Freihart v Dexplain

[2001] NSWSC 137

CITATION:	FREIHART v DEXPLAIN [2001] NSWSC 137
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 4708/2000
HEARING DATE(S):	27/02/2001
JUDGMENT DATE:	8 March 2001
PARTIES :	Freihart Pty Limited v Dexplain Pty Limited
JUDGMENT OF:	Master Macready at 1

COUNSEL :	D. Ryan SC & P.I. Bambagoitti for plaintiff D.L. Warren for defendant
SOLICITORS:	JDK Legal for plaintiff Garry Cassim & Associates for devendant
CATCHWORDS:	Corporations Law. Commencement of proceedings to set aside statutory demand by Notice of Motion in proceedings already in existence between the same two parties. Factual background of proceedings similar to background of debt claimed in demand. - Held proceedings could be commenced by Notice of Motion and that motion substantially complied with Form 3 of the Corporations Law Rules. Considerations of whether proceedings final or interlocutory.
CASES CITED:	Mibor Investments Pty Limited v Commonwealth Bank [1993] 11 ACLC 1062 Graywinter v Gas and Fuel Corporation [1996] 21 ACSR 581 Olney J in 71 Paisley Street Footscray Pty Ptd v Vineyards Estate Pty Ltd (unreported 18.8.95) Eyota Pty Limited v Hanave Pty Limited [1994] 12 ACLC 669 Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No2) 1994 12 ACLC 490 Joshua Corporation Pty Limited v KTX Technology Pty Limited, 3 April 1998 A-Pak Plastics v Merhone (1995) 13 ACLC 896 David Grant & Co Pty Ltd (Receiver and Manager Appointed) v Westpac Banking Corporation (1995) 184 CLR 265
DECISION:	Para 23

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

Thursday 8 March 2001

4708 of 2000 FREIHART PTY LTD v DEXPLAIN PTY LTD

1 MASTER: This is the hearing of an oral application by way of motion by the defendant seeking that a Notice of Motion filed by the plaintiff on 25 January 2001 be struck out pursuant to Part 13 Rule 5 of the Supreme Court Rules.

2   The principal proceedings were commenced on 22 November 2000 by a Summons and concerned the lease of the Royal Britannia Hotel and an adjacent house. Declarations are sought as to the existence of a lease and a claim is made for rectification of a lease.

3   On 4 January 2001 the defendant executed a statutory demand claiming the sum of $80,659.01 being arrears of rent, rates and land tax in respect of the premises and other amounts. The demand was served on 8 January 2001 and on 25 January 2001the plaintiff filed a Notice of Motion in these proceedings which is the subject of the oral application, for strike out. The Notice of Motion sought three substantive orders, namely:-

“1. An order that the statutory demand served by the defendant on the plaintiff dated 4 January 2001 be set aside pursuant to section 459G Corporations Law.
2. Alternatively that the Court calculate the substantiated part of the demand pursuant to section 459H Corporations Law.
3. That the plaintiff be granted leave to amend the summons herein in accordance with annexure “A” hereto.”

4   When the matter was before the Registrar he raised the question of whether it was appropriate for proceedings to set aside a demand to be commenced by a notice of motion in these existing proceedings. As a result it was referred to me and the matter has been dealt with on the defendant’s oral application to strike out the Notice of Motion. In the event that the motion is not successful it is suggested that the setting aside of the statutory demand be dealt with as a separate issue in the proceedings.

5 Under section 459G applications may be made to a court for an order setting aside a statutory demand subject to limitations in the section as to time and service of the application and an affidavit in support. By virtue of s 51(1) of the Corporations Law NSW Act 1990 rules of Court may be made under the Supreme Court Act in respect of any matter or thing that is required or permitted by the law be prescribed by rules within the meaning of the law or necessary or convenient to be prescribed by such rules for carrying out and giving effect to that law. The section concludes:-

“ This subsection does not limit the rule making powers conferred by the Supreme Court Act 1970.”

6 So far as concerns these proceedings rules have been made under the Supreme Court Act and they are the Corporations Law rules which commenced on 1 March 2000. Rule 2.2 of those rules provides for an originating process and an interlocutory process. The rule is in these terms:-

2.2. Originating process and interlocutory process---Forms 2 and 3
(1) Unless these Rules otherwise provide, a person must make an application required or permitted by the Law to be made to the Court:
(a) if the application is not made in a proceeding already commenced in the Court---by filing an originating process, and
(b) in any other case---by filing an interlocutory process.
(2) Unless the Court otherwise directs, a person may make an application to the Court in relation to a proceeding in respect of which final relief has been granted by filing an interlocutory process in that proceeding.
(3) An originating process must:
(a) be in accordance with Form 2, and
(b) state:
(i) each section of the Law or the ASIC Law, or each regulation of the Corporations Regulations, under which the proceeding is brought, and
(ii) the relief sought.
(4) An interlocutory process must:
(a) be in accordance with Form 3, and
(b) state:
(i) if appropriate, each section of the Law or the ASIC Law, or each regulation of the Corporations Regulations, or each rule of Court under which the interlocutory application is made, and
(ii) the relief sought.

