In the matter of Amy Holdings Pty Ltd; In the matter of Land Enviro Corp Pty Ltd
[2014] NSWSC 1176
•27 August 2014
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Amy Holdings Pty Ltd; In the matter of Land Enviro Corp Pty Ltd [2014] NSWSC 1176 Hearing dates: 12 May and 19 June 2014 Decision date: 27 August 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Applications to set aside creditors' statutory demands dismissed, with costs
Catchwords: CORPORATIONS - winding up - winding up in insolvency - creditors statutory demand application to set aside for "some other reason" - where debt claimed is a judgment debt and leave to appeal from judgment has been refused - whether pendency of application for special leave to appeal affords "some other reason" Legislation Cited: (CTH) Corporations Act 2001, s 459G, s 459H, s 459J Cases Cited: ACN 001 891 103 Pty Ltd v Reiby Street Apartments Pty Ltd [2007] NSWSC 1345
Australian Workers Union v Bowen (1946) 72 CLR 575
Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235
Bentham Management Pty Ltd v Union Finance Pty Ltd [2007] SASC 42
Colonial Mutual Life Assurance Society Limited v The Producers and Citizens Cooperative Assurance Company of Australia Limited (1931) 46 CLR 41
Crabtree -Vickers Pty Limited v Australian Direct Mail Advertising & Addressing Co Pty Limited (1975) 133 CLR 72
Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd [2011] NSWSC 9
First Line Distribution Pty Ltd v Whiley (1995) 18 ACSR 185
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480
Hickie v Land Enviro Corp Pty Ltd [2013] NSWSC 706
Hickie v Land Enviro Corp Pty Ltd [2014] NSWSC 472
In the matter of A.C.E.S. Sogutlu Holdings Pty Ltd [2014] NSWSC 140
In the matter of Land Enviro Corp Pty Ltd [2013] NSWSC 731
Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited [2012] NSWSC 382
Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited [2012] NSWSC 446
Land Enviro Corp Pty Ltd v Hickie [2014] HCASL 146
Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34
Manzo v 555/255 Pitt St Pty Ltd (1990) 21 NSWLR 1; 2 ACSR 809
Meehan v Glazier Holdings Pty Limited [2005] NSWCA 24; (2005) 53 ACSR 229
Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759; (2007) 25 ACLC 1038
Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451
Randall Pty Ltd v Chepan Pty Ltd (2009) 73 ACSR 267
Sajepe Pty Limited v Lawler (2000) 18 ACLC 457; [2000] NSWSC 262
Scope Data Systems Pty Ltd v BDO Nelson Parkhill [2003] NSWSC 137
Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466
Umina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454
Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039Category: Principal judgment Parties: 2013/104194:
2013/106377:
Amy Holdings Pty Ltd (plaintiff)
David Hickie (1st defendant)
Vocifa Pty Limited (2nd defendant)
Land Enviro Corp Pty Ltd (plaintiff)
David Hickie (1st defendant)
Vocifa Pty Limited (2nd defendant)Representation: Counsel:
S. Zdrilic (director) (by leave) (plaintiffs)
P. Brand (solicitor) (defendants)
Solicitors:
N/A (plaintiffs)
Bartier Perry (defendants)
File Number(s): 2013/104194 2013/106377
Judgment
In proceedings 2013/104194, Amy Holdings Pty Ltd by originating process filed on 8 April 2013 applies pursuant to (CTH) Corporations Act 2001, s 459G, for an order setting aside a creditors statutory demand served on it by David Hickie and Vocifa Pty Limited on 18 March 2013, claiming a debt of $358,588.89 described as "judgment entered in the Supreme Court of New South Wales on 14 March 2013". In proceedings 2013/106377, Land Enviro Corp Pty Ltd by originating process also filed on 8 April 2013 applies pursuant to the same provision for an order setting aside a creditors statutory demand served on it by the same creditors, also on 18 March 2013, claiming the same debt of $358,588.89, described in identical terms. For the sake of convenience I shall refer to the two plaintiff companies as "the applicants".
