Re John Farlow Pty Ltd

[2015] NSWSC 939

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of John Farlow Pty Ltd [2015] NSWSC 939
Hearing dates:	21 May 2015
Date of orders:	21 May 2015
Decision date:	21 May 2015
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Originating process dismissed.
Catchwords:	CORPORATIONS – winding up – winding up in insolvency – application to set aside creditor’s statutory demand – defect in demand – where demand fails to specify Court, judgment and judgment date with respect to judgment debt demanded – requirement that substantial injustice will be caused unless demand set aside – whether separate applications to set aside statutory demands must be made with respect to separate statutory demands – where appeal from judgment pending – whether pendency of appeal provides “some other reason” to set aside demand – relevant circumstances surrounding pendency of appeal which influence Court’s discretion
Legislation Cited:	(Cth) Corporations Act 2001, s 459G, s 459J(1), s 459J(2) (Cth) Corporations Regulations 2001, Form 509H (NSW) Uniform Civil Procedure Rules 2005, r 6.19
Cases Cited:	Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235 Byron v Southern Star Group Pty Ltd [1997] FCA 275; (1997) 73 FCR 264 Calquid P/L v A and D R Illes P/L [2000] NSWSC 558; (2000) 34 ACSR 52 Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd [2011] NSWSC 9 Help Desk Institute Pty Ltd v Adams (1998) 17 ACLC 18 Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd [2010] NSWSC 1279 In the matter of A.C.E.S. Sogutlu Holdings Pty Ltd ACN 122 192 509 [2014] NSWSC 140 Indigo Financial Money Pty Ltd v Moustrides [2010] SASC 355; (2010) 81 ACSR 249 Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229 Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759; (2007) 25 ACLC 1038 Re Geard; Ex parte Reid [1994] FCA 45 Remo Constructions Pty Ltd v Dualcorp Pty Ltd [2008] NSWSC 1172 Sajepe Pty Ltd v Lawler [2000] NSWSC 262; (2000) 18 ACLC 457 Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd; Oaklands Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466
Category:	Principal judgment
Parties:	John Farlow Pty Ltd ACN 053 637 497 (first plaintiff) Ylinen Pty Ltd ACN 102 023 521 (second plaintiff) R & K Baker Pty Limited ACN 101 667 572 (third plaintiff) BG & P Pty Ltd ACN 075 941 712 (fourth plaintiff) Stephen Roche (defendant)
Representation:	Counsel: J T Johnson (plaintiff) R Goodridge (defendant)   Solicitors: Beazley Singleton Lawyers (plaintiffs) Firths (defendant)
File Number(s):	2015/90593

Judgment (ex tempore)

1. HIS HONOUR: By originating process filed on 26 March 2015, the plaintiffs John Farlow Limited, Ylinea Pty Limited, R & K Baker Pty Limited and B & G Pty Limited apply pursuant to (Cth) Corporations Act 2001, s 459G, for orders in respect of four statutory demands served on each of those companies by the defendant Stephen Roche, to the effect that each of the statutory demands be set aside.

2. The creditors' statutory demands are, save for the identity of the debtor, in relevantly identical terms and demand:

The amount of $415,190.39 plus post-judgment interest in the amount of $10,732.39 to date, being the amount of the debt described in the schedule.

3. The schedule is in the following terms:

Description of the debt	Amount of the debt
Judgment	$415,190.39
Post-judgment interest to date	$10,732.39

4. The demand does not identify the Court or the judgment or the date of the judgment, as is stipulated by the relevant form in the (Cth) Corporations Regulations 2001. Form 509H contains a note that directs the judgment creditor to "indicate if it is a judgment debt, giving the name of the Court and the date of the order." The demand also does not identify the date from and to which interest is claimed, and at what rate. But it does describe the interest as post-judgment interest, and it does describe the interest as "to date", which would reasonably be understood to mean from the date of the judgment to the date of the demand. It has not been suggested that the interest has in fact been miscalculated.

5. The demand arises out of a judgment for damages for personal injuries given in the District Court. There is perhaps some room for argument as to precisely when the judgment was given, but it appears clear that it was not given on 10 October 2014, as was initially alleged by the defendant, but more likely in final form on 18 December 2014. The plaintiffs filed a notice of intention to appeal within 28 days after that final judgment, and have since filed a notice of appeal.

6. On the present application, the essential issues are:

1. first, whether there is an application that complies with s 459G, in that a single application has been made by four plaintiffs in respect of four statutory demands;

2. secondly, whether the demand is defective in failing to identify the court and the date of the judgment and, if so, the consequences of that defect; and

3. thirdly, whether there is “some other reason” why the demand should be set aside, having regard to the pendency of the appeal from the District Court judgment on which the demands are based.

