D&M (Australia) Pty Ltd v Crouch Developments Pty Ltd - [2009] WASC 283

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: D&M (AUSTRALIA) PTY LTD -v- CROUCH DEVELOPMENTS PTY LTD [2009] WASC 283

CORAM: MASTER SANDERSON

HEARD: 15 SEPTEMBER 2009

DELIVERED : 24 SEPTEMBER 2009

FILE NO/S: COR 136 of 2009
COR 137 of 2009

BETWEEN: D&M (AUSTRALIA) PTY LTD (ACN 102 773 722)
Plaintiff
AND
CROUCH DEVELOPMENTS PTY LTD (ACN 008 897 676)
Defendant

Catchwords:

Corporations law - Applications to set aside statutory demands - Money paid into trust account to secure arbitration award - Whether 'some other reason' why demands ought be set aside

Legislation:

Corporations Act 2001 (Cth), s 459J(1)(b)

Result:

Demands set aside

Category: B

Representation:

Counsel:

Plaintiff: Mr J G Abberton
Defendant: Mr B P Wheatley

Solicitors:

Plaintiff: Lavan Legal
Defendant: Mossensons

Case(s) referred to in judgment(s):

Cockatoo Dockyard Pty Ltd v Commonwealth of Australia [No 3] (1995) 35 NSWLR 689
Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454
Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452
Process Machinery v ACN 057 260 590 [2002] NSWSC 45
Quadwest Developments Pty Ltd v Thi [2009] WASC 54

MASTER SANDERSON: This was the return of two applications by the plaintiff to set aside statutory demands. At the conclusion of the hearing I indicated to the parties I would set both demands aside. I said I would publish reasons for doing so. These are those reasons.
There was no dispute between the parties as to the facts. The summary which follows is taken from the two affidavits of Kevin Chen, each of which was sworn 3 July 2009. Mr Chen is not a director of the plaintiff. He says he has been assisting the plaintiff in management of its building works at 1 Dunedin Street, Mount Hawthorn. Mr Chen says the directors of the plaintiff do not speak English, are residents overseas and they provide him with relevant instructions.
The defendant served two statutory demands on the plaintiff. The first demand dated 15 June 2009 is for an amount of $19,739.50. That demand appears as annexure KC1 to Mr Chen's affidavit sworn in support of the application in COR 137 of 2009. The second demand is dated 16 June 2009 and appears as annexure KC1 to Mr Chen's affidavit sworn in COR 136 of 2009. That demand is for an amount of $419,992.91. So the total amount demanded from the plaintiff by the defendant is just under $440,000.
It is common ground that the plaintiff engaged the defendant to construct certain works on a property owned by the plaintiff in Mount Hawthorn. A dispute arose in relation to these works. The contract anticipated an arbitration to resolve disputes and in early 2008 the defendant commenced arbitration proceedings against the plaintiff. The matter was heard before an arbitrator from 23 March ‑ 27 March 2009. On 7 May 2009 the arbitrator issued his interim award. The amount of the award was $419,992.91 in favour of the defendant. On…

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: [2009] WASC 283
Decision Date: 24 SEPTEMBER 2009

CaseChat Overview and Summary

D&M (Australia) Pty Ltd was the plaintiff and Crouch Developments Pty Ltd was the defendant in this case before the Federal Court. The dispute centred on the plaintiff's application to set aside statutory demands made by the defendant. The plaintiff had deposited funds into a joint trust account to secure an arbitration award, arguing this effectively secured the amount claimed by the defendant. The plaintiff contended that under s 459J(1)(b) of the Corporations Act 2001 (Cth) there was 'some other reason' why the demands ought to be set aside. The court had to determine whether the plaintiff's deposit into the trust account constituted a sufficient reason to set aside the statutory demands.

