Neptune GEOMATICS Pty Ltd v GREATSHIP Subsea Solutions Australia Pty Ltd

[2012] WASC 477

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   NEPTUNE GEOMATICS PTY LTD -v- GREATSHIP SUBSEA SOLUTIONS AUSTRALIA PTY LTD [2012] WASC 477

CORAM:   MASTER SANDERSON

HEARD:   27 NOVEMBER 2012

DELIVERED          :   10 DECEMBER 2012

FILE NO/S:   COR 157 of 2012

BETWEEN:   NEPTUNE GEOMATICS PTY LTD

Plaintiff

AND

GREATSHIP SUBSEA SOLUTIONS AUSTRALIA PTY LTD
Defendant

Catchwords:

Corporation law - Application to set aside statutory demand - Issue of demand said to be abuse of process - Turns on own facts

Legislation:

Nil

Result:

Demand set aside

Category:    B

Representation:

Counsel:

Plaintiff:     Mr J C Vaughan

Defendant:     Mr D B Shaw

Solicitors:

Plaintiff:     John Louden

Defendant:     DLA Piper Australia

Case(s) referred to in judgment(s):

Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85

1. MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. There is only one basis upon which the plaintiff makes it application. The plaintiff says the demand is an abuse of process and should be set aside under the provisions of s 459J(1)(b) of the Corporations Act 2001 (Cth). The facts are simple but highly unusual.

2. On or about 7 November 2011 the plaintiff entered into a contract with Hess Exploration Australia Pty Ltd pursuant to which it agreed to provide off‑shore geophysical and geotechnical survey services in relation to Hess' off‑shore 'Equus' gas project.  On or about 18 January 2012 the plaintiff and the defendant entered into a written subcontract pursuant to which the defendant agreed to provide a suitable vessel and related services in connection with the Hess work.

3. On 1 February 2012 the plaintiff and the defendant entered into an agreement to vary the subcontractual arrangement.  As a consequence of this variation:

   1.prior to submitting any invoice to Hess the plaintiff would have those invoices signed by nominated representatives of the defendant;

   2.the plaintiff would procure from Hess an agreement that all payments from Hess in respect of the plaintiff's invoices would be paid into a bank account held jointly between the plaintiff and the defendant; and

   3.the plaintiff's funds in an amount of $330,000 would be held in the joint account as 'security'.

4. Funds can only be released from the joint account if two authorised signatories from each of the plaintiff and the defendant sign the relevant transfer request form.

5. Notwithstanding cl 3 of the variation above on or about 16 August 2012 the plaintiff asked the defendant to consent to the release of the $330,000 security funds from the joint account.  The defendant agreed unconditionally and $330,000 was transferred to the plaintiff leaving the joint account with a nil balance.

6. The current balance in the joint account is $2,617,961.53.  The undisputed position between the parties is that of those funds:

   (a)$384,616.25 belongs to Neptune; and

   (b)the remainder ($2,233,345.28) belongs to the defendant.

7. The present position between the parties can be summarised in this way.  The plaintiff has offered to sign the relevant transfer form to enable the immediate transfer of all the funds from the joint account to the parties in the proportions to which they are entitled.  The defendant will not agree to release all of the plaintiff's funds from the joint account because it wishes to reinstate the $330,000 security funds.  The defendant has issued a statutory demand for the amount all parties agreed it is owed.  The plaintiff says the demand was issued for an improper purpose and should be set aside.

8. In Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85, Martin CJ had this to say:

   The issue of the statutory demand, and the appeal from the decision of the master setting it aside, reflect a fundamental misconception as to the purpose of the statutory demand process created by Pt 5.4 of the Corporations Act. That purpose is to provide a means whereby the insolvency of a company may be established for the purposes of an application to wind up that company. Its purpose is not to provide a means whereby those claiming a genuinely disputed debt can avoid the obligation of establishing their entitlement to that debt in a court of appropriate jurisdiction by placing commercial pressure on the party resisting payment. There is a clear inference from the evidence that Createc's purpose in issuing the statutory demand was the improper purpose of using the statutory demand process to enforce payment of a debt which it knew to be genuinely disputed. That is an abuse of process [2].

9. There is no question here of the debt being genuinely disputed.  The plaintiff admits it is owed and identifies the source from which payment will be made.  But it is clear the purpose of issuing this statutory demand is to put pressure on the plaintiff to not only make payment of the debt but to do so in circumstances where money to which it says it is entitled will remain locked in the joint account.  It is difficult to image a clearer case where the statutory demand procedure has been used for an improper purpose.  It is appropriate to refer again to the Createc decision.  After setting out why he was of the view there was a genuine dispute as to the debt, the subject of the demand, the Chief Justice went on:

   There is a further reason why this appeal should be dismissed.  That is because the issue of the statutory demand is, and any winding-up application proposed to be brought pursuant to the demand would be, an abuse of process.

   There is no suggestion in the evidence that Design Signs is insolvent, or lacked the financial capacity to pay the debt if the debt had not been disputed.  To the contrary, the evidence established that finance was available from a bank, which would have provided Design Signs with the capacity to pay the debt had it not disputed its obligation to do so [56] ‑ [57].

10. That is exactly this position.  If the plaintiff wished to pay the debt it could do so. But it is only prepared to do so if it too has funds released to it.  There is no question here of the defendant wanting to wind‑up the plaintiff.  It is inappropriate to use the statutory demand procedure in these circumstances.

11. The demand will be set aside.  The defendant should pay the plaintiff's costs of the application including the reserved costs.