Blueprint Investments Pty Ltd v Bemcray Pty Ltd

[2000] QDC 239

DISTRICT COURT OF QUEENSLAND

CITATION:

Blueprint Investments Pty Ltd v. Bemcray Pty Ltd [2000] QDC 239

PARTIES:

BLUEPRINT INVESTMENTS PTY LTD (Plaintiff)
v.
BENCRAY PTY LTD (Defendant)

FILE NO/S:

D1272 of 2000

DIVISION:

PROCEEDING:

Appeal

ORIGINATING COURT:

Magistrates Court Brisbane

DELIVERED ON:

19 July 2000

DELIVERED AT:

Brisbane

HEARING DATE:

22 June 2000

JUDGE:

Samios DCJ

ORDER:

Appeal dismissed

CATCHWORDS:

RESTITUTION – monies paid to avoid winding up of proceedings – held payment was voluntary and irrecoverable – held not paid under duress – public policy against recovery of the money paid

David Securities Pty Ltd v. Commonwealth Bank of Australia (1991-1992) 175 CLR 353
Woolwich Equitable Building Society v. Inland Revenue Commissioners (1993) AC 70, 165

COUNSEL:

Mr Hackett for the appellant
Mr Perkins for the respondent

SOLICITORS:

Crouch & Lyndon for the appellant
Frews Solicitors for the respondent

1. The appellant appeals from the whole of the order of the learned Magistrate at Brisbane given on 15 February 2000 in proceedings between the appellant as plaintiff and the respondent as defendant whereby the learned Magistrate:

(a)        Found a payment by the plaintiff to the defendant was voluntary; and

(b)        Found that the voluntary payment by the plaintiff to the defendant to avoid winding up proceedings was irrecoverable.

1. The learned Magistrate entered judgment for the defendant on the plaintiff’s claim and judgment for the defendant on the counterclaim in the sum of $2,000.  Further, the learned Magistrate ordered the plaintiff to pay the defendant’s costs to be taxed or agreed.

1. The grounds of the appeal are that the learned Magistrate erred in finding that the alleged overpayment by the plaintiff to the defendant forming part of the payment made by the plaintiff to the defendant to avoid winding up proceedings was irrecoverable.  Further, that the learned Magistrate erred in failing to find that the payment by the plaintiff to the defendant was made under:

1.          protest;  or

2.          duress

1. The appellant seeks orders that the appeal be allowed and the orders made by the learned Magistrate be set aside and that the respondent pay the appellant’s costs.  The appellant also seeks an order that the action be remitted to the Magistrates Court for further hearing, or that this court make such further other order as is considered appropriate.

1. In the proceedings before the learned Magistrate the plaintiff alleged:

1.          There was an agreement in writing entitled “Certificate of Deposit” and dated 2 September 1997 whereby the plaintiff agreed to repay to the defendant the sum of $40,000 advanced by the defendant to the plaintiff together with simple interest at the rate of 25% on 1 August 1998.

2.          The agreement was breached by the defendant because the defendant made demand of the plaintiff on or about 2 July 1998 for the sum of $61,357.53.  This demand was a creditors statutory demand for payment of debt and was dated 2 July 1998. 

3.          The defendant subsequently filed an application to wind up the plaintiff out of the Supreme Court of Queensland based upon that demand. 

4.          That on 18 September 1998 the plaintiff paid to the defendant the sum of $63,932.87 to avoid the defendant proceeding with the application to wind up the plaintiff and was ordered to pay the defendant’s costs of and incidental to the application to wind up to be taxed.

5.          These costs were taxed in the amount of $2,000 and the plaintiff incurred legal costs of its own in the sum of $2,688.80.

6.          That on 18 September 1998 the amount due by the plaintiff to the defendant pursuant to the agreement was $51,616.44.

7.          Therefore the sum of $12,316.43 was overpayed by the plaintiff to the defendant on 18 September 1998 and was therefore monies had and received to the use and benefit of the plaintiff ($63,932.87 - $51,616.44 = $12,316.43). 

8.          Further, the $2,000 plus the $2,688.80 referred to above totalling $4,688.80 was loss and damage suffered by the plaintiff as a consequence of the defendant’s breach of the agreement.

