Playford Vineyard Pty Ltd v WIshford Nominees Pty Ltd (NO 2) - [2018] SASC 152

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
PLAYFORD VINEYARD PTY LTD (ACN 604 608 157) v WISHFORD NOMINEES PTY LTD (ACN 008 077 236) (No 2)
[2018] SASC 152
Judgment of The Honourable Justice Stanley
27 September 2018
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENERALLY
Application by the plaintiff for a stay of execution pending the determination of an appeal from orders made in proceedings concerning a vineyard in the Riverland, and for the setting aside of a statutory demand issued by the defendant based on those orders.
Held:
1. There is a real risk the plaintiff will suffer significant prejudice if a stay is not granted and its appeal is successful.
2. It is appropriate to order a stay of execution pending the hearing and determination of the appeal.
3. Before the judgment is stayed the defendant’s position should be secured by an order of the Court that goes some way to ensuring that if the defendant succeeds on the cross-appeal there is some prospect of it being able to recover not just the judgment sum but also any award of damages and costs the Court may make.
4. The grant of a stay should be conditioned on payment into Court of the amount owing by the plaintiff to the defendant.
5. There is a commercial imperative in selling the wine now that meets the interests of both parties.
6. The parties are at liberty to sell the wine produced by Riverland Vintners from processing the grapes from the 2018 vintage.
7. Any proceeds of the sale of the wine (after payment of Riverland Vintners’ reasonable fees for the cost of processing the wine) are to be held on trust for the parties.
8. If the conditions are met and execution of the judgment sum is stayed, the statutory demand will be set aside pursuant to s 459J(1)(b) of the Corporations Act 2001 (Cth).
Corporations Act 2001 (Cth) s 459G, s 459J, s 467A, s 1322(2); Enforcement of Judgments Act 1991 (SA) s 17; Corporations Rules 2003 (SA) s 2, referred to.
Commissioner of Taxation v Myer Emporium Ltd (No 1) (1986) 160 CLR 220; Kalifair Pty Ltd v Digi-Tech (Aust) Ltd (2002) 55 NSWLR 737; McNally v Jack (1885) VLR 666; Quarter Enterprises Pty Ltd v Allardyce Lumber Co Ltd [2011] NSWSC 1031; Caruso v Built It Pty Ltd (In Liq) [2018] SASC 71, discussed.
Ryan v Urban Construct (SA) Pty Ltd (No 2) (2012) 114 SASR 410; Hackney Tavern Nominees Pty Ltd v McLeod (1983) 33 SASR 590; Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121; North Flinders Mines v Hartogen Energy Ltd (No 2) (1988) 52 SASR 14; Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685; Duke Group Ltd (in Liq) v Pilmer & Ors (No 9) [1998] SASC 6716; Technilock (Aust) Pty & Ors v Mondami Pty [1999] SASC 94; Ian Rodda Pty Ltd v Rodda [2015] SASC 149; Lesses v Maras (No 2) [2016] SASC 140; Rickard v Testel Australia Pty Ltd [2017] SASC 144; Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235; Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454; Midas Management Pty Ltd v Equator Communications Pty Ltd (2007) 25 ACLC 1038; Cranney Farm Pty Ltd v Carowa Fertilizers Pty Ltd [2011] NSWSC 9; Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466, considered.

PLAYFORD VINEYARD PTY LTD (ACN 604 608 157) v WISHFORD NOMINEES PTY LTD (ACN 008 077 236) (No 2)
[2018] SASC 152
STANLEY J.
Introduction

This is an application for a stay of execution pending the determination of an appeal from orders made by me in proceedings concerning the dispute over a vineyard in the Riverland and the setting aside of a statutory demand based on those orders.
The defendant was the lessee and the plaintiff was the lessor of the vineyard. The defendant had previously owned the vineyard, but sold it to the plaintiff in 2015, subject to the parties to the sale contract entering into a three-year leaseback with an annual option on the part of the defendant to re-purchase the vineyard at a fixed price. The term of that lease was to expire in April 2018.
