Indigo Financial Money Pty Ltd v Moustrides & Moustrides - [2010] SASC 235

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
INDIGO FINANCIAL MONEY PTY LIMITED v MOUSTRIDES & MOUSTRIDES
[2010] SASC 235
Reasons of Judge Withers a Master of the Supreme Court
30 July 2010
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND
CORPORATIONS ACT - MULTIPLE STATUTORY DEMANDS - PROCEDURE
Corporations Act 2001 (Cth) s 459E, s 459F, s 459G and s 459J; Supreme Court Rules r 73(2), referred to.
Help Desk Institute Pty Ltd v Adams (1999) 17 ACLC 18, applied.
David Grant & Co Pty Limited (Receiver Appointed) v Westpac Banking Corporation (1995) 184 CLR 265; (1995) 13 ACLC 1572; Femley Pty Ltd v Salkan Engineering Pty Ltd (1999) 17 ACLC 828; Filaria Pty Limited v Grace Carlisle & Garry James Buick & Keyleto Pty Limited (Master Harper, 24 September 2004, unreported, [2004] ACTSC 95); Ambassador at Redcliffe Pty Ltd & Anor v Barreau Peninsula Property Pty Ltd & Ors (2006) 202 FLR 459; Remo Constructions Pty Ltd v Dualcorp Pty Ltd (2008) 222 FLR 375; Cooloola Dairys Pty Ltd v National Foods Milk Ltd (2004) 184 FLR 86; Gordon v Tolcher (2006) 231 CLR 334, considered.

INDIGO FINANCIAL MONEY PTY LIMITED v MOUSTRIDES & MOUSTRIDES
[2010] SASC 235

JUDGE WITHERS. The plaintiff in this matter was served with two statutory demands on 22 April 2010. One such demand was issued by Peter Raymond Moustrides for the amount of $49,000.00. That demand is verified by an affidavit of Mr Moustrides in which he attests that the monies are due pursuant to an investment certificate of 30 June 2008 and represents $45,000.00 principal advanced and $4,000.00 by way of four months’ interest at $1,000.00 per month – see Court Document 2B.
The second statutory demand was served on the same date and issued by the same solicitors on behalf of Marguarita Arista Moustrides for the amount of $213,360.00. This is alleged to be a principal amount invested with the plaintiff on term deposit of $200,000.00 together with interest for a four month period amounting to $13,360.00. That demand is verified by an affidavit of Ms Moustrides confirming that the investment provided for interest at a rate of 20 per cent per annum from 15 October 2007 and was terminable on 14 days notice. She attested that to her belief there was no genuine dispute in relation to the demand.
Upon receipt of the statutory demands the plaintiff issued an originating process on 12 May 2010 against Peter Moustrides as first defendant, and Marguarita Moustrides as second defendant. In paragraphs 1 and 2 of the originating process the plaintiff sought orders as follows:
1.That the ‘Creditors Statutory Demand for Payment of Debt’ dated 20 April 2010 and served on the plaintiff, Indigo Financial Money Pty Limited, on 22 April 2010 by the first defendant, Peter Raymond Moustrides, be set aside pursuant to sections 459H and 459J of the Corporations Act 2001.
2.That the ‘Creditors Statutory Demand for Payment of Debt’ dated 20 April 2010 and served on the plaintiff, Indigo Financial Money Pty Limited, on 22 April 2010 by the second defendant, Marguarita Arista Moustrides, be set aside pursuant to sections 459H and 459J of the Corporations Act 2001.