Background
On 20 April 2012, following a lengthy hearing, Stevenson J gave judgment dismissing claims brought by Land Enviro Corp, Sam Zdrilic, Amy Zdrilic and Amy Holdings (to whom for the sake of convenience I shall refer as "the plaintiffs") against HTT Huntley Heritage Pty Limited, Robert Renshall, Mr Hickie, Sentel Pty Limited, Devubo Pty Limited, Vocifa and Michael Ansell ("the defendants"), in which the plaintiffs sought to have set aside two agreements and a consent order made in 2004 that dismissed earlier proceedings brought in 2001 by Land Enviro Corp against HTT, Mr Hickie, Mr Ansell and a Mr Bruce Hulley, upon grounds that they were procured by fraud [Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited [2012] NSWSC 382]. Stevenson J described the proceedings as concerning three matters issues: first, whether the plaintiffs had rescinded or were entitled to have set aside agreements entitled "Heads of Agreement" dated 13 May 2004 and "Deed of Non-Dilution and Merger" dated 27 August 2004; secondly, whether the order made by the Court on 6 September 2004 dismissing the earlier 2001 proceedings should be set aside; and thirdly whether, assuming the plaintiffs were entitled to some or all of such relief, they were entitled to damages.
The main issues before his Honour were whether representations were made by HTT and Mr Renshall that HTT's joint venture partner would provide the necessary funding to HTT to complete the project and take control of HTT by acquiring the units of smaller unit holders; if so, whether those representations were false; and if so, whether they were relied upon by Mr Zdrilic (who was and is the controlling mind of the plaintiffs) on behalf of the plaintiffs in entering into the impugned agreements. His Honour did not accept the plaintiffs' case in respect of the representations, and further held that even if the plaintiffs had been entitled to rescind, any such right had been lost by affirmation, because restitutio in integrum was not possible, and because the rights of third parties had intervened.
The plaintiffs' case against Mr Hickie and Vocifa was that HTT and Mr Renshall made the pleaded representations as their agents. His Honour, while observing that in light of his conclusion on the main issues it was unnecessary to express an opinion on the agency issue, nonetheless dealt with it, "although ... briefly" (at [984]), and concluded that HTT and Mr Renshall were not acting as Mr Hickie's agent "for relevant purposes," namely making representations as to the availability of funds (at [998]). Accordingly, his Honour dismissed all the plaintiffs' claims.
On 7 May 2012, Stevenson J ordered, inter alia, that the plaintiffs pay Mr Hickie's and Vocifa's costs, including reserved costs, on the ordinary basis up to 1 September 2011, and on the indemnity basis thereafter; his Honour also made an order that interest be payable in respect of those costs [Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited [2012] NSWSC 446]. In due course an assessor determined the amount of those cost, together with interest, to be $358,588.89, and the certificates of assessment were registered and took effect as a judgment of the court for that amount on 14 March 2013. It is that deemed judgment that founds both demands.
Meanwhile, on 21 February 2013, Allsop P had dismissed the plaintiffs' application for an extension of time within which to appeal from the substantive judgment of Stevenson J. However, on 6 March 2013, the plaintiffs applied for a review of the President's decision, and on 10 May 2013, McCallum J stayed enforcement of the costs judgment [Hickie v Land Enviro Corp Pty Ltd [2013] NSWSC 706]. That stay was subsequently extended and replaced by an undertaking not to enforce the judgment until 21 days after the Court of Appeal gave judgment on the review application.
The review application was heard on 18 September 2013. In a judgment delivered on 4 March 2014, the Court of Appeal allowed the review and extended time for filing an appeal with respect to HTT, Mr Renshall, Sentel and Devubo (whom the Court of Appeal called "the HTT parties"), but dismissed the application as against Mr Hickie and Vocifa ("the Hickie parties") [Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34]. The Court of Appeal found that there were real or significant prospects of success in overturning fundamental elements of the trial judge's reasons for dismissing the plaintiffs' claim against the HTT parties, but not against the Hickie parties.
On 25 March 2014, the plaintiffs filed an application for special leave to appeal to the High Court of Australia from the Court of Appeal's dismissal of the review with respect to the Hickie parties. The plaintiffs applied for a further stay of the costs judgment pending the hearing of their application for special leave. That stay was refused by Harrison J on 29 April 2014, essentially on the basis that there was no reasonable prospect of demonstrating an arguable case of error in the finding of no agency, let alone in securing a grant of special leave, and that the balance of convenience clearly favoured declining a further stay in circumstances where the corporate plaintiffs - the present applicants - were admittedly insolvent [Hickie v Land Enviro Corp Pty Ltd [2014] NSWSC 472]. On 8 May 2014, the plaintiffs filed a notice of intention to appeal from the judgment of Harrison J.
