Celerity Trading Pty Ltd v AGC (Advances) Ltd

[1997] FCA 1542

FEDERAL COURT OF AUSTRALIA

CORPORATIONS - statutory demand - application to set aside - whether statutory demand should be set aside -  whether there is a genuine dispute about the existence of the debt.

Corporations Law s 459G

Mibor Investments v Commonwealth Bank [1994] 2 VR 290, applied
Equuscorp Pty Limited  (Formerly Equus Financial Services Limited ) (ACN 006 012 344) v Perpetual Trustees WA Limited (ACN 004 431 827) (Full Court, 5 December 1997, unreported), considered
Coventry Hall Pty Limited v Howell Developments Pty Limited (In the matter of Conventry Hall Pty Limited) (Emmett J, 7 November 1997, unreported), applied

CELERITY TRADING PTY LTD (ACN 009 087 987) v AGC (ADVANCES) LIMITED (ACN 007 569 066)

VG 3267 of 1997

MARSHALL J
MELBOURNE
12 DECEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3267  of   1997

BETWEEN:	CELERITY TRADING PTY LTD (ACN 009 087 987) APPLICANT
AND:	AGC (ADVANCES) LIMITED (ACN 007 569 066) RESPONDENT
JUDGE:		MARSHALL J
DATE OF ORDER:		12 DECEMBER 1997
WHERE MADE:		MELBOURNE

THE COURT ORDERS THAT:

1. The statutory demand served by the respondent dated 15 August 1997 be set aside.

1. The respondent pay the applicant’s cost of and incidental to the application.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3267 of 1997

BETWEEN:	CELERITY TRADING PTY LTD (ACN 009 087 987) APPLICANT
AND:	AGC (ADVANCES) LIMITED (ACN 007 569 066) RESPONDENT

JUDGE:	MARSHALL J
DATE:	12 DECEMBER 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

This matter is an application by the applicant company (“the company”) pursuant to s 459G of the Corporations Law to set aside a statutory demand which was served on it by the respondent, AGC (Advances) Limited (“AGC”).  An application in identical terms has been made by eight other companies (“the other companies”) associated with Mr David William Neate.  The Schedule to the statutory demand described the relevant debt in the following way:

“The amount of the debt is owed by the company to the creditor as at 15 August 1997 pursuant to a guarantee given by the company to the creditor to guarantee the obligations of David William Neate under a Finance Facility Deed dated 20 October 1989, which guarantee is also contained in the said Finance Facility Deed dated 20 October 1989.”

BACKGROUND

On 21 July 1993 AGC commenced proceedings in the Supreme Court of Victoria (“the Supreme Court”) against Mr Neate and Anne Elizabeth Neate in which it alleged that Mr Neate has defaulted on a loan and that Mrs Neate was liable as a guarantor of the loan.  Mr Neate filed a defence dated 27 May 1994 in that Supreme Court action.  He alleged that AGC represented to him that as long as he continued to pay monthly interest payments, AGC would agree to extend the loan for further periods as required by Mr Neate.  The Supreme Court matter has not been allocated a trial date.  A live issue in that matter is whether or not Mrs Neate remains liable if Mr Neate’s defence succeeds.  Mrs Neate, the company and the other companies are the guarantors in relation to Mr Neate’s loan.

GENUINE DISPUTE?

A statutory demand will be set aside where the Court is satisfied that there is a genuine dispute about the existence or amount of a debt to which the demand relates.

As Hayne J said in Mibor Investments v Commonwealth Bank [1994] 2 VR 290 at 295:

“... it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute.  All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.”

His Honour’s approach has been recently approved by a Full Court of this Court in Equuscorp Pty Limited  (Formerly Equus Financial Services Limited ) (ACN 006 012 344) v Perpetual Trustees WA Limited (ACN 004 431 827) (Full Court, 5 December 1997, unreported).

See also Coventry Hall Pty Limited v Howell Developments Pty Limited (In the matter of Conventry Hall Pty Limited) (Emmett J, 7 November 1997, unreported) where Emmett J said:

“An application under section 459G is not the process or procedure whereby the sort of disputes to which I have referred should be resolved. The purpose of division 3 is to ensure that the provisions of division 2 relating to statutory demands which give rise to presumptions of insolvency are not used as a means of putting inappropriate pressure on corporations where there is a real dispute being a dispute which should be resolved in the ordinary way in the courts or by other dispute resolution process. On the hearing of an application it is not appropriate to decide the merits of a dispute. The function of the Court is simply to determine whether the recipient of the demand is asserting a position bone fide.  If it is, then the demand should be set aside and normal dispute resolution procedures should be undertaken.”

Mr Cosgrave, counsel for AGC, submitted that there was no relevant genuine dispute because the company was liable to pay AGC due to the express terms of the guarantee.  He submitted that the terms of the guarantee make the company liable notwithstanding that Mr Neate’s indebtedness may be unenforceable.  Mr Cosgrave also submitted that the Court should not assume that the positions of Mrs Neate and the company were identical.

Mr Cawthorn, counsel for the company, submitted that there was a relevant genuine dispute.  He contended that Mrs Neate and the company were in identical positions in relation to the alleged debt.  He observed that AGC had not moved for summary judgment against Mrs Neate in the Supreme Court.  He also contended for a different interpretation of the guarantee to that advanced by Mr Cosgrave.

CONSIDERATION

In my view there is a genuine dispute regarding the existence of the debt allegedly owed by the company.  The position of one guarantor, Mrs Neate, is the subject of active contest in an extant Supreme Court action.  There is no reason to consider her to be in any different position as co-guarantor to the position of the company.  On the face of the guarantee document their positions are identical.  I see no basis to accept the contrary view urged by Mr Cosgrave.

In my opinion the company has demonstrated an arguable position on a bona fide basis that it is not indebted to AGC.  Accordingly, I am of the view that the statutory demand should be set aside.  It is unnecessary for the Court to consider the other bases advanced by Mr Cawthorn upon which he submitted that the statutory demand should be set aside.

ORDER

The Court orders that:

1. The statutory demand served by the respondent dated 15 August 1997 be set aside.

1. The respondent pay the applicant’s cost of and incidental to the application.

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

Associate:

Dated:            

Counsel for the Applicant:	Mr P G Cawthorn
Solicitor for the Applicant:	White Cleland Pty
Counsel for the Respondent:	Mr P J Cosgrave
Solicitor for the Respondent:	Dunhill Madden Butler
Date of Hearing:	1 December 1997
Date of Judgment:	12 December 1997