In the matter of Diveva Pty Limited

[2015] NSWSC 794

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Diveva Pty Limited [2015] NSWSC 794
Hearing dates:	13 April 2015
Decision date:	13 April 2015
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Application for leave to cross-examine officer of plaintiff granted.
Catchwords:	CORPORATIONS – creditor’s statutory demand – application to cross-examine officer of plaintiff – where cross-examination is the exception rather than the rule – whether defendant entitled to cross-examine the plaintiff to contend that the dispute or offsetting claim is an invention or fictitious.
Cases Cited:	- Britten-Norman Pty Limited v Analysis and Technology Australia Pty Limited [2013] NSWCA 344; (2013) 85 NSWLR 601 - Edge Technology Pty Ltd v Lite-On Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 - Fitness First Australia Pty Limited v Dubow [2011] NSWSC 531 - Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 - Montage Group Pty Limited v Wong [2011] NSWSC 726 - United Capital Properties Pty Limited v Handbury Asset Management Pty Limited [2011] FCA 1075; (2011) 86 ACSR 161
Category:	Procedural and other rulings
Parties:	Diveva Pty Ltd (Plaintiff) Pacific Blue Metal Pty Ltd (Defendant)
Representation:	Counsel: J C Giles (Plaintiff) B DeBuse (Defendant) Solicitors: Somerville Legal (Plaintiff) Marsdens (Defendant)
File Number(s):	2014/346133

Judgment – ex tempore

1. Application is made in these proceedings to cross-examine Mr Pinson, a principal of Diveva Pty Limited, who has sworn two affidavits in these proceedings in support of the Plaintiff's application to set aside the creditor's statutory demand.

2. The matters which Mr DeBuse, who appears for the Defendant, indicates he seeks to cross-examine Mr Pinson about are, in effect, earlier documents in which matters now said to give rise to an offsetting claim were not raised and documents which it is said are inconsistent with the existence of that claim, or alternatively with the quantification of that claim so far as it involves a claim for loss of profit.

3. I should pause to note that there was a well-established position, over many years, which treated cross-examination as the exception rather than the rule in applications to set aside a creditor's statutory demand. In Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 292-293, Hayne J observed that the circumstances in which leave would be granted to cross-examination would be rare, perhaps very rare indeed, and did not grant such leave where a defendant sought to advance a case that matters relied on in opposition to a creditor's statutory demand were a recent invention. In Edge Technology Pty Limited v Lite-On Technology Corporation [2002] NSWSC 471; (2000) 34 ACSR 301, Barrett J observed at [45] that:

“The threshold presented by the test to set aside a statutory demand does not however require of the Plaintiff a rigorous and in-depth examination of the evidence relating to the Plaintiff's dispute or offsetting claim. That is why cross-examination in contested statutory demands is limited.”

4. In Edge Technology above, Barrett J referred to Mibor Investments above, and, in Fitness First Australia Pty Limited v Dubow [2011] NSWSC 531, Ward J observed at [6] that cross-examination was rarely permitted because:

“The Court does not determine the merits of any dispute that may be found to exist, but simply whether these [sic] is such a dispute and the threshold for that is not high."

5. I in turn referred to each of those decisions, and declined leave to cross-examine in Montage Group Pty Limited v Wong [2011] NSWSC 726.

6. Mr Giles in turn draws attention to the decision in United Capital Properties Pty Limited v Handbury Asset Management Pty Limited (2011) FCA 1075; [2011] 86 ASCR 161, where Stone J referred to the decision in Mibor Investments above and observed that, while there was no rule that precluded cross-examination in the context of an application of this kind, there were sound reasons why the discretion should rarely be exercised. Her Honour there did not accept a submission that cross-examination would be appropriate in respect of matters that were relevant to the genuineness of the dispute.

7. A question arises whether the approach adopted by the Court of Appeal in Britten-Norman Pty Limited v Analysis and Technology Australia Pty Limited [2013] NSWCA 344; (2013) 85 NSWLR 601 requires an alteration in that approach. On its face, it ought not to do so, because, as Mr Giles points out, the Court of Appeal there referred to Mibor Investments above and repeated the proposition that cross-examination in an application to set aside a creditor's statutory demand is not and ought not to be the norm, before finding that an offsetting claim was not established, inter alia, because a lack of genuineness of the claim had not been put to the relevant witness in cross-examination.

8. However, it seems to me that the approach adopted in Britten-Norman above, in finding that an offsetting claim should less readily be accepted, where it had not been put to the relevant witness, must turn upon a proposition that, had counsel sought to put the matter to the relevant witness, he or she would have been permitted to do so. It seems to me that the Court of Appeal’s reasoning that an inference that a genuine offsetting claim did not exist should less readily be drawn where it had not been put to the relevant witness must imply that counsel would have been permitted to do so had he sought to do so, despite the reluctance to permit that course in earlier authorities. Accordingly, notwithstanding that the legal principles applied appear to be the same, the practical outcome of the Court of Appeal's reasoning in Britten-Norman above seems to me to be somewhat different, so far as the extent to which cross-examination is permitted. It seems to me that the Court may need more readily to permit cross-examination in creditor's statutory demand applications than had previously occurred, because of the potential unfairness to a party that seeks to establish that a dispute or offsetting claim is not genuine, or not permitting cross-examination, where its not having done so may then be said to weaken its claim that a dispute or offsetting claim was not genuine.

9. It may be that the approach of the earlier cases, and Britten-Norman above, can be reconciled on a relatively narrow basis, to which Mr DeBuse referred in submissions. The earlier cases proceed on the basis that cross-examination would rarely be permitted because, inter alia, if cross-examination demonstrates a range of disputed matters, then that is likely to reinforce, rather than to impugn, the claim that a dispute or offsetting claim is genuine. The approach in Britten-Norman above may have the result that, at least if a party seeks to contend that, in effect, a dispute or an offsetting claim is an invention, or is so inconsistent with contemporary documents that it must be treated as a fiction, then it is necessary to put that matter to the relevant witness. That cross-examination may well not assist that party unless it advances such a claim, and may weaken its case if it demonstrates that the dispute or offsetting claim has a sound basis. On that basis, following Britten-Norman above, the Court would at least more readily permit such cross-examination where what is sought to be done is to impugn the genuineness of the relevant dispute or offsetting claim. That approach is not inconsistent with Mibor Investments above, which contemplated that cross-examination could be permitted in narrow circumstances.

10. For these reasons, it seems to me that I must permit, albeit within relatively narrow scope, the cross-examination sought to be undertaken by Mr DeBuse, so far as he seeks to put to Mr Pinson that the offsetting claim on which the Plaintiff relies is not genuine. I should note, however, that nothing in this judgment should be taken to permit a wide ranging cross-examination as to the matters in dispute, as distinct from a cross-examination that is targeted directly to the question whether the claim, for example, for loss of opportunity or loss of profits, as arising from the relevant events, is genuine.

**********

Decision last updated: 19 June 2015