
- determined that Eumina had no claim against Westpac. Emmett J said (at 1443):
"It is not open to the Company to contend to the contrary because of the doctrine of res judicata since a superior court has conclusively determined that the Company has no claim."
"It is, in my opinion, appropriate for a Court to exercise the discretion conferred by section 459J(1)(b) where the Court is satisfied that there is an appeal based on reasonable and arguable grounds which, if successful, would result in the existence of an offsetting claim."
25 His Honour referred to cases in which it had been held that a pending appeal did not provide a reason within s 459J(1)(b), including Barclays Australia (Finance) v Mike Gaffikin Marine (supra)and Wilden Pty v Greenco Pty Ltd (supra), and went on (at 1445):
"However, in an application under section 459J(1)(b), it may be appropriate to draw a distinction between the relevance of an appeal to a genuine dispute and the relevance of an appeal to an offsetting claim. Where there is an appeal against a judgment debt which gives rise to the statutory demand and there is no stay, whether or not the stay has been sought, there may be some substance in the conclusion that setting aside the statutory demand is a de facto stay. The appropriate course, in such a case, may be for the company to apply for a stay to the court which entered judgment.
Where, however, there is an appeal from a decision dismissing a possible offsetting claim, there is no dispute as to the debt which gives rise to the statutory demand as is the case here. There may be no basis for seeking a stay of the order [of the Federal Court]. On the other hand, no application for a stay could be made in respect of the order [dismissing Eumina's claim]. There is, therefore, no mechanism available to the Company in the present circumstances, other than section 459J(1)(b) to prevent the consequences of the presumed insolvency which would follow from non-compliance with the statutory demand"
(Page 10)
26 The question, therefore, which arose for determination in that case was quite different to the present case. The former was not concerned with the circumstance where there was an appeal against the judgment debt which gives rise to the demand. Indeed, Emmett J accepted that different considerations may arise in the latter. Nor did the question of whether, for the purposes of s 459H and s 459J of the Act, a distinction is to be drawn between judgments to which the doctrine of res judicata will apply and other judgments, arise for consideration.
27 In any event, in my view, the principle of res judicata does apply in the present case. The judgment is a final judgment obtained after trial, albeit a trial at which counsel for the current plaintiff withdrew and it called no evidence.
28 In Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508, Linprint had commenced proceedings against Hexham in the County Court of Victoria in 1978. Hexham counterclaimed against Linprint. When the action came on for trial in 1982 Hexham sought an adjournment. When the adjournment was refused its counsel withdrew and Hexham took no further part in the trial. The trial proceeded with Linprint calling its evidence. Judgment was given for Linprint and the counterclaim was dismissed. Many years later, the plaintiff sued the defendant in the New South Wales Supreme Court. The defendant contended that the subject matter of the proceedings was precisely the same as that of the earlier counterclaim which had been dismissed. The question arose whether res judicata applied. The Court of Appeal held that it did.
29 Hexham contended, among other things, that the earlier judgment was not final for the purposes of res judicata because it was susceptible to being set aside on the ground that it represented a determination of the issues without a trial on the merits so far as Hexham was concerned. That argument was rejected. Kirby P (as he then was) said (at 518) that where a judgment is on its face final, the mere fact that a party has a privilege to apply to have that judgment set aside cannot convert it to a contingent or provisional judgment, forever flawed and incapable of giving rise to res judicata. His Honour went on (at 520) to observe that if, as it contended, Hexham did not have a trial on the merits, that was solely by virtue of its own conduct. Once the adjournment was refused, no endeavour was made to prove its case. It was simply abandoned.
30 Similarly, it was held by Clarke JA (with whom Samuels JA agreed) that if a plaintiff withdraws from the trial and an order is made
(Page 11)
- in its absence dismissing its claim then that order will, unless set aside or successfully appealed from, found a plea of res judicata in the event that a later attempt is made to litigate the same case.
31 In Palmbay Nominees Pty Ltd v Fowler [2003] WASCA 217, Malcolm CJ (with whom Murray J agreed) held, at [57], that a judgment in default of defence will not found a plea of res judicata or issue estoppel, as the judgment is not one made on the merits, but that a judgment or order made following a trial, even where no evidence is led by the defence, is made "on the merits" and it will found the plea.
32 It is not in issue that the judgment obtained by the defendant in the present case was regularly obtained. The plaintiff's witness, its sole director, failed to attend at the trial of the action and the application by the plaintiff's counsel for an adjournment was refused. The plaintiff's counsel then withdrew and the plaintiff called no evidence. The defendant proved its case to the satisfaction of the Court and judgment was entered accordingly. A subsequent application to the Court for a rehearing was refused. An application to the Supreme Court of Victoria for a stay of execution of the judgment, pending the plaintiff's application for review by the Supreme Court of the Magistrate's refusal to order a rehearing, was dismissed. There is a presently existing and enforceable debt under the judgment. The fact that there is a subsisting application which may at some time in the future lead to a rehearing of the defendant's original claim does not, in my view, give rise to a genuine dispute about the existence of the debt within the meaning of s 459H or "some other reason" within the meaning of s 459J(1)(b) of the Act.
33 There may, of course, be cases where, because of the circumstances in which a judgment was obtained, it is open to a Court to conclude that the issue of whether or not there is a genuine dispute as to a party's liability for the judgment debt is a matter that can properly be taken into account on an application of this sort. But I do not consider that the present case is of such a nature.
34 The plaintiff relied upon a further ground in support of its application for an adjournment of this application. On 23 September 2003, it applied to this Court for the hearing of its application to set aside the statutory demand to be adjourned to a date after the hearing of its application to the Supreme Court of Victoria for a stay of execution on the judgment of the Magistrate's Court. The defendant opposed the adjournment. The plaintiff offered to pay into Court the amount
(Page 12)
- claimed in the statutory demand. Ultimately, it was ordered that the application to set aside the statutory demand be adjourned to 3 November 2003 and the plaintiff pay into Court the amount claimed in the demand.
35 Counsel for the applicant contended that, as the money had now been paid into court, there was no prejudice to the respondent in adjourning this application until after the judicial review proceedings had been concluded in the Supreme Court of Victoria.
36 The respondent opposed any such adjournment, contending that it would simply leave the matter in limbo for an indeterminate time. The respondent would not have the use and benefit of the money for that time. I accept that the applicant's proposal is not an appropriate course. The effect would be to preclude the respondent from perhaps the most effective means of enforcing its judgment and, in that respect, would amount, in substance, to the stay of the judgment that the Supreme Court of Victoria declined to grant: see Eagle Homes v LED Builders (supra) per Hodgson CJ in Eq, at [20].
37 In my view, the grounds have not been made out either for the statutory demand to be set aside or for the application to set it aside to be further adjourned. I would therefore dismiss the application.
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