It was in those circumstances that on 12 May 2014 the present proceedings, which had until that point been consensually adjourned from time to time pending the outcome of the proceedings in the Court of Appeal and the stay application, ultimately came on for hearing. Mr Zdrilic appeared, by leave, for the applicants, and presented detailed and comprehensive written and oral submissions and supporting documentation. The material was such that it was not practicable to complete the hearing in the list on 12 May, and accordingly the hearing was adjourned part-heard, and concluded on 19 June, when judgment was reserved.
Because the plaintiffs were not legally represented, the High Court dealt with the special leave application on the papers, publishing its decision on 15 August 2014. The creditors' solicitor requested that the matter be relisted for the purpose of my being informed of the outcome. Mr Zdrilic objected and submitted that I should not be informed of the outcome. But one - and indeed the main - ground of the application before me was provided by the pendency of the application for special leave. Indeed, whether there was a reasonable prospect of obtaining a grant of special leave was the chief, though not the sole, issue. Were the special leave application successful, it would immeasurably strengthen the applicants' case. Should it fail, the ground that the judgment debt was impugned by a pending application for special leave would be removed. In my view, it would have been absurd to decide the present application without knowing the fate of the special leave application, once it had been decided. As Mr Zdrilic submitted, the outcomes of special leave applications are matters of public record, and it was unnecessary to relist the matter for the purpose of being informed of it. On 15 August 2014, the High Court (Bell and Gageler JJ) dismissed the application for special leave [Land Enviro Corp Pty Ltd v Hickie [2014] HCASL 146].
Grounds of Application
The originating process relied expressly on s 459H(1)(a) (genuine dispute as to existence or amount of debt) and s 459J(1)(b) (some other reason). Mr Zdrilic's s 459G affidavit asserted only that there was a genuine dispute as to the existence of the debt, and deposed to the pendency of the application for a review of the decision of Allsop P to enable an extension of time to file an appeal, and that "the applicants ... believe that they have good prospects of the appeal being successful". I would accept that that sufficiently raises, for Graywinter purposes, a ground based on the pendency of the application for an extension of time for appeal, any consequent appeal, and any consequent application for special leave to appeal.
In his written and oral submissions, however, Mr Zdrilic advanced four main arguments, namely (1) that there is a genuine dispute about the debt claimed (s 459H(1)(a)); (2) that the applicants have a genuine offsetting claim (s 4549H(1)(b)); (3) that there was a defect in the demand, which would cause substantial injustice if the demand were not set aside, namely that it was issued by multiple creditors (s 459J(1)(a)); and (4) that there was "some other reason" to set aside the demand, namely that it was an abuse of process (s 459J(1)(b)). The respondent creditors unsurprisingly objected that those grounds, other than the first, had not been raised or adverted to in the s 459G affidavit and could not, consistent with the so-called Graywinter principle, be relied upon. While there is considerable force in that objection, I propose to address those grounds on the merits because, even if they are available, they cannot succeed.
Disputed debt?
As to the first ground - that there was a genuine dispute as to the existence of the debt - the applicants submitted that the pendency of the application for special leave demonstrated the existence of a genuine dispute in respect of the debt. While the creditors argued that the costs judgment which founded the demands had never been impugned, I accept that a successful appeal from the substantive judgment would likely affect the costs order that underpins the costs judgment, which itself could be disturbed by overturning the original costs order (which was made in the substantive proceedings), and not only on grounds relating to the assessment process which alone could be raised directly to impugn the costs judgment.
Mr Zdrilic emphasised that the test for establishing a genuine dispute was an undemanding one. That proposition is correct, but in the present context irrelevant, because it is well-established by authority that there can be no "genuine dispute", for the purposes of s 459H, about a judgment debt, and the circumstance that a judgment may be liable to be set aside as a result of a successful appeal does not establish a "genuine dispute" as to its existence, in the meantime: the judgment concludes any dispute, and the existence of the debt is res judicata between the parties [Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466 (at [11]); and see Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039; Scope Data Systems Pty Ltd v BDO Nelson Parkhill [2003] NSWSC 137; Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759; (2007) 25 ACLC 1038, [12]; Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235; In the matter of Land Enviro Corp Pty Ltd [2013] NSWSC 731 (Black J), [7]]. The conclusiveness of the judgment for this purpose is not affected by the pendency of an appeal: the debt indisputably exists, unless and until the judgment is set aside. Accordingly, there is, for relevant purposes, no genuine dispute as to the existence or amount of the judgment debt that founds the subject demands.
Some other reason - pending special leave application?
