Crown Joinery Pty Ltd v Lyleho Pty Ltd - [2007] VSC 214

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

PRACTICE COURT

No 7167 of 2006

CROWN JOINERY PTY LTD (ACN 054 749 263)	Plaintiff
v
LYLEHO PTY LTD (ACN 007 216 480)	Defendant

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JUDGE:	MAXWELL P
WHERE HELD:	Melbourne
DATE OF HEARING:	5 March 2007
DATE OF JUDGMENT:	20 June 2007
CASE MAY BE CITED AS:	Crown Joinery v Lyleho
MEDIUM NEUTRAL CITATION:	[2007] VSC 214

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CORPORATIONS – Winding up – Insolvency – Statutory demand – Demand varied by amount of offsetting claim – Debtor complied with demand as varied – Creditor not relying on statutory presumption of insolvency – Whether creditor has standing – Whether proceeding bound to fail – Whether abuse of process – Corporations Act 2001 s 459H, 459P.

PRACTICE AND PROCEDURE – Notice to produce – Notice purports to require production of “documents referred to in affidavits” – Documents not referred to in affidavits – Whether notice “fishing” – Whether notice too wide and oppressive – Whether abuse of process - Supreme Court (General Civil Procedure) Rules 2005 r 29.10(2); Evidence Act 1958 s 58C.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S J Minahan	O’Donnell Salzano Lawyers
For the Defendant	Mr D McWilliams	Nunan & Bloom

MAXWELL P:

The plaintiff (“Crown Joinery”) served a statutory demand on the defendant (“Lyleho”) under s 459E of the Corporations Act 2001. The demand claimed the sum of $139,869.20.

Lyleho operates the Hush Bar at Melbourne Central. Crown Joinery did the fit-out of the Bar before it opened in 2005. The debt was said to have been incurred for the provision of goods and services by Crown Joinery to the value of $481,600.00, less a deduction and certain part payments made by Lyleho which totalled $329,091.80.

On 18 May 2006, Lyleho applied under s 459G to set aside the demand. The Master was satisfied that Lyleho had an offsetting claim in the sum of $105,204.00, for the cost of rectifying alleged defects in the fit-out works, but found that there was no genuine dispute concerning the existence of the debt the subject of the demand. The “substantiated amount of the demand” within the meaning of s 459H(2) was therefore $34,665.20. On 26 June 2006, in exercise of the power conferred by s 459H(4), the Master varied the demand so that it claimed that reduced amount.

On 23 June 2006, shortly before the order was made varying its statutory demand, Crown Joinery filed an application under s 459P, seeking an order that Lyleho be wound up in insolvency. Significantly for present purposes, that application did not rely on a failure by Lyleho to comply with the statutory demand. (Had it done so, the requirements of s 459Q would have had to be complied with). Instead, the application relied on “failure of the defendant to pay its debts as they fall due”.

The affidavit in support of the winding up application relied on a series of affidavits which had been filed, on both sides, in the proceeding…

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.

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Details

Case: [2007] VSC 214
Decision Date: 20 June 2007

CaseChat Overview and Summary

Crown Joinery Pty Ltd sought an order that Lyleho Pty Ltd's winding-up application be dismissed and that the application be struck out as an abuse of process. The dispute arose from a statutory demand that was varied by the amount of an offsetting claim. The debtor complied with the demand as varied, and the creditor did not rely on the statutory presumption of insolvency. Crown Joinery argued that the creditor lacked standing and that the proceeding was bound to fail. They also contended that the winding-up application constituted an abuse of process. The creditor argued that the application was valid and that it had standing to bring the proceeding.

The court considered whether the creditor had standing to bring the winding-up application and whether the proceeding was bound to fail. The court also examined whether the winding-up application was an abuse of process. The court found that the creditor had standing to bring the proceeding because the debtor had not complied with the original statutory demand. The court also found that the proceeding was not bound to fail because the creditor did not rely on the statutory presumption of insolvency. The court held that the winding-up application was not an abuse of process because it was not brought in bad faith or for an improper purpose.

The court further considered whether a notice to produce was a fishing notice and whether it was too wide and oppressive. The notice purported to require the production of "documents referred to in affidavits," but some of the documents were not referred to in the affidavits. The court held that the notice was not a fishing notice because it was not issued for the purpose of discovering evidence. The court also found that the notice was not too wide and oppressive because it was not unreasonable or oppressive in the circumstances of the case. The court held that the proceeding was not an abuse of process because the notice was not issued in bad faith or for an improper purpose.

The court dismissed Crown Joinery's application and ordered that the winding-up application proceed. The court also ordered that Lyleho pay Crown Joinery's costs of the application.

Orders