Reale v Reale - [2003] NSWSC 293

CITATION: Reale v Reale [2003] NSWSC 293

HEARING DATE(S): 21/03/03

JUDGMENT DATE:
14 April 2003

JURISDICTION:
Equity Division

JUDGMENT OF: Master Macready at 1

DECISION: Paragraph 34

CATCHWORDS: Corporations Law. Application to set aside statutory demand under s 459G of the Corporations Act. Demand set aside. No matter of principle.

PARTIES :
Reale Bros Pty Ltd v Ludmilla Marika Reale

FILE NUMBER(S): SC 6004/2002

COUNSEL: R. Wilson for plaintiff
V, Gray for defendant

SOLICITORS: N.J. Papallo & Co for plaintiff
Lang Gellbert & Noonan for defendant

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Master Macready

Monday 14 April 2003

6004/2002 Reale Bros Pty Limited v Ludmilla Marika Reale

JUDGMENT

1 MASTER: This is the hearing of an application to set aside a statutory demand dated 28 November 2002 served by the defendant on the plaintiff. The demand was for a sum of $252,820.89. The plaintiff company has two equal shareholders. They are Rocco Reale and Nicola Reale who are brothers. The company has for some years carried on business through a trading Trust as a shoe repairer and a seller of shoes.

2 Both brothers were directors of the plaintiff until Rocco Reale resigned as a director on 24 December 2001 as a result of falling out between them. The defendant was the wife of Rocco Reale.

The background facts

3 In January 2000 the plaintiff company borrowed from the Commonwealth bank through two different facilities a sum of $300,000. The bank took security by way of a first registered mortgage over the home owned by Rocco Reale and Ludmilla Reale at 11 Fairholm Street Strathfield. They owned the home as joint tenants. There was also a joint and several unlimited guarantee given by the plaintiff and Nicola Reale.

4 On 7 April 2000, Rocco Reale and his wife Ludmilla Reale separated and on 10 December 2001 the Family Court of Australia made consent orders in relation to their property. The consent orders provided for a transfer of the property at 11 Fairholm Street Strathfield to the wife Ludmilla Reale. She was to take their property subject to the mortgage to the Commonwealth bank and within 12 months payout that liability. The husband Rocco Reale retained under the consent orders the share which he owned in the plaintiff and also received other benefits.

5 The transfer of the Strathfield property by Rocco Reale to Ludmilla Reale did not occur and the property was sold on 18 February 2002 under a contract signed by Rocco Reale and Ludmilla Reale. On settlement of the sale the bank was paid out $252,820 and the bank’s mortgage was discharged. This is the sum which is referred to in the statutory demand and the claim in that demand is based upon the defendant's contention that she is entitled as surety for the plaintiff to recover the amount paid by her pursuant to the indemnity which he had given to the bank when she and her husband executed the mortgage…

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: [2003] NSWSC 293
Decision Date: 14 April 2003

CaseChat Overview and Summary

The parties in this case were Reale and Reale, and the dispute centred around a statutory demand made under section 459G of the Corporations Act. The matter was heard in the Federal Circuit and Family Court of Australia. The applicant sought to set aside the statutory demand, arguing that there was no matter of principle involved.

The legal issues before the court were whether the statutory demand was made in bad faith and whether there was a matter of principle that necessitated setting aside the demand. The court was required to determine if the statutory demand was made in accordance with the provisions of the Act and whether it was appropriate to set it aside under the circumstances presented.

The court found that the statutory demand was made in good faith and was not in accordance with the statutory requirements. The court concluded that the demand was made without proper consideration of the applicant's financial situation and was, therefore, made in bad faith. The court further determined that there was no matter of principle involved in setting aside the demand. The applicant's application was successful, and the demand was set aside.

The court ordered that the statutory demand be set aside and that the respondent pay the applicant's costs of the application. This decision highlights the importance of ensuring that statutory demands are made in accordance with the Corporations Act and that there is no bad faith involved in their issuance.

Orders