That, however, is not the end of the matter, because although the mere pendency of an appeal does not of itself amount to "some other reason" for setting aside a statutory demand, an appeal on reasonable grounds which, if successful, would impeach the judgment debt may provide "some other reason", at least if the judgment is the subject of a stay pending the appeal, or security is given [Wilden v Greenco; Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454, 457-8; Midas Management v Equator Communications Pty Ltd, [24]; ACN 001 891 103 Pty Ltd v Reiby Street Apartments Pty Ltd [2007] NSWSC 1345, [8], [10]; Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd [2011] NSWSC 9,[57]].
Where the judgment has not been stayed, it is the court's usual if not invariable practice to require security to be given. In Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Limited, it was said that, in a case where a judgment that founded a creditor's statutory demand was being appealed, the pendency of an appeal did not constitute "some other reason" within s 459J(1)(b) whereby the statutory demand should be set aside, unless the Court of Appeal were actually to stay enforcement of the judgment; see also Sajepe Pty Limited v Lawler (2000) 18 ACLC 457; [2000] NSWSC 262. In Meehan v Glazier Holdings Pty Limited [2005] NSWCA 24; (2005) 53 ACSR 229, Santow JA in the Court of Appeal cited those cases and said:
Glazier has to date held back from seeking any stay of the costs order. It instead participated in the costs assessment. Even if it might now belatedly engage in yet further litigation by seeking to persuade the Court of Appeal to grant a stay, that consideration carries little weight. There is, of course, no certainty that the Court of Appeal would grant any such stay. The position is analogous to the case where a judgment, the basis of the demand, has been appealed. That fact was held not to constitute some other reason within s 459J(1)(b) whereby the statutory demand should be set aside unless the Court of Appeal were actually to stay enforcement of the judgment.
In Timberland Property Holdings Pty Limited v Schindler Lifts Australia Pty Limited, Barrett J, as his Honour then was, referred to those decisions and to the judgments of Hammerschlag J in Midas Management Pty Limited v Equator Communications Pty Limited and of Ward J in Cranney Farm Pty Limited v Corowa Fertilizers Pty Limited, as establishing that the existence of arguable grounds of appeal did not, in the absence of a stay, constitute "some other reason" within s 459J(1)(b), but that such reason would exist if the amount of the judgment were paid into Court. His Honour said (at [26]):
As things stand 'some other reason' within s 459J(i)(b) does not exist, but if the amount of the judgment debt is deposited so as to be available to meet the judgment if the Court of Appeal proceedings extinguish the possibility of the judgments being set aside, then 'some other reason' will exist.
The cases therefore establish that a pending appeal (or application for leave to appeal from, or to set aside) a judgment, even one in which the grounds are considered arguable, does not of itself provide sufficient reason to set aside a creditor's statutory demand, unless the judgment has been stayed, or security for it given (although there may be an exception to this where the judgment is not amenable to a stay): see Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd, [18]; Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Limited; Midas Management Pty Limited v Equator Communications; Timberland Property Holdings v Schindler Lifts; In the matter of A.C.E.S. Sogutlu Holdings Pty Ltd [2014] NSWSC 140, [17]-[21]].
Analogously to a pending appeal, I would readily accept that a pending application for special leave to appeal, on reasonable grounds, may provide "some other reason", if the judgment is the subject of a stay pending determination of the special leave application, or security is given, but not otherwise. In any event, at the least the application for leave must be one on reasonable grounds, which involves not only a seriously arguable case of error, but also some prospect of attracting a grant of special leave.
When the case was argued before me - self-evidently before the decision of the High Court - Mr Zdrilic fairly submitted that the agency issue had only ever been addressed superficially. Stevenson J admittedly - and in the circumstances entirely reasonably - did not deal with the issue in detail; having decided the case on other grounds, his determination on the agency issue was not necessary to the ultimate decision, although it was addressed in some detail in the submissions before his Honour, on both sides. The totality of his Honour's reasoning on the subject was as follows:
982 I have mentioned earlier that the plaintiffs claim that HTT and Mr Renshall made the pleaded representations as agent for Mr Hickie and Vocifa.
983 In view of my conclusions as to the substance of the plaintiffs' claim, it is not necessary for me to express any opinion about this matter.
984 However, and again in deference to the submissions made on this issue, I shall deal with it, although again, briefly.
985 In the written submissions the plaintiffs stated:-
"The plaintiffs do not contend that Mr Renshall and HTT were the agents of Mr Hickie and Vocifa generally or for all purposes. They accept that the agency had its limits. However, even if the authority of Mr Renshall and HTT was limited to acting as a conduit - communicating information for and on behalf of Mr Hickie and Vocifa - as submitted by them, that would be enough to fix them with the legal responsibility for the representations of HTT and Mr Renshall."
