Drewniak v Air Rubber Pty Ltd - [2002] SASC 319

DREWNIAK AND ANOR v AIR RUBBER PTY LTD
[2002] SASC 319
Full Court: Duggan, Debelle and Williams JJ (ex tempore)

DUGGAN J I agree that this appeal should be dismissed for the reasons given by Debelle J.
DEBELLE J This is an appeal from a decision of a Master of this Court setting aside a statutory demand made pursuant to s 459E of the Corporations Act 2001.
The appellant Peter Drewniak and his wife have lent the sum of $80,015 to a company called Air Rubber Pty Ltd (“Air Rubber”). The appellants assert that the sum of $80,015 was a loan repayable on demand. By a demand dated 12 November 2001 addressed to Air Rubber, the appellants demanded payment of the loan of $80,015. On 4 December 2001, Air Rubber made an application pursuant to s 459H and s 459J of the Corporations Act to set aside the demand. The application was heard by the Master on 11 March 2002 who gave reasons ex tempore and set aside the demand. The appellants appeal from that decision.
Air Rubber does not deny that it owes the appellants the sum of $80,015 but it asserts that the loan is not repayable until it is earning profits. The background to that assertion is as follows. Air Rubber is a company which makes airbags and associated products for motor vehicles. Mr Peter Drewniak was a director of Air Rubber from 18 April 1995 to 5 August 1999. The other directors of the company are Mr and Mrs Holownia. Mr Drewniak and Mr and Mrs Holownia are all immigrants from Poland. In about October 1994, Mr and Mrs Holownia established a company which is now called Airbags Pty Ltd. Mr Drewniak became interested in the business. In 1995, Mr Drewniak, together with Mr and Mrs Holownia, established Air Rubber. In 1995 and 1996, Mr Drewniak invested the total sum of $80,015 in Air Rubber. It was treated in the books of the company as a director’s loan.
Mr and Mrs Holownia assert that it is the practice and custom in Poland that moneys invested in a company for working capital are not repayable until such time as the company is profitable and profits are not needed to develop new products, buy new equipment or upgrade existing equipment. The appellants deny that there is such a custom or practice.
Mr and Mrs Holownia also assert that Mr Drewniak initialled a memorandum dated 16 February 1997 which states that work, capital, interest and a car will be paid out of net profits. They rely also on a document which is said to be notes of a discussion in mid-1998 between themselves and Mr Drewniak in which it was agreed that directors’ loans need not be paid until the company earns profits. The relevant part of the note is in these terms:
“The Directors have decided that when the company achieves profits and provided that there is need (sic) for the introduction of new products and no need…

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: [2002] SASC 319
Decision Date: 14 October 2002

CaseChat Overview and Summary

Drewniak and his wife are appealing a decision of a Master of the Court who set aside a statutory demand made by them against Air Rubber Pty Ltd. The appellants claim that they lent $80,015 to Air Rubber as a repayable loan on demand. The respondents dispute this and claim that the loan is not repayable until the company is profitable. The appellants made a demand for repayment on 12 November 2001 and the respondents applied to set aside the demand on 4 December 2001. The Master heard the application on 11 March 2002 and set aside the demand, finding that there was a genuine dispute on substantial grounds. The appellants appeal this decision. The legal issues before the court were whether the Master was correct to set aside the statutory demand and whether the appellants should pay indemnity or solicitor and client costs. The court found that there was sufficient evidence to conclude that a genuine dispute existed and dismissed the appeal. The court also noted that parties pressing statutory demands where a genuine dispute exists may be at risk of an order to pay costs on an indemnity basis or on a solicitor and client basis. However, in this case, the court decided not to make an order for costs. The final order of the court was that the appeal be dismissed and that the appellants pay the costs of the respondent.

Orders