7   It is apparent that the rule requires the use of particular forms. Rule 1.7(1) provides:-

1.7. Substantial compliance with forms
(1) It is sufficient compliance with these Rules in relation to a document that is required to be in accordance with a form in Schedule 1 if the document is substantially in accordance with the form required or has only such variations as the nature of the case requires.
(2) Without limiting subrule (1), the Court or the Court officer must not reject a document for filing only because a term used to describe a party in the document differs from the term used in these Rules.

8 It is therefore clear that under the Corporations Law rules substantial compliance with the forms is required.

9 It was submitted on behalf of the defendants that there should have been separate proceedings brought for the purposes of the application or, alternatively, in any event the Notice of Motion does not substantially comply with the requirements of Form 3 of the rules in Schedule 1 to the Corporations Law rules.

10 On the first question one must note that Rule 2.2 does not of itself purport to prescribe whether any particular type of application should be brought by way of originating process or interlocutory process. All it does is give a description of the type of process depending upon whether or not there is a connection with an existing proceeding. It then proceeds to prescribe the nature of the forms for that process. In these circumstances it would depend upon in part the nature of an application under s 459G as to whether it is appropriate to fall within the usual description of interlocutory process. There are a number of cases where the question of whether proceedings which are commenced to set aside a statutory demand are interlocutory. The matter normally arises on a question of the admissibility of evidence tendered in such proceedings.

11   Hayne J in Mibor Investments Pty Limited v Commonwealth Bank [1993] 11 ACLC 1062 at 1067 had the following to say on this aspect at page 1067.

”The bank contended that some of the evidence relied on by the applicants (especially the solicitor's affidavits filed on behalf of Mideb) were inadmissible because the deponent stated facts based on information and belief. It was submitted that the application was not an interlocutory application and reference was made to Licul v Corney (1976) 50 ALJR 439.

The question whether an application is interlocutory for the purposes of r43.03(2) is not to be decided according to whether the order made on determination of the application would be interlocutory for purposes of appeal: see e.g. Cowie v State Electricity Commission of Victoria [1964] VR 788, at 789. It is to be determined according to whether the application will decide the rights of parties or is " . . . made for the purpose of keeping things in statu quo till the rights can be decided, or for the purpose of obtaining some direction of the Court as to how the cause is to be conducted, as to what is to be done in the progress of the cause for the purpose of enabling the Court ultimately to decide upon the rights of the parties."

Gilbert v Endean (1878) 9 Ch. D. 259, at 269, per Cotton LJ.

In my view this application is an interlocutory proceeding. Unlike the question in Cowie's Case (which was whether a statutory authority had immunity from suit in a particular case because of a failure to give notice under the Statute of Limitations) the present proceeding determines only whether a demand may stand or not. If the demand stands, the consequences are serious but there is no final determination of any right.

All that follows from the demand not being set aside is that the company will have a further perhaps short period within which it must meet the demand or face a conclusion that it is to be presumed insolvent (unless it proves the contrary). No order can be made under s459G which finally determines the rights of parties.”

12   A different view that has been expressed by Sunberg J in Graywinter v Gas and Fuel Corporation [1996] 21 ACSR 581. Sunberg J did not discuss the matter and merely referred to a decision of Olney J in 71 Paisley Street Footscray Pty Ptd v Vineyards Estate Pty Ltd (unreported 18.8.95). Olney J did not refer to any authority in support of his view.

13   The matter was not answered by his Honour McLelland CJ in Eq in Eyota Pty Limited v Hanave Pty Limited [1994] 12 ACLC 669. Mr Justice Young in Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No2) 1994 12 ACLC 490 in the context of an application to reopen described the proceedings as “in one sense an interlocutory application, although it had aspects of finality about it.”

14   Hayne J's decision has been followed by Master Sanderson in the Supreme Court of Western Australia in Joshua Corporation Pty Limited v KTX Technology Pty Limited, 3 April 1998. In A-Pak Plastics v Merhone (1995) 13 ACLC 896 the Court of Appeal was concerned with whether for the purposes of appeal an application under s459G may be final or interlocutory. It held that in that case it was but expressed a reservation to the effect that if there had been conditions imposed under s459GM it may not have been final for the purposes of appeal.

