Hardel Pty Ltd v Burrell & Family Pty Ltd
[2009] SASC 77
•25 March 2009
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
HARDEL PTY LTD v BURRELL & FAMILY PTY LTD
[2009] SASC 77
Judgment of The Full Court
(The Honourable Justice Nyland, The Honourable Justice David and The Honourable Justice Kourakis)
25 March 2009
PROCEDURE - JUDGMENTS AND ORDERS - IN GENERAL - CLASSIFICATION - FINAL AND INTERLOCUTORY
Appeal against a decision of a Master dismissing the appellant's application to set aside a statutory demand - appellant appealed the decision to a single Judge - respondent challenged competence of the appeal on the ground that the Master's decision was a final judgment and that the appeal therefore lay to the Full Court pursuant to r 17 of the Supreme Court Civil Rules 2006 (SA) - Judge referred the appeal to the Full Court and referred the underlying question of law: is an order of a Master dismissing an application to set aside a creditor's statutory demand made pursuant to the Corporations Act 2001 (Cth) a "final judgment" within the meaning of Rule 17?
Held: The answer to the question of law is no - an order dismissing an application to set aside a creditor's statutory demand made pursuant to the Corporations Act 2001 (Cth) is not a "final judgment" within the meaning of Rule 17.
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENUINE DISPUTE AS TO INDEBTEDNESS
ESTOPPEL - GENERAL PRINCIPLES
Appeal against the decision of a Master dismissing the appellant's application to set aside a statutory demand - statutory demand claimed that the appellant owed the respondent money pursuant to a loan agreement entered into by the parties - a term of that agreement was that "The Borrower must repay and fully discharge the loan on or before the Repayment Date of 1 June 2008" - appellant claimed it was at least arguable that it was not liable to repay the debt on the Repayment Date specified in the loan agreement on grounds that it was only liable to repay the loan if and when it refinanced its property development and that the respondent should be estopped from relying on a term requiring repayment by a certain date.
Held: There was no genuine dispute as to the debt - the Master was correct in so ruling and dismissing the appellant's application to set aside the statutory demand - appeal dismissed.
Supreme Court Act 1935 (SA) s 49(1); Corporations Act 2001 (Cth) Ch 5, Pt 5.4, ss 459P, 459A, 459E, 459F, 459G, 459C, 459H, 459J, 459K, 459L, 459S; Supreme Court Civil Rules 2006 (SA) r 17, referred to.
R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361, applied.
Keylink Physical Care Pty Ltd v Ergoline (Australia) Pty Ltd [1999] SASC 483; Dodoro v Knighting (2004) 10 VR 277; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; A-Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 120 FLR 277; Terranora Group Management Pty Ltd v Terranora Lakes Country Club Ltd (In Liq) (Unreported, Supreme Court of New South Wales, Santow J, 3 December 1997); Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2007) 212 FLR 56; Hall v Nominal Defendant (1996) 117 CLR 423; Licul v Corney (1976) 180 CLR 213; Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246; T.R.A.M.S. Pty Ltd v The Grand Hotel Pty Ltd (1993) 170 LSJS 312, discussed.
Hornsby v Kaschke [1999] 3 VR 27; Stewart v Miller [1979] 2 NSWLR 131; Levis v McDonald (1997) 75 FCR 36; John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346; Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588; Malouf v Malouf (1999) 86 FCR 134; FAI Home Security Pty Ltd v Price [1999] VSC 274; Norwich Pharmacal Co v Commissioners of Customs and Excise [1974] AC 133; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59; Standard Discount Co v La Grange (1877) 3 CPD 67; Millbank v Price [1954] SASR 166; Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251; Jefferson Ford Pty Ltd v Ford Motor Co Ltd (2008) 167 FCR 372; Dousi v Colgate Palmolive Pty Ltd (1987) 9 NSWLR 374; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Legione v Hateley (1983) 152 CLR 406; Low v Bouverie [1891] 3 Ch 82; Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325, considered.
HARDEL PTY LTD v BURRELL & FAMILY PTY LTD
[2009] SASC 77FULL COURT: Nyland, David and Kourakis JJ
NYLAND J: I have had the advantage of reading the draft judgment of Kourakis J. For the reasons expressed, I agree with the conclusion that the order of the Master dismissing the application to set aside the creditor’s statutory demand was an interlocutory order. I also agree that the appeal should be dismissed.
DAVID J: For the reasons given by Kourakis J, I agree that the appeal should be dismissed. I also agree that the order dismissing the application to set aside the creditor’s statutory demand made pursuant to the Corporations Act 2001 (Cth) (the Act) is not a “final judgment” within the meaning of r 17 of the Supreme Court Civil Rules 2006 (SA) (the Rules).
KOURAKIS J: This is an appeal from a decision of a Master dismissing the appellant’s application to set aside a statutory demand. The appellant appealed that decision to a single Judge. The respondent challenged the competence of the appeal on the ground that the Master’s decision was a final judgment and that an appeal therefore lay to the Full Court. For that reason the appeal has been referred to the Full Court. At the same time, a Judge of this Court, acting pursuant to s 49(1) of the Supreme Court Act 1935, referred to the Full Court the underlying question of law: is an order of a Master dismissing an application to set aside a creditor’s statutory demand made pursuant to the Corporations Act 2001 (Cth) (the Act) a “final judgment” within the meaning of Rule 17 of the Rules?
For the reasons that follow I would hold that:
(a)The decision of the Master dismissing the plaintiff’s summons to set aside the Notice of Demand is an interlocutory order;
(b)Notwithstanding the conclusion that the order is interlocutory, this Court should proceed to hear and determine the appeal pursuant to the referral made by the single Judge of this Court;
(c)The appellant has not established a genuine dispute about the existence or amount of the debt to which the demand relates and the appeal must therefore be dismissed.
