BHA Industries Pty Ltd v Gorokan Display Village Pty Ltd

[1998] FCA 1541

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 3113 of 1998

BETWEEN:	BHA INDUSTRIES PTY LIMITED APPLICANT
AND:	GOROKAN DISPLAY VILLAGE PTY LIMITED RESPONDENT

JUDGE:	TAMBERLIN J
DATE:	5 NOVEMBER 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT
Ex-tempore Judgment

In this matter an application has been made to set aside a creditor’s statutory demand for payment of a debt. The demand was served on the applicant, pursuant to sections 459H and/or 459J of the Corporations Law (“the Law”). Those sections provide as follows:

“459H(5)       In this section:

‘admitted amount’, in relation to a debt, means:

(a)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of a debt – a nil amount; or

(b)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt – so much of that amount as the Court is satisfied is not the subject of such a dispute; or

(c)       otherwise – the amount of the debt

…”

459J(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.”

The basis stated in the application to set aside the statutory demand is said to be on grounds stated in an accompanying affidavit and statement of claim.

Having considered the evidence which has been filed, I am not satisfied that any ground has been made out which would warrant the setting aside of the statutory demand for payment.  The basis of the application to set aside is that the requirements of the statutory demand have, in effect, been met.  It is claimed that the company, within 21 days after service of the demand, demonstrated that it had secured or compounded the total debt to the reasonable satisfaction of the creditor.

Leaving aside for one moment the question of reasonable satisfaction, it is evident from the facts that the application is opposed.  Also the affidavit of Mr Millard filed on 5 November 1998 indicates that the creditor, from a subjective point of view, is not satisfied that the debt, which is the subject of the statutory demand, has been satisfactorily compounded or secured in any respect.

The basis on which it is claimed that the Court should find that the debt has been compounded or secured to the reasonable satisfaction of the creditor is the execution of agreements between the present parties and others in relation to an Exhibition Village Management and Promotion Agreement, dated 20 June 1994 and an Exhibition Village Investors Agreement of the same date made between the parties.  There is provision made in those agreements for indemnities and also for the granting of a charge in respect of levies which arise in relation to the property.  No provision is made for any registered legal mortgage in relation to the levies, and whilst it appears in relation to at least one of the agreements that there is probably an equitable charge securing the levies, I am satisfied that in order to enforce that charge the procedure would be somewhat cumbersome.

In the case of the one of the agreements there is some doubt, and I make no decision on this point, as to whether an effective charge has been granted by the relevant party within the meaning of the expression used in the statutory demand.  Be that as it may, it seems to me that the enforcement of that charge entails considerable inconvenience and uncertainty as well as being time consuming and expensive. In my view, it was reasonably open to the creditor in the present circumstances to take the view that the debt had not been secured to its “reasonable satisfaction”.

One further reason on which I base the decision to dismiss the application to set aside the statutory demand is that no proper grounds are disclosed in the accompanying statutory declaration, which has been relied on in support of the application to set aside the demand.  It is evident from recent decisions of this Court that the grounds must be disclosed in the supporting affidavits and, in this case, whilst there is some evidence produced in relation to the agreements, I am not satisfied that the supporting affidavit discloses those grounds.  As Sundberg J said in the recent decision in Graywinter Properties Pty Limited v Gas & Fuel Corporation Superannuation Fund (1996) (Decision Number 822 FCA 1 Unreported, 17 September 1996).

“In several cases it has been held that an applicant is not restricted on the hearing to the affidavit that is served with the application .. an applicant whose initial affidavit has satisfied the threshold test must be able to supplement the material because, while the supporting affidavit does not have to deploy the evidence on the hearing, only admissible evidence can be relied on.”

The case refers to a statement made by Ryan J in Re Louisbridge Pty Ltd [1994] 2 Qd R 144 at 145:

“Provided an affidavit is filed and served within the 21 day period which supports the application by providing grounds for concluding there is a genuine dispute or, that the company is an off-setting claim, supporting affidavits may be filed after the period has expired. In the present case the affidavit filed does not satisfy this threshold test.”

The decision in Graywinter was referred to and applied by Emmett J in Sacon Constructions Pty Limited v Concrite Pty Limited (1997) 843 FCA (Unreported 15 August 1997) at page 4 where he said, after referring to the observations of Sundberg J:

“I am disposed to agree with those observations.  The object of those provisions was to avoid having these sorts of disputes on the hearing of a winding up application.  That object would be best served by requiring a company in receipt of a demand to specify the grounds upon which it says there should be no winding up application.”

His Honour in that case did not consider the affidavit satisfied the requirements because it did not support the application.  It contained something more than mere assertion but there was no explanation as to the nature of the cross-claim relied on or its quantification.  In my opinion it is appropriate to apply this approach to the affidavits in the present case. Accordingly I am satisfied this provides a further basis for dismissing the application and the order of the Court is that the application to set aside the notice of statutory demand is dismissed with costs.

In relation to an extension of time for compliance, I am satisfied that this matter has been on foot for a sufficient period of time that it is not appropriate to unduly extend the period for compliance.  Accordingly, I further order that the period for compliance with the statutory demand shall end at 5.00 pm on 12 November, 1998.

In referring to the statutory demand, of course, I am referring to the statutory demand as varied by the previous order made by me in this matter as to the amount of the demand.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin

Associate:

Dated:             5 November 1998

Counsel for the Applicant:	Mr R W Cameron
Solicitor for the Applicant:	Stewart Bell Solicitors
Solicitor for the Respondent:	Vaughan Barnes
Date of Hearing:	5 November 1998
Date of Judgment:	5 November 1998