Femley Pty Ltd v Salken Engineering Pty Ltd

[1999] NSWSC 334

Reported Decision: [1999] 17 ACLC 828

New South Wales

Supreme Court

CITATION:	Femley Pty Limited & Ors v Salken Engineering Pty Limited [1999] NSWSC 334
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	1531/99
HEARING DATE(S):	29/3/1999
JUDGMENT DATE:	15 April 1999
PARTIES :	In the matter of Femley Pty Limited, Taylor Lea Pty Limited & Kehoe Pty Limited and the Corporations Law Femley Pty Limited (ACN 083 186 743) Taylor Lea Pty Limited (ACN 083 403 776) and Kehoe Pty Limited (ACN 003 483 949) (Ps) Salken Engineering Pty Limited (ACN 002 923 873) (D)
JUDGMENT OF:	Santow J

COUNSEL :	C R C Newlinds (P) J B Simpkins (D)
SOLICITORS:	Dibbs Crowther & Osborne (P) Henry Davis York (D)
CATCHWORDS:	CORPORATIONS LAW — Statutory Demand in relation to a joint debt of partnership companies (if owed) — Single composite application to set aside rather than one application by each partner company — Compliance with s459G — Defect or irregularity within s467A.
ACTS CITED:	Acts Interpretation Act 1901 (NSW) s23(b) Bankruptcy Act 1966 (Cth) Corporations (NSW) Act 1990 s10(1) Corporations Law s459E, s459F, s459G, s459T, s467A. Pt 5.4 Partnership Act 1892 (NSW) s9
CASES CITED:	Bank of Western Australian v The Federal Commissioner of Taxation (1994) 125 ALR 605 Bartex Fabrics Pty Ltd v Phillips Fox (1994) 12 ACLC 462 David Grant & Co Pty Limited v Westpac Banking Corporation [1995] 184 CLR 265 Dolvelle Pty Limited v Australian Macfarms Pty Limited (1998) 43 NSWLR 717 Eden Bay Pty Ltd v Bennett & Co 91997) 15 ACLC 1,634 Ex parte Blain; re Sawers (1879) 12 ChD 522 Graywinter Properties Pty Ltd v Gas and Fuel Corp Super Fund (1996) 21 ACSR 581 Help Desk Institute Limited v Adams (1999) 17 ACLC 18 Marr v Australian Telecommunications Corporation (1991) 24 ALD 473 Re Meiklejohn; Ex parte Barnard [1961] QdR 70 Re Myers (1932) 5 ABC 128 Re Pepper (1969) 14 FLR 282 Upperedge v Bailey (1994) 13 ACSR 541 Z-tek Computers Pty Ltd v Aus Linx International Pty Ltd (1997) 15 ACLC 1,233
DECISION:	Composite application to set aside statutory demands in relation to joint partnership debt complies with s459G

Femley.15Apr.99 — 14 April, 1999

12

IN THE SUPREME COURT
OF NEW SOUTH WALES
IN EQUITY

SANTOW J

No. 1531/99

In the matter of Femley Pty Limited, Taylor Lea Pty Limited & Kehoe Pty Limited and the Corporations Law
FEMLEY PTY LIMITED (ACN 083 186 743)
TAYLOR LEA PTY LIMITED (ACN 083 403 776)
AND
KEHOE PTY LIMITED (ACN 003 483 949)
Plaintiff

SALKEN ENGINEERING PTY LIMITED (ACN 002 923 873)
Defendant

JUDGMENT
15 April 1999

INTRODUCTION — The question to be determined.

1 This separate question turns on whether a composite application by the Plaintiffs collectively, to set aside the Defendant’s three statutory demands, is fatally deficient in failing to satisfy mandatory requirements of s459G of the Corporations Law. This is on the basis that, in responding to each statutory demand in relation to a partnership debt jointly owed by three partnership companies — if owed at all — the three partnership companies sought to set aside the statutory demand in the one composite application doing so by way of a single summons, rather than by way of multiple applications, one for each alleged debtor company. If that contention were correct, there never has been an application as required by s459G within twenty-one days after the demand was served.
2 It is not disputed that each partner company would be liable, jointly and severally, in the event that the debt the subject of the statutory demand were payable. Likewise it is not in dispute that each of the Plaintiffs, proceeding under the one application by way of summons with a supporting affidavit, do so on the same legal grounds and factual basis.
3 Accordingly, the separate questions which I have resolved should be determined under Pt 31 of the Supreme Court Rules are as follows:

“1. Whether the summons filed on 26 February 1999 with the three supporting affidavits constituted an application made by each of the Plaintiffs individually in respect of the three statutory demands served upon them.
2. Whether an application so made conforms to the requirements of s459G(1), (2) and (3) of the CorporationsLaw .
3. In the event that such application fails to conform to the requirements of s459G(1), (2) and (3) of the Corporations Law or in the event that the answer to question 1 is no, is nonetheless the Plaintiffs’ application not invalidated by reason of s467A and s1322(2) of the CorporationsLaw and/or is capable of being rendered not invalid by reason of an order under s1322(4)(a) of the CorporationsLaw and in the latter case should such an order be made?”


SALIENT FACTS AND PRINCIPAL CONTENTIONS

4 Taken from the Outline of Plaintiffs’ Submissions of 20 March 1999, para 1, the following can be taken to be common ground:

“(i) on 11 November 1998 the Defendant entered into a contract with a partnership known as the ARQ Sydney Partnership.
(ii) the parties of ARQ were and are the three Plaintiffs.
(iii) following discussions and correspondence between the Defendant and ARQ the position emerged whereby the Defendant was asserting that ARQ was indebted to it in the sum of $80,000.00
(iv) on 2 February, 1999 the Defendant executed three separate statutory demands one directed to each Plaintiff. Each of those demands claimed a debt of $80,000.00 and is based on monies due pursuant to the 11 November contract.
(v) the three demands were served on the Plaintiffs on either 8, 9 or 11 February 1999.
(vi) the $80,000.00 claimed was clearly a partnership debt of the ARQ Partnership and as such a debt for which each of the partners would be jointly and severally liable.
(vii) prior to the commencement of these proceedings, the solicitors for the Plaintiffs wrote to the solicitors for the Defendant and enquired as to whether any point would be taken as to seeking to set aside the three statutory demands in the one proceedings. The solicitors for the Plaintiff responded indicating that no such point would be taken.
(viii) thereafter on 26 February, 1999 the summons was filed on behalf of each of the Plaintiffs seeking orders to set aside the three statutory demands.”

5 In relation to (vii) I do not consider that the correspondence there referred to, more particularly set out as paragraphs (d) and (e) of the affidavit of Wendy Jacobs of 29 March 1999, provides a sufficient basis for my declining to deal with the point that has now been taken by the Defendant. If the argument be correct that there needed to be three separate applications, one for each alleged debtor company in relation to the relevant statutory demand applicable to that company, then the absence of three separate applications goes to jurisdiction. The Defendant submits that a single application by way of one summons, fails to satisfy mandatory requirements of s459G of the Corporations Law; see David Grant & Co Pty Limited v Westpac Banking Corporation [1995] 184 CLR 265.
6 The Plaintiffs for their part contend that s459G applies in its absolute stringency only as a time requirement. Second, they contend that the composite application to set aside by way of a single summons from the three partner companies in relation to their joint alleged debt does comply with the description in s459G(1) of what must be done within time. There is either complete compliance, or at least compliance within that degree of latitude allowed by s459G for the content of the application, having regard to s467A’s direction to disregard any irregularity or defect in expression, for an application “under” Pt 5.4 of the Corporations Law, where no substantial injustice results, there being none such here. The position is thus analogous to that applicable to the supporting affidavit which is valid if it contains what is essentially required to state the grounds for setting aside.
7 I quote s459G(1) and (2) below, for convenience:

“ 459G(1) [Company may apply] A company may apply to the Court for an order setting aside a statutory demand served on the company.
459G(2) [Time limit] An application may only be made within 21days after the demand is so served.”


