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Re Essential Media and Entertainment Pty Ltd

Re Essential Media and Entertainment Pty Ltd

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Case Copied 31 July 2020 70 min read

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Essential Media and Entertainment Pty Limited [2020] NSWSC 990
Hearing dates: 24 July 2020
Date of orders: 31 July 2020
Decision date: 31 July 2020
Jurisdiction: Common Law
Before: Rees J
Decision:
Statutory demand set aside.

Catchwords:
CORPORATIONS — Statutory demand — Application to set aside — whether affidavit accompanying demand complied with s 459E(3) Corporations Act 2001 (Cth) – affidavit sworn by director – no resolution of board authorising demand – importance of affidavit at [49]-[54] – principles regarding authority of director at [55]-[58] – whether can ratify unauthorised demand – statute overrides common law – creditor to authorise statutory demand when issued or possibly cure within the 21 days for payment – otherwise cannot retrospectively confer authority by ratification at [59]-[67] – as a matter of fact, director was authorised.
CORPORATIONS — Winding up — Statutory demand — Genuine dispute — principles at [76]-[80] — loan apparently arranged by common director of lender and borrower — advance of loan not otherwise authorised by lender – receipt of loan not otherwise authorised by borrower –– lender and borrower both appear to consider common director liable – genuine dispute.
CORPORATIONS — dispute whether “due and payable” under s 459E Corporations Act 2001 - principles at [96]-[102] — genuine dispute.

Legislation Cited:
Corporations Act 2001 (Cth), ss 236, 237, 459E(1), 459E(3), 459H(1)(a), 459J(1)(b)
Supreme Court (Corporations) Rules 1999, r 5.2

Cases Cited:
A R Pilot Pty Ltd v Gouriotis [2007] NSWSC 396
Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499
AspectFP Pty Ltd v Messer [2019] VSC 249
Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1; [2009] NSWSC 1229
AWA Limited v Daniels trading as Deloitte Haskins & Sells (1992) 7 ACSR 759
Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344
Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601
Chadmar Enterprises v IGA DistributionPty Ltd [2005] ACTSC 39; (2005) 53 ACSR 645
Chase Manhattan Bank Australia Limited v Oscty Pty Limited [1995] FCA 1208; 17 ACSR 128
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35 at [20]; (2000) 201 CLR 520
David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265
Dennis Hanger Pty Limited v Kanambra Pty Limited (1992) 10 ACLC 284
Eumina Investments Pty Ltd v Westpac Banking Corp [1998] FCA 824; 84 FCR 454
Evans v Levy [2011] NSWCA 125
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Haller v Ayre [2005] 2 Qd R 410
HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234
Horizon Star Pty Ltd v Carina Holdings Pty Ltd [2003] WASCA 94
In the matter…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NSWSC 990
Decision Date: 31 July 2020

CaseChat Overview and Summary

Essential Media and Entertainment Pty Ltd was the subject of a statutory demand issued by a creditor, which the company sought to set aside. The dispute centred on the validity of the statutory demand and the company's ability to demonstrate a genuine dispute regarding the debt claimed. The case was heard in the Federal Circuit and Family Court of Australia.

The primary legal issues before the court were whether the affidavit accompanying the statutory demand complied with the statutory requirements and whether the company could demonstrate a genuine dispute concerning the debt. The court examined the authority of the director who swore the affidavit and whether the company could ratify an unauthorised demand. Furthermore, the court considered whether there was a genuine dispute about the amount of the debt due.

The court found that the affidavit did not comply with the statutory requirements as it was not sworn by a director or a secretary with authority, nor did it contain a resolution of the board authorising the demand. The court emphasised that the statute overrides common law and that retrospective authority cannot be conferred by ratification. However, the court determined that the director had de facto authority to issue the demand, thereby satisfying the statutory requirements. Regarding the genuine dispute, the court concluded that there was a genuine dispute because the loan was arranged by a common director, and neither party had authorised the receipt or advance of the loan. Consequently, the court set aside the statutory demand.

The court ordered that the statutory demand be set aside and that the creditor pay the company’s costs of the application.

Orders