In September 2017, the plaintiff purported to terminate the lease, with immediate effect, and re-enter the land on the basis the defendant was in default of its obligations under the lease and/or had repudiated the lease agreement. The right of the plaintiff to terminate the lease and re-enter was disputed by the defendant. Following its re-entry, the plaintiff undertook certain work on the vines which the defendant submits reduced the productivity of the vines for the 2018 vintage. It claims to be entitled to damages for that loss.
The trial commenced in late November 2017. The trial continued until 18 December 2017 when it was adjourned to resume in February 2018. Judgment was reserved on 9 March 2018.
During the trial in December 2017 it became apparent that judgment was unlikely to be delivered before the 2018 vintage. In order to preserve the position of the parties, the Court made interim orders on 20 December 2017 in the following terms:
1.That until further order, the plaintiff and the defendant be restrained from, whether directly or indirectly, dealing with the grapes grown on the vines located upon the land located at Lot 4, Playford Road, Sunlands, in the State of South Australia, 5332, and known as the Playford Vineyard (‘the Playford Vineyard’) other than in accordance with the following orders.
2.Until further order:
2.1    The defendant is, at its cost, to undertake all works reasonably necessary to manage, maintain and harvest the grapes being grown on the Playford Vineyard for the 2018 harvest (subject to any contrary order that the Court may make in the ultimate disposition of the proceedings);
2.2    The defendant is to deliver (and cause to be delivered) all of the grapes harvested from the Playford Vineyard from the 2018 harvest to Riverland Vintners for the purpose of:
2.2.1The grapes being processed into wine pursuant to the Spot Purchase Wine Grape Agreement, as set out in sub‑paragraph 2.3 of these orders for cabernet sauvignon, merlot and shiraz grapes (“the wine”); and
2.2.2The wine being stored by Riverland Vintners on trust for the parties.
2.3    In the event the plaintiff is ultimately unsuccessful in the proceedings, the plaintiff and the defendant will execute a Spot Purchase Wine Grape Agreement, as modified to conform to these orders, for the processing of grapes harvested from the Playford Vineyard in the 2018 harvest into wine;
2.4    In the event the plaintiff is ultimately unsuccessful in the proceedings, the plaintiff will purchase the wine held by Riverland Vintners at a rate of $510 per tonne delivered to Riverland Vintners for the 2018 harvest. Payment will be made in three tranches, with 50 per cent payable by 31 March 2018, 25 per cent payable by 30 June 2018 and the balance payable by 30 September 2018. Late payment will incur a penalty of interest at 9.3 per cent;
2.5    In the event the defendant is ultimately unsuccessful in the proceedings, the plaintiff will pay the defendant a reasonable amount for its cost of harvesting and of delivering the grapes from the Playford Vineyard for the 2018 harvest (calculated by reference to the actual amount expended by the defendant in performing the 2018 harvest);
2.6    The plaintiff will be entitled to have one representative present at the Playford Vineyard at all times during the 2018 harvest;
2.7    The defendant will be entitled to have one representative present at the weighbridge on deliver of the grapes to Riverland Vintners and the parties will agree the quality of the grapes, including the MOG rating and, in the absence of agreement, the parties will have the quality, including the MOG rating determined by an agreed independent expert, based on the Australian Wine Grape Load Assessment – A Visual Guide (Allen 1998), and using photographs taken of the load if the expert is unable to attend. It is agreed that MOG 3 or below is acceptable and will not result in any reduction of the price;
2.8    Neither the plaintiff nor the defendant shall, whether directly or indirectly, take steps to effect the release of the wine, sell or enter into any contract or arrangement for the sale of the wine, and in any way seek to deal with the wine, other than in accordance with these orders; and
2.9    The plaintiff is to bear the costs invoiced by Riverland Vintners for the processing of the grapes into the wine and the storage of the wine.
3.I grant liberty to the parties to apply.
In accordance with those orders the grapes harvested in the 2018 vintage were processed into wine by Riverland Vintners. That wine has been held on trust for the parties by Riverland Vintners pending the outcome of the proceedings.