RESOLUTION OF SEPARATE QUESTION

8 The Defendant contends that the decision of Young J in Help Desk Institute Limited v Adams (1999) 17 ACLC 18 is determinative of the issue and should be followed unless the Court is convinced that it is plainly wrong: see Marr v Australian Telecommunications Corporation (1991) 24 ALD 473 per Hill J at 475; Upperedge v Bailey (1994) 13 ACSR 541 per Jenkinson J at 543; Bank of Western Australian v The Federal Commissioner of Taxation (1994) 125 ALR 605 per Lindgren J at 627, and the extra-judicial comments of Lockhart J in The Doctrine of Precedent — Today and Tomorrow (1987) 3 AVR 1 at 10.
9 The Defendant submits that the decision is not plainly wrong; indeed that it is correct and should be followed.
10 The Defendant states in its written submissions that Help Desk (supra) decides that:

(a) Section 459G(2) of the Corporations Law limits the way an application can be made (judgment at page 20); and
(b) Section 459G(2) on its proper construction requires only one summons dealing with one demand (judgment at page 21).

11 It is then said that the proposition referred to in (a) above follows from David Grant & Co Pty Ltd v Westpac Banking Corporation (supra). Essentially, the proposition that the Defendant puts is that s459G(1), in referring to “an application for an order setting aside a statutory demand”, precludes the Acts Interpretation Act 1901 (NSW) and in particular s23(b) from being called in aid in treating the singular as including the plural. The Defendant finds further support by reference to the terms of s459E, s459F and s459G(2), contending that these provisions depend for their operation on a separate application by each company in relation to each demand. Thus in relation to s459G(2) Young J in Help Desk, at 20, says:

“But the real difficulty comes from subs (2) of s459G. The legislature has made it clear, and the High Court in Grant’s case (supra) has underscored this, that the section itself limits the way in which applications can be made and the section talks about a strict time limit ‘after the demand is so served’.
If more than one demand was contemplated, one would have expected the legislature to have said ‘after the demand is so served, or if more than one demand is served, by 21 days after the first of such demands is so served’.”

