Graywinter Properties Pty Ltd v Jakum Pty Ltd

[1996] FCA 712

IN THE FEDERAL COURT OF AUSTRALIA )

)

VICTORIA DISTRICT REGISTRY       )    No. VG 3118 of 1996

)

GENERAL DIVISION                 )

BETWEEN:  GRAYWINTER PROPERTIES PTY LTD

ACN 051 373 570

(Applicant)

AND:     JAKUM PTY LTD

ACN 009 840 493

(Respondent)

CORAM:    Ryan J

DATE:     31 July 1996

PLACE:    Melbourne

REASONS FOR JUDGMENT

RYAN J:   The applicant in this matter has applied for an adjournment of its application which is to set aside a statutory demand made on it pursuant to the provisions of the Corporations Law.  The application itself is dated 8 March 1996 and was filed on 12 March 1996.

On 25 March Registrar Agnew adjourned the application to 7 May 1996 for further directions, and directed that the applicant file and serve any further affidavit by 12 April 1996.  On 7 May 1996 it was directed that the matter be placed in the list of cases to be heard not before 31 May 1996 so that at that time the applicant should have been aware, first, that it was in default in the filing of the affidavits which it had been required to file by 12 April 1996 and that the matter could be fixed for hearing within a time not less than 21 days away. 
It appears that despite that knowledge no attempt was made to file any further affidavit material.

An affidavit has been filed today in support of the application for an adjournment.  That is an affidavit of James William Gray, a director of the applicant company, but in that affidavit Mr Gray does not descend to any particulars which would provide the material for any further affidavit.  Rather he deposes that:

3.The adjournment is sought to enable a written proposal to be submitted and considered by Mr John Murdoch, director of the respondent company, who, I believe is currently in Brisbane.  Discussions between the parties legal representatives have occurred prior to today's hearing.

There is then reference to the fact that the brief was passed from one counsel to another yesterday afternoon, 30 July 1996, and to the refusal of Mr Winter, another director of the applicant, to become involved in resolving the matter.  Mr Gray concludes his affidavit by saying:

I believe that a period of 30 days adjournment should enable meaningful settlement discussions to occur with the Respondent.

There is accordingly a complete absence of indication of what further affidavit material would be adduced by the applicant.  The concentration rather seems to be on negotiating what is called a commercial resolution of the underlying claim that a debt is owed by the applicant to the respondent.  In those circumstances, and particularly having regard to the fact that the Court has set aside today for this matter and is not in any position to accord it another hearing date in the near future, I have decided that I should refuse the application for the adjournment, notwithstanding the offer made on behalf of the applicant to pay the respondent's costs of the day.  I have also taken into account the fact that the consequences of the dismissal of this application are not in a sense fatal in that, as I understand it, non-compliance, or failure to set aside a statutory notice does no more than raise a presumption of insolvency which can be rebutted in the event that a petition for winding up is issued.

Accordingly, the application for adjournment is refused.

After hearing additional argument, his Honour gave the following further reasons for judgment.

This is an application to set aside a statutory demand which was served on 20 February 1996.  The demand was supported by an affidavit of John Murdoch, sworn 14 February 1996, in which it is deposed that the debt referred to in the respondent's demand "is now due and payable to the creditor by the company".  The schedule to the demand recited:

Description of the Debt  Amount of the Debt

Principal and Interest due under a Loan Agreement  $1.656 million

Dated 21 September 1993

There is now in evidence before the Court an agreement between the applicant as borrower and the respondent as lender dated 21 September 1993.  That agreement recites:

A.The Borrower and the Guarantors have requested the Lender to advance to the Borrower the sum of A$1 million ("the Advance").

B.The Borrower and the Guarantors have agreed to give this security and the securities hereinafter referred to in order to secure to the Lender the issue to the Lender of 1,130,000 ordinary fully paid shares of $1 each ("Shares") in Esplanade Markets Ltd (ACN 061 252 953) ("Esplanade").

Among the provisions of the agreement were the following:

2.The Borrower covenants with the Lender that on or before 20 December 1993 it will cause Esplanade to issue to the Lender the Shares in Esplanade.

3.The Lender agrees that the Advance will be satisfied in full by the issue to the Lender of the Shares.