At the trial of the action, the principal issues for determination were whether the defendant was in breach of its lease obligations so as to entitle the plaintiff to terminate the lease and re-enter, whether the defendant had repudiated the lease agreement, and whether the defendant still enjoyed an option to re-purchase the vineyard in 2018.
The Court found that the plaintiff had not established a breach of the lease entitling it to terminate, and as a result had not established its case of repudiation, but that the defendant did not have a further option to re-purchase the vineyard exercisable in 2018.
After delivery of the Court’s reasons for judgment, on 26 June 2018 the Court made declarations that the plaintiff was not entitled to terminate the lease and re-enter the land, and that there is no option available to the defendant to re‑purchase the land exercisable after 1 April 2018 (or at all). That leaves for decision the defendant’s claim for damages for the loss of grape production caused by the pruning undertaken by the plaintiff upon its re-entry in September 2017.
The plaintiff has appealed the finding that it had failed to prove a breach of the lease entitling it to terminate and failed to prove its case of repudiation. The defendant cross-appealed on the finding that, pursuant to the terms of the lease, there was no right to an option to re-purchase exercisable in 2018.
The plaintiff has sought orders in the nature of a stay of execution pending the determination of the appeal and cross-appeal.
The basis upon which the stay application is brought
Following the delivery of the Court’s judgment in the principal proceedings on 22 June 2018, the defendant issued a statutory demand in reliance upon the orders made on 20 December 2017. The demand was served on the plaintiff on 12 July 2018. The statutory demand is for an amount of $291,585.03. This amount is alleged to be a judgment debt of $286,356.09, plus interest to 11 July 2018 at 9.3 per cent per annum of $5,228.94. The judgment debt represents the amount the defendant says is owing for the grapes harvested in 2018 and supplied to Riverland Vintners for processing in accordance with the orders made by the Court on 20 December 2017; that is, 561.48 tonnes of grapes at $510 per tonne. That represents the first two tranches of payment prescribed by clause 2.4 of those orders. It does not include a claim for the third and final tranche of the remaining 25 per cent of the wine due on 30 September 2018.
The defendant separately claims an entitlement to damages for the loss suffered as a result of the plaintiff’s pruning of the vines following its re-entry in September 2017. In addition, it seeks the costs of the trial.
The plaintiff seeks a stay of the judgment sum on the basis that it has an arguable case on appeal and the balance of convenience favours the grant of a stay. It says it is likely it will suffer irremediable prejudice if it was to pay the judgment sum now and succeed on appeal. It submits that the evidence before the Court fails to demonstrate that the defendant enjoys a capacity to repay the judgment sum in those circumstances. Further, it contends that any prejudice to the defendant by a stay will be cured by payment of interest. Finally, the plaintiff contends that, if a stay is granted, the Court should set aside the statutory demand as the stay will constitute some other reason in accordance with s 459J(1)(b) of the Corporations Act 2001 (Cth) (Corporations Act).[1]
[1] Ryan v Urban Construct (SA) Pty Ltd (No 2) [2012] SASC 193, (2012) 114 SASR 410.
The plaintiff seeks orders that constitute a variation of the orders made on 20 December 2017. The plaintiff proposes that it pay into Court the sum of $381,808.12. Once that has occurred, it is to be permitted to sell and transfer the beneficial ownership and possession of the wine stored by Riverland Vintners on trust for the parties pursuant to those orders and retain and utilise the proceeds realised from the sale of the wine. In that event, it seeks a stay of orders 1, 3, 4 and 5 of the orders made by the Court on 26 June 2018, following judgment.[2]
[2] 1. A declaration that the plaintiff was not entitled to terminate the Lease and re-enter the land.
3.During the trial the judge’s absence on leave the action is referred to a master of the court not before 18 July 2018 for directions as to the continuing conduct of the matter.
4.The parties formulate each of their order for costs and file and serve any evidence if so advised by 27 July 2018.
5. The other party files its response to the other claim for costs and any evidence if so advised by 10 August 2018.
The sum of $381,808.12 represents the total amount owing as at 30 September 2018 in accordance with the orders made on 20 December 2017 (without payment of any interest).