12 The Defendant then submits that “if an application of the kind required by s459G(2) has not been made in time, then Grant’s case is authority for the proposition that no relief can be granted in respect of that failure”.
13 To this the Plaintiff responds that either Young J was plainly wrong or, if not plainly wrong, that at any rate Help Desk is distinguishable from the facts before me. The distinction sought to be relied upon by the Plaintiff is that Help Desk should be understood as applying only where the debts are separate and distinct and not where, as here, the debts in question are the one debt jointly owed by all three partner companies, assuming for present purposes that such debt were not in dispute.
14 I consider that Help Desk can properly be distinguished from the facts before me, though it is necessary to do so with some care. I certainly do not think that Young J’s conclusion in relation to the circumstances before him was plainly wrong. There is, in addition, some force in the contention that the scheme of Pt 5.4 could not work as intended if, in relation to non-jointly owed debts, each company with its separate indebtedness were in the one application with the one accompanying affidavit to attempt to set aside the statutory demand applicable to it, on varying grounds as between each company. Grounds for setting aside each statutory demand for each alleged debtor company need to be separately identified, where there are non-joint debts; how could this be done with the one composite affidavit and one composite application? Even if for separate and distinct debts such gymnastics could be achieved, at least as a matter of drafting, Pt 5.4 would fail to achieve expeditious resolution of disputes as to such alleged debts as Parliament intended. Thus the Explanatory Memorandum states: “The provisions in this Part allow disputes in relation to the existence or amount of a debt to be dealt with quickly and in a way that will not impede the resolution of an application for the winding-up of a company in insolvency.” See para 665 of the Explanatory Memorandum to the Corporate Law Reform Bill 1992 introducing, inter alia, the changes to the statutory demand regime recommended by the Law Reform Commission’s Report No. 45 on general insolvency (“the Harmer Report”).
15 With a joint debt such as a partnership debt, these difficulties fall away because the same grounds to set aside will apply uniformly to each alleged debtor company. Thus if the debt be a joint debt, the one application would rely on precisely the same matters in seeking to set aside the applicable statutory demand, even though it be a separate statutory demand for each company.
16 It should be remembered that a demand does not institute proceedings; it is merely the means of providing presumptive evidence of insolvency: see Bartex Fabrics Pty Ltd v Phillips Fox (1994) 12 ACLC 462 at 466. That prompts the question, would a single statutory demand in respect of the one joint debt owed by a partnership comply with Pt 5.4 and in particular s459E? If it did, that would lend further support to the argument that such a composite demand could be met by a composite application to set aside. Indeed if the demand were broken out — optionally — into multiple demands, that should not alter the efficacy of a composite application to set aside, merely because that option was taken.
17 Significantly, s459T, in dealing with an application to institute winding-up proceedings, does expressly provide that “a single application may be made for two or more companies to be wound up in insolvency if they are joint debtors, whether partners or not”. That provision is assisted by the provisions of s459T(2). Section 459T(2) provides that a joint debtor application may be split by the court if the court so orders, even if it dismisses the application insofar as it relates to other joint debtors. No such provision would be needed in relation to a composite statutory demand for a joint debt, as the presumption of insolvency could hardly apply to some joint debtors and not others.
18 Those provisions find their origin in the Harmer Report (at 160), to achieve consistency with existing bankruptcy legislation thus avoiding “the present necessity in company winding-up proceedings for multiple applications”. The relevant counterpart provision of the Bankruptcy Act 1966 (Cth) is s46 and overcomes the decisions in Re Myers (1932) 5 ABC 128 and Re Meiklejohn; Ex parte Barnard [1961] QdR 70. In the former case, Macrossan SPJ stated that he was “not satisfied that two or more joint debtors may be included in the one petition”, adding “there appears to be no authority which permits the petitioning creditor to include joint debtors in the one petition”. The decision did not deal, however, with the question of joint debtors who were such by reason of being in partnership. It was held under the English bankruptcy act of 1869 that an act of bankruptcy must be a personal act of default, and could not be committed by a firm as such: Ex parte Blain; re Sawers (1879) 12 ChD 522 at 529. Neither that Act nor the 1914 English Act, however, contain a provision corresponding to s45 of the Bankruptcy Act 1966 (Cth) which provides that: “A creditor of a partnership may present a petition against the partnership if he is entitled to present a petition against any one of the members of the partnership in respect of a partnership debt.”
19 Could therefore the Defendant have proceeded with a composite statutory demand for all the partner companies, on the basis that their alleged debt is a joint one? Section 459T of the Corporations Law may, by an expressio unius argument, point to the need for a parallel express provision permitting such a composite statutory demand to be utilised for a plurality of joint debtors, whether partners or not. Or alternatively, and as I prefer, s459T may rather carry no implication of that sort, because the statutory demand is but a step towards winding up, in providing presumptive evidence of insolvency. The demand is thus ancillary to an application to wind up, and should likewise be capable of being effected by a composite notice of demand, always provided the debt grounding it is a joint one. I prefer that view, though I do not need to resolve that question. I observe in that regard that the related provisions of Pt 5.4, insofar as they had to deal with a composite statutory demand in respect of a joint debt, would be capable of operating without practical difficulty. If then it be the case that a composite statutory demand were an option open to the creditor who seeks to utilise Pt 5.4 in relation to a joint debt, it should follow that an application which sought to set aside such a composite statutory demand would likewise comply with s459G of the Corporations Law. Accordingly, if the Defendant instead opts to use a separate statutory demand for each partnership company, that should still not prevent a composite application in response.
