In the matter of Homeward Bound Export Cherry Project Pty Limited

[2012] NSWSC 572

Supreme Court

New South Wales

Case Title:	In the matter of Homeward Bound Export Cherry Project Pty Limited
Medium Neutral Citation:	[2012] NSWSC 572
Hearing Date(s):	17 May 2012
Decision Date:	17 May 2012
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Application for orders for further production of documents and adjournment refused. Matter adjourned for hearing with half day estimate. Costs reserved.
Catchwords:	CORPORATIONS - Winding up - Statutory demand - Corporations Act 2001 (Cth) s 459H(1)(b) - Application to set aside statutory demand on the basis of offsetting claim - Application for orders for further production of documents and adjournment of the proceedings - Further application for adjournment on the basis that the Plaintiff would be caught by surprise if matter proceeded to hearing on the merits.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) ss 56, 56-58, 57, 58 - Corporations Act 2001 (Cth) Pt 5.4, ss 459G, 459G(3), 459H(1)(a), 459H(1)(b), 459J
Cases Cited:	- Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; 21 ACSR 581
Texts Cited:
Category:	Interlocutory applications
Parties:	Homeward Bound Export Cherry Project Pty Limited (Applicant/Plaintiff) Farm Working Hands Pty Ltd (Respondent/Defendant)
Representation
- Counsel:	Counsel: A.B. Gartrell (Director in person) (Applicant/Plaintiff) J.H. Stephenson (Respondent/Defendant)
- Solicitors:	Solicitors: A.B. Gartrell (Director in person) (Applicant/Plaintiff) Flynns Solicitors (Respondent/Defendant)
File number(s):	11/370352
Publication Restriction:

JUDGMENT - EX TEMPORE

1. This is an application brought by the Plaintiff, Homeward Bound Export Cherry Project Pty Limited ("Homeward Bound") to set aside a statutory demand dated 26 October 2011 ("Demand") issued by the Defendant, Farm Working Hands Pty Limited ("FWH").

2. The application was filed by Homeward Bound on 18 November 2011 and was identified as an application under ss 459G and 459H(1)(b) of the Corporations Act. Section 459H(1)(b) deals with applications to set aside a statutory demand on the basis of an offsetting claim. At the time the application was filed Homeward Bound was represented by solicitors although it appears today before me by its director Mr Andrew Gartrell. The application was supported by affidavits of Mr Gartrell sworn 18 November 2011 and Ms Angelina Gartrell sworn 18 November 2011. The affidavit of Mr Gartrell identified a matter which would be relevant to establishing an offsetting claim, namely, a claim that FHW was alleged to have caused damage to motor vehicles, cherries which were being harvested and to a home occupied by workers which was estimated, by Mr Gartrell, as in excess of $30,000.

3. The affidavit also raised other matters which would not be relevant to establishing an offsetting claim although they would be relevant to establishing either a genuine dispute as to the Demand for the purposes of s 459H(1)(a) of the Corporations Act or, possibly, that the Demand should be set aside for some other reason under s 459J of the Act. I will proceed, for present purposes, on the basis that those other matters are in issue notwithstanding that the Originating Process referred only to s 459H(1)(b) of the Act because the Originating Process also sought such further or other relief as the nature of the case may require.

   Production of documents by FWH

4. The Court had previously made orders which provided for Homeward Bound to notify FWH of superannuation, employment or wage records of FHW that Homeward Bound maintained were relevant to whether there was a genuine dispute in relation to the invoices the subject of the Demand. By email dated 9 April 2012, Mr Gartrell identified certain categories of documents which Homeward Bound sought to have produced.

5. Mr Gartrell has identified certain complaints before me as to the adequacy of the documentation produced by FHW. First, Homeward Bound sought production of draft agreements between the parties which were ultimately not executed and associated correspondence. Objection was taken to the production of those documents on the basis that they were not relevant to the proceedings. In my view that objection was well-founded because there appears to be no contention by either party in the proceedings that a written document governs the relationship between them; second, a draft of such an agreement would not take the application to set aside the Demand any further; and third, because the orders previously made by the Court extended to superannuation, employment or wage records and such draft documents do not fall within that category.