The statutory context
Chapter 5 of the Act is headed “External Administration” and deals, in part, with arrangements for the winding up of companies, usually because they are insolvent. Part 5.4 of the Act deals with the manner in which a company may be wound up in insolvency. Section 459P of the Act provides that a creditor has standing to apply to the Court for an order that a company be wound up in insolvency, on which application the Court may make such an order.[1]
[1] Corporations Act 2001 (Cth) ss 459A, 459P.
The provisions relating to statutory demands appear in Division 2 of Part 5.4 of the Act. A person may serve a statutory demand on a company where either a single debt, or the sum of two or more debts, owed by the company to that person equals or exceeds the statutory minimum.[2] The demand must satisfy certain requirements as to form and must be accompanied by an affidavit that the debt, or the sum of the debts, is due and payable by the company.[3] The demand must require the company to pay the amount of the debt within 21 days after the demand is served.[4] That period may be extended by the Court if an application to set aside the demand is made.[5]
[2] Corporations Act 2001 (Cth) s 459E(1).
[3] Corporations Act 2001 (Cth)ss 459E(2), 459E(3).
[4] Corporations Act 2001 (Cth) s 459E(2).
[5] Corporations Act 2001 (Cth) s 459F(2).
An application to set aside a statutory demand must be made within 21 days after the demand is served.[6] The following sections prescribe the powers of the Court on that application and the consequences that attend the exercise of those powers:
[6] Corporations Act 2001 (Cth) s 459G(2).
459C Presumptions to be made in certain proceedings
(2)The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:
(a) the company failed (as defined by section 459F) to comply with a statutory demand;…
(3)A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application.
459H Determination of application where there is a dispute or offsetting claim
(1)This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.
(2)The Court must calculate the substantiated amount of the demand in accordance with the formula:
Admitted total – offsetting total
…
(3)If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4)If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a) varying the demand as specified in the order; and
(b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
459J Setting aside demand on other grounds
(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b) there is some other reason why the demand should be set aside.
459K Effect of order setting aside demand
A statutory demand has no effect while there is in force under section 459H or 459J an order setting aside the demand.
459L Dismissal of application
Unless the Court makes, on an application under section 459J, an order under section 459H or 459J, the Court is to dismiss the application.
459S Company may not oppose application on certain grounds
(1)In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:
(a) that the company relied on for the purposes of an application by it for the demand to be set aside; or
(b) that the company could have so relied on, but did not so rely on (whether it made such an application or not).
(2)The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.
The Authorities
In Keylink Physical Care Pty Ltd v Ergoline (Australia) Pty Ltd[7] Doyle CJ held that an order made by a Master on an application to set aside a statutory demand varying the amount of the statutory demand pursuant to s 459H(4) is a final judgment. In Keylink the issue arose in the context of an application to dismiss an amended Notice of Appeal to a “Judge of the Supreme Court” as incompetent for lack of particularity, and because the appeal was to a single judge and not the Full Court. For the purposes of that application it was therefore necessary to determine whether the Master’s order was final or interlocutory. Both parties in Keylink submitted that the order was a final order. Ultimately Doyle CJ concluded that the submissions of the parties should be accepted, even though he had initially expressed some doubt that an order dismissing an application to set aside a statutory demand was a final order.[8]
[7] [1999] SASC 483.
[8] Keylink Physical Care Pty Ltd v Ergoline (Australia) Pty Ltd [1999] SASC 483 at [27].
Doyle CJ reached his conclusion on the basis that the right in issue in the proceedings to set aside the statutory demand was “the right to challenge the validity of the statutory demand, or, putting it a little differently, that the matter that was in issue was the validity of the statutory demand”.[9] The reference to validity in that sentence suggests that an application to set aside a statutory demand is analogous to an application for judicial review of administrative acts, and for that reason the disposition of the application would result in a binding declaration of the rights of the parties with respect to that act. I am not sure, however, that the two types of proceedings are analogous. Even if they were, I observe that some decisions of the Victorian Court of Appeal have gone so far as to hold that at least some orders disposing of judicial review proceedings are not final.[10]
[9] Keylink Physical Care Pty Ltd v Ergoline (Australia) Pty Ltd [1999] SASC 483 at [24].
[10] Hornsby v Kaschke [1999] 3 VR 27 at 28, [4]; Dodoro v Knighting (2004) 10 VR 277 at 282, [19].
In Keylink, Doyle CJ held that the Master had finally determined the validity of the statutory demand by deciding that the statutory demand, as amended, was to continue to have its statutory effect. Doyle CJ placed some significance on the circumstance that because the 21 day period within which to bring an application had expired, as a practical matter no further application could be made. Doyle CJ distinguished the decision of Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia[11] on the basis that it was a decision made on the proper form of affidavits, which varied according to whether the proceedings were interlocutory or not. Doyle CJ expressly agreed with the approach taken by the Court of Appeal of New South Wales in A-Pak Plastics Pty Ltd v Merhone Pty Ltd.[12]
[11] [1994] 2 VR 290.
[12] (1995) 120 FLR 277.
In A-Pak Plastics it was held that a decision to set aside a statutory demand was a final judgment. The Court in A-Pak took a narrow view of the proceedings on foot between the parties, holding that they were those begun by the application to set aside the statutory demand.
