JEG Constructions No.2 Pty Ltd v Workers Compensation Nominal Insurer

[2007] NSWSC 1017

CITATION:	JEG Constructions No.2 Pty Ltd v Workers Compensation Nominal Insurer [2007] NSWSC 1017 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	3 September 2007
JUDGMENT OF:	Hammerschlag J
EX TEMPORE JUDGMENT DATE:	3 September 2007
DECISION:	Statutory demand be set aside.
CATCHWORDS:	CORPORATIONS – Application to set aside statutory demand – Whether claims made in statutory demand barred by definition of “claim” and “fixed date” in deed of company arrangement – Circumstances giving rise to claim present before “fixed date” – Statutory demand set aside
LEGISLATION CITED:	Corporations Act 2001 (Cth) Workers Compensation Act 1987 (NSW) Bankruptcy Act 1966 (Cth)
CASES CITED:	Health Insurance Commission v Trustee In Bankruptcy of the Estate of Ioakim Alekozoglou [2003] FCA 848 Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702 Gaffney v Federal Commissioner of Taxation (1998) 81 FCR 574 Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2007] NSWSC 930
PARTIES:	JEG Constructions No. 2 Pty Ltd T/A Tailored Property Constructions Workers Compensation Nominal Insurer by its Scheme Agent Allianz Australia Workers’ Compensation (NSW) Limited ABN 17 003 087 545
FILE NUMBER(S):	SC 2787/2007
COUNSEL:	R. Freeman (Solicitor) (Plaintiff) P. Day (Solicitor) (Defendant)
SOLICITORS:	Graham Wilks, Solicitor (Plaintiff) Woods & Day (Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

HAMMERSCHLAG J

3 SEPTEMBER 2007

2787/2007 JEG CONSTRUCTIONS NO. 2 PTY LTD T/A TAILORED PROPERTY CONSTRUCTIONS –V- WORKERS COMPENSATION NOMINAL INSURER BY ITS SCHEME AGENT ALLIANZ AUSTRALIA WORKER’S COMPENSATION (NSW) LIMITED ABN 17 003 087 545

EX TEMPORE JUDGMENT

1 HIS HONOUR: This is an application to set aside a statutory demand dated 26 April 2007 in which the defendant insurer demanded of the plaintiff $25,696.88 comprising “Wage Audit Extra Premium 8 January 2004 to 8 January 2005” of $10,978, “Extra Premium 8 January 2005 to 8 January 2006” of $5,656.62 and “Extra Premium 8 January 2005 to 8 January 2006” of $8,357.65, together with a small amount of $703.71 for late payment fees.

2 Mr Day, solicitor who appeared for the defendant, accepted that the demand is inaccurate by $5,656.62 for reasons to which I shall briefly refer below.

3 The plaintiff company (“the Company”) appointed Mr Mark Cooper as voluntary administrator. The creditors of the Company resolved at a meeting on 25 August 2005 to enter into a deed of company arrangement (“the Deed”), which it did on 14 September 2005.

4 “Claim” is defined in the Deed to mean “a claim against the Company in any amount, including a claim which is present or future, certain or contingent, ascertained or sounding only in damages being a claim the circumstances giving rise to which occurred on or before the Fixed Date”.

5 “Fixed Date” is defined to mean 29 July 2005.

6 The Deed provides for creditors to prove in the administration in respect of claims and further provides that creditors who either fail to prove within the time prescribed under the Deed or within 14 days of notification of the rejection of their claim fail to institute proceedings to establish their claim, are deemed to have abandoned the claim and are barred from instituting or continuing any legal or other proceedings or maintaining an entitlement to the claim.

7 Section 444D of the Corporations Act 2001 (Cth) (“the Act”) provides that a deed of company arrangement binds all creditors of the company so far as concerns claims arising on or before a day specified in the Deed under paragraph 444A(4)(i) of the Act.

8 Section 444A(4)(i) provides that a deed of company arrangement must specify the day on or before which claims must have arisen if they are to be admissible under the Deed.

9 The question here is whether the claims made in the statutory demand are barred by the Deed. That is, are they claims the circumstances giving rise to which arose on or before the Fixed Date of 29 July 2005?

10 The defendant proved in the administration for the amount $5,656.52 and was paid a dividend. To that extent the demand overstates any possible debt owing.

11 The Workers Compensation Act 1987 (NSW), provides for compulsory insurance to be effected by employers. Under s 155 an employer (other than a self-insurer) is obliged to effect and maintain in force a policy of insurance for the full amount of the employer’s liability under the Act in respect of all workers employed. There is statutory machinery for the adjustment and payment of adjusted premium as well as for the provision to the WorkCover Authority of, amongst others, wages information.

12 Mr Day put that the circumstances giving rise to these claims occurred after the Fixed Date. After that date and after an “audit” pursuant to the provisions of s 174 of the Workers Compensation Act which the defendant carried out on the plaintiff, adjustments were made to the appropriate amounts payable by the plaintiff in respect of workers compensation premiums. These adjustments are the subject of the statutory demand.

13 On the face of the statutory demand one of the periods in respect of which the adjusted premiums were payable expired before the Fixed Date and the two other periods straddled it.

14 The definition of “Claim” in the Deed bears a close resemblance to s 82(1) of the Bankruptcy Act 1966 (Cth).

15 Section 82(1) of the Bankruptcy Act provides as follows:

"Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his is or her bankruptcy".

16 In the context of this provision, the concept of a contingent liability has been construed widely. It has been held to be one that must be a recognisable one created by law and not “some amorphous vulnerability to a possible debt”: see Health Insurance Commission v Trustee In Bankruptcy of the Estate of Ioakim Alekozoglou [2003] FCA 848 at 11 [51] per Marshall J; Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702 at 709 and following per Priestley JA; Gaffneyv Federal Commissioner of Taxation (1998) 81 FCR 574 at 578 per Mansfield J; Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2007] NSWSC 930.

17 The obligation to pay the premiums claimed by the plaintiff was incurred and relates in one instance to a period wholly, and in the two other instances to a period partially, before the Fixed Date. The audit after the Fixed Date ascertained the existence and extent of obligations which were created by law and which were in being (wholly or in part) before the Fixed Date. To that extent they meet the requirement of being obligations (at worst contingent) where the circumstances giving rise to them occurred before the Fixed Date.

18 The premiums payable in respect of a period before the Fixed Date, that is 29 July 2005, are accordingly met by the Deed.

19 The plaintiff has accordingly met the threshold of establishing a genuine dispute with respect to the amounts claimed sufficient to warrant setting aside the demand.

20 In addition, the amount claimed is an admitted overstatement. Although the overstatement may not have been sufficient on its own to warrant the setting aside of the demand, it is a substantial overstatement, representing some 20 per cent of the amount claimed. It is not necessary for me to determine whether or not in that circumstance alone I would have set aside the demand but there is reasonable prospect that I would have.

21 The statutory demand will accordingly be set aside. The defendant is to pay the plaintiff’s costs of the application.

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25/09/2007 - Remove the word "Solicitor" - Paragraph(s) After R Freeman in heading