Infact Consulting P/L v Kyle House P/L

[2005] NSWSC 995

CITATION:	Infact Consulting P/L v Kyle House P/L [2005] NSWSC 995
HEARING DATE(S):	8 September 2005
JUDGMENT DATE :	8 September 2005
JUDGMENT OF:	Brereton J
DECISION:	Extension of time for compliance with creditors statutory demand pending appeal from Associate Judge's refusal to set aside, refused.

CATCHWORDS:	CORPORATIONS - winding up - creditors statutory demand - appeal from Associate Judge's refusal to set aside - application to extend time for compliance pending hearing of appeal - analogous to application for stay pending appeal - where balance of convenience would favour extension - where no arguable case of error.
LEGISLATION CITED:	Corporations Act s 459E
CASES CITED:	Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589
PARTIES:	Infact Consulting Pty Limited (plaintiff) Kyle House Pty Limited (defendant)
FILE NUMBER(S):	SC 2836/05
COUNSEL:	D Knaggs (solicitor) (plaintiff) R A Parsons (defendant)
SOLICITORS:	Cross Law (plaintiff) Norbert Lipton & Co (defendant)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Thursday 8 September 2005

2836/05 Infact Consulting Pty Limited v Kyle House Pty Limited

JUDGMENT (ex tempore – revised 19 October 2005)

1 HIS HONOUR: On 18 April 2005 the defendant Kyle House Pty Limited served a creditor's statutory demand under the Corporations Act s 459E on the plaintiff Infact Consulting Pty Limited. Infact made application to set aside the statutory demand, and that application was heard by Associate Justice Macready on 16 August 2005. His Honour decided that there was no genuine dispute as to Infact's indebtedness as claimed in the creditor's statutory demand and no genuine offsetting claim, and dismissed the application. His Honour extended the period for compliance with the demand to a period of twenty-one days after that date. That twenty-one day period expired on Tuesday of this week, 6 September 2005.

2 On 6 September 2005, Infact filed a Notice of Appeal from the judgment of Associate Justice Macready. Although the Notice of Appeal goes into considerably more detail, in substance it alleges that the Associate Judge erred in failing to find that there was a genuine dispute and in failing to hold that there was a genuine offsetting claim. Shortly, it alleges that, as to the first point, the Associate Judge erred in holding that there was no evidence given on behalf of Infact that certain documents, the production of which was said to be a precondition to the operation of the agreement under which Infact's liability arose, had been produced; and, as to the second, that His Honour erred in failing to consider that a claim subsequently brought in the Local Court by Infact against Kyle raised a genuine offsetting claim.

3 Also on 6 September Mr Knaggs, who appears for Infact, appeared before me as duty judge to claim a further extension of the period for compliance with the creditor's statutory demand. I granted that extension up to and including today. Today, Mr Parsons of counsel appears for Kyle and opposes the further extension of the period for compliance.

4 I consider the relevant facts against the background that the Notice of Appeal was initially made returnable on Monday, 12 September 2005, and that were I minded to grant the extension sought, I would do so up until and including 12 September 2005 and place the matter in the Corporations List that day, in the expectation that the appeal could be heard and determined that day and, in the unlikely event that it could not, that the Corporations Judge could then consider whether a further extension should be granted and, if so, what terms should be imposed.

5 Given that without a further extension the utility of the appeal would be much reduced, given the absence of prejudice to Kyle from a further extension, and given the very short time that would be involved in the extension, the balance of convenience wholly favours the grant of an extension as sought, at least until Monday.

6 However, Mr Parsons rightly reminds me that on an application for a stay pending appeal, which is closely analogous to the present application, the balance of convenience is not the only consideration, and that before one considers the balance of convenience, it is necessary to be satisfied that there is at least an arguable case of error. I am prepared, because of where the balance of convenience lies and the short time frame involved, to approach this matter on the basis that only a fairly faintly arguable case of error would be sufficient to justify granting an extension.

7 Mr Knaggs, who as well as his oral submissions provided helpful written submissions which I will leave with the papers, did not address what I have described as the second ground of appeal, which deals with the offsetting demand. In my judgment, he was quite right not to do so. The nature of the original proceedings before the Local Court which resulted in the terms of settlement under which the present claimed debt arises was such that any claim to the effect that Infact had been overcharged rent would have had to be raised by defence or cross-claim in those original proceedings, in accordance with the principles enunciated in cases such as Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589. I consider the proposition that there was a genuine offsetting claim – which, as I have said, has not been agitated before me by Mr Knaggs beyond its statement in the Notice of Appeal – to be quite unarguable. There is no arguable case of error on that ground.