However, two years later in Terranora Group Management Pty Ltd v Terranora Lakes Country Club Ltd (In Liq),[13] Santow J held that proceedings to set aside a statutory demand were interlocutory. He remarked:
Turning to the present case, I am satisfied that the present proceedings are of an interlocutory character. This is because they do not ultimately determine whether there is a particular debt which is payable. Rather they are in reality a procedural step aimed to illicit the recovery of an undisputed debt under threat of winding up, based on an unmet Notice of Demand. Thus I would not describe the present proceedings as finally determining any independent right at issue or ‘lis’ in proceedings between the parties so as to be final in character.
[13] (Unreported, Supreme Court of New South Wales, Santow J, 3 December 1997) at [5].
In Mibor Hayne J explained his view that such proceedings were interlocutory in this way:
The question whether an application is interlocutory for the purposes of r.4303(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 eg Cowie v State Electricity Commission of Victoria [1964] VR788, at p 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 p269, 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 s 459G which finally determines the rights of parties.[14]
[14] Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 296-7.
In the first paragraph cited above, Hayne J distinguishes the question whether the proceedings themselves are interlocutory from the nature of the order disposing of those proceedings. However, in the second paragraph he concludes that the proceedings are interlocutory, precisely because no order could be made in them which “finally determines the rights of the parties”. It follows that the reasons in Mibor, if not the decision itself, strongly support the conclusion that an order dismissing an application to set aside a statutory demand is not a final order.
That conclusion has been put beyond doubt in Victoria by the decision of the Court of Appeal, comprising five Justices, in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd.[15] It was there held that an order dismissing an application to set aside a statutory demand was interlocutory. Maxwell P and Neave JA adopted the reasoning of Hayne J in Mibor. They then continued:
In our view the decision in A-Pak Plastics does not determine the issue before us. As Nettle JA says, it may be accepted that an order setting aside the statutory demand is final, because it means that the creditor can no longer rely on the demand to have the company wound up on the ground of its insolvency.
The issue in the present case is whether an order dismissing the application to set aside a statutory demand is a final order. As Dodoro emphasised, the question whether an order is final or interlocutory depends on its legal rather than its practical effect. As Hayne J said in Mibor, if the demand stands, the consequences are serious but there is no final determination of any right.
As Nettle JA also points out, the fact than an order setting aside a statutory demand is final (as in A-Pak Plastics) does not mean than an order dismissing an application to set aside a statutory demand must be characterised in the same way. There is ample authority for the proposition than an application may give rise to a final order if it is decided in one way, even though if it were decided the other way the order would be interlocutory, because it would not have finally determined the rights of the parties.
If (contrary to our view) the decision in A-Pak Plastics were to be viewed as inconsistent with the view of Hayne J in Mibor, we consider that the reasoning in Mibor is to be preferred. [16] (footnotes omitted)
[15] (2007) 212 FLR 56.
[16] Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation (2007) 212 FLR 56 at [10]-[13], pp 61-62.
Nettle JA distinguished between an order setting aside a statutory demand and an order allowing it to stand in the following way:
In A-Pak Plastics Pty Ltd v Merhone Pty Ltd the New South Wales Court of Appeal held than an order setting aside a statutory demand was a final order. Their Honours reasoned that, because the only proceeding on foot between the parties was the application to set aside the demand, one was to treat the lis or issue between the parties as being whether the demand should be se aside; and, since the order setting aside the demand finally determined that issue, it was a final order.
With respect, I agree that the order in A-Pak Plastics was a final order, although as it appears to me, not so much because the application was the only proceeding on foot between the parties as for the reason that once the order was made the rights and obligations the subject of the demand could not be revisited. As is shown by the earlier decision of the New South Wales Court of Appeal in Dousi v Colgate Palmolive Pty Ltd, the fact than an order may be the only order sought in a proceeding does not necessarily mean that the order is final. An interlocutory order may be sought and made in a proceeding in which the lis or sole issue is whether the order should be made. An application for pre-action discovery under r 32.05 of the Rules of the Supreme Court (Vic) and an application for extension of time under s 23A of the Limitation of Actions Act 1958 (Vic) are commonplace examples. Despite the fact that such orders when made may finally determine the proceedings in which they are made, they are categorised as interlocutory orders because they involve no final adjudication of substantive rights. [17] (footnotes omitted)
[17] Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2007) 212 FLR 56 at [110]-[111], pp 89-90.
I make the following observations about those passages. First, I respectfully agree that the fact that an order disposes of the only proceeding on foot between the parties cannot be determinative. Every order, whether it be final or interlocutory, will dispose of the application in which it is made, and applications which determine only procedural rights may be brought before any substantive action is instituted; applications for leave, either to appeal or to proceed, and for an extension of time are examples. Conversely, the determination of interlocutory applications may bring the only substantive proceedings to an end; orders striking out claims or entering default judgments are examples.
Secondly, applications for pre-action third party discovery referred to by Nettle JA are particularly problematic. Such orders were thought to be final orders by Sheppard J in Stewart v Miller[18] and Lindgren J in Levis v McDonald.[19] On the other hand, the courts in Re Dernacourt Investments Pty Ltd,[20] Malouf v Malouf[21] and FAI Home Security Pty Ltd v Price[22] all held that preliminary discovery applications were interlocutory. It seems to me that the difficulty here arises from the dual nature of discovery orders. They finally determine the right of a person to control his or her own documents, but they do so for the limited purpose of actual or contemplated proceedings. Given the accepted interlocutory nature of discovery orders in inter partes actions and the historical origin of pre-action discovery,[23] the conclusion that those orders are interlocutory is difficult to resist, even though they undoubtedly finally and adversely derogate from the property rights of the respondent in the documents sought.
[18] [1979] 2 NSWLR 131 at 133B.
[19] (1997) 75 FCR 36 relying on a passage in John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346 at 356 where in a different context the High Court said of such an application that it was not “an interlocutory proceeding” in a defamation action.