20 However, I consider that whatever be the position regarding the availability of a single statutory demand, a clear enough answer in the present case is to be found in the words of s459G of the Corporations Law read in context with the operative provisions of Pt 5.4, in identifying what is required for an application complying with s459G(1) and (2). Put shortly, there is nothing in those provisions which prevent a composite application operating as intended in relation to a joint alleged debt, even if there be a separate statutory demand for each alleged joint debtor, so long as the application is expressed so it can be read distributively, along with the accompanying affidavit. Section 467A directs, not merely allows, latitude for any defect or irregularity in that expression, absent substantial injustice, and provided the application remains “under” Pt 5.4; that is, in complying with any mandatory time limits or methods which have been directed with the emphasis of “may only” in s459G; David Grant & Co Pty Limited at 278-9 and compare Dolvelle Pty Limited v Australian Macfarms Pty Limited (1998) 43 NSWLR 717 at 725-6. Indeed even without aid of s467A, a non-technical approach to construing such an application is appropriate; that is by adopting parity of reasoning as applies to the affidavit supporting the application. There the courts apply a benevolent construction in requiring an affidavit that contains the material facts relied on but which may read like a pleading without setting out in admissible form all of the evidence which supports the argument of the applicant; Z-tek Computers Pty Ltd v Aus Linx International Pty Ltd (1997) 15 ACLC 1,233 at 1,236; Graywinter Properties Pty Ltd v Gas and Fuel Corp Super Fund (1996) 21 ACSR 581 at 587-588; Eden Bay Pty Ltd v Bennett & Co 91997) 15 ACLC 1,634 at 1,635.
21 In the present case, a composite application has been made, in accordance with the Supreme Court Rules, by summons. It purports to be by all three alleged debtor companies who, if indebted, can only be so by reason of a joint debt incurred by them as partners. The Plaintiffs seek to read their composite application distributively, that is to say so as to match the relevant Plaintiff to the applicable statutory demand for that Plaintiff. Each Plaintiff who so applied contends that this composite application satisfies the description of what a company must do to apply in accordance with s459G(1) and thus to conform to the time period of twenty-one days in s459G(2). Provided there is to be found an application “under Pt 5.4” in these terms, s467A provides that the application must not be dismissed “merely because of a defect or irregularity in connection with the application”. This is “unless the court is satisfied that substantial injustice has been caused that cannot otherwise be remedied (for example, by an adjournment or an order for costs)”. Such defect or irregularity may be found in the reference in the application (para 1) to “the creditor’s Statutory Demand for Payment of Debt served by the defendant on the plaintiff on 2 February 1999”. It is common ground that each of the three statutory demands was executed rather than served on that day. Any defect or irregularity therefore lies in the fact that the service was not as stated on 2 February 1999 but, so far as Taylor Lea Pty Limited and Kehoe Pty Limited are concerned, was on 9 February 1999, while service on Femley Pty Limited was on 11 February 1999. Nonetheless it is readily apparent to which statutory demand reference is made. Certainly the Defendant could be under no misapprehension as the correspondence earlier referred to confirms. There could be no substantial injustice in declining to dismiss the Plaintiffs’ composite application on that ground. Then it is said that the collective reference to “plaintiffs”, which appears twice on page 2, somehow constitutes a defect or irregularity. However, it is difficult to see how that even rises to the level of a defect or irregularity. Clearly enough the reference is to the Plaintiffs collectively whose names appear immediately after the first reference. In any event this would again constitute the kind of defect or irregularity, if it be one, where no substantial injustice would be caused by declining to dismiss on that ground.
22 The application by way of summons has obviously to be read in conjunction with any affidavit in support. It is clear enough and undisputed that the grounds reflected in the affidavit are common to all three Plaintiffs. Each of the Plaintiffs therefore seeks to set aside on common grounds, the particular demand that had been served on them in relation to the joint debt alleged. Naturally they would do so in that way, for the debt, if it be a debt, is a joint debt of partners in a partnership.
23 The simple reference to “may apply” in s459G and the absence of any detailed prescription of the form of that application, presupposes that, provided the application is in terms — as this is — for an order setting aside a statutory demand served on the company, it derives its formal content from the relevant rules of court. In relation to the Supreme Court of New South Wales, Pt 80A r3 provides that such “applications” be commenced by way of summons, though Pt 4 r2A would not preclude a statement of claim. In the Federal Court of Australia, Order 71 r36B provides that such an application must be in accordance with Form 5 of the Federal Court forms. This requires a document entitled “Application”. Other Supreme Courts have made their own rules in relation to such applications. The content requirements in this Court for such an application do not bear on the present issue before me.
24 To sum up. Here, where the debt in question is a joint debt, rendered such by s9 of the Partnership Act 1892 (NSW) (as affected by s97 of the Supreme Court Act 1970 (NSW)), I can find nothing in s459G(1) or (2) which would preclude such a composite application being made on behalf of each of the joint debtors in sufficient conformity therewith, provided the application is expressed so as to be capable of being read distributively as applicable to the relevant statutory demand applicable to the relevant Plaintiff. I am satisfied that it can and should be so read; further, that s467A directs that any irregularity or defect in expression be ignored in reaching that conclusion. Section 459G does impose a strict time requirement on the filing of an application. That presupposes only that there is an application meeting the general description in s459G(1) for s459G(1) does not lay down any detailed mandatory description as to content. This application does meet that general description, allowing as regards its formal expression similar latitude as applies to affidavits in support. The mandatory directive in s467A can be called in aid to disregard any irregularity or defect that does not rise to the level where the application is no longer “under” Pt 5.4, in circumstances where, as here, no substantial injustice results. If it be the case that separate and distinct debts require a separate and distinct application such that a single application could not be utilised (see Help Desk), that conclusion does not entail that a joint debt must be treated in the same way. Section 23(b) of the Acts Interpretation Act 1901 (NSW), rendered applicable by s10(1) of the Corporations (NSW) Act 1990 to the Corporations Law applies “unless the context otherwise provides”. Here the context does not otherwise provide, as the debts, if they exist, are joint debts. There are in the case of joint debts none of the difficulties to which I have earlier referred in the application of various provisions of Pt 5.4 to separate and distinct debts.
25 I should add that I have considered the Defendant’s submission that Re Pepper (1969) 14 FLR 282 involved a similar point which, in its reasoning in relation to s55(1) of the Bankruptcy Act 1966 (Cth), supports the Defendant’s contentions. Section 55(1) of the Bankruptcy Act 1966 provides that:
“Subject to this section, a debtor may present to the Registrar a petition against himself accompanied by a statement of his affairs verified by affidavit.”
26 Gibbs J thought the prima facie rule of construction of the singular including the plural laid down by s23(b) of the Acts Interpretation Act was displaced by the context, saying:

“If the word ‘debtor’ in section 55 were construed as including the plural, the section would enable any two or more debtors to petition whether they were joint debtors or not. The section so construed would permit two debtors to join in a petition, even though they had no joint liabilities or joint assets. This result would be obviously inconvenient. It might be suggested that the presentation of a joint petition by two debtors who were not partners and had no joint assets or liabilities could be held to be an abuse of the procedure provided by the section (cf. In re Bond ). However, the application to section 55 of the rule laid down by section 23(b) of the Acts Interpretation Act will give an undesirable width to the provisions of section 55. This provides some ground for holding that the rule does not apply.
Moreover, the provisions of s55 are applied in relation to a petition against a partnership, so that the majority of those members of the partnership who are resident in Australia may present a petition (section 56), but they are not similarly applied to the case of joint debtors who are not partners. On the other hand, express provision is made for the presentation of a creditor’s petition, not only against a partnership (section 45), but also against two or more joint debtors whether partners or not (section 46). The present section 46 may be explained by an intention on the part of the legislature to overrule Re Myers; ex parte Mulholland , in which it had been held that a petitioning creditor might not on one petition obtain a sequestration order against two or more joint debtors who are not partners. Nevertheless, a comparison with ss45 and 46 with ss55 and 56 on the other strengthens the view that the intention of the legislature was that although a creditor’s petition may be presented against two or more debtors who are not partners, such debtors may not present a joint petition against themselves.”

27 However, it will be observed that Gibbs J was dealing with a situation where the joint petition by two debtors was not by partners and did not involve joint assets or liabilities. Indeed he makes express mention of that in his judgment. I do not consider that s55 of the Bankruptcy Act or the reasoning based on it, bears upon the construction of s459G of the Corporations Law in the present context.

Conclusion

28 The separate questions to which I have earlier made reference should be answered as follows:

1. Yes
2. Yes
3. Not necessary to answer, though to the extent that there is any defect or irregularity, s467A of the Corporations Law precludes the dismissal of each Plaintiff’s application by way of the summons on behalf of the three Plaintiffs.


COSTS

29 As I presently see matters, costs in relation to the present matter before me should follow the event and thus be awarded to the Plaintiffs.

**********

I certify that this and the 11 preceding pages are a true copy of the reasons for judgment herein of The Hon. Justice Santow

Associate
Date: 14 April, 1999

Last Modified: 04/15/1999