The defendant submits that a stay should not be granted pending the determination of the appeal unless the plaintiff has demonstrated that it has the wherewithal to pay the judgment sum. It submits that the plaintiff has not done so. It has not paid the judgment debt. The defendant contends that the plaintiff’s assets are the vineyard land and money in the bank. Loans to the plaintiff are secured over the vineyard land. The defendant submits that if it succeeds on the cross-appeal the plaintiff’s equity in the vineyard and the proceeds of sale from the option agreement will be consumed by the plaintiff’s liabilities to the defendant. In these circumstances it submits it ought not be exposed to the risk of being unable to recover its claims because the plaintiff has not met its liabilities under the judgment because of the grant of a stay. The defendant submits this situation is compounded by a substantial exposure on the part of the plaintiff to an award of damages and costs. The defendant estimates that the plaintiff’s liability for damages is in excess of $700,000 and its liability for costs is an amount of $700,500.
The defendant opposes the setting aside of the statutory demand on the basis that the application to set aside is incompetently brought and there is no cogent other reason to set aside the statutory demand.
Principles applicable to the grant of a stay pending an appeal
Section 17 of the Enforcement of Judgments Act 1991 (SA) provides that the Court may, if satisfied that there is a proper reason for granting a stay of execution of a judgment do so in such terms as it considers appropriate.
SCR 300[3] confers a power upon a Court to order a stay of execution of a judgment for any proper reason. An appeal may constitute a proper reason for granting a stay.
[3] Supreme Court Civil Rules 2006 (SA).
Ordinarily, a judgment creditor is entitled to enforce their judgment when there is an appeal pending.[4] The applicant for a stay bears the onus of satisfying the Court that the discretionary power should be exercised in its favour.
[4] Hackney Tavern Nominees Pty Ltd v McLeod (1983) 33 SASR 590 at [594]-[595]; Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [1997] HCA 24, (1997) 145 ALR 121.
An applicant for a stay of execution pending the hearing and determination of an appeal must demonstrate a proper reason, or appropriate case, to warrant the exercise of the discretion. The mere filing of an appeal will not suffice. The Court generally proceeds from a starting point that the decision below was correct and that the party who has been successful at trial is entitled to the benefit of their judgment. However, in considering the balance of convenience, an important consideration is that a successful appellant should not be deprived of the fruits of a successful appeal.[5]
[5] North Flinders Mines v Hartogen Energy Ltd (No 2) (1988) 52 SASR 14 at 16.
An applicant must establish that the appeal raises a serious issue, that there is a real risk the appellant will suffer some significant prejudice or damage if the stay is not granted and the balance of convenience favours a stay.[6] A stay should only be granted where the justice of the case requires it.[7] It is necessary to show that the appeal mechanism is not being used as an instrument of oppression or merely as a delaying tactic.[8] In exercising the discretion the Court will balance the interests of the parties and ultimately have regards to the balance of convenience.[9]
[6]    Ian Rodda Pty Ltd v Rodda [2015] SASC 149.
[7]    Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685; Duke Group Ltd (in Liq) v Pilmer & Ors (No 9) [1998] SASC 6716; Technilock (Aust) Pty & Ors v Mondami Pty [1999] SASC 94.
[8]    Ryan v Urban Construct (SA) Pty Ltd (No 2) [2012] SASC 183 at [16], (2012) 114 SASR 410 at [16].
[9]    Lesses v Maras (No 2) [2016] SASC 140; Rickard v Testel Australia Pty Ltd [2017] SASC 144.
In Commissioner of Taxation v Myer Emporium Ltd (No 1)[10] Dawson J held that the grant of a stay would be warranted if there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed. In Kalifair Pty Ltd v Digi‑Tech (Aust) Ltd,[11]it was held that balance of convenience favours the grant of a stay where an appeal would be rendered nugatory or abortive if the stay was not granted.
[10] [1986] HCA 13, (1986) 160 CLR 220.
[11] [2002] NSWCA 383, (2002) 55 NSWLR 737 at [17].
Not only does the Court have a discretion whether or not to grant a stay, it also has a discretion, where it decides to grant a stay, as to the terms upon which that would be fair.[12]
[12] Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at [694].