6. Mr Gartrell also sought production of a number of other categories of documents including daily tally sheets, time sheets, and payroll records which would establish the hours worked by the employees or persons performing services on behalf of FHW in picking cherries. Mr Gartrell has submitted, before me, that there are difficulties as to the content of the documents produced which he suggests are not readily reconciled. He goes further to submit that those documents are, effectively, concoctions prepared by FHW on a later date.

7. Homeward Bound seeks, in effect, orders for the further production of documents and an adjournment of the proceedings to allow those further documents to be analysed. In my view, there are two substantial difficulties with that course. The first, which seems to me to be reason enough that the Court should not take that course, is that the affidavits filed in support of the application to set aside the Demand do not identify a contention that the hours charged were not worked by the relevant persons. There is a complaint in paragraph 8 of Mr Gartrell's affidavit as to payment arrangements involving FHW as at December 2010. There is a complaint in paragraph 9 as to such arrangements in the 2009 harvest. In paragraph 10, Mr Gartrell refers to his recollection that the invoices include charges for superannuation, workers compensation and other margins. The invoices which are in evidence before me do not include such charges, at least as any express identified charge, since they are charged on the basis of an hourly rate and a per lug rate in respect of cherries.

8. As I understand Mr Gartrell's contention, Homeward Bound seeks to have the documents produced in order to identify a basis on which it may have been overcharged in respect of the labour provided. This faces the fundamental difficulty that it has long been established that the only grounds of opposition which may be relied upon in an application to set aside a statutory demand are those identified in the affidavits supporting that application filed within the 21 day period in which that application was made or which may necessarily or reasonably be drawn from documents relied on in those affidavits. Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; 21 ACSR 581. This principle has been repeatedly applied subsequently in this court, other State Supreme Courts and the Federal Court of Australia. The principle is supported by matters of policy; in particular, the requirement for a supporting affidavit under s 459G(3) of the Corporations Act necessarily implies that that affidavit must identify the grounds on which the application to set aside the statutory demand is based.

9. In my view, the affidavits filed in support of the application to set aside the Demand provide sufficient identification of a contention that, first, another entity, Tablelands Cherry Management Pty Limited, was responsible for payment of the relevant invoices; second, there may have been irregularities in superannuation and tax arrangements in respect of payments by FHW; third, that charges made for the pruning of trees were not in accordance with an agreement reached between Homeward Bound and the Defendant; and fourth, there was damage caused which might support an offsetting claim. I do not understand those affidavits sufficiently to identify a ground to set aside the Demand that the hours charged for had not been worked by the relevant workers, which appears to be the basis on which the application for production of further documents is put.

10. There is a second difficulty with the application although it is perhaps less fundamental. FHW has already produced documents in response to the Court's order and Homeward Bound's request. While Mr Gartrell has identified an attack upon the substance or content of the documents produced, that is not non-compliance with the orders for production and is a matter which would be relevant, if at all, in a determination of the merits of the application to set aside the Demand.

11. Accordingly, I do not consider that there is any occasion to make further orders as to the production of documents. I also do not consider that there is any basis for an adjournment to permit further analysis of the documents already produced since that would only waste time and costs for both parties where further evidence would not be admissible as to these matters having regard to Graywinter and the long line of cases which has followed it.

12. Accordingly, I do not either adjourn the proceedings on this basis or make orders for the further production of documents.

    Homeward Bound's further adjournment application

13. Following my judgment in respect of the production of documents, Mr Gartrell, indicated, initially from the bar table and subsequently by evidence given on affirmation, that he had understood that the matter was listed only for directions today and Homeward Bound would be caught by surprise and disadvantaged if the matter proceed to a hearing on its merits.

