Mabrouk Pty Ltd v Sunshine Stainless Steel Pty Ltd

[2006] NSWSC 569

CITATION:	Mabrouk Pty Ltd v Sunshine Stainless Steel Pty Ltd [2006] NSWSC 569
HEARING DATE(S):	09/06/06
JUDGMENT DATE :	9 June 2006
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	06/09/2006
DECISION:	Application for order setting aside statutory demand dismissed. Plaintiff to pay defendant's costs on the indemnity basis.
CATCHWORDS:	CORPORATIONS - winding up - creditor's statutory demand - application for order setting aside - affidavit in support of application contains bald assertion of genuine dispute - affidavit fails to give any evidence whatsoever of indicating nature of and basis for genuine dispute - PROCEDURE - costs - indemnity costs - where plaintiff persists with unsustainable claim after defects clearly drawn to its attention
LEGISLATION CITED:	Uniform Civil Procedure Rules, rules 7.1(2) and (3)
CASES CITED:	Elm Financial Services Pty Ltd v McDougal [2004] NSWSC 560 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Oshlack v Richmond River Council (1998) 193 CLR 72
PARTIES:	Mabrouk Pty Limited - Plaintiff Sunshine Stainless Steel Pty Limited - Defendant
FILE NUMBER(S):	SC 6482/05
COUNSEL:	Mr J. Cernigoi in person as director of plaintiff Mr A. Iuliano - Defendant
SOLICITORS:	Mr J. Cernigoi in person as director of plaintiff Colin Biggers & Paisley - Defendant

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

BARRETT J

FRIDAY 9 JUNE 2006

6482/05 MABROUK PTY LTD v SUNSHINE STAINLESS STEEL PTY LTD

JUDGMENT

1 On 22 December 2005 the plaintiff, Mabrouk Pty Ltd, filed an originating process by which it sought an order setting aside a statutory demand served on it by the defendant, Sunshine Stainless Steel Pty Ltd. The demand is dated 5 December 2005 and refers to a debt of $205,141.17 described as:

“The creditor's tax invoice No.442 dated 28 October 2005 for materials provided and work done by the creditor for the company in respect of the Alto Apartments project.”

2 There was filed with the originating process the affidavit of Joseph Cernigoi sworn 21 December 2005. I shall come back to the content of that affidavit.

3 When the matter was called on for hearing this morning, Mr Cernigoi announced that he wished to appear for the company in his capacity as director and to seek an adjournment. Over the objection of the defendant, based on rule 7.1(2) and (3) of the Uniform Civil Procedure Rules, I granted leave for the plaintiff to make representations and address the court through Mr Cernigoi. I heard and dismissed the application for an adjournment.

4 In relation to the substantive application advanced by means of the originating process, Mr Cernigoi then made a long statement from the bar table about a great variety of matters having to do with the dealings and relationships between the parties but not referred to in or borne out by his affidavit of 21 December 2005 which is the only affidavit the plaintiff has filed.

5 I must disregard the various factual assertions Mr Cernigoi made. They are not evidence and cannot be taken into account in determining the plaintiff's application. The only evidence before the court is that in Mr Cernigoi's affidavit of 21 December 2005.

6 That affidavit is short. In paragraph 1 Mr Cernigoi says that he is a director of the plaintiff. In paragraph 2 he refers to the statutory demand and the accompanying s.459E affidavit both of which he then annexes. The remainder of the affidavit consists of paragraphs 3 and 4, which I shall quote in full (noting that the references to “the Affidavit” are references to the s.459E(3) affidavit):

“3. In relation to paragraph 4 of the Affidavit I deny that the alleged debt of $205,141.17 is due and payable by the debtor company.
4. In relation to paragraph 5 of the Affidavit I say that (a) there is a genuine dispute about the amount of the debt due to the defendant; (b) the said Thahn Truong Do is aware that there is such a dispute but he and I have been unable to resolve the dispute to date for various reasons.”