[20] (1990) 20 NSWLR 588 at 608.
[21] (1999) 86 FCR 134.
[22] [1999] VSC 274.
[23] The equitable procedure was designed to facilitate the prosecution of common law proceedings; Norwich Pharmacal Co v Commissioners of Customs and Excise [1974] AC 133.
In Asian Century Holdings Inc v Fleuris Pty Ltd[24] the Full Court of the Supreme Court of Western Australia followed A-Pak and held that an order setting aside a statutory demand was a final order, although it acknowledged that there was “some attraction in the contrary view” expressed by Hayne J in Mibor.
[24] [2000] WASCA 59.
The differences between the courts of the States on this question calls for closer examination of the authorities and principles on which they relied in reaching their conflicting conclusions.
In Hall v Nominal Defendant[25] the High Court held that an order refusing an application for an extension of time within which to institute proceedings against the Nominal Defendant was not a final order. Windeyer J acknowledged the difficulty caused by the mass of apparently conflicting decisions on the distinction between final and interlocutory orders and then continued:
In most cases the test that seems to be most satisfactory, and the one that accords most nearly with what has been said on the subject in this Court, is it seems to me to look at the consequences of the order itself and to ask does it finally determine the rights of the parties in a principal cause pending between them. It is never enough to ask simply does the order finally determine the actual application or matter out of which it arises; because, subject to the possibility of an appeal, every order does that, unless it be an order that is expressly declared to be subject to variation.[26]
[25] (1996) 117 CLR 423.
[26] Hall v Nominal Defendant (1996) 117 CLR 423 at 443.
Windeyer J then referred to the view expressed by Brett LJ in Standard Discount Co v La Grange[27] that:
[N]o order in an action will be found to be final unless a decision upon the application out of which it arises, but given in favour of the other party to the action, would have determined the matter in dispute.[28]
[27] (1877) 3 CPD 67.
[28] Standard Discount Co v La Grange (1877) 3 CPD 67 at 72.
Windeyer J observed that that view was not capable of general application and had not been accepted. Windeyer J continued:
The effect of such decisions as there are of this Court on the point seems to me to be that when an action has been commenced between parties then whether an order in that action is interlocutory depends on whether or not it results in a final determination of that action. I say of ‘that action’ because it appears that the question depends more upon the action actually brought by a writ than upon the cause of action upon which the writ was founded. For example, it has been held that a judgment of non-suit is a final judgment, notwithstanding that it leaves the plaintiff at liberty to bring another action for the same cause. … A judgment on a demurrer may thus be either final or interlocutory depending upon circumstances … These cases are all illustrative of the general proposition that a final order is one which finally disposes (subject only to appeal) of an action or an existing dispute between parties. … But I find it hard to relate the test of finality or otherwise in the determination of a dispute between parties to an application under s 65A(3), because in such a case there is no existing dispute between parties and no existing action, and unless the prescribed times be complied with or extended there is no cause of action it seems to me. … The question is, in effect, whether he should be permitted to bring an action. A refusal of this application means that he cannot do so. I am prepared to assume that in practical effect, if not in strict law, a refusal would preclude him from making another application for an extension of time. But does this mean that such a refusal would be a final order? On the whole I think not. … The position when there is an existing dispute between the defined parties does not, I think, provide an analogy. There, as I have said, the cases shew that the determining factor is the effect of the order in establishing finally or otherwise the rights of the disputant parties – does it put an end to an existing dispute or existing action? But in a case such as this the character of the proceedings in which the order is made seems to me of more significance than is the result for the applicant. I am unable to accept the view that if an extension of time as sought were granted such an order would be a final order. It seems to me it would be interlocutory; and I think that the position is the same if the extension be refused or if a lesser time were allowed than was sought.[29]
[29] Hall v Nominal Defendant (1996) 117 CLR 423 at 443-45.
The discussion in those passages of the interrelationship between the underlying dispute or matter involving the parties and the action which is instituted to resolve it is of considerable importance. An action is brought so that the controversy between the parties may be adjudicated. A final order determines the underlying matter, or some part of it, and for that reason will generally dispose of the action or an element of it. An interlocutory order, on the other hand, determines an aspect of the forensic procedure in accordance with which the matter will be adjudicated. For that reason it will generally direct the course of further proceedings rather than determine any part of the subject matter of the dispute. It must be remembered that the action itself is no more than the procedure by which the court’s jurisdiction is invoked; it must not be conflated with the subject matter of the controversy. Consequently, an order bringing an action to an end by dismissal of the action or default judgment may still be interlocutory. The anomalous position of an order non-suiting a party is the result of the peculiar history and features of that procedure.[30]
[30] Milbank v Price [1954] SASR 166.
In his dissenting judgment in Hall, Barwick CJ analysed the statutory provisions under which an action could be brought against the nominal defendant, and in particular the nature of the limitation period applicable to such an action. He concluded that:
It is clear that the statute gives a right of action to a person of the described class in the stated circumstances if the right is exercised by the commencement of an action within the stated time after due notice to the nominal defendant.[31] (emphasis added)
[31] Hall v Nominal Defendant (1996) 117 CLR 423 at 428.
In the opinion of Barwick CJ, the limitation period was, to use the language adopted in a more recent decision of the High Court,[32] enacted as “a condition which is of the essence of the right to damages rather than providing for no more than a bar to the enforcement of an existing right”. Having so characterised the limitation period, it is not surprising that Barwick CJ held that an order extending the time was final and not merely procedural. The order of a court extending time, would, in effect, administratively vary a substantive element of the cause of action.
[32] Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251 at 268-9.