Consideration
In this matter I am satisfied that the grounds of appeal are reasonably arguable. So much was conceded by the defendant.
Further, the defendant concedes that there is no evidence before the Court that demonstrates it has the capacity to repay the judgment sum in the event that the plaintiff’s appeal is successful.
Nonetheless the defendant submits that the Court should not grant the stay sought. It seeks to resist the application for a stay on the basis that a condition precedent to the grant of a stay is proof by the applicant for the stay that it has the capacity and willingness to meet its liability for the judgment sum. Absent such proof the Court need not consider the question of the balance of convenience. The defendant relies upon the authority of McNally v Jack[13] where Higinbotham J said:[14]
A party applying for a stay of proceedings usually relies upon the supposed inability of the successful party to repay the amount that may be paid to him under the judgment, if the applicant's appeal be successful. A very strong case has always to be presented to the judge, showing facts from which the inference can be drawn that the party who has a judgment in his favour for a sum of money, will not be able to repay that money in the event of his opponent being successful. But if the party applying to stay proceedings pending an appeal, while he endeavours to show that his opponent will not be able to pay in the event of the appeal being successful, with-holds' from the judge the fact that he himself is then unable to pay, and so satisfy the judgment in the event of his opponent being successful, he places himself in a false position and leads the judge to make an unjust Order. It is unjust that the successful party should be deprived of the means of immediately enforcing his judgment if the other party is unable to satisfy it.
[13] (1885) VLR 666.
[14] (1885) VLR 666 at 667-668.

I do not accept this submission. Two premises underpin the principle for which McNally v Jack stands. First, that the applicant for a stay lacks the capacity to satisfy the judgment and second, that the applicant for the stay conceals this fact from the Court.
The evidence before me does not establish that the plaintiff lacks the capacity to satisfy the judgment. Further, it cannot be said that there has been an attempt by the plaintiff to conceal from the Court its financial capacity to satisfy the judgment.
The plaintiff has put on evidence as to its present financial position. That evidence includes a draft financial report of the Playford Vineyard Unit Trust for the year ending 30 June 2018, which discloses a profit before income tax for the year ending 30 June 2018 of $237,575 and net assets of $3,255,918. It is not obvious that if the defendant succeeds on the appeal and cross appeal the plaintiff will be unable to satisfy the judgment sum. If the defendant succeeds on the appeal, whether it is entitled to an award of damages and, if so, the quantum of damages to which it is entitled, and the amount of costs, is yet to be determined. If the defendant succeeds on its cross-appeal it will enjoy an option to repurchase the vineyard, which if exercised will inject funds into the plaintiff.
On the other hand there is no evidence that the defendant has the capacity to repay the judgment sum in the event the plaintiff’s appeal succeeds. I am satisfied that in these circumstances there is a real risk the appellant will suffer significant prejudice if a stay is not granted and its appeal is successful. On this basis I am satisfied that it is appropriate to order a stay of execution pending the hearing and determination of the appeal.
That leaves for consideration whether the grant of a stay should be conditioned on terms.
In my view the grant of a stay should be conditioned upon terms. So much is accepted by the plaintiff. It proposes that a stay should be conditioned upon payment into Court of the sum of $381,808.12. It further proposes that once payment into Court has been made, the beneficial ownership and possession of the wine stored by Riverland Vintners on trust for the parties pursuant to the orders made by the Court on 20 December 2017, be transferred to it allowing it to sell the wine and retain and utilise the proceeds realised from the sale of the wine.
I do not consider that is appropriate.
In my view the grant of a stay should be conditioned on payment into Court of the amount owing by the plaintiff to the defendant pursuant to the orders made on 20 December 2017. That is not the sum of $381,808.12. By 30 September 2018 the amount owing pursuant to the orders made on 20 December 2017 is $381,808.12 plus interest of $10,992.92. That is a total of $392,801.04.
I consider that the grant of a stay of execution pending the hearing and determination of the appeal should be conditioned on payment into Court by the plaintiff of $392,801.04. In addition, however, I do not consider it fair that upon payment of that sum into Court, the beneficial ownership and possession of the wine stored by Riverland Vintners is transferred to the plaintiff, allowing it to sell the wine and retain and utilise the proceeds realised from its sale.