15   After discussing the usual cases concerned with rights of appeal Sheller JA referred to comments of Hayne J in Mibor Investments Pty Limited v Commonweath Bank (supra) in these terms:-

“Hayne J said that in his view proceedings taken under s459G were interlocutory because no order could be made under the section which finally determined the rights or parties. This was said in the context of a submission that some evidence was inadmissible because the deponent stated facts based on information and belief. His Honour was not concerned directly with the question of whether an order made was final or interlocutory. Although His Honour did not draw the distinction it may be that for some purposes, since as the admissibility of evidence, a judge hearing proceedings to set aside a statutory demand should treat them as if they were interlocutory, even though the judgment determining the proceedings is final.”

16   His Honour apparently approved the views of Hayne J for the purpose of admissibility of evidence. Such views, in my opinion also are appropriate for the purposes of deciding what is the correct process to commence the proceedings.

17 In these circumstances it is not inappropriate that the application was brought by way of some interlocutory process in the existing proceedings between the parties. After all section 459G merely requires the company to “apply to the court for an order”. The mode of making such an application is, of course, dealt with by the rules and in this case the rules having primacy are, of course, the Corporations Law rules. See Corporations Law rule 1.3(2). The rules, as I have pointed out, do not purport to prescribe whether any particular type of application should be brought in fresh proceedings. Accordingly, I am satisfied that in this case the proceedings have been properly commenced.

18   Even if I am wrong in the view that I have taken that the application can be made by way of interlocutory application in the existing proceedings it would seem to me that even if it were held that the application was an irregularity under section 467A an appropriate order could be made as it is clear that no substantial injustice has been caused in the circumstances of the present matter.

19 The next point is, of course, the question of whether or not there has been substantial compliance with the mandatory provisions of clause 2.2(4)(a) and (b). There are three substantive orders in the Notice of Motion the third of which is that the plaintiff be granted leave to amend the Summons in accordance with an Amended Summons attached. There are a number of problems in the way of that application not the least of which is that there may be problems with Part 20 Rule 4. I would have thought that leave to amend could not be given in these circumstances because the cause of action does not arise out of the same or substantially the same facts as that in the original Summons. There is one new fact which is central to the whole application which is the giving of the notice of demand. It may also be debatable whether the time limit imposed by section 459G is in fact a “statute of limitation”.

20   A more fundamental problem also arises because the power of amendment under Part 20 Rule 1 can result in action dating back to the date of commencement of the proceedings. This was in November well before the Notice of Demand was issued. Any use of such power now to allow an amendment would seem to me to also be contrary to the reasoning of the High Court in David Grant & Co Pty Ltd (Receiver and Manager Appointed) v Westpac Banking Corporation (1995) 184 CLR 265. For these reasons I do not see that any relief is possible in respect of paragraph 3 and I would be minded to dismiss that claim in the Notice of Motion.

21   This leaves a balance of the Notice Motion and the question of whether there has been substantial compliance, If one considers Form 3 and compares it to the Notice of Motion in the present case there are certainly matters of style and heading which are different. However, it seems to me that it is more important to concentrate on the substance of what is said in the Notice of Motion to see whether there has been substantial compliance. Under the rule, of course, it is necessary for appropriate sections of the law to be set out. This has been done in each of the first two paragraphs of the Notice of Motion. The motion also indicates the relief sought. An important part of the Form 3 is the notice to the respondents which warns the recipient to attend or otherwise face the consequences of non-appearance. That has been appropriately specified in a similar manner in the existing Notice of Motion. One matter which does appear in Form 3 which does not appear in the Notice of Motion is the statement which is in the following terms.

“On the facts stated in the supporting affidavit (s) the applicant (name) applies for the following interlocutory relief:”

22 It was submitted that this was an important aspect as it indicates the affidavit which was to be relied upon and which has an important rule under section 459G. However, the form itself does not require a specification by description of the supporting affidavit or affidavits and does not seem to me to be a matter which goes to the substance of the form. The substantive matter is actually dealt with in section 459G itself. If there is non compliance with the requirements for filing and service of the affidavit the result flows from the terms of section 459G. Accordingly, it would seem to me that the Notice of Motion that has been filed is in substance in accordance with the form required. In the circumstances I decline to dismiss paragraphs 1 and 2 of the Notice of Motion.

23   The orders I propose are:-

1. I dismiss paragraph 3 of the Notice of Motion filed 25 January 2001.

2. I declare that the Notice of Motion filed 25 January 2001 was an appropriate process for commencing an application under section 459G of the Corporations Law.

3. I order that the question whether the Statutory Demand served on the plaintiff by the defendant should be set aside pursuant to the provisions of section 459G of the Corporations Law be dealt with separately before other issues in the proceedings.

4. I order the plaintiff to file and serve any further evidence upon which it intends to rely on or before 2001.

5. Order the defendant to file and serve any evidence on which it intends to rely in relation to the separate question on or before 2001.

6. Order that the plaintiff file and serve any evidence in reply in relation to the separate question on or before 2001.

24   The parties shall bring in Short Minutes and I will hear submissions on costs if these are not agreed on a date suitable to the parties.

Last Modified: 03/12/2001