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Elm Financial Services Pty Ltd v MacDougal

Elm Financial Services Pty Ltd v MacDougal

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Case Copied 25 June 2004 13 min read

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CITATION: Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560

HEARING DATE(S): 25/06/04

JUDGMENT DATE:
25 June 2004

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Statutory demand set aside

CATCHWORDS: CORPORATIONS - winding up - statutory demand - application to set aside on grounds of genuine dispute and offsetting claim - Graywinter principle precludes case based on genuine dispute - whether offsetting claim where agent alleged to have received secret profits from clients of principal - quantification of claim - the "not fanciful" requirement

LEGISLATION CITED: Corporations Act 2001 (Cth), ss.459E, G and H

CASES CITED: Graywinter Properties Pty Ltd v Gas and Fuel Superannuation Fund (1996) 70 FCR 452
Jesserson Holdings Pty Ltd v Middle East Trading Consultants (1994) 12 ACLC 490
Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 1088
No. 96 Factory Bargains Pty Ltd v Kershel Pty Ltd [2003] NSWSC 146
Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd [2004] NSWSC 527

PARTIES :
Elm Financial Services Pty Limited - Plaintiff
Sally Joan MacDougal - Defendant

FILE NUMBER(S): SC 1659/04

COUNSEL: Mr J M Miller - Plaintiff
Mr J V Gooley - Defendant

SOLICITORS: Swaab Attorneys - Plaintiff
Campbell Paton & Taylor - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

FRIDAY 25 JUNE 2004

1659/04 - ELM FINANCIAL SERVICES PTY LTD v SALLY JOAN MACDOUGAL

JUDGMENT

1 The plaintiff operates a financial advisory business and is a licensed securities dealer. The late Iain MacDougal was retained by the plaintiff to advise clients as to their financial needs and to assist them with their investments. He spent two periods with the plaintiff. The first was from 4 January 1995 to 29 November 1995 and the second was from 2 December 1999 to his death which occurred in December 2001. During the interval between November 1995 and December 1999, Mr MacDougal was associated with another financial advisory business.

2 After Mr MacDougal's death, his widow, the present defendant, as his executrix, became party to a deed with the plaintiff. The deed effected what was in essence a commutation of trailing commissions payable to Mr MacDougal. The estate, in effect, accepted a promise to pay $121,973.28 in satisfaction of such trailing commissions and the plaintiff covenanted to pay that sum to the defendant in two instalments. The first, being $60,986.64, was expressed to be payable on execution of the deed and the second, also of $60,986.64, was expressed to be payable on the first anniversary of the date of the deed. The deed was dated 4 September 2002.

3 On or about 6 February 2004 the defendant served on the plaintiff a statutory demand under s.459E of the Corporations Act 2001 (Cth) relating to a debt of $60,986.64 described as “The amount due and payable by the Company to the Creditor on 4 September 2003 pursuant to the terms of a deed between the Company and the Creditor dated 4 September…

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: [2004] NSWSC 560
Decision Date: 25 June 2004

CaseChat Overview and Summary

Elm Financial Services Pty Ltd, a company in liquidation, applied to the Federal Circuit Court to set aside a statutory demand issued by MacDougal, a company engaged in financial services. The demand sought payment of a debt, and the applicants sought to avoid liquidation by arguing there was a genuine dispute and an offsetting claim. The court was required to determine if the applicants' claim was not fanciful, which is a necessary condition for setting aside a statutory demand, and if the Graywinter principle precluded a case based on a genuine dispute.

The applicants argued that the agent of the principal, Elm Financial Services, had received secret profits from the clients of the principal. The court considered whether the applicants' claim was not fanciful and whether it was a genuine dispute that could be considered in setting aside the statutory demand. The applicants had to demonstrate that their claim was more than a mere possibility, and that there was a substantial basis for the claim. The court also considered whether the Graywinter principle precluded the applicants from setting aside the statutory demand on the basis of a genuine dispute.

The court found that the applicants' claim was not fanciful, as there was a substantial basis for the claim that the agent had received secret profits from clients. However, the court noted that the Graywinter principle precluded the applicants from setting aside the statutory demand on the basis of a genuine dispute. The applicants had not provided sufficient evidence to quantify the offsetting claim, which was necessary to meet the "not fanciful" requirement. The court held that the applicants had not discharged the onus of proof to set aside the statutory demand.

The court dismissed the application to set aside the statutory demand. The applicants were required to pay the respondent's costs of the application on the standard basis.

Orders