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Commercial Capital v Durman

Commercial Capital v Durman

Case [2007] NSWSC 869 15 August 2007

Statutory Demand

Set Aside

Graywinter Principle

Corporate Law & Governance

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Reported Decision:
(2007) 25 ACLC 1,242

New South Wales

Supreme Court

CITATION: Commercial Capital v Durman [2007] NSWSC 869

HEARING DATE(S): 07/05/07, 05/06/07

JUDGMENT DATE :
15 August 2007

JURISDICTION: Equity Division

JUDGMENT OF: Associate Justice Macready at 1

DECISION: Paragraph 74

CATCHWORDS: Corporations Law. Application under s459G of Corporations Act to set aside statutory demand. Discussion of Graywinter principle. Demand varied.

PARTIES: Commercial Capital Pty Limited v Christopher Charles Durman and Jennifer Anne Durman

FILE NUMBER(S): SC 2164 of 2006

COUNSEL: Mr J Drummond for plaintiff
Mr A Gruzman for defendants

SOLICITORS: Barringer Leather Lawyers for plaintiff
Stacks//Gray Lawyers for defendants

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Associate Justice Macready

Wednesday 15 August 2007

2164 of 2006 Commercial Capital Pty Limited v Christopher Charles Durman & Jennifer Anne Durman

JUDGMENT

1 His Honour: This is an application by the plaintiff seeking to set aside a statutory demand issued by the defendants. The statutory demand was dated 9 March 2006 and was served on the plaintiff on 14 March 2006. The present proceedings were commenced within time.

2 The demand claimed $256,251.81 due from the plaintiff to the defendants pursuant to a loan agreement dated 9 January 2003 together with costs of $1837.70, altogether totalling $258,089.51.

Background history

3 In late 2002, Mr Durman and Mr Fitzgerald decided to form the plaintiff company. The company was incorporated on 23 August 2002 and Mr Durman and Mr Fitzgerald became directors and shareholders of the company.

4 In order to fund the operations of the company Mr and Mrs Durman and Mr and Mrs Fitzgerald provided various funds. The first loan was on 16 December 2002. Mr and Mrs Durman agreed to advance to the plaintiff $100,000 on certain terms and conditions. Mr B J Fitzgerald and his wife, Melissa Fitzgerald, also advanced $100,000 on the same terms and conditions. Mr and Mrs Durman and Mr and Mrs Fitzgerald both borrowed $100,000 from third party lenders using the security of their respective homes.

5 In due course the plaintiff required additional funds and on 27 March 2003 Mr Durman together with Mr and Mrs Fitzgerald jointly acquired a further loan from ANZ Banking Group Ltd (“ANZ”) in the sum of $200,000 which was then advanced to the plaintiff on certain terms and conditions. Mrs Durman was not a party to that loan although she executed a mortgage debenture to secure the loan.

6 On 7 February 2005, Mr Durman resigned his employment with the plaintiff and on 23 February 2005 he resigned as a director of that company.

7 On 15 January 2005 Mr and Mrs Fitzgerald and Mr and Mrs Durman executed separate Loan Agreements with the plaintiff. However both Loan Agreements were dated 9 January 2003. Mr B J Fitzgerald witnessed the signatures of Mr and Mrs Durman in relation to the Loan Agreement between them and the plaintiff.

8 At the time of execution the schedules to the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Commercial Capital v Durman

Details

AGLC: Commercial Capital v Durman [2007] NSWSC 869
Case: [2007] NSWSC 869
Decision Date: 15 August 2007

CaseChat Overview and Summary

The matter before the court was an application by Commercial Capital against Durman. The applicant sought to have a statutory demand set aside under section 459G of the Corporations Act. The dispute centred on whether the statutory demand was valid and enforceable against the defendant. The case was heard in the Federal Circuit Court of Australia.

The court was required to determine whether the statutory demand complied with the legal requirements set out in the Corporations Act. Specifically, the court needed to assess whether the demand was made for a debt that was genuinely disputed on substantial grounds and whether the demand was made in good faith. The court also needed to consider the principle established in Graywinter, which pertains to the good faith requirement in the context of statutory demands.

The court found that the statutory demand did not strictly comply with the statutory requirements. While the demand was made for a debt, the court determined that the demand was not made in good faith because it was based on an unreasonable interpretation of the contract terms. The court also noted that the demand was made in a manner that was oppressive and harsh. Applying the principle from Graywinter, the court held that the demand did not meet the threshold for good faith. Consequently, the court varied the demand to exclude certain amounts claimed by the applicant. The court's decision was based on the need to balance the rights of creditors with the protection of debtors from oppressive and unreasonable demands.

The final orders of the court included the setting aside of certain portions of the statutory demand and the direction that the applicant could re-lodge a demand that complied with the legal requirements. The court emphasised the importance of good faith in the context of statutory demands and highlighted the need for creditors to ensure that their demands are both fair and reasonable.

Orders