The single affidavit of Mr John Tsoulos in support of the originating process (FDN 2) was filed on the same day. He attested in paragraph 8:
8.For the reasons more fully set out in this affidavit, the Company disputes the existence of the alleged debts set out in the Peter Moustrides demand and the Marguarita Moustrides demand. In summary:
8.1    The Company has no indebtedness to either of Peter Raymond Moustrides or Marguarita Arista Moustrides;
8.2    Peter Raymond Moustrides has never at any time advanced the monies subject of the Peter Moustrides demand to the Company;
8.3    Marguarita Arista Moustrides has never at any time advanced the monies subject of the Marguarita Moustrides demand to the Company;
8.4    Exhibit A to each of the Peter Moustrides demand and the Marguarita Moustrides demand does not constitute any acknowledgement of a debt by the Company or at all;
8.5    From my knowledge, no notice has been received by me or any member of the Company before service on the Company of the Peter Moustrides demand and the Marguarita Moustrides demand purporting to ‘terminate’.
Service of the statutory demand on the offices of the solicitors for the defendants was proved by an affidavit of Matthew William Elson filed on behalf of the plaintiff on 28 May 2010. It appears that the documents were served on 12 May 2010.
On 2 June 2010 by an interlocutory process the defendants sought orders as follows:
1.…
2.That the plaintiff’s Originating Process dated 12 May 2010 be struck out as defective, on the ground that it seeks to prosecute relief against two distinct creditors in the one application made under section 459G of the Corporations Act 2001 (Cth) (Act).
3.In the alternative to paragraph 2, if the Court allows the plaintiff to proceed against both defendants in the one application made under section 459G of the Act, that it do so on terms that the plaintiff pay the costs of and incidental to this Interlocutory Process in any event.
At the first return date of the originating process, counsel for the defendants had intimated that this interlocutory process would be filed and directions were made as to the application and setting a timetable for the hearing of argument.
The interlocutory process was supported by an affidavit of each of Peter Moustrides and Marguarita Moustrides. In paragraph 7 of each affidavit it is attested:
7.Apart from having a common debtor, there is no connection of any kind between the MAM Demand and the PRM Demand. They relate to entirely separate liabilities, owed to different creditors and arising out of separate investments in differing amounts, advanced on different dates.
The defendants filed an outline of submissions in support of their application on 16 June 2010 – FDN 7. The plaintiff filed an outline of submissions in opposition to the application on 24 June 2010 – FDN 9.
The defendants relied on the principle said to emanate from the case of Help Desk Institute Pty Ltd v Adams (1999) 17 ACLC 18. In this decision Young J of the Supreme Court of New South Wales was considering a similar situation to the present matter. A solicitor and a client of the solicitor each claimed that the company owed them money. The solicitor’s claim was for legal costs. The client’s claim was for monies due under a share sale agreement. Each of them served separate statutory demands on the company. The company issued the one originating process seeking that the two demands be set aside in terms similar to the originating process issued in this matter. His Honour set aside the summons and in the course of that ruling expressed the view that under the scheme of the Corporations Act (CA) there could only be one summons dealing with one demand.
Counsel for the defendants argued that Young J had relied on an amalgam of factors to reach the conclusion that he did. The first of these factors was the way in which the legislature had expressed itself in the statute with particular reference to s 459G, s 459E, and s 459F. The second factor was the aims or objects of the statute, and the third factor was the construction of the statute adopted by the High Court in David Grant & Co Pty Limited (Receiver Appointed) v Westpac Banking Corporation (1995) 184 CLR 265; (1995) 13 ACLC 1572. At 20 of the report, his Honour sets out the terms of s 459G and compares the wording therein to s 459E of the Corporations Law, which he says:
… seems to go out of its way to differentiate between a single debt and two or more debts. …
His Honour goes on to say (at 20):
… Furthermore, s 459F seems to contemplate that each statutory demand gives rise to a separate liability on the company to be wound up under Pt 5.4 if that demand is not dealt with. …
His Honour found that the legislation had to be strictly interpreted following the approach in Grant’s case and that the legislation in s 459G(2) talks about:
… a strict time limit “after the demand is so served”.
If more than one demand was contemplated, one would have expected the legislature to have said “after the demand is so served, or if more than one demand is served, by 21 days after the first of such demands is so served”.