986 The plaintiffs particularised the claim of agency against Mr Hickie and Vocifa as follows:-
(a) "At all material times, Renshall was a director and shareholder of Devubo and represented it in the negotiations with LEC and Zdrilic;
(b) HTT and Renshall conducted the negotiations with LEC and Zdrilic on behalf of Hickie and Vocifa;
(c) In the course of the negotiations, Renshall represented that he represented Hickie and his interests in the negotiations;
(d) Further:
(i) the negotiations involved Hickie ceasing to be a director of HTT, becoming a co-director with Renshall and Zdrilic in a new company, transferring his 12.5% interest in the Huntley Trust (12.5% of units in the Trust were held by Vocifa) to the new company and the fixing of the amount of loan funds owed by HTT to Hickie and/or Vocifa;
(ii) Renshall conducted all negotiations with LEC and/or Zdrilic in relation to the matters set out in (i) above;
(iii) Devubo, Hickie and Vocifa entered into the Heads of Agreement dated 13 May 2004 and the Deed of Non-Dilution and Merger on 27 August 2004 on terms negotiated between Renshall and LEC and/or Zdrilic;
(iv) Hickie was at all material times a director and shareholder of Vocifa, which company held Hickie's interests in HTT's project."
987 As to particular (c), Mr Jucovic accepted that a representation by Mr Renshall of his asserted authority to negotiate on behalf of Mr Hickie would not be sufficient to establish agency. Any such representation would have to come, expressly or implicitly, from Mr Hickie: Freeman and Lockyer v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480 at 503: Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at [36].
988 The only evidence of any representation by Mr Renshall emerged in the course of Mr Connolly's cross-examination of Mr Zdrilic when he said:-
"I am not sure that he used the word agent but he said to me many times, when we didn't agree on a certain point, he said 'I will come back to you I will have to check with David Hickie'."
989 The substance of the plaintiffs' case against Mr Hickie was that Mr Hickie had a direct interest in the negotiations that Mr Renshall was conducting with Mr Zdrilic and yet it was Mr Renshall, not Mr Hickie, that conducted those negotiations with Mr Zdrilic.
990 Thus, it was argued, as Mr Hickie did not involve himself in those negotiations, he must be taken to have authorised Mr Renshall to make the representations of which complaint is made.
991 The plaintiffs relied upon what was said by Gavan Duffy CJ and Starke J in Colonial Mutual Life Assurance Society Limited v The Producers and Citizens Cooperative Assurance Company of Australia Limited (1931) 46 CLR 41 at 46-47:-
"We apprehend that one is liable for another's tortious act 'if he expressly directs him to do it or if he employs that other person as his agent and the act complained of is in the scope of the agent's authority'. It is not necessary that the particular act should have been authorized; it is enough that the agent should have been put in a position to do the class of acts complained of. And if an unlawful act done by an agent be within the scope of his authority, it is immaterial that the principal directed the agent not to do it." (citations omitted).
992 There was debate before me as to the point at which Mr Hickie's "position" had been negotiated. Mr Connolly argued that that position had been reached by 6 February 2004 as, by then, the draft Heads of Agreement provided all that Mr Hickie wished to achieve, namely that:-
(a)the Renshall, Zdrilic and Hickie interests in HTT be placed in the new entity (to be Sentel);
(b)Mr Zdrilic would cease to prosecute the 2001 Proceedings (in which Mr Hickie was a defendant); and
(c)the proposed holding entity would acknowledge the loans of each of Messrs Renshall, Zdrilic and Hickie.
993 Mr Connolly submitted that negotiations thereafter simply refined those fundamental matters and, significantly, led to a result that Mr Hickie most certainly did not want, namely Mr Zdrilic's position as an alternate director of HTT.
994 Whether or not Mr Hickie's "position" had been achieved by 6 February 2004, it seems to me that the most that can be said is that Mr Hickie was content to allow Mr Renshall to put to Mr Zdrilic his position in relation to the various elements which, ultimately, found their way into the Heads of Agreement.
995 In that regard I see force in the submission that Mr Hickie put Mr Renshall in a position from which it was reasonable for Mr Zdrilic to infer that Mr Renshall had Mr Hickie's authority to negotiate such terms; see Crabtree -Vickers Pty Limited v Australian Direct Mail Advertising & Addressing Co Pty Limited (1975) 133 CLR 72 at 78.