Barwick CJ then turned to a consideration of whether an order refusing an extension of time is also a final order. He held that it is. Barwick CJ distinguished applications to extend time for the taking of a step in an action and applications to set aside a default judgment. He explained that such interlocutory steps were “under the control of and generally within discretion of the Court in which the action is brought”,[33] whereas the action itself “is brought to enforce rights which, if they exist, derive from facts or circumstances apart from the statute or jurisdiction which gives the court control of the proceedings”.[34] Barwick CJ also distinguished the order sought in Hall from the dismissal of an action for a deficiency in the statement of claim. He explained that in these cases “the right, if any exists, is not determined by the order”.
[33] Hall v Nominal Defendant (1996) 117 CLR 423 at 429.
[34] Hall v Nominal Defendant (1996) 117 CLR 423 at 429.
In Licul v Corney[35] the High Court held that orders made for substituted service and orders made setting aside those orders were interlocutory orders for the purposes of s 35(1)(a) of the Judiciary Act 1903 (Cth). Barwick CJ said:
The first question arising from the objection to the competency of the appeal to this Court is whether the order of the Supreme Court was a final order within the meaning and operation of s.35(1)(a) of the Judiciary Act 1903 (Cth) (as amended). To be final for this purpose, the order, in my opinion, must of its own force put an end to the action or proceeding between the parties. It is not enough, in my opinion, that by reason of circumstances unconnected with and uncontrolled by the order itself, it may be or become impossible or impracticable to proceed with this action.[36]
[35] (1976) 180 CLR 213.
[36] Licul v Corney (1976) 180 CLR 213 at 219-20.
In the same case Gibbs J said:
The distinction between final and interlocutory judgments is not always easy to draw and there has been disagreement as to the test by which the question whether a judgment is final or interlocutory is to be determined. One view - which was preferred by the Court of Appeal in Salter Rex & Co v Ghosh - is that the test depends on the nature of the application made to the Court. The other view which, since Hall v Nominal Defendant, should, I think, be regarded as established in Australia, depends on the nature of the order made; the test is: Does the judgment or order, as made, finally dispose of the rights of the parties? Within either of those tests the judgment of the Full Court in the present case is not a final judgment. It does not have the effect of finally disposing of the rights of the parties. It leaves it open - at least in theory - to the applicants to make a further application, upon prior notice served on the respondent himself, for an extension of time for service of each summons, and if that extension is granted, and the summonses are served, to proceed with the actions. The order is therefore not final in nature whatever its practical effect may be.[37] (footnotes omitted)
[37] Licul v Corney (1976) 180 CLR 213 at 225 per Gibbs J.
In Carr v Finance Corporation of Australia Ltd (No 1)[38] the High Court held that an order refusing to set aside a judgment obtained upon the default of the defendant in delivering a defence does not finally dispose of the rights of the parties, and was therefore not a final order. Gibbs CJ confirmed that the test for determining whether a judgment is final or not was correctly stated in Licul: does the judgment or order appealed from, as made, finally determine the rights of the parties?[39] Gibbs CJ then continued:
In my opinion the test in Licul v Corney requires the Court to have regard to the legal rather than the practical effect of the judgment. If this were not so, the question whether a judgment is final or interlocutory would be even more uncertain than it is at present.[40]
[38] (1981) 147 CLR 246.
[39] Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246 at 248 per Gibbs CJ
[40] Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246 at 248.
In Dodoro v Knighting[41] the Victorian Court of Appeal considered the nature of an application pursuant to s 93(4)(d) of the Transport Accident Act 1986 (Vic) to bring proceedings for common law damages for a “serious injury”. Section 74(2D) of the County Court Act 1958 (Vic) provided that an appeal did not lie to the Court of Appeal from a judgment or order of the County Court in an interlocutory application, except with the leave of the Court of Appeal. Dodoro’s application for leave to proceed was refused by a County Court Judge, and he purported to appeal the Judge’s refusal, but in the alternative sought leave to appeal. It appears from the judgment of Eames J in Dodoro that leave to proceed applications under the Transport Accident Act 1986 (Vic) are heard, as a matter of practice, in a relatively summary manner and largely on the papers.[42] There is nothing in s 93 of the Transport Accident Act 1986 (Vic) that suggests that the parties to a leave to proceed application are bound, in a subsequent action for damages, by a finding made on the leave to proceed application that the applicant had suffered serious injury. Moreover, because the severity of a personal injury may vary over time, it is unlikely that a refusal of leave was intended to be a final determination of the extent of injury suffered by the applicant.
[41] (2004) 10 VR 277.
[42] Dodoro v Knighting (2004) 10 VR 277 at p 289, [49].
The court in Dodoro held that an order refusing leave to bring common law proceedings was interlocutory. The court drew an analogy between applications for leave to appeal to the Supreme Court itself and to the High Court. Callaway JA said:
In my opinion, Mr Ruskin’s second submission should be accepted, so that an order refusing leave to bring common law proceedings is interlocutory and the applicant requires leave to appeal from the order made on 17th June 2004. The natural reading of s 93(4)(d) is that an application for ‘leave to bring’ common law proceedings is not a principal cause but a preliminary step. An application pursuant to s 93(4)(d) is a proceeding, but is not a principal cause. Like an application for leave to appeal to the Trial Division or to this Court or an application for special leave to appeal to the High Court, it is no more than a preliminary application. Indeed, because there is no cause of action, the application has an even more preliminary character: not only is there, as yet, no principal cause, but there is not even a cause of action.