1. The defendant’s response in the proceedings before the learned Magistrate by way of defence admitted there was the agreement in writing described as the “Certificate of Deposit” dated 2 September 1997. However, the defendant alleged the agreement was to pay a sum of $52,500 to the defendant on 30 April 1998. Further, that the plaintiff defaulted under the terms of the agreement in that, save for the sum of $5,500, it failed to repay the monies due under the agreement by 30 April 1998. The defendant admitted that it served a statutory demand on the plaintiff pursuant to the Corporations Law for an amount of $61,357.53. However, the defendant claimed this was for the amount due and owing under the agreement. The defendant claimed this demand was not satisfied and no application was made by the plaintiff to set aside the demand. The defendant also admitted that the application to wind up the plaintiff came on for hearing in the Supreme Court of Queensland on 18 September 1998. However, the defendant alleged the plaintiff, by its servants or agents, orally agreed with the defendant by its servants or agents to compromise the winding up proceedings by paying the defendant the full amount of the statutory demand. The defendant alleged that on 18 September 1998 the plaintiff paid the defendant the full a mount of the statutory demand and the winding up application was adjourned. Thereafter, the defendant took no further part in those proceedings.

1. Hence the defendant claimed it gave good consideration for the amount of monies paid by the plaintiff in that it agreed not to continue with the winding up application and it accepted the monies in good faith as a complete compromise of the winding up proceeding.  Further, the defendant alleged the defendant had adversely changed its position in reliance in good faith on the payment made by the plaintiff in that it agreed to compromise the winding up proceeding without obtaining a winding up order such that it was now exposed to the incurrence of further legal costs and other loss and it had otherwise put the monies received to the use of the defendant.  Hence, the defendant claimed the plaintiff was estopped and knew or ought to have known that the defendant would rely in good faith on the compromise to withhold from proceeding with the winding up application to its detriment.  The defendant made a counterclaim for the $2,000 costs that were taxed pursuant to the order made in the Supreme Court on 18 September 1998 when the defendant did not proceed further with the winding up application. 

1. The plaintiff’s amended reply and answer admitted the application to wind up the plaintiff filed by the defendant came before Registrar White in the Supreme Court of Queensland on 18 September 1998. However, the plaintiff denied any compromise of proceedings as alleged by the defendant on the basis that:

   (i)         The plaintiff was entitled to pay the amount demanded to avoid the winding up;

   (ii) The plaintiff was precluded at law by s.459S of the Corporations Law from disputing the:

   A:         quantum of the indebtedness demand by the defendant; or

   B:         the timing of the payment due by the plaintiff to the defendant. 

   The plaintiff claimed that the winding up proceedings proceeded on the assumption that the quantum of the indebtedness demanded by the defendant and the timing of the payment due by the plaintiff to the defendant were in accordance with the demand by virtue of the statutory demand not being satisfied and no application being made by the plaintiff to set aside the demand. Further, that there had been no determination by a court or compromise of the amount due by the plaintiff to the defendant or the timing of the payment due by the plaintiff to the defendant or the timing of the payment due by the plaintiff to the defendant. Further, because of the plaintiff being precluded at law by s.459S of the Corporations Law, and the winding up proceedings proceeding on the assumption referred to, the payment by the plaintiff to the defendant was made under duress.

1. When the proceedings came on for trial before the learned Magistrate, the learned Magistrate accepted a submission made by counsel for the defendant that the learned Magistrate should decide as a separate issue in the proceedings whether there had been a compromise as a ruling on that issue in favour of the defendant would be the end of the proceedings.  Although the application made by counsel for the defendant in that respect was opposed by counsel for the plaintiff, nevertheless, counsel for the plaintiff conceded that if the defendant succeeded on that issue it would be determinative of the plaintiff’s claim. 

1. The learned Magistrate proceeded on that basis and there is no appeal from the learned Magistrate’s decision to do so. 

