Detail v Kleenkut Stratti v Kleenkut

[2003] NSWSC 643

CITATION:	Detail v Kleenkut Stratti v Kleenkut [2003] NSWSC 643
HEARING DATE(S):	11/07/03
JUDGMENT DATE:	14 July 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Master Macready at 1
DECISION:
CATCHWORDS:	Corporations Law. Application to set aside statutory demand. Effect of a stay when debt ordered to be paid by instalments. Demand set aside under s 459J(1)(b).
PARTIES :	Detail Rock Tooks Pty Limited v Kleenkut Pty Limited Stratti Ocean & Earth works v Kleenkut Pty Limited
FILE NUMBER(S):	SC 2630/03; 2632/03
COUNSEL:	Mr Ash for defendant
SOLICITORS:	Mr Orlizki and Norman Waterhouse for plaintiff R.A. Dunbier & Associates for defendant

- 1 -

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

MONDAY 14 JULY 2003

2630/03 - DETAIL ROCK TOOLS PTY LIMITED v KLEENKUT PTY LIMITED

2632/03 – STRATTI OCEAN & EARTHWORKS v KLEENKUT PTY LIMITED

JUDGMENT

1 MASTER: This is a hearing of two matters which are related. In each, the defendant issued a statutory demand dated 11 April 2003 for an amount, which is debatable, of $38,642.27 under the Local Court judgment obtained on 1 April 2003. The judgment was obtained following the assessment of party and party costs ordered to be paid in proceedings in the Industrial Relations Commission on 23 August 2002.

2 The statutory demand was served on 14 April 2003. On 1 May 2003 the plaintiff made an application to the Local Court to pay by instalments. On that day the Registrar made an order for payment by instalments at $3,000 per month, with the first payment due on 31 May 2003.

3 The plaintiff raises three matters:

(a) there is some other reason to set aside the demand as there is a stay;
(b) that the demands which were separately issued to joint debtors are duplicitous;
(c) various formal defects in the demand.

4 I turn to each of these matters. The stay. Part 27 Rule 2(13) of the Local Court (Civil Claims) Rules, 1998, provides:

“Where the court or the registrar makes an instalment order under this rule, the order shall, while it remains in force, operate as a stay of enforcement of the judgment in respect of which the order was made, except enforcement by way of a garnishee order to which section 48 of the Act applies made before the order under this rule was made.”

5 Although some objection to the instalment orders was made, it has not yet been heard and thus the stay of enforcement remains in place.

6 A similar problem arose in Scope Data Systems v BDO Nelson Parkhill [2003] NSWSC 137. There Barrett J was concerned with s 107 of the Justices Act, and in particular he was concerned with s 107(1), which is in these terms:

“The execution of a sentence imposed as a consequence of a conviction, or of any other order, is stayed when a notice of appeal is given in accordance with this Division.

and S 107(3) which says:
“The stay of execution continues until the appeal is finally determined, subject to any order or direction of the Supreme Court and section 111(3).”

7 His Honour concluded, after reviewing the authorities, that the section did not change the character of the debt which was still due and payable and thus there could be no genuine dispute.

8 He then moved on to see if there was some other reason under s 459J(1)(b) to set aside a demand. He referred to several cases and then, at paragraphs 25 and 26, said:

“If, in the present case, a stay of execution of the Local Court orders is in force by operation of s.107 of the Justices Act , reliance upon the statutory demand to produce a statutory presumption of insolvency as a basis for seeking a winding up order will entail for the plaintiff consequences of a serious and adverse kind. The defendant, as a judgment creditor to whom the remedy of execution upon the judgment is expressly denied pending determination of the appeal to this court, will nevertheless be permitted to rely on the judgment as a basis for bringing to bear the pressure for payment and threat of serious and adverse consequences inherent in a statutory demand and a winding up petition, notwithstanding the legislative policy that precludes direct resort to execution. That legislative policy would thereby be circumvented.

If Parliament sees fit to provide that, where a certain type of appeal is initiated in respect of a judgment debt, the judgment creditor is not to be allowed to exercise ordinary judgment creditor remedies by proceeding to execute the judgment, it would, in my view, be inconsistent with the position Parliament has striven to create if the judgment creditor could nevertheless proceed with impunity to initiate winding up proceedings on the basis of the mere existence (even though technically not subject to ‘genuine dispute’) of that judgment debt. Such a course would, in my view, be oppressive in the sense referred to by Austin J in Moutere and by Mullins J in Softex. The circumstances would therefore warrant an order under s.459J(1)(b) setting aside the statutory demand, even though the initiation of action towards winding up was not technically within the black letter operation of s.107 of the Justices Act (cf Australian Cherry Exports Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337).”

9 The same can be said for the procedure for a stay when a debt is ordered to be paid by instalments as in this case.

10 Although the stay was not in force at the time of the issue of the demand, it did come into effect within twenty-one days after the date of issue. I do not see why that would make any difference. It is apparent the application was made promptly and only a month after the judgment. It was no doubt done as a response to the service of the demand. That does not detract from the clear legislative provision which allows applicants to pay debts by instalments. For those reasons I would propose to set aside the demand but I will briefly refer to the other matters.

11 The duplicitous claim. Identical demands have been served on each plaintiff company as they and some others are jointly liable under the judgment.

12 It was submitted if one of the companies were to pay the debt within the time specified in each demand, there would be a presumed insolvency as against the other company. The presumed insolvency could be used to found a winding up application. I, myself, doubt that this is a proper construction. It would seem to me that where the debt is paid it would not matter by whom it was paid and there could thus be no failure to comply with a demand.

13 I turn to the defects in the demand. Paragraphs 1 and 3 and the schedule to the demand are in the following terms:

“1. The company owes KLEEN KUT PTY. LTD (A.C.N. 082 205 365) of registered office 3/31 Stafford Street, Kingswood, in the State of New South Wales (‘the Creditor’) the amount of $38,642.27 with respect to a judgment entered in the Local Court, Downing Centre on 1 April, 2003 plus filing fees of $59.00 and interest at the Court rate, being the total of the debts described in the Schedule.
3. The Creditor requires the Company, within 21 days after service on the Company of this demand:
(a) to pay to the creditor the total of the debt; or
(b) to secure or compound for the amount of $38,701.27 to the Creditor’s satisfaction.”

14 There are a number of points made about the demand: in particular, it was pointed out that the amount in paragraph 3 was different to the amount in paragraph 3(b). However, that plainly is nothing more than the addition of the two amounts in paragraph 1.

15 The other more substantial matter is what is claimed as interest at the Court rate and no amount is specified. There is authority for the fact that to fail to specify the rate of interest is a defect in the demand: see Topfelt Pty Limited v State Bank of New South Wales Limited 12 ACSR 381. However, the trend of authority is that in respect of defects on the demand, they must be set aside under s 459J(1) and in such cases it is necessary to show substantial injustice. As none has been identified, I would not set aside the demand for this reason.

16 However, in the light of my findings on the first point, I make order 1 in the application and order the defendant to pay the plaintiff’s costs.

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Last Modified: 07/28/2003