The court considered the plaintiff's argument that the deposit of funds into the joint trust account constituted 'some other reason' under s 459J(1)(b) of the Corporations Act to set aside the statutory demands. The plaintiff relied on two cases to support its argument: Eumina Investments Pty Ltd v Westpac Banking Corporation and Ahern v Deputy Commissioner of Taxation (Qld). However, the court found that the circumstances in the present case differed significantly. Unlike the situation in Eumina, where an appeal based on reasonable and arguable grounds could result in an offsetting claim, the plaintiff in this case had already secured the amount claimed by the defendant. This effectively meant there was no genuine dispute over the debt, as the amount had already been secured by the plaintiff's deposit. The court concluded that the plaintiff's argument did not satisfy the criteria for setting aside the statutory demands under s 459J(1)(b).

The Federal Court ultimately dismissed the plaintiff's application to set aside the statutory demands. The court found that the plaintiff's deposit of funds into the joint trust account did not constitute 'some other reason' under s 459J(1)(b) of the Corporations Act to set aside the demands. The deposit had already secured the amount claimed by the defendant, thereby negating any genuine dispute over the debt. The court held that the statutory demands remained in effect and the plaintiff's application was dismissed in its entirety.

Orders

Orders of the court

Demands set aside

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The plaintiff's position was that as it had effectively secured the amount claimed by the defendant by the deposit of funds into a joint trust account it was entitled to have the demand set aside. In making that submission reliance was placed on s 459J(1)(b) of the Corporations Act 2001 (Cth) - the plaintiff saying this was a case where there was 'some other reason' why the demand ought be set aside. In making this submission, counsel relied upon two cases. The first of these was the decision of Emmett J in Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454. The facts in this case can be summarised in this way. Eumina Investments Pty Ltd (Eumina) owed Westpac Banking Corporation (Westpac) $42,000. This debt was owed under a Federal Court order that required Eumina to pay Westpac's costs in certain proceedings. These proceedings had been dismissed but without prejudice to Eumina's right to bring further proceedings. Eumina did indeed bring further proceedings in the New South Wales Supreme Court. The claim was dismissed. Eumina took the matter to the Court of Appeal and lost. It then lodged an application for special leave to appeal to the High Court. Before the special leave application was heard, Westpac served a statutory demand. Eumina applied to the Federal Court for an order setting aside the demand. Eumina raised a number of arguments. First, it said it had a 'genuine claim' against Westpac within the meaning of s 459H(5) of the Corporations Act. Emmett J determined that, as a result of the decision at first instance in the New South Wales Supreme Court and on appeal, Eumina had no claim against Westpac and, until the first instance decision was set aside, no other court could consider Eumina's claim. The only bona fide claim that Eumina had against Westpac was Eumina's claim for special leave to appeal. Even assuming Eumina had reasonable prospects of success on appeal if leave was granted, that established only that the claim for special leave could be characterised as a genuine claim. The first instance decision conclusively determined as between Eumina and Westpac that there was no money recovered by Eumina arising out of the proceedings in the New South Wales Supreme Court. Therefore Eumina did not have a genuine claim against Westpac within the meaning of s 459H. However, Emmett J was satisfied that Eumina could have the demand set aside under the provisions of s 459J(1). His Honour said:It is, in my opinion, appropriate for a Court to exercise the discretion conferred by s 459J(1)(b) where the Court is satisfied that there is an appeal based on reasonable and arguable grounds which, if successful, would result in the existence of an offsetting claim. The expression 'reasonable and arguable grounds' is suggested by the decision of the Full Court in Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148. …However, in an application under s 459J(1)(b), it may be appropriate to draw a distinction between the relevance of an appeal to a genuine dispute and the relevance of an appeal to an offsetting claim. Where there is an appeal against a judgment debt which gives rise to the statutory demand and there is no stay, whether or not the stay has been sought, there may be some substance in the conclusion that setting aside the statutory demand is a de facto stay. The appropriate course, in such a case, may be for the company to apply for a stay to the court which entered judgment. Where, however, there is an appeal from a decision dismissing a possible offsetting claim, there is no dispute as to the debt which gives rise to the statutory demand as is the case here. There may be no basis for seeking a stay of the order made … On the other hand, no application for a stay could be made in respect of the order of [the Supreme Court of New South Wales] or the order of the Court of Appeal. There is, therefore, no mechanism available to the Company in the present circumstances, other than s 459J(1), to prevent the consequences of the presumed insolvency which would follow from non‑compliance with the statutory demand (459 ‑ 460).