7 The defendant contends that this affidavit fails to advance any ground in support of the application for an order setting aside the statutory demand.

8 Mr Iuliano of counsel, who has appeared for the defendant, has adverted to the well known case of Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 and to the rule it lays down, to the effect that the applicant under s.459G is confined to the grounds appearing from the affidavit sworn in support of the application itself and served, like the application, within the 21 day period referred to in s.459G(3). That period cannot be extended: David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265.

9 Mr Iuliano has referred to the statement of the so called Graywinter principle which appears in my judgment in Elm Financial Services Pty Ltd v McDougal [2004] NSWSC 560 at paragraph [7]:

“What it means is that the application for an order setting aside the statutory demand and the affidavit in support of that application, both filed and served within the 21 day period stipulated in s.459G(3), must fairly alert the claimant to the nature of the case the company will seek to make in seeking to have the statutory demand set aside. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by ss.459H and 459J for setting aside statutory demands. That process of delineation may not be extended after the end of the 21 day period, although it is open to the plaintiff to supplement the initial affidavit by way of additional evidence relevant to the area of controversy identified within the period.”

10 The simple reality in this present matter is that the affidavit sworn and filed in support of the originating process deposes to no facts from which it can be seen that any dispute exists. There is merely a bald and entirely unsupported assertion of the existence of a dispute. There is simply no evidence from which the court could begin to glean whether, in realty, the asserted dispute exists at all.

11 It is well established that bald assertion, unsupported by underlying factual material and reasoning, is of no value in cases of this kind. I am therefore in a position where no case can be seen to have been made in support of the application for an order setting aside the statutory demand, with the result that that order must be refused.

12 The claim in paragraph 1 of the originating process is accordingly dismissed.

[Mr Iuliano addressed on costs. Mr Cernigoi replied.]

13 The defendant seeks an order for costs and submits that costs should be assessed on the indemnity basis. According to the generally applicable principle that costs follow the event, the defendant is entitled to a costs order. There is nothing about the circumstances of this case that would displace the general rule.

14 As to the basis of assessment of costs, the defendant has tendered a bundle of correspondence (which I will mark as Exhibit 1) between the defendant's solicitors and the solicitor for the plaintiff, or in the later stages after that solicitor had ceased acting, Mr Cernigoi. The correspondence makes it clear that the fatal defect in the plaintiff's case, upon which my decision is based, was pointed out by the defendant's solicitors to the plaintiff's solicitors as long ago as January of this year. A letter of 19 January refers to the affidavit in support of the originating process and says that that affidavit “does not set out the grounds upon which your client alleges there are to be [sic] a genuine dispute as to the amount payable to our client in its statutory demand”.

15 The letter continues:

“It is well recognised law that it is not enough for an affidavit, in support of an application to set aside a statutory demand, to contain a mere assertion that there is a dispute.”

16 For more than four months thereafter the plaintiff nevertheless persisted with its case, even to the point of attendance, through Mr Cernigoi, today at the time and place appointed for final hearing. This was despite the clear message in the letter of 19 January 2006 being repeated in several more letters up to this current month.

17 Mr Iuliano has drawn my attention to the following statement of Woodward J in the case of Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at p.401:

“I believe that it is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.”

18 The case before me is one in which the plaintiff, properly advised, should, particularly in light of the message in the letter of 19 January 2006 (which message was repeated more than once thereafter), have abandoned the proceedings at the invitation of the defendant, rather than persisting to the point where the defendant was compelled to continue to contend with the claim, even to the point of appearing in court to do so.

19 There is, in those circumstances, “relevant delinquency” within the concept as explained in Oshlack v Richmond River Council (1998) 193 CLR 72 and it is appropriate that costs be assessed on the indemnity basis.

20 I therefore order that the plaintiff pay the defendant's costs of the proceedings, such costs to be assessed on the indemnity basis.

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