Growth Equities Corporation Ltd v Genesis Growth Investments Pty Ltd

[2010] NSWSC 1302

CITATION:	Growth Equities Corporation Ltd v Genesis Growth Investments pty Ltd [2010] NSWSC 1302
HEARING DATE(S):	09/11/10
JUDGMENT DATE :	9 November 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	9 November 2010
DECISION:	Statutory demand set aside. Defendant to pay plaintiff's costs on the indemnity basis.
CATCHWORDS:	CORPORATIONS - winding up - winding up in insolvency - application for order setting aside statutory demand - defendant abandons statutory demand except as to one element - whether genuine dispute as to existence of debt - obvious dispute obviously genuine - demand set aside - appropriate case for indemnity costs
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 459G, 459H(1)(a)
CATEGORY:	Principal judgment
CASES CITED:	Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
PARTIES:	Growth Equities Corporation Limited - Plaintiff Genesis Growth Investments Pty Ltd - Defendant
FILE NUMBER(S):	SC 2010/231833
COUNSEL:	Mr N J Heinecke - Plaintiff Mr P G Cutler - Defendant
SOLICITORS:	Horton Rhodes - Plaintiff Joseph Ho Lawyers - Defendant

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

BARRETT J

TUESDAY 9 NOVEMBER 2010

2010/231833 GROWTH EQUITIES CORPORATION LIMITED v GENESIS GROWTH INVESTMENTS PTY LTD

JUDGMENT

1 The plaintiff (“Growth Equities”) applies under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 25 June 2010 served on it by the defendant (“Genesis”).

2 The statutory demand relates to two debts or alleged debts totalling $34,202.62 described in its schedule as follows:

“Pursuant to the tax invoice number 180610 issued by Genesis Growth Investments Pty Ltd ACN 137 005 488 sent to Growth Equities Corporation Limited ACN 100 570 723 on 18 June 2010 for the principal amount $33,202.62	$33,202.62
plus
Legal costs incurred by the Creditor upon the issuance of this Notice, supporting affidavit, search, correspondence and advice	$ 1,000.00
Total amount	$34,202.62”

3 When the hearing began, Mr Cutler, who appeared for Genesis, indicated that the statutory demand was not pressed except in respect of one item of $10,000 to which I shall come.

4 The first of the alleged debts referred to in the statutory demand is said to be "pursuant to" the particularly described invoice. It must be said at once that an invoice of its nature cannot in general create or be the source of a debt. Rather, it has the character of a request or demand for payment in respect of a sum for which liability has already arisen from some independent source, such as by the supply of goods or services.

5 The only item in the invoice and therefore in the schedule to the statutory demand in respect of which Genesis seeks to sustain the demand is an item of 4 August 2009 entitled "PWC Fee", the position of Genesis being that Growth Equities owes $10,000 to Genesis for “PWC Fee” and that that sum is due and payable.

6 The evidence may warrant (and for the moment I assume it does) findings that Growth Equities owed PriceWaterhouse Coopers $10,000 for professional services, that Mr Lui paid $10,000 to Growth Equities and that Mr Lui recorded that money as owing to him by Genesis under a pre-existing loan agreement between him and Genesis.

7 There are two obviously missing links, it seems to me, taking the evidence at its highest. One is any evidence of an obligation of Growth Equities then to pay $10,000 to Genesis. The second is any evidence that Growth Equities paid $10,000 to PWC.

8 Mr Chan, a director of Growth Equities, has given evidence that there is no record of any relevant debt of Growth Equities to Genesis recorded in Growth Equities' books and that he is not aware of the existence of any such debt, although it must be noted that Mr Chan was not a director at the relevant time.

9 The most that has been put on behalf of the defendant is an implication that the making of the payment by Mr Lui which he then charged to Genesis caused Growth Equities to become indebted to Genesis. No evidence of any promise of Growth Equities to pay is identified. Genesis has a 55 percent shareholding in Growth Equities. There is evidence of Genesis having given financial support to Growth Equities by way of a letter of comfort addressed to its auditors. There may also have been other aspects of financial support that Genesis gave to Growth Equities. But the fact that a shareholder in a company makes a payment to an outsider which benefits the company cannot, of itself, justify the conclusion that a debt of the company to the shareholder has arisen.

10 In this proceeding, the court is not concerned to come to a firm conclusion as to the existence of the alleged debt of $10,000. Its sole task is to decide whether, in the words of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, there is on the question of the debt's existence "a plausible contention requiring further investigation".

11 In the circumstances that emerge from the evidence that I have outlined, there is quite obviously a plausible contention that there is no indebtedness of Growth Equities to Genesis in the sum of $10,000. The forum in which the question of the existence of any such debt should be determined is a debt collecting court, not a company court.

12 The ground put forward by the plaintiff based on genuine dispute within s 459(H)(1)(a) is amply made out. There is no need to deal with the plaintiff's alternative submission based on alleged abuse of process.

13 I order that the statutory demand dated 25 June 2010 served on the plaintiff by the defendant be set aside.

(Submissions on costs)

14 The successful plaintiff claims an order that the unsuccessful defendant pay its costs. There can be no question about that. Such an order will be made.

15 The plaintiff also says that the costs should be assessed on the indemnity basis. I accept that submission.

16 The defendant's attempt to sustain the statutory demand by showing that there was no genuine dispute was spectacularly unsuccessful. Indeed, the defendant conceded the plaintiff's claim at the outset except as to the $10,000 item concerning PWC. I have said in relation to that that it was quite obvious that a plausible contention existed.

17 The defendant nevertheless persisted in relying on the implication of a promise to pay in circumstances of earlier financial support. The defendant ought to have conceded the plaintiff's claim in respect of all items in the demand and avoided this matter coming to court at all.

18 There has been “relevant delinquency” on the defendant's part warranting the assessment of costs on the indemnity basis.

19 The costs order therefore is that the defendant pay the plaintiff's costs of the proceedings, such costs to be assessed on the indemnity basis.

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