Having regard to the evidence that the optimum price for the wine is likely to be achieved if the wine is sold in the next few months, I am satisfied there is a commercial imperative in selling the wine now that meets the interests of both parties.
In my view it would not be fair for the defendant to be kept out of the fruits of its success at trial while the plaintiff, who was unsuccessful at trial on the subject matter of its appeal, is free to enjoy the proceeds of the sale of the wine which is the product of the processing of the grapes from the 2018 vintage. It must be remembered that the result of the trial is that I have found the grapes belong to the defendant. It follows from this finding that, subject to the determination of the appeal, there is at least a prospect that the plaintiff is liable to the defendant in damages for its unlawful re-entry and management of the vineyard in the period immediately following re-entry. Before the judgment is stayed the defendant’s position should be secured by an order of the Court that goes some way to ensuring that if the defendant succeeds on the appeal there is some prospect of it being able to recover not just the judgment sum but also any award of damages and costs the Court may make.
I would permit the sale of the wine to occur, but the proceeds of the sale are to be held on trust pending the hearing and determination of the appeal. As the appeal puts in issue the ownership of the grapes from the 2018 vintage, sale of the wine can only occur with the parties jointly agreeing to the sale. I propose that, in the event of the wine being sold, the proceeds (after payment of Riverland Vintners’ reasonable fees for the cost of processing the wine) shall be held on trust in a joint account opened by both parties pending the outcome of the appeal. However, I would hear submissions from the parties if they wish to propose an alternative mechanism that achieves the same objective.
The application to set aside the statutory demand
The plaintiff submits that the statutory demand should be set aside as it is defective. It contends that the judgment debt claimed by the defendant does not exist because it is founded on the orders of the Court made on 20 December 2017. Order 2.4 provides that in the event the plaintiff is ultimately unsuccessful in the proceedings, it is to purchase the wine held by Riverland Vintners in three tranches due on 31 March 2018, 30 June 2018 and 30 September 2018. Those orders for payment are predicated upon the plaintiff being ultimately unsuccessful in the proceedings. The plaintiff submits that the ultimate success or otherwise of the proceedings is yet to be determined because an appeal and cross-appeal is on foot. I do not accept this submission. The reference to ultimate success in the context in which the order was made, during the course of the trial, which was brought on at short notice having regard to the urgency of deciding the issues at trial given the proximity of the 2018 vintage, was a reference to the ultimate success or failure on the trial of the action.
The defendant opposes the Court making an order setting aside the statutory demand for two reasons. First, it contends that the application is incompetent for a number of reasons. It submits that the application had to be brought by originating process under the Corporations Rules[15] as there was not a substantive connection between the relief sought in the application and the subject matter and scope of the proceeding that has already been commenced; the application was not in accordance with Form 2; the application did not state each section of the Corporations Act under which it was made; and the supporting affidavit did not describe the basis of the application to set aside the statutory demand. Second, it contends that there is no cogent other reason to set aside the statutory demand. In these circumstances the defendant submits that the Court should not set aside the statutory demand.
[15] Corporations Rules 2003 (SA).
I do not accept these submissions.
I am satisfied that there is a substantive connection between the relief sought in the application and the subject matter and scope of the proceeding that has already been commenced. The basis of the statutory demand, which the plaintiff seeks to set aside, arises from the orders made by the Court in the principal proceedings.[16] The requirement that the application be in accordance with Form 2 applies to an originating process pursuant to r 2.2(3) and not to an interlocutory process pursuant to r 2.2(4). The application states it was made pursuant to s 459G of the Corporations Act. That is the provision under which the application is made for the purpose of r 2.2(4). So much is apparent from the terms of s 459J(1)(b) which provides that the Court may set aside the demand on an application under s 459G if it is satisfied that there is some other reason why the demand should be set aside. In any event, s 467A and s 1322(2) of the Corporations Act provide that an application is not to be dismissed or invalidated merely because of a defect or irregularity in connection with the application or the proceedings unless the Court is satisfied that the defect or irregularity has caused or may cause substantial injustice that cannot otherwise be remedied by an order of the Court.