To adapt the language of Murray J in Lamac Developments Pty Ltd v Devaugh Pty Ltd, an order refusing leave to bring common law proceedings is interlocutory because it is ‘procedural in character when regard is had to its legal effect’. It is the legal effect of the order to which attention must be directed in accordance with the authorities referred to earlier in these reasons. It matters not, for the purpose of characterising the order as final or interlocutory, that the refusal of leave to bring proceedings may be of great importance to the parties. That is simply a factor to be taken into account in deciding whether to grant leave to appeal to this Court.[43] (footnotes omitted)
[43] Dodoro v Knighting (2004) 10 VR 277 at p 283-4, [23]-[24].
In T.R.A.M.S. Pty Ltd v The Grand Hotel Pty Ltd[44] the Full Court of this Court held that orders refusing a plaintiff’s application for leave to file a further amended statement of claim and striking out the action itself for failure to comply with the pleading rules were interlocutory. Bollen J, with whom the other members of the Court agreed, concluded:
We are concerned to see whether the order finally determines the rights of the parties. It did not determine those rights. It determined that there had been procedural or adjectival failing. In these circumstances I do not think that the order is ‘final’.[45]
[44] (1993) 170 LSJS 312.
[45] T.R.A.M.S. Pty Ltd v The Grand Hotel Pty Ltd (1993) 170 LSJS 312 at 317.
Discussion
In my respectful opinion there is much utility in the reformulation of the interlocutory/final dichotomy by reference to the concept of procedural or adjectival orders on the one hand, and orders determining substantive rights and obligations on the other. Disputed questions of law may arise between persons about the scope and extent of those rights and obligations, as may factual disputes about the circumstances which attract them. Rights carry with them a co-relative right to enforcement or remedial orders if those obligations are breached. It is the function of courts to adjudicate those controversies. As Kitto J observed in R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd:[46]
[J]udicial power involves, as a general rule, a decision settling for the future, as between defined persons or classes of persons, a question as to the existence of a right or obligation, so that an exercise of the power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons.[47]
[46] (1970) 123 CLR 361.
[47] R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 374.
A final order is generally one that creates the “new charter” to which Kitto J referred. It is the very essence of the exercise of judicial power that it finally settles the controversy which is the subject matter of the action, and thereby precludes any further application for another or different orders with respect to that matter; to ask whether a further application can be brought for the purpose of determining whether an order is final or interlocutory conflates cause and effect.
Conversely, decisions on whether the court’s jurisdiction to adjudicate a controversy has properly been invoked, and on whether its procedures for determining that controversy have been complied with, are generally adjectival and therefore interlocutory. Speaking loosely it might be said that parties have a right to the correct and proper application of the procedural rules of the Court to the litigation they conduct within it. Indeed, if the proper procedure is not applied, the parties can generally seek leave to appeal procedural orders. However, parties do not have “rights” against the judicial tribunals that determine their controversies in the same sense that they have rights against each other under the substantive law.
The distinction between substantive and adjectival orders to which I have referred is not the same as, but may be informed by, the distinction drawn by the common law between procedural and substantive legislative amendments for the purpose of determining whether the legislation will be given retrospective or prospective effect.
The distinction, I think, also explains why in some cases different orders made on the same application may be interlocutory or final depending on the result. An order granting an application for summary judgment is a final order, because it finally disposes of the action by a judgment which creates a new charter governing the substantive rights of the parties. However, an order dismissing an application for summary judgment merely decides that the procedure by which the controversy will be determined will be the ordinary trial procedures of the Court, and not the summary procedure that the party attempted to invoke.[48]
[48] See generally the discussion in Jefferson Ford Pty Ltd v Ford Motor Co Ltd (2008) 167 FCR 372.
Applying the principles I have identified to an action of the nature here in question, I am of the opinion that an order made on an application to set aside a statutory demand is procedural and interlocutory. The relevant statutory provisions inextricably link proceedings to set that demand aside to proceedings to wind up the debtor company.
Those statutory provisions show that, although the service of a statutory demand and the proceeding in which it can be set aside precede an application to wind up a company, their only legal effect is in the subsequent winding up proceedings, should they ever be brought. Proceedings to set aside a statutory demand are therefore analogous to other pre-action proceedings, like applications for leave to proceed and applications for pre-action discovery.
Applications to set aside a statutory demand are pre-action procedures which affect, and only affect, the proceedings on the winding up. Service of statutory demands, orders dismissing applications to set them aside and orders varying them do not determine or affect in any way the underlying controversy about the alleged debtor’s liability to pay the debt. If the creditor wishes to prove the debt and obtain an order for its payment, it must take separate proceedings for that purpose. Even orders made on the winding up proceedings cannot settle the controversy over the debt. The substantive right in question in the winding up proceedings is the right of the company to its corporate personality and to the exercise of the rights, powers and privileges that go with it.
The procedural nature of the orders made on the application to set aside a statutory demand is emphasised by ss 459C(3) and 459S(2) of the Act. Section 459C(3) allows the company to rebut the presumption of insolvency, which is a statutory concomitant of an extant statutory demand, by proving that the company is solvent notwithstanding the debt which is the subject of the demand. Section 459S empowers the Court, in the exercise of its discretion, to allow the debt itself to be disputed even where a statutory demand has not been set aside.
The practical effect of the dismissal of an application does not in any way alter my conclusion. First, it is clear on the authority of Licul that it is the legal effect that must be considered.[49] Secondly, even if one were to consider the practical effect of the dismissal, that effect is completely procedural and adjectival in nature for the reasons that I have given.
[49] See also Dousi v Colgate Palmolive Pty Ltd (1987) 9 NSWLR 374 at 377-8 per Kirby P and Glass JA.