7. As to the first of those issues – namely, whether there is a compliant demand – there is a line of authority which suggests that a separate application must be made in respect of each separate demand [see, in particular, Help Desk Institute Pty Ltd v Adams (1998) 17 ACLC 18 and Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd [2010] NSWSC 1279]. On the other hand, there are cases that hold that, at least in some circumstances, a single proceeding can be brought, in which applications are made in respect of multiple demands [see Remo Constructions Pty Ltd v Dualcorp Pty Ltd [2008] NSWSC 1172 and Indigo Financial Money Pty Ltd v Moustrides [2010] SASC 355; (2010) 81 ACSR 249].

8. I would depart from judgments of Young J, Barrett J and Santow J (who took a similar view in Calquid P/L v A and D R Illes P/L [2000] NSWSC 558; (2000) 34 ACSR 523) with great hesitation. Yet, it seems to me that all those cases are sourced in the view that by requiring that an application may only be made within 21 days after the demand is so served, s 459G(2) evinces an intention that an application can only be made in respect of a single demand. Otherwise, so it is said, it would have said 21 days after the first of the demands is so served. With great respect, that seems to me to read too much into s 459G(2), and if it were necessary to do so, I would be inclined to depart from the views that have been taken, in particular, in the three cases to which I have just referred. If several plaintiffs bring an application to a court in respect of several demands, where the defendant is the same creditor and the demands are in respect of the same judgment debt for which the plaintiffs are jointly and severally liable, there are a number of causes of action which can, under (NSW) Uniform Civil Procedure Rules 2005, r 6.19, properly be joined in the one proceeding, and if they can properly be joined, I cannot see why the application brought by the originating process in these proceedings by each of the plaintiffs to set aside each of the demands does not encompass an application to set aside each of the statutory demands within s 459G.

9. In any event, it is probably not necessary to go so far as to depart from the three cases to which I have referred, because the cases which take a more liberal view of s 459G, such as Remo Constructions Pty Ltd v Dualcorp Pty Ltd and Indigo Financial Money Pty Ltd v Moustrides, hold that it is not necessary that there be separate applications where there is a coordinate liability for the debt in question, as there is here. Accordingly, I am satisfied that the application is compliant and competent.

10. The second issue then pertains to the form of the demand, and in particular its failure to comply in some respects with the prescribed form by identifying the judgment and date of the judgment and the period of the interest calculation. It is not only true that the demands are defective in that respect for non-compliance with the prescribed form; it is somewhat extraordinary that they are so defective, when this is the third attempt that this creditor has made to serve valid and effective demands on these plaintiffs, two earlier sets of demands having been withdrawn. But s 459J(1)(a), read with subsection (2), has the effect that where the ground relied on for setting aside a demand is a defect in the demand, the Court is only to set aside the demand if substantial injustice will be caused unless the demand is set aside. In this case, the plaintiff debtors were parties to the proceedings in the District Court. They must be taken to have known of the judgment against them and the court in which it was given. It is evident enough that the claim for interest seems to be from the date of judgment to the date of demand, and there is not the slightest suggestion, let alone evidence, of any substantial injustice to the plaintiffs arising from the relevant defects. If they had been able to show, by evidence or calculations or submissions, that it was impossible to tell whether interest had been correctly calculated at the correct rates between the relevant dates, or that they had no idea to what court and to what judgment the demand referred, it would have been another matter. But no substantial injustice from the defects has been demonstrated, and in those circumstances not only is the ground not established, but the Court is prohibited by subsection (2) from setting aside the statutory demand merely because of a defect. (I do not think that this is a case in which it could conceivably be suggested that the defect was such as to deprive the demand of the quality of a statutory demand).

11. I therefore turn to the third issue, which is the relevance of the pendency of an appeal from the District Court judgment. The defendants submitted, in effect, that the appeal was incompetent because the parties to the appeal were different from the parties against whom judgment was given in the District Court. It is not at all apparent to me that that is so. It is true that in a document filed in the appeal proceedings, the parties in the proceedings below are identified as having a trustee capacity, when they do not appear to have been so identified in the District Court proceedings. However, nor are they so identified in the initiating process in the Court of Appeal; that is, in the notice of intention to appeal or in the notice of appeal itself. In any event, even if there were some absence of correlation between a trustee capacity and an ordinary capacity, I am far from convinced that that would render the appeal incompetent.

12. The defendants also submitted that the appeal had no prospects of success, but it does not seem to me, on a very cursory review of the material, that that proposition has been made good. I am not to be taken, however, as concluding that the appeal has reasonable prospects, as I have not found it necessary to examine that question in detail.

