Hazaran v Doyle

[2001] NSWSC 643

CITATION:	HAZARAN v DOYLE [2001] NSWSC 643
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2154/01
HEARING DATE(S):	26/07/01
JUDGMENT DATE:	26 July 2001
PARTIES :	HAZARAN PTY LTD v PETER DOYLE WINE CENTRES PTY LTD - TRADING AS PETER DOYLE CELLARS
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr L.J. Aitken for plaintiff Mr J.S. Drummond for defendant
SOLICITORS:	Horowitz & Bilinsky for plaintiff Hewitts Commercial Lawyers for defendant
CATCHWORDS:	Corporations Law. - Application to set aside statutory demand. - Demand set aside. - Liquor Law. Section 154A of Liquor Act 1992. Circumstances in which liability arises considered.
DECISION:	Paragraph 21

- 1 -

1   MASTER: This is an application to set aside a statutory demand dated 22 March 2001 claiming payment of $49,477.20 for liquor sold by the defendant. There is a dispute as to whether the amount is payable by the plaintiff or Great Northern Hotel (Newcastle) Pty Ltd.

2   The defendant is a liquor supply company who supplied liquor to the business carried on at the Great Northern Hotel Pty Ltd in Scott Street Newcastle.

3   The evidence includes licensing records in respect of that hotel which show that the business owner was Great Northern Hotel (Newcastle) Pty Ltd from 17 December 1999 to 23 November 2000, and that the plaintiff was a business owner from 23 November 2000 to date. It is clear from the other evidence in the case that there was an application for transfer of the licence to the plaintiff which was approved and led to the notice of change of the business owner.

4   The plaintiff was in fact the lessee of the premises. It had a 6 year lease commencing on 22 November 1996. Under that lease there were substantial payments that the plaintiff had to make for rental and outgoings.

5   There is evidence from Miss Battese, who is a director and shareholder of both the plaintiff and Great Northern Hotel (Newcastle) Pty Ltd. She swore in her affidavit of 10 April that at all relevant times the owner of the business was Great Northern Hotel (Newcastle) Pty Ltd. She denied the ownership of the business changed on 23 November 2000, and indicated that it was that company which carried on the business notwithstanding there had been a change in the licensing arrangements. It may be that the change in the licensing arrangements was some requirement that was imposed by the licensing authorities.

6   It is clear that the plaintiff company does not have bank accounts, and it is also clear that the Great Northern Hotel (Newcastle) Pty Ltd meets the rental payable by the plaintiff under the lease and licence fees which the plaintiff has to pay in respect of the poker machines which it owns and operates on the premises. It has been apparently trading under that name.

7   When one looks at the defendant's evidence it seems that the defendant agrees that this is the situation. The defendant read an affidavit of Peter William Doyle which was in fact an affidavit verifying a statutory demand in another matter, namely, an application to set aside a demand served on Great Northern Hotel (Newcastle) Pty Ltd.

8   However, that might be that evidence is before me, and it was plain that the defendant thought it was contracting with that company. Certainly the defendant, when it issued its invoices, simply addressed them to the business name "Great Northern Hotel". It is therefore plain that the plaintiff is not involved in the contracts for the purchase of the liquor which are the relevant ones which underpin the statutory demand.

9 The way that the defendant says that there is a separate liability, which attaches as against the plaintiff, is by reason of the provisions of section 154A of the Liquor Act 1992. Those sections are in the following form:

"(1) A contract made with a licensee to sell liquor in accordance with this Act to the licensee shall be deemed, for the purposes only of subsection (2), to be a contract made jointly and severally with the licensee and the persons directly or indirectly interested in the profits of the business carried on pursuant to the licence.

(2) If liquor is sold to a licensee under a contract referred to in subsection (1) and the licensee defaults in payment for the liquor, civil proceedings may be taken by the vendor of the liquor against all or any of the persons so referred to for recovery of the unpaid amount."

10   The defendant says that there are a number of ways the plaintiff is a person indirectly interested in the profits of the business carried on pursuant to the licence:

(1) The plaintiffs liability to pay rent under the lease is met by Great Northern Hotel (Newcastle) Pty Ltd;

(2) The plaintiff's liability to pay its gaming taxes, in respect of the poker machines owned by it, is met by Great Northern Hotel (Newcastle) Pty Ltd.

11   There is no suggestion in the evidence that the plaintiff has any legal or equitable entitlement to profits of the other company. There is no evidence of shareholding before me which might give some interest in profits as a result of a shareholding ownership in Great Northern Hotel (Newcastle) Pty Ltd.

12 A similar type of expression was considered by the Full Court in Tasha v Fullwood (1978) 1 NSWLR page 20. The section that the Court of Appeal was considering was section 24 of the Liquor Act 1912 which required declarations setting out the names of: "All persons directly or indirectly interested in the application, or in the business or the profits of the business to be carried on, under the license applied for". In that case a question which arose was whether the lessor, who received rent under the lease, was a person falling within that description.

13   Although it had resolved the matter on a another basis, the Court did conclude that in the circumstances of that lessor's interest, it had an interest in the profits. At page 23 it said:

"A lessor whose entitlement to rent fluctuates with the receipts of the whole business, including the liquor section, as pecuniary or financial interest which in our opinion falls on that side of the dividing line which requires disclosure. In this respect the trial judge fell into no error."

14   Here the plaintiff has an interest in the income produced by the business because of this money which is used in accordance with the arrangements made between it and Great Northern Hotel (Newcastle) Pty Ltd - the latter meets the plaintiffs liability for rent. To the extent that the continued meeting of that liability will probably only happen if Great Northern Hotel (Newcastle) Pty Ltd makes profits, it arguably may have an indirect interest in the profits. It is a difficult point and I will not decide the matter on it, but on another point which I will now address.

15 It is important to note that the deeming, which is worked by section 154A(1), is for a very limited purpose. It is, "For the purposes only of subsection (2)." When ones look at that subsection, one finds that purpose expressed as, "Proceedings may be taken by the vendor of the liquor... for recovery of the unpaid amount."

16   It was suggested that the present proceedings can be so characterised. I think this is not correct. The true nature of the proceedings is a statutory right to set aside a notice which has a deeming effect if there is no compliance. The purpose of these proceedings is to forestall that statutory deeming of insolvency. They do not result in any order of the Court that the amount claimed in the claim is payable.

17   Indeed, the very foundation of a statutory demand is the existence of a valid debt dehors any proceedings to establish the debt.

18   These present proceedings are brought by someone who is not the vendor of the liquor. The issue of the statutory demand by the vendor of the liquor are not “proceedings”.

19   The legislature could have allowed the deeming provisions to have been unlimited, in which case a liability in debt could have arisen generally at the time the contract of sale for the liquor was made. This could then have allowed the issue of statutory demand against a person indirectly interested. However, the legislature did not do this. It only allowed the deeming for an expressly limited purpose.

20   For these reasons I do not think that there is any liability on the plaintiff for the debt. In these circumstances the demand should be set aside.

21   Accordingly, I order that the statutory demand dated 22 March 2001 served by the defendant on the plaintiff be set aside.

22   I order the defendant to pay the plaintiff's costs.

oOo

Last Modified: 08/02/2001