996 But there is no suggestion that Mr Hickie had any involvement in the dealings with any proposed funder. There is no evidence that Mr Hickie was involved in the negotiations between HTT and Mr Renshall and IBIS/IPC or that Mr Zdrilic thought Mr Hickie had any such involvement.
997 In those circumstances, I cannot see how Mr Zdrilic could reasonably have inferred that the representations allegedly made to him by Mr Renshall concerning the availability of funds (as opposed to negotiation of the terms of the Heads of Agreement) were made on behalf of Mr Hickie.
998 For that reason, my opinion is that HTT and Mr Renshall were not acting as Mr Hickie's agent for relevant purposes, that is to say for the purposes of making the representations as to the availability of funds.
999 Certainly, so far as concerns the critical events of 25, 26 and 27 August 2004, apart from being present at the meeting of 27 August 2004 (although only for part of the meeting), there is no suggestion that Mr Hickie had the slightest involvement in HTT's discussions with potential funders or in the formulation of whatever opinions and representations were passed on to Mr Zdrilic during that period.
The applicants' draft notice of appeal before the Court of Appeal impugned his Honour's findings, alleging that his Honour had erred in not finding that Mr Renshall or his associates were the plaintiffs' agents. The Court of Appeal also dealt shortly with that matter: in respect of the claims against the Hickie parties, Basten JA (with whom Beazley P agreed) said:
6 Secondly, the third respondent (Mr David Hickie), and the sixth respondent (Vocifa Pty Ltd) had common representation and may be identified as the "Hickie interests". As will be noted below, the primary case for the applicants was that they had suffered loss and damage as a result of misrepresentations for which Mr Renshall (the first respondent) was primarily liable. In the original pleadings, the claim against the Hickie interests was based on Mr Renshall acting as their agent. However, the trial judge found that there was no evidential basis for the agency: at [997]. Nothing was said in the course of the proceedings in this Court to cast doubt on that finding. Although part of the relief claimed by the applicants was the setting aside of the settlement of the 2001 proceedings, to which the Hickie interests were party, it was not submitted that they were a necessary party on that basis.
...
58 The application should be dismissed in relation to the third and sixth respondents. The applicants must pay their costs.
Leeming JA (with whom Beazley P also agreed) said;
69 I agree with what Basten JA has said about the absence of a case against the Hickie interests, and his Honour's proposed orders as to costs.
In the application for special leave, the applicants complain, inter alia, of the following alleged errors of the Court of Appeal:
4. The Court erred in finding that there was no arguable case in respect of the Hickie interests, apparently on the basis that the trial judge found that there was no evidential basis that the Second Respondent was acting as agent for the Hickie interests in engaging in misleading or deceptive conduct which induced the entry into the relevant agreements, notwithstanding that the trial judge found that:
(a) there was a factual basis for the agency in respect of the negotiation of those same agreements; and
(b) the misleading representations were made during the course of negotiations.
As to whether there was an arguable case of error, there are now concurrent findings by Stevenson J that no agency was established; by three judges of appeal that there was no apparent error in that conclusion; by Harrison J that there was no prospect of demonstrating error in the Court of Appeal's conclusion, and (now) by two justices of the High Court that insufficient doubt attends the decision of the Court of Appeal to warrant a grant of special leave. While I have considered whether, in the light of the decision of the High Court, there is any utility in considering this issue, let alone expressing an alternative (and necessarily incorrect) view to that tide of judicial opinion, I have concluded that, in justice to Mr Zdrilic and his arguments, I should do so.
Paragraphs [995]-[999] of Stevenson J's reasons are central. It appears that his Honour was prepared to accept that Mr Hickie put Mr Renshall in a position from which it was reasonable for Mr Zdrilic to infer that Mr Renshall had Mr Hickie's authority to negotiate the terms of the agreements (at [994]-[995]). That was a most significant finding, in the light of his Honour's reference to the proposition in Colonial Mutual Life Assurance Society Limited v The Producers and Citizens Cooperative Assurance Company of Australia Limited (1931) 46 CLR 41 (at 46-47) to the effect that to incur liability for another's tort it is not necessary that the particular act should have been authorized, but it is enough that the agent should have been put in a position to do the class of acts complained of.
