MIG Property Services Pty Ltd v S&D International Pty Ltd
[2011] VSC 600
•30 September 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 4072 of 2011
| MIG PROPERTY SERVICES PTY LTD | Plaintiff |
| v | |
| S&D INTERNATIONAL PTY LTD | Defendant |
JUDGE: | Efthim AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 August 2011 |
DATE OF JUDGMENT: | 30 September 2011 |
CASE MAY BE CITED AS: | MIG Property Services Pty Ltd v S&D International Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2011] VSC 600 |
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CORPORATIONS- Section 453J Corporations Act 2001- Application to set aside a statutory demand where the plaintiff had filed appeal to set aside the judgment on which the statutory demand was based.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Triaca | Mason Black Lawyers |
| For the Defendant | Mr M. Galvin | Mills Oakley McKay |
HIS HONOUR:
MIG Property Services Pty Ltd applies for an order that a statutory demand dated 13 July 2011 served on it by the defendant, Geoffrey Niels Handberg (in his capacity as liquidator of S&D International Pty Ltd) be set aside pursuant to s.459J of the Corporations Act 2001.
On 19 June 2009, Robson J declared that mortgages held by the plaintiff over properties of S&D International Pty Ltd in Footscray and Hillside had been discharged and satisfied in full on the settlement of the sale of the Footscray property on 19 October 2007. His Honour ordered that there be an inquiry into the amounts and sums that should have been included in the account that the plaintiff, in its capacity as controller in possession of the property of S&D International Pty Ltd, should have rendered to the defendant on settlement of the sale.
On 5 October 2009, the plaintiff consented to orders of Robson J that it pay to S&D International Pty Ltd’s liquidator the sum of $164,994 plus interest of $35,139.52.
The plaintiff’s statutory demand claims that the plaintiff owes the defendant the amount of $237.001.95 (the amount ordered by Robson J together with interest on the judgment debt to the date that the statutory demand was issued).
An appeal was filed on 3 July 2009 in relation to the order made by Robson J on 19 June 2009. On 14 February 2011, Robson J made an order in respect of costs. A further appeal was filed on 2 March 2011.
At a directions hearing on 25 August 2011 relating to the appeals of the plaintiff, Lansdowne As J stated as follows:
“3.The appellant did not comply with the order for filing and service of agreed proposed directions and seeks today an extension to 2 September to do so. That would necessitate a further adjournment of the directions hearing.
4.The appellant has not filed any affidavit to explain its failure to comply. It relies on the following events, being the service of a statutory demand by the first respondent on 14 July 2011, an earlier statutory demand served 27 June 2011 which was withdrawn as defective on 13 July 2011, and the subsequent necessity to make application to have the statutory demand set aside (by originating process S CI 2011 04072 filed 4 August 2011 returnable tomorrow) and apply to the Court of Appeal for a stay of the order which is the subject of the appeal. That application was made by summons filed in this appeal yesterday, returnable 13 October 2011.
5.It is clear from these dates that all of these events, with the exception of the earlier withdrawn statutory demand, occurred after the date on which the appellant was to comply with the orders of 9 June 2011. Accordingly, they cannot be explanations for a failure to comply with those orders in a timely way. Further, there is no indication on the Court file of any written contact made by the appellant with the Court before or after 14 July 2011 seeking an extension of time to comply.
6.I am now concerned to ensure that the appellant will in fact diligently prosecute the appeal, as it contends it wishes to do. The appeal was filed in July 2009. Orders by consent for the payment by the appellant of security for the costs of the first and second respondent were made in October 2010. The security was provided in February 2011. The first and second respondents seek orders that rather than just proposed directions as to how to prosecute the appeal, the appellant take a substantive step, and file and serve its outline of submissions prior to the next occasion, as a demonstration that it will prosecute the appeal diligently, and with a view to identifying the material to be relied upon and so limit the appeal book. I consider this to be appropriate and will so order. I will require the outline be filed and served sufficiently in advance of the hearing of the stay application to allow the respondent to take such action as it is advised if the direction is not complied with.”
The fact that an appeal has been filed by the plaintiff from the judgment on which the statutory demand is based is not a basis for setting aside the demand. In Scope Data Systems v BDO Nelson Parkhill,[1] Barrett J posed the question whether an appeal represents a genuine dispute. His Honour stated:[2]
[1][2003] NSWSC 137.