1. As I have said, there was no issue that on 2 July 1998, the defendant served upon the plaintiff a statutory demand for payment of debt.  The learned Magistrate accepted evidence that after the statutory demand was served, the plaintiff by Mr. McCoy, in a facsimile from the plaintiff to the defendant’s solicitors dated 7 July 1998 disputed the quantum claimed by the plaintiff and that at that stage the defendant was entitled to be paid.  However, the learned Magistrate also found that the plaintiff did not apply to the court to have the statutory demand set aside.  The learned Magistrate found that the plaintiff did not seek legal advice regarding the statutory demand until after the expiry of the 21 days within which an application could have been made to set aside the statutory demand.  The learned Magistrate noted that para. 4 of the demand sets out the consequences of a failure to comply with the statutory demand.  That is, that an application to wind up the company may be made and in para. 5 that an application may be made to have the statutory demand set aside.  The learned Magistrate noted the consequences of failing to have a statutory demand set aside.  The statutory provisions are as follows:

“Company may not oppose Application on certain grounds

(1)Insofar as an Application for a company to be wound up in insolvency relies on a failure by the company to comply with the statutory demand, the company may not, without the leave of the Court, oppose the Application on a ground:

(i)         …

(ii)       That the company could have so relied on, but did not so rely on (whether it made such an Application or not).

(2)        The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.”

1. On the evidence before the learned Magistrate there was no dispute the defendant applied to wind up the plaintiff.  Before the learned Magistrate the solicitor for the plaintiff (Mr. Scott) gave evidence.  In the course of his evidence, he stated that he advised Mr. McCoy that because the plaintiff had not disputed the statutory demand his company no longer had a right to dispute the entitlement of the other party to the money and that his only option was with an application to the court to have the court find that the company was solvent, and therefore should not wind up the company.  He also told him that the other option the plaintiff had was to pay the money in full.  He acknowledged in his evidence-in-chief (t.51/50) there was a third option which was to allow the company to be wound up.  Mr. Scott stated in evidence that  was never discussed with the plaintiff because obviously as Mr. McCoy consulted with Mr. Scott, Mr. McCoy did not want that to happen.  Mr. Scott’s evidence was that when he tried to resolve the matter, which were his initial instructions, Mr. Shah, the solicitor for the defendant, told him the defendant’s instructions were that the defendant was not prepared to discuss resolving the matter on any basis other than the defendant being paid in full.  Ultimately, Mr. Scott told Mr. Shah that the plaintiff was prepared to pay the amount in full and in exchange for paying that amount of money, the defendant would withdraw the application to wind up the company.  A figure was advised as the amount to be paid.  In Mr. Scott’s evidence, he said that another creditor had made a claim on the plaintiff for monies alleged to be owed.  However, an agreement was made with that creditor that an irrecoverable authority would be given by the plaintiff that the money alleged to be due to that creditor would be paid from the settlement of a property transaction in Sydney.  Mr. Scott said that a similar proposal was put to the defendant,  however that was rejected because Mr. Shah’s instructions were that payment was required that day, namely 18 September 1999, otherwise the defendant was proceeding with the winding up. Mr. Scott told Mr. Shah that the monies were expected through his trust account, and then he went back to court at 2.30 with a bank cheque in favour of the defendant for the amount that had been requested, being payment in full and then they went before the Registrar.  Before the Registrar, counsel for the defendant sought to withdraw the application to wind up which was granted and the other creditor was substituted for the defendant.  The matter was then adjourned.  An order was made as to costs.  There was some dispute raised before the learned Magistrate whether or not the order had been by consent or not.  The sealed copy shows that it was by consent however, Mr. Scott said in evidence he did not  make any agreement to pay the costs by consent.  He just did not make any submissions.  That would appear to be because he could not oppose an order for costs being made in the circumstances. 

1. When Mr. Scott was cross-examined by counsel for the defendant, he said his client had two choices to make with respect to the winding up application.  Either satisfy a judge on the application that the company was solvent, and therefore the application should be set aside, or pay the amount in full.  He said his client elected to pay the amount in full (t.63/50).  Mr. Scott accepted that the application to prove the company was solvent which were his instructions was not brought.  However, he said there was a risk that if proving solvency was not successful, the company could be wound up.  With respect to that risk, Mr. Scott said that might have been why his client paid the money.  He said “He had two choices and he said to me ‘I’m going to pay the amount in full’”.  He was asked this question: “Okay, so he elected to pay the amount in full?--  That’s correct.” 

