Buddies Liquor Pty Ltd v Wah Lai Investment (Australia) Pty Ltd

[2001] NSWSC 337

Reported Decision: (2001) 19 ACLC 855

New South Wales

Supreme Court

CITATION:	Buddies Liquor P/L v Wah Lai Investment (Australia) P/L [2001] NSWSC 337 revised - 1/05/2001
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 2112/01
HEARING DATE(S):	30 April 2001
JUDGMENT DATE:	30 April 2001
PARTIES :	Buddies Liquor Pty Limited ACN 002 402 191 (Plaintiff) Wah Lai Investment (Australia) Pty Limited ACN 003 169 497 (Defendant)
JUDGMENT OF:	Santow J

COUNSEL :	M Christie / Ms V Culkoff (Plaintiff) N Banfield (Solicitor) (Defendant)
SOLICITORS:	Meers & Meers (Plaintiff) Sally Nash & Co (Defendant)
CATCHWORDS:	CORPORATIONS — Withdrawal of statutory demand directed wrongly against the Plaintiff company — Policy of statutory regime — Costs awarded in favour of Plaintiff.
LEGISLATION CITED:	Corporations Law s459E; s459G
CASES CITED:	Winning Appliances Pty Limited v St George Appliances Pty Limited (Bergin J [1999] NSWSC 1157, 30 November 1999, unreported)
DECISION:	Costs awarded to party setting aside statutory demand.

REVISED — 1 May, 2001
IN THE SUPREME COURT
OF NEW SOUTH WALES
IN EQUITY

SANTOW J

No. 2112/01
Buddies Liquor Pty Limited ACN 002 402 191
Plaintiff
Wah Lai Investment (Australia) Pty Limited ACN 003 169 497
Defendant
JUDGMENT — ex tempore

orders

1. By consent, I order that the Statutory Demand of the Defendant and subsequently purportedly withdrawn, be set aside to the extent that an order to that effect is required

2. The Defendant to pay the Plaintiff’s costs..

OBSERVATIONS

1 It has been strenuously argued by the Defendant that while there is no dispute about the first order, in circumstances where there was no basis for serving the Statutory Demand on the Plaintiff, no cost order should be made. It was not put in the alternative that any cost order should be solely such costs as would have been incurred excluding those applicable to the s459G application brought by the Plaintiff. Essentially the Defendant contends that notwithstanding the blatant misuse of the Statutory Demand procedure, no cost order should be made but each party pay their own costs. The fact, undisputed, was that the Statutory Demand simply named the wrong company. But no explanation was given to the effect that there was some other company, indebted to the Defendant, which would have been correctly named.

2 It is long settled that Statutory demands may not be used as some kind of commercial lever to exact favourable settlement of disputed debts. Whether that was the case here is not clear, though in argument the Defendant cited this as a common use of the Statutory Demand. By making the cost order that I have made I intend to signal in the clearest way that those who issue statutory demands have a responsibility to ensure that there is a proper basis for doing so. This is not a case of the kind contemplated by s459E(2)(c) where the debt is paid or otherwise compounded or secured leading to withdrawal of the demand without need for an application is set aside under s459G of the Corporations Law. No submission is made that there is any outstanding debt by the recipient of the demand. Accordingly it is the clearest case of a statutory demand that the Plaintiff is entitled to have extinguished immediately and in a manner that leaves no room for any question of the effectiveness of that extinction.

3 I do not need to decide whether a withdrawal of a statutory demand would have been open and indubitably effective without the s459G application that was in fact brought. Such are the serious consequences of a statutory demand for a company’s reputation in its trading and with creditors, especially in giving rise to the presumption of insolvency, that I am satisfied the Plaintiff was entitled to take the precaution of launching a s459G application preparatory to an order setting it aside, even if the Defendant had already purported to withdraw the statutory demand. This was against the risk that the statutory regime applicable to statutory demands may be exhaustive in requiring extinction of the demand (outside s459E(2)(c)) only via a s459G application. The Plaintiff was entitled to an extinction that could not be open to question. Whether a s459G application is for more abundant caution or legally essential, I am satisfied that the Plaintiff acted reasonably in the steps that it took, such that costs should be awarded. It does not mean that next time indemnity costs would not be awarded but in all the circumstances I will not do so here.

4 Such a cost order reinforces the clear policy applicable to statutory demands and reflected in the legislation; they are only to be issued on proper cause. I do not anticipate a flood of applications seeking the orders that the Plaintiff sought but equally a plaintiff is entitled, as this one has, to take the cautious approach and have the benefit of orders framed in pursuance of s459G.

5    Finally, I should note that there is nothing in the unreported judgment of Bergin J in Winning Appliances Pty Limited v St George Appliances Pty Limited (Bergin J [1999] NSWSC 1157, 30 November 1999, unreported) which directs me to a different result; in that case the debt the subject of the relevant statutory demand had been compromised, here there was no debt.

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Last Modified: 05/02/2001