[2]At para 17.
“[17] That, however, is not the end of the matter so far as the s 459H(1)(a) ground is concerned. The next question is whether the initiation and existence of the appeal to this court is, quite apart from any effect that s 107 may have by way of stay of execution, properly to be regarded as the source of a genuine dispute as to the existence or amount of the judgment debt. That question is, to my mind, disposed of by the analyses made by Master Adams in Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039 and by McLelland CJ in Eq in Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235.
[18] Master Adams said in Wilden:
‘It is a judgment which is under appeal and the question is whether the existence of that appeal, and in this case, if it makes any difference, the fact that the appeal has now been heard and a decision awaited, can amount to a genuine dispute between these parties about the existence or amount of the judgment debt. In my view it cannot.
The question of whether there is a dispute between these parties as to the debt the subject of the judgment has been resolved. There is a judgment of the court, the District Court, which has determined the matter as between the parties. It matters not that the matter is under appeal for the purposes of this particular application, that may well be an issue that might have an impact, should there be a winding-up application made and the matter go to a hearing, but that is not the matter before me. All I need to do is decide whether the demand should be set aside.
It is clear that an appeal does not operate as a stay of the judgment. There is no stay of the judgment. That is a matter to which I will turn in a moment, but I accept the submissions of the respondent that until it is set aside on appeal the judgment stands and concludes the issue between these parties as to whether there is a disputed debt. That therefore disposes of the first ground that was put forward, as to whether there can be a genuine dispute.’
[19]McLelland CJ in Eq said in Barclays Australia v Mike Gaffikin (at 238):
‘The assertion that there is a genuine dispute about the existence of the debt is in turn based on two grounds. The first relies on the existence of the undetermined appeal, in which orders are sought by Dan (inter alia) that the proceedings brought by Gaffikin Marine be dismissed and that Gaffikin Marine pay the costs of those proceedings. If the appeal succeeds, it is possible that the costs orders of 16 July 1995 (including the order against Barclays, although it is not an appellant) may be set aside. The answer to this submission is that the possibility that a presently existing and enforceable debt may be set aside in the future pursuant to a subsisting appeal does not give rise to a genuine dispute about the existence of the debt within the meaning of s 459H (see eg Hoare Bros v DCT (1995) 16 ACSR 213; 13 ACLC 358; Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039). The position would of course be different if there were a stay of proceedings under, or stay of execution of, the costs order against Barclays, but there is not, and in the absence of any such stay and notwithstanding the pedency of the appeal, the costs orders of 16 July 1995 against Barclays (together with the judgment of 16 May 1996), unless and until set aside on appeal, operate as res judicata determining the matter of Barclays’ costs liability to Gaffikin Marine (see Spencer-Bower & Turner Res Judicata, 2nd ed, p 44; Lahoud v B & M Quality Constructions (unreported, SC(NSW), McLelland CJ in Eq, 22 July 1994).’”
Pursuant to s.459J(1)(b) of the Act, the Court may set aside a statutory demand if it is satisfied that there is some reason why it should be set aside. Section 459J(1)(b) of the Act has been interpreted broadly.[3]
[3]See Scope Data Systems v BDO Nelson Parkhill (Supra), Hoare Bros Pty Ltd v DCT (1996) 135 ALR 677
In Arnoya Holdings Pty Ltd v Metway Leasing Ltd, Master McLaughlin refused an application to set aside a statutory demand pursuant to s.459J(1)(b) where the plaintiff had filed a notice of appeal against a judgment debt upon which the demand was based. In that case, there had been two unsuccessful applications for stays of execution pending the appeal.
In my view, the mere fact that an appeal has been lodged does not constitute some other reason why a statutory demand should be set aside. If there is a stay of the order or judgment upon which the demand is based then the situation would be different.
Here, the plaintiff has filed an application for a stay which has been listed for hearing on 13 October 2011. The defendant submits that the application for the stay was prompted only by the service of the statutory demand. It says that judgment was obtained almost two years ago and no explanation has been given for the delay in applying for a stay. It also submits that it is not apparent that the application for the stay has any prospect of success as the test in Victoria for granting a stay is onerous as the appellant must demonstrate some special or exceptional circumstances [4] and no such circumstances exist in this case.
[4]See Kakavas v Crown Melbourne Ltd [2010] VSCA 102.