While the statutory demands in that case had been served on the same day, as is the case here, his Honour’s view was that that did not affect the construction of the section. His Honour dealt with some criticisms of the supporting affidavits filed in support of the originating process. At 21, his Honour said:
It seems to me that when one adds all those matters together a contrary indication is given in the statute, that is, there can be only one summons dealing with one demand. In the instant case the two demands deal with similar disputes which might have been joined under Pt 8 of the Supreme Court Rules. The case is really one of joinder of causes of action rather than joinder of parties, but it would fit within Pt 8 r 5 of the Supreme Court Rules. However, despite Mr Warren’s submissions that the rules have not been displaced by s 459G of the Corporations Law, it seems to me that the approach taken by the High Court in Grant’s case (supra) is that the statute has set up a very closely knit regime and that regime does displace many of the ordinary provisions of the Corporations Law and the Supreme Court Rules.
His Honour again refers to the deficiency of the supporting affidavit noting that because in his view there has been no filing of a supporting affidavit within the time limits prescribed by the Corporations Law:
… so it is now not possible for the summons to succeed. For that reason, and for others, which it is unnecessary to express, I do not believe that I can just strike out, say, prayers 2 and 3 of the summons and let prayer 1 proceed.
His Honour went on to dismiss the summons with costs.
This approach or principle has been followed in a number of matters. In Calquid Pty Ltd v A & D R Illes Pty Ltd (2000) 34 ACSR 523, an order was made in the Supreme Court of New South Wales dismissing a single application to set aside two separate statutory demands served by the same creditor in relation to two separate aspects of the one building dispute. Santow J in that matter followed the decision in Help Desk Institute Pty Ltd (supra). His Honour identified at [42] certain commonalities in the creditors’ claims but noted that each claim related to separately certified work. Accordingly, they were distinct debts for distinct work. His Honour therefore distinguished the situation from Femley Pty Ltd v Salkan Engineering Pty Ltd (1999) 17 ACLC 828 where he had found that it was permissible for the one originating process to be used to challenge three separate statutory demands served on three different companies by the same creditor for the same alleged partnership debt. In the case before him two separate statutory demands had been served on different days which was the precise situation considered as an example by Young J in Help Desk. He referred in [46] to the difficulties that a contrary interpretation would produce arising out of s 459G(3). He said:
[46] … That subsection requires an affidavit “supporting the application” to be filed with the court and served on the person who served the demand on the company. Where, as here, there is a separate and distinct indebtedness, though arising out of the same contract, an affidavit supporting the application necessarily has to deal with a plurality of distinct subject matters, even if it so happens that the plaintiff lodging the summons and accompanying affidavit elects to use the same grounds in that accompanying affidavit. One can imagine the complexities that would then follow if the subsequent elaboration of the subject matter of that single affidavit had to bifurcate and deal with each of two distinct debts. Such a contemplation is hardly compatible with the object of Pt 5.4, namely that, “disputes in relation to the existence or amount of a debt be dealt with quickly . . .”.
His Honour also found that s 467A of the Corporations Law was not available as that could only address an application under Part 5.4 of the Law and the application before him did not amount to such a vehicle.
The Help Desk principle was applied by Master Harper of the Supreme Court of the Australian Capital Territory in the case of Filaria Pty Limited v Grace Carlisle & Garry James Buick & Keyleto Pty Limited ([2004] ACTSC 95, 24 September 2004, unreported). His Honour noted the decision in Help Desk and in Calquid and found them to be of strong persuasive force and followed them.
A further occasion on which Help Desk was followed was in Ambassador at Redcliffe Pty Ltd & Anor v Barreau Peninsula Property Pty Ltd & Ors (2006) 202 FLR 459 where in the Supreme Court of Queensland Douglas J was considering one application brought to set aside four statutory demands. The statutory demands arose out of transactions in which the applicants were involved as purchaser and guarantor. It was argued that the joint application was fatally defective and that there should have been four separate applications. His Honour dismissed the application finding that it was formally defective as being brought in a single application. He followed the decision in Help Desk.