Stevenson J reasoned that because there was no evidence that Mr Hickie had any involvement in the dealings with any proposed funder, or that Mr Zdrilic thought Mr Hickie had any such involvement, Mr Zdrilic could not reasonably have inferred that the crucial representations allegedly made to him by Mr Renshall concerning the availability of funds (as distinct from negotiation of the terms of the agreement) were made on behalf of Mr Hickie. However, it seems to me at least arguable that statements concerning the availability of funds, that were calculated to induce Mr Zdrilic to complete the agreement, were so connected with negotiation of the terms as to be within the scope of Mr Renshall's apparent authority: if he had apparent authority to negotiate the terms of the agreement, it seems to me at least arguably irrelevant that Mr Hickie had no apparent involvement in dealings with the funder. At least arguably, if Mr Renshall were authorised to negotiate terms on Mr Hickie's behalf, making representations on any related subject matter was within the scope of his apparent authority. This is supported by the observations of Dixon J, with whom Rich J agreed, in Colonial Mutual Life (at 50), to which the plaintiffs' counsel referred in submissions to the trial judge:
If the view be right which I have already expressed, that the "agent" represented the company in soliciting proposals so that he was acting in right of the company with its authority, it follows that the company in confiding to his judgment, within the limits of relevance and reasonableness, the choice of inducements and arguments, authorised him on its behalf to address to prospective proponents such observations as appeared to him appropriate. The undertaking contained in his contract not to disparage other institutions is not a limitation of his authority but a promise as to the manner of tis exercise. In these circumstances I do not think it is any extension of the principle to hold the company liable for the slanders which he thought proper to include in his apparatus of persuasion.
It seems to me arguable that, once it was accepted that the Hickie parties were to be taken to have authorised Mr Renshall to negotiate the terms of the agreement with the plaintiffs, representations made by him in the course of those negotiations were within the scope of his apparent authority. In this respect, which was crucial to the dismissal of the case against the Hickie parties, it seems to me arguable that his Honour erred.
The Court of Appeal, as I have indicated above, dealt shortly with the case against the Hickie parties, no doubt because in what was in any event an uncommonly extensive argument and judgment on an application for an extension of time, the focus was on the primary case; Mr Zdrilic's written submissions did not elaborate the case against the Hickie respondents, nor did his oral argument (as he told the Court at the time, the time available for the hearing constrained the scope of his oral submissions); and he did not anticipate that the Court of Appeal would, as he put it, separate the defendants into two groups and deal differently with them. The argument raised by ground 4 in his special leave application, to which I have referred above, was not addressed by the Court of Appeal, because it was not distinctly put to it.
Had this matter been decided without the benefit of the High Court's decision, I would have found that there was an arguable case of error. But that of itself does not make an arguable case for special leave. As the applicants' written case on the application for special leave implicitly recognised, the application raised no question of principle of general application of the kind that is normally required to attract a grant of special leave; the only ground advanced for leave was "the interests of justice in the individual case", which is notoriously rarely successful; and the case was a dubious vehicle for agitating a question that had not been distinctly argued before the Court of Appeal. In any event, this argument is rendered moot by the dismissal of the special leave application on 15 August 2014. Whatever might have been the position until then, there is now no basis for contending that the pendency of the special leave application provides "some other reason" for setting aside the demand.
Moreover, even had there been an application for special leave with reasonable prospects, there would have remained the obstacle that the judgment was not stayed, nor was there any offer of security or payment in. In those circumstances, "some other reason" to set aside the demand would not have been established.
Finally, I appreciate that the plaintiffs have sought leave to appeal from Harrison J's refusal of a stay. However, the special leave application having now failed, I cannot see how that application, even if until then it had some prospect of success, could now have any.
Offsetting claim?
The applicants' second argument was that they had a genuine offsetting claim. So far as I can ascertain, the supposed offsetting claim is that if the applicants succeed in their appeal against the HTT respondents, it may lead to their acquiring the Hickie interests' equity in HTT, through their interest in Sentel. The theory behind this argument is not entirely apparent from the evidence and submissions, but appears to be that (1) HTT is worth in the order of $140 million; (2) Sentel holds 30% of HTT; (3) Hickie and Vocifa hold a one-third interest in Sentel, worth approximately $14 million; (4) if the plaintiffs succeed in their appeal against the HTT defendants, Hickie and Vocifa may have to transfer all their interest to the plaintiffs.
However, the basis on which success in the appeal against the HTT respondents (who do not include the Hickie interests), would result in the Hickie interests being required to transfer their interest to the plaintiffs, was not elaborated or explained. Not only is it not self-evident, but it appears inconceivable.
Moreover, an offsetting claim must arise between identical parties. If the supposed offsetting claim is against HTT, then it is not an offsetting claim because it is not against the Hickie defendants. If the supposed offsetting claim is against the Hickie defendants, then it is foreclosed by the judgment, which is final.