In order to dispose of this question on this appeal it is only necessary to decide that an order dismissing an application to set aside a statutory demand is interlocutory. However, it is, I think, a necessary consequence of the reasoning I have adopted that an order setting aside a statutory demand is also interlocutory. It does not determine in any way whether the company is in fact liable to pay the debt. That controversy must be determined in the ordinary way. Nor does it in any way determine the solvency of the company and its right to continue to exist as a corporate entity. That right can only be determined by the insolvency proceedings. A decision to set aside a statutory demand means only that the application to wind up the company must proceed without the benefit of the statutory presumption. Therefore an order setting aside a statutory demand is also purely adjectival. Similarly, an order varying a statutory demand does no more than affect the way in which the presumption operates and is, for that reason, also procedural and adjectival.
I would therefore answer the question referred to this Court:
No; an order dismissing an application to set aside a creditor’s statutory demand made pursuant to the Corporations Act 2001 (Cth) is not a “final judgment” within the meaning of Rule 17 of the Rules.
The statutory demand
Even though henceforth appeals of this nature will ordinarily be heard by a single Judge, it will appear from the discussion that follows that the determination of the question whether there is a genuine dispute about the existence of the debt can conveniently be dealt with by this Court.
The statutory demand served by the respondent claimed the sum of $1,552,963.41, which it described as the principal balance and interest due as at 31 August 2008 and payable pursuant to an agreement dated 1 April 2008. The agreement relied on was one made between the respondent and the appellant. It is headed “MEMORANDUM FOR AN AGREEMENT FOR LOAN” and contains the following principal terms:
1. The Loan
The Lender agrees to lend to the Borrower and the Borrower agrees to borrow from the Lender the sum of ONE MILLION, FOUR HUNDRED AND FORTY THOUSAND, SEVEN HUNDRED AND EIGHTY-SIX DOLLARS AND EIGHTY-SEVEN CENTS (“the Principal Sum”) for a period of two months (“the Term”), commencing on Tuesday the 1st day of April 2008. ($1,440,786.87)
2. Purpose of the Loan
The Purpose of the loan facility is to continue the provision of short-term capital until the Borrower is able to re-finance for property development activity and in accordance with the time lines as advised by the borrower.
3. Interest on Loan
The Borrower is required to pay interest on the Principal Sum + Any Outstanding interest at a rate of 1.55 per centum (%) compounding per month or part thereof until the loan is paid in full.
4. Repayment of The Principal Sum
(a)The Borrower must repay and fully discharge the loan on or before the Repayment Date of 1 June 2008. The Borrower must also pay any interest accrued on the loan and not then paid, and all other amounts payable under or as a consequence of this agreement and unpaid, to the Lender on or before the Repayment Date.
(b)The Borrower shall have the right from time to time and at any time during the term of the loan to repay to the Lender the whole or any portion of the Principal Sum.
(c)Failure to fully discharge the loan on the repayment date may result in recovery action and it is agreed that all costs associated with recovery will be charged to the borrower. Such recovery action will not be limited to Hardel Pty Ltd but will extend to include all related entities, parties and trusts and will continue until all of the debt is fully recovered.
(d)The director of the borrowing entities also acknowledges personal liability for all debt remaining after the loan repayment date inclusive of all interest and recovery costs.
No genuine dispute
The appellant contends that it is at least arguable that it is not liable to repay the loan on the Repayment Date. It contends that it is only liable to repay the loan if and when it refinances the property development, and that if it were never able to obtain other finance the respondent would be bound to take an unspecified interest in an unidentified property development in Queensland. It submits in the alternative that the respondent should be estopped from relying on a term requiring repayment by the Repayment Date because of certain representations that the appellant claims were made by the chief executive officer of the respondent at the time of entering into the agreement.
The Court’s function on an application to set aside the statutory demand is to determine whether the demand is genuinely disputed. The applicant needs to demonstrate only a bona fide dispute on real grounds.[50] A dispute is genuine if it has sufficient prima facie plausibility to merit further investigation.[51] It is necessary therefore to consider the material that the appellant claims reveals a genuine dispute over the existence of the debt.
[50] Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 462-4; Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103.
[51] Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787.
The evidence admitted on the application to set aside the demand shows that the respondent made the following loans to the appellant between 1 February 2001 and 21 July 2001:
(a)$300,000 on or about 1 February 2005;
(b)$750,000 on or about 10 June 2005;
(c)$120,000 on or about 22 June 2005; and
(d)$150,000 on or about 21 July 2005.
The loans referred to in the preceding paragraph were made pursuant to separate written agreements.
On 30 November 2006 the parties entered into an agreement which stipulated the terms on which the combined loans and interest accrued on them would be continued. The loan amount in that agreement was $1,464,511.28. The loan was expressed to be for a period of two months commencing on 30 November 2006. The purpose of the loan was described in the same way as it was in the April 2008 agreement, except that the words “with the time lines as advised by the borrower” were not included. The November 2006 agreement also had a penalty interest clause in the following terms:
4. Penalty Interest
The Borrower is required to pay penalty interest on the Principal Sum + Outstanding Interest as described in point 3 above at a rate of 1.25 per centum (%) compounding per month or part thereof until the loan is paid in full.
Clause [5] of the November 2006 loan agreement, like clause [4] of the April 2008 loan agreement, provided that the borrower “must repay and fully discharge the loan on the Repayment Date”. The November 2006 loan agreement did not expressly nominate that date in the way in which the April 2008 agreement does. Rather, the November 2006 agreement left the Repayment Date to be calculated, as it easily can be, from the two month term of the loan and the date of the agreement.