1. The learned Magistrate found that the plaintiff could have applied to set aside the statutory demand and could have sought to prove solvency, but chose not to do so.  Therefore the learned Magistrate found that the payment made was a voluntary payment made by the plaintiff to avoid being wound up and the monies were not recoverable. 

1. Apart from submitting that the learned Magistrate ought to have found the payment was not voluntary in that it was made under duress, and that the effect of the correspondence prior to the institution of the winding up proceedings established that the payment ultimately paid to the defendant was under protest, on the hearing of the appeal, counsel for the plaintiff submitted that the learned Magistrate erred in finding a compromise because there was no evidence of an agreement made by the solicitors to compromise the claim of the defendant. 

1. In my opinion, the learned Magistrate was correct to find that the plaintiff made the payment voluntarily, and the payment was not recoverable and was a compromise of legal rights. 

1. In my opinion, the learned Magistrate was correct to find on the evidence that the plaintiff had its opportunity to seek to set aside the statutory demand and had the option to seek to prove solvency on the hearing of the application to wind up the plaintiff. 

1. In my opinion, the learned Magistrate was correct to reject the claims that the payment was made under duress or under protest, and therefore not recoverable.

1. The correct principle to apply, in my opinion, is to be found in David Securities Pty Ltd v. Commonwealth Bank of Australia (1991-1992) 175 CLR 353 where at pages 373-374 the majority of the High Court said:

“The payment is voluntary or there is an election if the plaintiff chooses to  make the payment even though he or she believes a particular law or contractual provision requiring the payment is, or may be, invalid, or is not concerned to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment.  We use the term ‘voluntary’ therefore to refer to a payment not made under any form of compulsion or undue influence.”

As the learned Magistrate found on the evidence the plaintiff had choices the plaintiff could have made. However, the plaintiff elected with respect to the statutory demand not to seek to set it aside, and with respect to the application to wind up the company, the plaintiff did not attempt to prove solvency.  In my opinion, applying the principle from David Securities, the learned Magistrate came to the correct conclusion on the evidence. The learned Magistrate was correct to conclude that on the evidence there was no compulsion upon the plaintiff to make the payment and the payment was voluntary.

1. Further, with respect to the submission there was no evidence given by the solicitors of a compromise, it is my opinion the learned Magistrate was again correct to conclude there had been a compromise of legal rights.  In my opinion, the evidence supported a finding that the defendant’s claim to proceed with the winding up was an honest claim.  That is, neither party called any evidence from which the learned Magistrate could decide if in fact the quantum claimed by the defendant was correct or that the money was due at the time claimed by the defendant.  In my opinion, that did not preclude the learned Magistrate making the findings that are sought to be reversed on this appeal.  That is because the evidence supported a finding that subject to the plaintiff satisfying a judge of solvency, the defendant could succeed upon its application to wind up the company. Even though the plaintiff disputed the quantum of the money claimed to be due and that the money was due at that time in correspondence, in my opinion, that would not prevent a finding that the claim by the defendant  to be entitled to wind up the plaintiff was an honest claim to be entitled to do so.  In my opinion, the learned Magistrate was correct to conclude that a compromise was reached by the solicitors. The defendant’s solicitor told the plaintiff ’s solicitor that the defendant would proceed with the winding up application unless the amount it claimed was paid in full.  In my opinion, to claim in correspondence that there is a dispute about the quantum of the claim and that money is not then due and the legal consequences that flow from failing to seek to set aside a statutory demand do not prevent the conclusion being reached that money paid to avoid an order to wind up a company is a compromise.  The conversations between the solicitors and the conduct of the plaintiff providing the funds to its solicitors to make the payment in my opinion was evidence upon which the learned Magistrate could find the parties agreed to compromise the defendant’s claim. 

1. Further, principle and policy supported the findings made by the learned Magistrate.  That principle being that a payment made in order to avoid litigation is irrecoverable.  Further, that there is policy in favour of the finality of dispute resolution that requires the payer should have contested the matter at the time the demand for payment was made.  If the payer elects to pay the money rather than to contest the claim, the money is irrecoverable (Woolwich Equitable Building Society v. Inland Revenue Commissioners (1993) AC 70, 165.

1. Therefore, I dismiss the appeal.

1. I will hear the parties on the question of costs.