13. This is because the critical issue here is that the pendency of an application for leave to appeal or an appeal, even upon reasonable grounds, does not of itself provide "some other reason" for setting aside a demand under s 459J(1)(b). In Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235, it was said that in a case where a judgment that founded a creditor's statutory demand was being appealed, the pendency of an appeal did not constitute "some other reason" within s 459J(1)(b) whereby the demand should be set aside, unless the Court of Appeal were actually to stay enforcement of the judgment [see also Sajepe Pty Ltd v Lawler [2000] NSWSC 262; (2000) 18 ACLC 457]. In Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229, Santow JA in the Court of Appeal cited those cases and said:

…Glazier has to date held back from seeking any stay of the costs order. It instead participated in the costs assessment. Even if it might now belatedly engage in yet further litigation by seeking to persuade the Court of Appeal to grant a stay, that consideration carries little weight. There is of course no certainty that the Court of Appeal would grant any such stay. The position is analogous to the case where a judgment (the basis of the demand) was being appealed. That fact was held not to constitute “some other reason” within s459J(1)(b) whereby the statutory demand should be set aside, unless the Court of Appeal were actually to stay enforcement of the judgment…

14. In Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd; Oaklands Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466, Barrett J referred to those decisions and to the judgments of Hammerschlag J in Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759; (2007) 25 ACLC 1038 and of Ward J in Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd [2011] NSWSC 9 as establishing that the existence of arguable grounds of appeal did not, in the absence of a stay, constitute "some other reason" within s 459J(1)(b), but that such reason would exist if the amount of the judgment debt were paid into court. His Honour said:

As things stand, "some other reason" within s 459J(1)(b) does not exist, but if the amount of the judgment debt is deposited so as to be available to meet the judgment if the Court of Appeal proceedings extinguish the possibility of the judgment's being set aside, then "some other reason" will exist.

15. The cases, therefore, establish that a pending appeal or application for leave to appeal from or to set aside a judgment, even one in which the grounds are considered arguable, does not of itself provide sufficient reason to set aside a creditor's statutory demand. Relevant considerations include whether reasonable and arguable grounds for the application to set aside the judgment or for the appeal have been shown; whether a stay is available and, if so, has been sought or refused; and whether there has been an offer to pay into Court the amount of the demand pending the outcome of the application or appeal. In short, the Court will at least ordinarily require either that a stay has been granted or that the moneys be paid into Court pending the outcome of the appeal, although there may be an exception to this where the judgment is not amenable to a stay [see In the matter of A.C.E.S. Sogutlu Holdings Pty Ltd ACN 122 192 509 [2014] NSWSC 140, [17] – [21] (Brereton J)].

16. I do not suggest that the absence of an application for a stay or even the refusal of a stay is necessarily fatal to an application to set aside a creditor's statutory demand. Ultimately, the Court has a discretion in that respect. However, the cases indicate that where a stay has not been sought or where a stay has been refused, that is a highly influential and often decisive consideration. There is a strong policy reason why that is the case, namely that is that it is for the Court in which the judgment has been given – or, sometimes, a Court in which an appeal from which that judgment has been brought – to determine whether the merits of any appeal and other relevant discretionary considerations are such as to justify staying enforcement of the judgment pending the outcome of the appeal. It is undesirable that a third Court, neither the trial Court nor the appellate Court, has to undertake separately that examination. An application to set aside or extend time for compliance with a creditor's statutory demand, like an application to set aside or extend time for compliance with a bankruptcy notice, is not an alternative to an application for a stay. Companies who wish enforcement of judgments against them to be stayed pending an appeal must understand that their proper course is to apply for a stay, rather than to wait until a creditor's statutory demand is issued and then apply to have it set aside. The Court readily entertains applications to set aside demands where a stay has been granted, even after the creditor's statutory demand has been served, because while such a stay does not otherwise deprive the demand of effect at the date it was made, it indicates that the proper court has decided that it is appropriate that it not be enforced in the meantime.

17. But the highest the evidence rises here is some evidence that there is an intention to apply for a stay, and no evidence as to why that has not already been done. Nor was any adjournment sought to permit a stay to be sought prior to the hearing of these proceedings, which have already been adjourned over opposition at least once. In those circumstances, I do not consider that the mere pendency of an appeal, which I will accept for relevant purposes is not unarguable, does not constitute sufficient other reason to set aside the demand under s 459J(1)(b).

18. It was also submitted that, in the alternative, the Court should extend time for compliance with the demand. That power exists, at least principally, in aid of the power to set aside the demand. The decisions of the Federal Court of Australia in Re Geard; Ex parte Reid [1994] FCA 45 and Byron v Southern Star Group Pty Ltd [1997] FCA 275; (1997) 73 FCR 264 were invoked in support of the proposition that in the exercise of the analogous power in the bankruptcy jurisdiction, time for compliance could be extended pending the outcome of an appeal from the judgment on which the demand was based. While those cases accepted that there was such a discretion, they also emphasised, consistently with what I have just said, that a highly relevant consideration in its exercise is whether there has been an application for a stay of the judgment in the meantime. In both those cases, in the absence of a stay, the applications failed, principally on that ground.

19. The Court orders that the originating process be dismissed, with costs assessed in the sum of $15,000.

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Decision last updated: 15 July 2015