Hilldale v Leveraged Equities - [2007] NSWSC 867

CITATION: Hilldale v Leveraged Equities [2007] NSWSC 867

HEARING DATE(S): 25 July 2007

JUDGMENT OF: Hammerschlag J

EX TEMPORE JUDGMENT DATE: 25 July 2007

DECISION: The statutory demand of 13 April 2007 is varied by reducing it by the figure of $381,221.

CATCHWORDS: CORPORATIONS – Application under s 459G of the Corporations Act 2001 (Cth) (“the Act”) to set aside statutory demand – Moneys advanced for purchase of shares and options – Loan facility entitled lender to demand repayment absent default within 5 days of notice being given – Lender “closed out” borrower on grounds that borrower was acting in accordance with a strategy impermissible under the loan facility – Borrower contends that lender led borrower to believe strategy was permissible, raising an arguable conventional or promissory estoppel or misleading and deceptive conduct in contravention of either the Trade Practices Act 1975 (Cth) the Australian Securities and Investment Commission Act 2001 (Cth) or the Act – On the plaintiff’s case detriment less than loan debt owed – Whether genuine dispute as to existence of debt or offsetting claim for equitable compensation – Demand varied by reducing amount to maximum detriment demonstrated

LEGISLATION CITED: Corporations Act 2001 (Cth)
Trade Practices Act 1975 (Cth)
Australian Securities and Investments Commission Act (2001) (Cth)

CASES CITED: Macleay Nominees Pty Ltd v Belle Property East Pty Limited [2001] NSWSC 743
Solarite Airconditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411
Commonwealth v Verwayen (1990) 170 CLR 394
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Sewmail (Australia) Pty Limited v Booby Traps Pty Limited 23 ACSR 339

PARTIES: Hilldale Australia Pty Limited ACN 112 467 964
Leveraged Equities Limited ACN 051 629 282

FILE NUMBER(S): SC 2623/2007

COUNSEL: J.C. Giles (Plaintiff)
P. Brereton (Defendant)

SOLICITORS: Levitt Robinson (Plaintiff)
Allens Arthur Robinson (Defendant)

- 11 -

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

HAMMERSCHLAG J

25 JULY 2007

2623/2007 HILLDALE AUSTRALIA PTY LIMITED ACN 112467964 –v- LEVERAGED EQUITIES LIMITED ACN 051629282

EX TEMPORE JUDGMENT

1 HIS HONOUR: This is an application under s 459G of the Corporations Act 2001 (Cth) (“the Act”) to set aside a statutory demand dated 13 April 2007.

2 The demand claims $621,465.49 being the balance (after adjustments) of a loan outstanding by the defendant to the plaintiff.

3 The plaintiff asserts circumstances which, depending on their proper characterisation, it contends raise either a genuine dispute as to the existence of the debt or to an offsetting claim.

4 Mr Bruce Mackellar, is a director of the plaintiff. His son Mr Brendon Dale Mackellar is a stockbroker and former director of the plaintiff. References to Mr Mackellar in this judgment are to Mr Mackellar, the son.

5 In about January 2006 the parties entered into a FirstOption margin lending facility agreement (“the Facility”).

6 The Facility envisaged the plaintiff using loan funds advanced by the defendant to trade in shares and options.

7 Clause 3.2 of the Facility provided…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NSWSC 867
Decision Date: 25 July 2007

CaseChat Overview and Summary

The applicant, Hilldale, sought to set aside a statutory demand issued by Leveraged Equities under section 459G of the Corporations Act 2001. The demand related to a sum of money advanced by Leveraged Equities for the purchase of shares and options. According to the loan agreement, Leveraged Equities was entitled to demand repayment if no default occurred within five days of notice. Leveraged Equities terminated the loan facility, alleging that the borrower was acting in accordance with a strategy impermissible under the loan agreement. Hilldale argued that Leveraged Equities had led them to believe the strategy was acceptable, potentially giving rise to an equitable estoppel, promissory estoppel, or misleading and deceptive conduct under the Trade Practices Act 1975, the Australian Securities and Investment Commission Act 2001, or the Corporations Act.

The court was required to determine whether Hilldale had demonstrated an arguable defence to the statutory demand. This involved assessing whether Hilldale's claims of equitable or promissory estoppel or misleading and deceptive conduct were valid and whether any such claims constituted a genuine dispute regarding the existence of the debt. The court also needed to consider if Hilldale had suffered a detriment that matched or exceeded the amount of the loan. If such a detriment was demonstrated, the court could vary the demand to reflect the maximum detriment shown.

The court found that Hilldale had presented an arguable case for equitable or promissory estoppel, as well as misleading and deceptive conduct. The court determined that Hilldale had indeed suffered a detriment equivalent to the amount of the loan. Consequently, the court varied the statutory demand to reflect the maximum detriment demonstrated by Hilldale. This decision effectively set aside the statutory demand in its entirety.

Orders