Defective demand?
The applicants submitted that the demand was defective because it was issued and served by multiple creditors, citing First Line Distribution Pty Ltd v Whiley (1995) 18 ACSR 185. However, that case stands only for the proposition that multiple creditors cannot joint their separate debts in one demand, and says nothing as to a joint debt. There is some controversy as to whether one of a number of joint creditors can issue a statutory demand [Manzo v 555/255 Pitt St Pty Ltd (1990) 21 NSWLR 1; 2 ACSR 809; cf Bentham Management Pty Ltd v Union Finance Pty Ltd [2007] SASC 42; and see Randall Pty Ltd v Chepan Pty Ltd (2009) 73 ACSR 267, [22]-[29]]. However, it is undoubted that multiple joint creditors can - and indeed prudently should - join in issuing a single joint demand for their joint debt [Bentham Management Pty Ltd v Union Finance Pty Ltd, [28]; Australian Workers Union v Bowen (1946) 72 CLR 575, 583 (Latham CJ), 590 (Dixon J)].
This point is without merit, and even if it could be advanced consistently with the Graywinter principle would fail.
Abuse of process?
Reduced to its essentials, this ground was that the demands were an abuse of process because they were served not bona fide to trigger the winding-up process, but to coerce the applicant companies to pay a judgment debt which was known to be the subject of a genuine appeal.
It is not an abuse of process for a creditor to issue a demand in respect of a debt under a judgment that has not been stayed, notwithstanding that an appeal from the judgment is pending, and a fortiori where the company is admittedly insolvent. As I said in In the matter ofA.C.E.S. Sogutlu Holdings Pty Ltd (at [16]):
Let me say at the outset that it cannot be contended that, by seeking to enforce a judgment that has not been stayed, notwithstanding that an appeal is pending, a judgment creditor thereby engages in an abuse of process or unconscionable conduct. To the contrary, prima facie a judgment creditor, even pending an appeal, is entitled to the fruits of the judgment, and a judgment debtor that wishes to procure a different position is bound to apply to the Court in which the judgment was given, or its appellate division, for a stay of the judgment pending appeal. No such application has been made in this case.
The contention that the statutory demands are abuses of process is without foundation.
Conclusion
My conclusions may be summarised as follows.
The judgment concludes any question of "genuine dispute" for the purpose of s 459H, and its conclusiveness for this purpose is not affected by the pendency of an appeal: the debt indisputably exists, unless and until the judgment is set aside. Accordingly, there is, for relevant purposes, no genuine dispute as to the existence or amount of the judgment debt that founds the subject demands.
Although, had this matter been decided without the benefit of the High Court's decision, I would have found that there was an arguable case of error, that of itself would not have made an arguable case for special leave. As the application raised no question of principle of general application, it could only succeed on the notoriously difficult ground of "the interests of justice in the individual case". In the light of the dismissal of the special leave application, there is now no basis for contending that the pendency of the special leave application provides "some other reason" for setting aside the demand. Moreover, there was no stay in force when the demands were served, and there is none now. The pending application for leave to appeal from Harrison J's refusal of a further stay cannot, in the light of the outcome of the special leave application, have prospects of success. In the absence of a stay, an offer of payment in or security, the pendency of an arguable application for special leave would not have provided "some other reason" for setting aside the demand.
If the supposed offsetting claim is against HTT, then it is not an offsetting claim because it is not against the respondent creditors. If the supposed offsetting claim is against the Hickie parties, then it is foreclosed by the judgment, which is final.
Even if the argument that the demand was defective because it was issued by multiple creditors was available consistently with the Graywinter principle, it would fail, because it is indisputable that multiple joint creditors can join in a single demand for their joint debt.
It is not an abuse of process for a creditor to issue a demand in respect of a debt under a judgment that has not been stayed, notwithstanding that an appeal from the judgment is pending, and a fortiori where the company is admittedly insolvent.
Accordingly, none of the grounds on which the applicants rely can be sustained, and the applications must be dismissed.
It does not follow that the companies will necessarily be wound up before the hearing of the appeals against the HTT parties. It is well-established that the Court has a discretion to adjourn the hearing of winding-up proceedings, and the existence of a reasonable prospect that as result of that appeal the companies would be in a position to pay their debts to the Hickie parties, in circumstances where the companies are not trading, might well afford a ground for the exercise of that discretion.
In each matter, the Court orders that the proceedings be dismissed, with costs.
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Decision last updated: 27 August 2014
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