8 That leaves what might be called the first ground of appeal, which is whether the sum of $8,000 plus or minus the debt or credit shown in the reconciliation statement, which sum became the subject of the statutory demand, is the subject of a bona fide dispute. The argument that it is depends upon the construction of the terms of settlement reached between the parties in the Local Court, which were as follows:

“1. Statement of claim dismissed.

2. Cross-claim dismissed.

3. No order as to costs.

4. Note the agreement:


(a) The plaintiff will within fourteen days make available to the Defendant or his agent all documents called for in the Defendant’s Notice to Produce dated 30 January 2005 for the period 1 January 2003 to 31 October 2003 (‘the period’).

(b) Subject to clause 4(c) hereof, within fourteen days of receipt of a Reconciliation Statement by the Defendant for the period, the Defendant will pay to the Plaintiff’s solicitor $8,000 plus or minus the debit or credit shown in the Reconciliation Statement.

(c) In the event that the said debit or credit is disputed by the Defendant, the dispute shall be referred to an accountant appointed by the President of the Australian Institute of Chartered Accountants (NSW) whose determination shall be final and conclusive.

(d) In the event of a referral as provided in clause 4(c) hereof, the Defendant will pay to the Plaintiff’s solicitor:-

(i) within fourteen days of receipt of the Reconciliation Statement, the sum of $5,000 to be held in trust pending the determination of the dispute;

(ii) the sum of $3,000 plus or minus any debit or credit as determined pursuant to 4(c) hereof within seven days of such determination, or the Plaintiff will pay the Defendant’s solicitor the amount of any balance in favour of the Defendant after crediting the sum of $3,000 due by the Defendant to the Plaintiff.”

9 The argument for Infact depends on the combined operation of two propositions. The first is that the requirement or obligation imposed on Kyle (the plaintiff) by clause 4(a), to make available within fourteen days to Infact (the defendant) all documents called for in a certain Notice to Produce for the period 1 January to 31 October 2003, is a condition precedent to the operation of clause 4(b). The second is that there was non-compliance with that obligation to produce all such documents.

10 As to the first proposition, it is instructive that clause 4(b) is expressed to be subject to clause 4(c), but not to clause 4(a). That itself suggests that 4(a) was not a condition precedent to 4(b). Nor is there any reason of practicality which would make 4(a) a precondition of 4(b): there is no reason why, upon the receipt of the reconciliation statement referred to in 4(b), Infact could not have disputed the claim and required its reference within time to an accountant as provided for in clause 4(c), whether or not all documents referred to in 4(a) had been produced.

11 As to the second, the Associate Judge said (emphasis added):

“There was no evidence given by the lessee that the relevant documents from 1 January 2003 to 31 October 2003 were not produced and indeed such evidence could not have been given because Mr Knaggs and Mr Heart did not stay to inspect the relevant documentation."

12 The Associate Judge set out parts of the affidavit of Tom Mitsoulis sworn 26 May 2005 which were read before His Honour by Kyle, but before me by Mr Knaggs on behalf of Infact. True it is, as Mr Knaggs submits, that while Mr Mitsoulis deposes to the production of certain statements for 2003, he does not refer to the production of assessments, statutory or other rating assessments for that period. However, the picture which this evidence paints, and it was not the subject of cross-examination before the Associate Judge, is one of Mr Hart, on behalf of Infact, anticipating the production of documents predating 2003, being told that such documents would not be produced, and therefore departing, without inspecting such documents as were produced. In those circumstances, I am unable to see how there is any foundation for Mr Hart’s assertion that any documents referred to in clause 3 of the Notice to Produce were not produced. Likewise, I am unable to see how there is any basis for challenging the Associate Judge’s conclusion that such evidence could not have been given – or, I interpose, if given, could not have been accepted - because Mr Knaggs and Mr Hart did not stay to inspect the relevant documentation. The mere absence of assertion by Mr Mitsoulis that such documents were produced is not evidence that they were not produced.

13 Accordingly, I am afraid that I am compelled to come to the conclusion, despite where the balance of convenience overwhelmingly lies, that there is simply no arguable case of error raised by the Notice of Appeal which has been advanced before me.

14 Mr Knaggs says that in any event time ought to be extended until Monday in order that he may retain counsel to argue the matter, and that counsel's ingenuity may be able to reveal some ground which has not so far been argued or advanced before me. I am inclined to agree with Mr Parsons' submission that that submission considerably underrates Mr Knaggs' own ingenuity and ability, but in any event it would not be an appropriate exercise of discretion to find a seriously arguable case of error, or for that matter any arguable case of error, on the basis that one not yet identified might be identified by counsel between now and the hearing.

15 Accordingly, I must decline further to extend time for compliance with the notice.

16 I order that the interlocutory application for an extension of time be dismissed with costs.

17 The Notice of Appeal is adjourned to Monday, 12 September 2005 at 10am before the Corporations List Judge.

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