14. When the matter was listed before Ward J on 2 April 2012, her Honour made orders including a note that her Associate would notify the parties of the hearing date for the application to set aside the statutory demand (on a half day estimate) or as to the next listing date. Mr Gartrell accepts that he received a notification from her Honour's Associate but says he understood that notification related to a mediation which took place earlier this week and did not understand that the matter had been listed for hearing today. Homewood Bound seeks, in effect, to have the matter adjourned to avoid a situation where it is not prepared for the hearing today.

15. In dealing with that adjournment application I am required to have regard to the matters specified in ss 56-58 of the Civil Procedure Act 2005 (NSW). Section 58 of the Act requires that, in deciding whether to make any order granting an adjournment of proceedings the Court must seek to act in accordance with the dictates of justice. For the purposes of determining what are the dictates of justice in a particular case, the Court must have regard to the provisions of ss 56 and 57 and may have regard to certain other matters, including the degree of injustice that would be suffered by the respective parties as a consequence to any order for direction and such other matters as the Court considers relevant. Section 56 in turn identifies the overriding purpose of the Act and the rules of Court in their application to civil proceedings as to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. Section 57 indicates that proceedings are to be managed having regard to specified objects including the just determination of the proceedings, the efficient disposal of the Court's business, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings and all earlier proceedings in the court, at a cost affordable by the respective parties.

16. Homewood Bound's application for an adjournment requires a difficult balance to be drawn. On the one hand, the application to set aside the Demand was filed on 18 November 2011 in respect of the Demand that had been served in late October 2011. It has now been six months since that application was filed and there is an importance, in the public interest, in dealing with applications to set aside statutory demands promptly. In particular, if the application to set aside the Demand fails and the Demand is not met, a presumption of insolvency will arise and other consequences may follow under Pt 5.4 of the Corporations Act. On the other hand, I am conscious that the interests of justice require that parties not be caught by surprise, and I am conscious that the risk of, and the disadvantages of, surprise to Homeward Bound would be greater in circumstances that Mr Gartrell is not legally trained I accept that there is a possibility that that has occurred in the particular case.

17. Mr Gartrell has also identified the possibility that Homeward Bound may wish to lead further evidence. Within the limits of the need to have this matter determined promptly, having regard to the time which has already lapsed, I will set a timetable for that to occur. The extent to which further evidence may be led will, of course, be limited by the principle identified in Graywinter to which I have previously referred, so that the only evidence that Homeward Bound could rely on would be evidence directed to matters which had already been identified as a basis to set aside the Demand and not evidence that raised any new ground to set aside the Demand which had not been identified in the original affidavits in support of the application to set aside the Demand. In allowing time for any further evidence, I will have regard to the fact that six months has elapsed since the original application to set aside the Demand and there has therefore been ample time for Homeward Bound, which was legally represented through at least part of that period, to identify any evidence which should be led.

18. In these circumstances I do not propose to proceed to a hearing today. I propose to list the matter for hearing with a half day estimate in the second half of next week. I will make an order, if Homeward Bound seeks it, allowing Homeward Bound to file any further affidavits on which it relies prior to that hearing.

    Costs

19. FWH applies for an order that Mr Gartell pay the costs of today, since the matter could not proceed today by reason of a misunderstanding as to whether it was listed for hearing today. In the course of submissions, Mr Gartell made a qualified concession that he would have no difficulty with paying the reasonable costs of today but indicated a degree of concern as to the quantum of those costs. I do not consider that I should act on that qualified concession and consider that it is preferable to determine the application on its merits.

20. FWH relies on the fact that Homeward Bound has sought to lead further evidence and contends that orders were previously made for the leading of evidence in the proceedings so that Homeward Bound seeks an indulgence in that regard. In my view a proper judgment as to the costs of today would require evidence as to the directions which had previously been made in the proceedings, and the history of compliance or non-compliance with them, which is not presently available. I consider that the proper course is to reserve the costs of today so they can be dealt with at the final hearing of the matter. If any party seeks orders for costs on that occasion on the basis of non-compliance of another party or the history of or conduct of the proceedings that application should be supported by affidavit evidence which indicates the events on the basis of which that application is made.

21. Accordingly I reserve the costs of today.

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