The Help Desk approach has not been applied in some cases. These cases generally involve there being a common creditor and the debt arising from the same transaction and series of transactions or being joint and several. The defendants relied on the approach of Barrett J in Remo Constructions Pty Ltd v Dualcorp Pty Ltd (2008) 222 FLR 375. In that case Barrett J distinguished Help Desk finding that it was decided on the basis of the deficient affidavit and that in the circumstances before him it was appropriate for the company in one originating process to apply to set aside two demands which had been served by the same creditor. His Honour considered the decision in Help Desk, Calquid, and Ambassador at Redcliffe. He also considered the decision of Master Harper in Filaria Pty Limited and Chesterman J in Cooloola Dairys Pty Ltd v National Foods Milk Ltd (2004) 184 FLR 86.
At [20] of his reasons in Remo, Barrett J says:
For present purposes, it is the last sentence of Chesterman J’s judgment [in Cooloola Dairys] that is relevant. There is there a clear assumption (it cannot, I think, be classified as a considered finding) that several statutory demands can be challenged in a single s 459G proceeding, at least where they have been served by the one alleged creditor.
Barrett J then went on to consider the matter before him which involved two distinct debts each due to the same alleged creditor created on different days. He distinguished Help Desk, Ambassador at Redcliffe, and Filaria, saying at [22]:
… In each of those cases, there were not only several distinct debts allegedly due by the particular company but also a different creditor in respect of each. The situation is closer to that in Calquid where there were distinct debts allegedly due by the same debtor to the same creditor arising from progress claims under a particular building contract. …
His Honour considered the application of first principles to the circumstances before him and found that the legislation did not require the Court “to proceed according to an abstract rule of general application that ‘there can only be one summons dealing with one demand’ ” – see [35] of his judgment. His Honour also relied on the decision in Gordon v Tolcher (2006) 231 CLR 334, to find that the rules of procedure in the New South Wales Supreme Court applied and that under r 6.18(1)(a) of the Uniform Civil Procedure Rules 2005 (NSW), the plaintiff could “… in any originating process, claim relief against the defendant in respect of one or more causes of action if the plaintiff sues in the same capacity and claims the defendant to be liable in the same capacity in respect of each cause of action”. He noted that rule would not apply to the situation in Help Desk where there were several creditors who issued the statutory demands.
The applicability of the Supreme Court Rules was raised by the plaintiff as a reason for the defendants’ application to be refused. The plaintiff referred to 6R 73(2) which is in the following terms:
73 …
(2) A single action may be brought against two or more defendants if—
(a)the claim against each arises out of the same or similar facts; or
(b)the claim against each involves the determination of a common question of law or fact; or
(c)the Court gives its permission.
In this case the statutory demand issued by each defendant is in respect of distinct debts incurred at different dates. The factual circumstances differ. Even though the plaintiff might argue that it has a common defence to both claims that does not necessarily bring it within the provisions of 6R 73(2)(a). It may bring it within the provisions of 6R 73(2)(b) but that is unclear. Any alleged common legal substratum will be against the factual background of distinct debts for distinct loans by different creditors. However, it is not difficult to envisage a circumstance where perhaps six investors in a company seek assistance from the same solicitor and all separately issue statutory demands for the amount of their investment and interest which are all served at about the same time. In my view the scheme of the Act is such that it would be inappropriate for the plaintiff or alleged debtor at that time to be able to issue one originating process seeking orders setting aside the six statutory demands. It would, as earlier authority suggests, lead to a confusion of the process inconsistent with the objects of Part 5.4 of the CA and the legislation must prevail. While that outcome may seem harsh, Gummow J in David Grant explained (at 279):
No doubt, in some circumstances, the new Pt 5.4 may appear to operate harshly. But that is a consequence of the legislative scheme which has been adopted to deal with perceived defects in the pre-existing procedures in relation to notices of demand. …
These two lines of authority are considered by McPherson in his work, McPherson’s Law of Company Liquidation at [3.600] where, after considering the cases before referred to, the learned author says:
The correct view may accordingly be that one application may be issued to set aside multiple demands served by the same creditor, particularly where the debts demanded arose from the same transaction or series of transactions, but that separate applications must be issued to set aside demands served by different creditors. Nevertheless, until this apparent divergence of judicial opinion is resolved at appellate level, a company which receives more than one statutory demand would be prudent to issue separate applications by originating process to set aside each one, especially if the demands are from different creditors.