[16] Mentha v Epic Energy South Australia Pty Ltd [2018] FCA 925 at [15]-[17].
That is consistent with the obiter observations in Caruso v Built It Pty Ltd (In Liq)[17] by Doyle J that where the Corporation Rules have not been complied with, courts are entitled to dispense with compliance in an appropriate case. Any non-compliance with the Corporations Rules that has occurred here has not occasioned any substantial prejudice or injustice to the defendant. To the extent that there has been non-compliance with the Corporations Rules, I would dispense with compliance with those rules.
[17] [2018] SASC 71 at [46].
In this case the exercise of the Court’s discretion is informed by the principles underpinning the grounds upon which a court would set aside a statutory demand for some “other reason” in accordance with s 459J(1)(b) of the Corporations Act. Those principles were helpfully summarised in Quarter Enterprises Pty Ltd v Allardyce Lumber Co Ltd[18] where White J said:[19]
Where it is shown that there are arguable grounds of appeal, the Court's discretion may be enlivened under s 459J(1)(b) to set aside the demand on the grounds that there is some other reason why the demand should be set aside. Some cases have stressed that there will not be some other reason for setting aside the statutory demand if to do so will have the practical effect of granting a stay of the judgment when the plaintiff ought to have sought a stay. A fortiori, if a stay has been sought but refused, or has been granted on conditions that have not been met, then (at least prima facie) there will not be some other reason why the demand should be set aside. However, there is no rigid rule that can confine the scope of the power under s 459J(1)(b). That is not to say that under that section the Judge can do simply what he or she considers to be fair. The power must be exercised on a good reason relevant to the purposes for which the power exists. But it is consistent with the purposes of Part 5.4 for a Court to set aside a statutory demand based upon a judgment debt if satisfied that there are arguable grounds of appeal. Typically in such cases the demand is set aside on the condition that the debt claimed is secured by payment into Court or by other means.
[Citations omitted.]
[18] [2011] NSWSC 1031 at [9].
[19] [2011] NSWSC 1031.
The existence of reasonably arguable grounds together with the payment into Court of the judgment sum is usually sufficient to establish the existence of some other reason to set aside a statutory demand based upon the judgment debt.[20] However, in this case, as matters presently stand, where the judgment debt does not necessarily reflect the full extent of the plaintiff’s liability to the defendant, it is fair that a further condition be imposed to protect the defendant’s position before a stay is granted. In my view, given the circumstances that I am prepared to grant a stay of execution where the conditions I have prescribed are satisfied, no useful purpose will be served in enforcing strict compliance with the Corporations Rules.
[20] Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 233 at 239 -240; Eumina Investments Pty Ltd v Westpac Banking Corporation [1998] FCA 824, (1998) 84 FCR 454 at 462; Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759, (2007) 25 ACLC 1038 at [35]-[36]; Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd [2011] NSWSC 9 at [56]-[60]; Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466 at [25]-[26]); Ryan v Urban Construct (SA) (No 2) [2012] SASC 193 at [73]-[74], (2012) 114 SASR 410 at 429.
In this case, where I am prepared to make a conditional order staying execution pending the hearing and determination of the appeal as described above, I consider it appropriate to set aside the statutory demand pursuant to s 459J(1)(b) once those conditions have been satisfied.
Conclusion
In the circumstances of this matter I would grant a stay of execution pending the hearing and determination of the appeal and cross-appeal, on the condition that within 14 days the plaintiff pays into Court $392,801.04. The parties are at liberty to sell the wine produced by Riverland Vintners from processing the grapes from the 2018 vintage. Any proceeds of the sale of the wine (after payment of Riverland Vintners’ reasonable fees for the cost of processing the wine) are to be held on trust for the parties. The plaintiff is to prosecute the appeal with all reasonable diligence. If those conditions are met and execution of the judgment sum is stayed, I would set aside the statutory demand pursuant to s 459J(1)(b) of the Corporations Act. The parties are to bring into Court minutes of order reflecting these reasons.
I would hear the parties as to costs.