The statutory demand served on the plaintiff is the fourth demand that has been served on the defendant. A statutory demand dated 6 December 2009 was served on the defendant. A letter was sent by the plaintiff’s solicitors to the defendant’s solicitors identifying a defect in the first statutory demand. The defendant’s solicitors did not accept that the demand was defective but withdrew the demand.
A second statutory demand dated 12 January 2010 was served on the plaintiff. The plaintiff’s director, Mr David Bond, was overseas when the demand was served and did not return to Australia until 21 January 2010. No winding up application was issued as a result of the failure of the defendant to respond to the second statutory demand.
A third statutory demand dated 27 June 2011 was served on the defendant. The amount claimed in paragraph 1 of the demand was not the same as the amount referred to in the schedule to the demand and the demand was again withdrawn.
Mr Mond deposes that he did not instruct his solicitors to lodge an application to stay the execution of the judgment because it seemed that the defendant did not intend to demand payment of the judgment debt pending the appeal, having failed to act on previous statutory demands and having received security for costs that it had sought.
In an affidavit in support of the application for a stay affirmed on 24 August 2011, Mr Mond deposed that he believed that the defendant would not seek to wind up the plaintiff. The basis of that belief was a public declaration given by Mr Handberg at a meeting of creditors on 7 October 2010.
The minutes of that meeting states that:
“Mr Bill Velos asked why the liquidator had not yet wound up MIG, which would be cheaper option than continuing the court action.
The Chairman stated that his legal advice was not to take steps to wind up MIG whilst the appeal was still on foot.”
Approximately one year has elapsed since the meeting took place. The third statutory demand was served on 28 June 2011 and the fourth statutory demand was served on 14 July 2011. The application for a stay was filed on 24 August 2011. I also note that orders on 19 June 2009 were made by Robson J in the same proceeding against the second defendant, Mr Paul Vartelas. He made an application for a stay which was refused by the Court of Appeal on 21 August 2009.
It is not for me to determine the merits of the stay application. The plaintiff had ample opportunity to bring an application for a stay and chose not to do so. Lansdowne AsJ has indicated that the plaintiff has not diligently prosecuted the appeal. There is no reason to adjourn this application until the application for a stay has been determined. If the plaintiff is successful in obtaining the stay then this may become an important issue if any winding up proceedings are brought by the plaintiff.
If I was satisfied that the appeal had a sufficient degree of merit then there would be a ground to set aside the statutory demand pursuant to s.459J(1)(b) of the Act.[5] The only submission made by counsel for the plaintiff was that the appeal must have some merit because no application has been taken to strike out the appeal. The fact that an application has not been made to strike out the appeal does not mean that the appeal has merit.
[5]See Barclays Australia Finance v Mike Gaffikin Marine (1996) 21 ACSR 235 and Eiros Pty Ltd v St George Bank Ltd [2008] FCA 1475.
I have perused the Notice of Appeal and the decision of Robson J and, on the material before the Court, I am not in a position to form a view as to the merits of the appeal.
In June 2010, the defendant made an application for security for costs of the appeal. Orders were made by consent that the defendant pay an amount of $70,000 into Court as security for costs. The plaintiff is the trustee for the MIG Property Trust No. 2. It is only a passive investment trust and does not employ any staff. It is not currently trading or active and remains operational pursuant for the purpose of prosecuting the appeal. It did not have sufficient funds or assets to cover the order for security for costs and Mr David Mond, the director of the plaintiff, provided a bank guarantee and paid it into Court on 17 February 2011.
The fact that there has been security for costs and also that the director of the plaintiff is funding the appeal personally were raised as ground for the statutory demand to be set aside. That cannot be a relevant consideration in an application to set aside a statutory demand pursuant to s.459J(1)(b) of the Act.
In support of an application for an adjournment, the plaintiff submitted that it would suffer substantial injustice because it would be unable to prosecute its appeal. The application to set aside the statutory demand has no effect on the plaintiff’s ability to prosecute the appeal. The effect of the order will be that unless the plaintiff pays the debt due within the time prescribed by s.459F of the Act, the plaintiff will be presumed insolvent. The defendant will then be in a position to make an application to wind up the company. The plaintiff will have the opportunity to oppose the application and if successful in obtaining a stay, raise that issue in opposition to the application.
The plaintiff’s application to set aside the statutory demand will be dismissed.
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