4.The Borrower and the Guarantors jointly and severally agree with the Lender that:

(a)Notwithstanding anything contained elsewhere in this Loan Agreement, this security shall become enforceable and the sum of $1,130,000 (the "Share Price") together with interest on the Share Price calculated at the rate of 6% per annum from 20 December 1993 to the date of repayment shall become immediately payable:

(i)If Esplanade fails to issue to the Lender the Shares by 28 February 1994;

(ii)If the Borrower or the Guarantors or any of them default in the observance or performance of any other covenant or obligation contained or implied in this Loan Agreement;

(iii)If any Receiver, Receiver and Manager, Official Manager or Liquidator is appointed of the Borrower, the Guarantors or any of their assets or income;

(iv)If the Borrower or the Guarantors or any of them propose or make a composition or arrangement with creditors or become a protected person under Guardianship and Administration Board Act 1987;

There is further evidence that a proposal was made on behalf of the applicant by a Mr Matthews to vary the rate at which interest should accrue on the amount due to the respondent and defer until some unspecified date in the future the repayment of principal and interest accrued thereon to 31 January 1995.  However, there is no suggestion that Mr Matthews' proposal was ever accepted on behalf of the respondent, nor has it been
suggested that some unspecified counter proposal made by Mr Murdoch on behalf of the respondent on 31 March 1994 was ever accepted on behalf of the company.

In terms of s. 459H of the Corporations Law, I am satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt specified in the statutory demand.  However, I am also satisfied that so much of that amount as consists of $1,130,000 together with interest thereon at the rate of six per cent per annum from 20 December 1993 to service of the statutory demand on 20 February 1996 is not the subject of a genuine dispute.

There is no offsetting claim.  Accordingly, there is a substantiated amount considerably in excess of $1.13 million.  I am not satisfied in the circumstances in terms of s. 459J that because of the over-statement in the demand of the amount due from the company, substantial injustice will be caused unless the demand is set aside.  Nor am I satisfied that there is some other reason why the demand should be set aside.  The fact that the statutory demand overstated the amount due is not fatal in cases of this kind for the reasons given by Northrop J in Hornet Aviation Pty Ltd v Ansett International Air Freight 16 ACSR 21 where his Honour observed at p. 26:

The fact that the amount has been reduced, in my opinion, does not justify a dismissal or setting aside of the statutory demand because of the defect in the statutory demand.  This is a case where the present applicant, the debtor company, should have kept its own records of its dealings with the customers of Ansett and it would have been very simple for the company to have produced its records showing what it had received and what it had forwarded on.  In the light of the very detailed and clear material given on behalf of Ansett, I accept the
Ansett figures but reduce it to the lower amount because of the fact that what the court must find is that there is a genuine dispute between the company and the respondent about the existence or amount of a debt.  Even assuming that there is a genuine dispute about the amount of the debt, even accepting the applicant's figures, there still is an amount owing of $36,864.81.  This is a figure which is not binding on the creditor.  If the company is wound up, the creditor will be able to prove its debts in the normal way where a company is wound up.

In my view, any potential injustice to the applicant can be overcome by the Court's exercising the discretion under s.459H(4) by varying the demand to claim an amount equal to $1.13 million together with interest thereon at the rate of six per cent per annum from 21 December 1993 until 20 February 1996 and by declaring the demand to have had effect as so varied as from when the demand was served on the company and by extending the period for compliance with the demand as so varied for a further 21 days from this day as contemplated by s.459F(2) of the Corporations Law.

For these reasons, the application to set aside the statutory demand is refused and I shall make what I understand to have become the usual order for costs in these circumstances, which is that in the event that the applicant is wound up in an application relying on the present demand as so varied, the respondent's costs of this application form part of its costs in that winding up application, but that otherwise the applicant pay the respondent's costs to be taxed or as agreed.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment of his Honour Justice Ryan.

Associate:

Date:

Counsel for Applicant   :    Mr A.N. Bristow

Solicitors for Applicant     :    Gray & Winter

Counsel for Respondent  :    Mr A.D.B. Ingram

Solicitors for Respondent:   Logie-Smith Lanyon

Date of Hearing        :    31 July 1996

Date of Judgment       :    31 July 1996