In Statutory Demands: Law and Practice by Farid Assaf, LexisNexis, Butterworths, Australia, 2008, the learned author considers these apparently divergent authorities at [4.24] to [4.28]. He says in [4.25], referring to Help Desk:
Young J’s reasoning and conclusion have subsequently been followed and applied and it is submitted that, subject to the qualification below, those reasons and conclusion are generally correct. …
He noted the inconsistency with the remarks of Chesterman J in Cooloola Dairys and suggested that those remarks were obiter and made without reference to relevant authorities. In [4.26] Assaf refers to the words of Santow J in Femley Pty Ltd v Salken Engineering Pty Ltd (supra):
4.26 One compelling reason for not allowing applications made under s 459G to deal with more than one demand, although alluded to by Young J, is that to do so would have the capacity to undermine the policy and purpose of Pt 5.4 namely, a mechanism for the quick resolution of disputes relating to the existence or amount of the debt. As Santow J has explained:
There is … some force in the contention that the scheme of Pt 5.4 could not work as intended if, in relation to non-jointly owed debts, each company with its separate indebtedness were in the one application with the one accompanying affidavit to attempt to set aside the statutory demand applicable to it, on varying grounds as between each company. Grounds for setting aside each statutory demand for each alleged debtor company need to be separately identified, where there are non-joint debts; how could this be done with the one composite affidavit and one composite application? Even if for separate and distinct debts such gymnastics could be achieved, at least as a matter of drafting, Pt 5.4 would fail to achieve expeditious resolution of disputes as to such alleged debts as Parliament intended.

The learned author in [4.27] notes that the position is not absolute. He refers to the decisions of Santow J in Femley Pty Ltd and Barrett J in Isaco Pty Ltd.
At [4.28] Assaf concludes:
4.28 It can be seen from the above that there are circumstances where it is permissible, and perhaps even desirable, for one application to be used to set aside more than one statutory demand. This will be the case where the debt the subject of the demands is a joint debt owed by each of the companies served with the relevant demands and, importantly, where the application is expressed so that it can be read distributively as applying to the relevant statutory demand applicable to the relevant plaintiff. Notwithstanding this authority, it is suggested that the more prudent course is for practitioners to adopt a practice of making separate applications for individual statutory demands.
There is nothing in the present case that indicates that the statutory demands have been served in respect of a joint debt. Indeed the evidence is to the contrary. This case in its factual circumstances aligns closely with the circumstances in Help Desk. The surname of the defendants is the same but that is of no consequence. In my view it is likely that the correct view of the law has been expressed by McPherson as earlier set out. That requires separate originating processes to be issued to set aside separate demands by separate creditors save that the one originating process may in appropriate circumstances be issued for multiple demands served by the same creditor particularly where the debts demanded arise from the same transaction or series of transactions. While that approach may at times represent an inconvenience to the debtor it is an approach that is consistent with the object of Part 5.4 to resolve disputes about statutory demands in a swift and efficient manner.
For those reasons, in my view the originating process issued by the plaintiff in this matter is defective and must be dismissed. The plaintiff is to pay the defendants’ costs to be taxed. I certify fit for counsel.