If the appellant’s liability were to be determined by reference to the April 2008 loan agreement alone, then there could be no dispute about that liability. The description of the purpose of the loan creates no ambiguity about the Repayment Date. The Repayment Date is expressed in clear and unequivocal terms. The description of the purpose of the loan in clause [2] serves three purposes. First, it emphasises that the loan may be repaid at an earlier time and, by implication therefrom, without any penalty. Put in another way, clause [2] supports an implication that the expression “principal sum” means principal sum less any repayment of the principal amount that might have been made. Secondly, it imposes an implied obligation on the borrower to make its best endeavours to refinance the property development referred to. Thirdly, it imposes an obligation on the borrower to spend the money on that property development.
If the appellant’s argument that the loan need only be repaid if and when the appellant was able to refinance were accepted, the first sentence of clause [4] of the April 2008 loan agreement would have no actual legal effect. That submission cannot be accepted. It cannot seriously be put that in the context of that agreement the words “must repay … the loan on or before … 1 June 2008” are merely aspirational, or in effect meaningless.
The largely self contained and complete nature of the April 2008 agreement and its plain terms leave very little room for its meaning to be affected by the history of the loan transactions between the parties to it. It is necessary, however, to deal with the only aspect of that history that could have any material bearing on the construction of the April 2008 loan agreement. When the November 2006 loan agreement was executed, the parties subscribed to a handwritten addendum to that agreement. It included the following notations:
(1)The borrower is making best endeavours to finalise loan agreements by January 31 2007.
(2)The borrower does not remain fully confident that this date will be achieved due to the timing of the financial restructure required for the property group.
…
(4)The borrower undertakes to represent the true nature of the lenders intentions that this was not an investment loan, rather a loan of grace intended to assist the borrower from a Christian perspective.
(5)The borrower will actively seek to provide security/rights/ownership within existing Hardel property ventures to ensure the return of capital. This will be actively pursued throughout January 07.
Mr Harris, the sole director of the appellant, deposed that when the agreement and addendum were signed in November 2006, he told Mr Burrell, the chief executive officer of the respondent, that he was concerned that Mr Burrell intended to take enforcement action on the debt. Mr Harris deposed that Mr Burrell’s reply was that he fundamentally misunderstood their relationship if that is what he thought.
Mr Harris also deposed that on signing the April 2008 agreement he told Mr Burrell that no more than $1 million could currently be repaid, and that any repayment was subject to refinancing arrangement. He deposed that Mr Burrell “accepted these matters”.
In my view it is not arguable that the addendum in any way modified the clear obligations of the November 2006 loan agreement. The addendum can not possibly be regarded as anything more than a side note recording Mr Harris’ disclosure of the difficulties he anticipated in meeting the legal obligations the appellant had accepted by executing the November 2006 loan agreement. The very terms of the addendum are premised on the existence of an obligation to repay the loan by January 31 2007. In any event, whatever the effect of the addendum in November 2006, the absence of any similar addendum to the April 2008 loan agreement reinforces rather than detracts from the clear terms of the later agreement.
Turning to the discussion that Mr Harris alleges took place when the April 2008 agreement was signed, there is, on one possible view at least a theoretical inconsistency between the obligation to repay in clause [4] of the April 2008 loan and the conversation alleged by Mr Harris. However, the contractual dispute over whether there was an obligation to pay on the Repayment Date must be determined objectively. The question is, therefore, what a reasonable person would understand from both the written terms of the April 2008 agreement and the contemporaneous conduct of the parties.[52]
[52] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179, [40].
The strength of the representation conveyed by subscribing to a perfectly legible and easily comprehended document is so great that it is generally regarded as conclusive.[53] It is simply unarguable that a discussion as vague as that deposed to by Mr Harris could in any way vary clause [4]. Objectively considered, the conversation was, like the addendum, no more than a disclosure by Mr Harris of the practical difficulty he would have in meeting the unambiguous legal liability imposed by that clause. Any “acceptance” by Mr Burrell of that fact could not possibly be regarded as any more than an acknowledgement that it may be difficult to get “blood out of a stone”, notwithstanding the legal relations between the appellant and respondent recorded in the April 2008 loan agreement.
[53] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 181, [44], [46].
For similar reasons I would find that the conversation between Mr Harris and Mr Burrell deposed to by Mr Harris could not possibly give rise to an estoppel. The conduct relied on to support an estoppel must be clear and unambiguous.[54] It must be of such a nature that it would mislead any reasonable person.[55] The representation must be understood as a whole and in context.[56] It is not arguable that the conversation which Mr Harris claims accompanied the execution of the April 2008 agreement could have led any person to reasonably believe that the obligation to repay in clause [4] expressed no more than a forlorn hope which would not be legally enforced.
[54] Legione v Hateley (1983) 152 CLR 406 at 435.
[55] Low v Bouverie [1891] 3 Ch 82 at 113 per Kay LJ.
[56] Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [134].
The correspondence between Mr Harris and Mr Burrell after the Repayment Date impliedly acknowledges liability. Mr Harris does not at any point dispute Mr Burrell’s claims that the debt is due and payable. On the contrary, he kept Mr Burrell informed of his attempts to obtain finance to repay the debt in a way which appears to accept that the debt was immediately due and payable.
I am not persuaded in the face of the clear terms of the April 2008 loan agreement that the contractual and equitable grounds relied on by the appellant merit any further investigation. The implicit acknowledgement of the debt by Mr Harris in his correspondence with Mr Burrell is further confirmation, if any be needed, that the debt is not genuinely disputed. The Master was right to dismiss the application.
Conclusion
I would make the following orders:
1The question referred to this court by Layton J on 16 January 2009 is answered: No.
2The appeal against the decision of the Master is dismissed.
3I would hear the parties on the question of costs.
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