Reliance Financial Services Pty Ltd v Lemery Holdings Pty Ltd

[2007] NSWSC 181

CITATION:	Reliance Financial Services Pty Ltd v Lemery Holdings Pty Ltd [2007] NSWSC 181
HEARING DATE(S):	05/03/07
JUDGMENT DATE :	5 March 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	5 March 2007
DECISION:	Statutory demand set aside
CATCHWORDS:	CORPORATIONS - winding up - statutory demand - whether genuine dispute as to amount or existence of debt - no question of principle
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.459G, 459H(1)(a),
CASES CITED:	Bentham Management Pty Ltd v Union Finance Pty Ltd [2007] SASC 42
PARTIES:	Reliance Financial Services Pty Limited - Plaintiff Lemery Holdings Pty Limited - Defendant
FILE NUMBER(S):	SC 6219/06
COUNSEL:	Mr J. Dai, Solicitor - Plaintiff Defendant's representative in person
SOLICITORS:	Hancocks Solicitors - Plaintiff Defendant's representative in person

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

MONDAY 5 MARCH 2007

6219/06 - RELIANCE FINANCIAL SERVICES PTY LTD v LEMERY HOLDINGS PTY LTD

JUDGMENT

1 The plaintiff applies under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 17 November 2006 served on it by the defendant. The debt, or alleged debt, to which the demand relates is in the amount of $194,264.72 “Plus Section 94 interest $6,016 11/07/06 to 12/09/06” and is described as follows:

“Monies owing pursuant to an order made by Campbell J on 29 June 2005 in the Supreme Court of NSW that the company pay creditors costs on an indemnity basis as agreed or assessed. On 11 July 2006 an order was made by Campbell J in the Supreme Court of NSW that the amount as agreed or assessed is payable forthwith. On 13 July 2006 the company agreed to pay the creditor the amount of $194,264.72.”

2 The plaintiff contends that the debt is not owing or payable as it has been satisfied. The case is thus one in which the ground of challenge to the demand is that provided for in s.459H(1)(a), that is, that there is a genuine dispute as to the amount or existence of the debt.

3 Before I address that question, I must consider whether the present application was initiated within the period of 21 days specified in s.459G. The demand was served on 17 November 2006. The address for service specified in the demand itself was 96 Bulls Road, Wakeley, which is the home of members of the Sobbi family. One member of the family deposes that another member of the family found the documents outside the front door of the house on Saturday 9 December 2006. Mr Basta, formerly an in-house counsel for the plaintiff, has sworn an affidavit of service deposing to events on the evening of 8 December 2006 when he went to the house at 96 Bulls Road, spoke to several people, tried to get them to take the documents, was unsuccessful, and left the documents at the front door. The evidence that the documents were found by a person outside the front door on 9 December 2006 is not inconsistent with and does not challenge the evidence that they were left at the front door on 8 December 2006. There is no reason why I should reject either account. That being so, I find that service occurred on 8 December 2006 when Mr Basta left them at the front door of the premises having spoken to several people there beforehand. The s.459G application was made within the time limited by that section.

4 I turn therefore to the question of genuine dispute. In consolidated proceedings 4294/2004 and 3923/2004, Justice Campbell made certain orders on 29 June 2005. The orders in 3923/2004 included an order that the first and second defendants pay the plaintiff’s costs of the proceedings on the indemnity basis. The first defendant there was the present plaintiff. The plaintiff there was the present defendant. On 11 July 2006, his Honour ordered that those costs should be assessed and payable forthwith.

5 On 13 July 2006, Justice Campbell made further orders which, in a judgment of 30 October 2006, he described as orders to give effect to the judgment of 11 July 2006. The orders of 13 July 2006 made in 3696/2004 included an order for payment out of money in court in 4924/2004, to the extent of $194,264.72. That sum was, in accordance with the orders, to be paid out to Tzovaras Legal, the solicitors who had acted for the present defendant in 3696/2004. The sum was described as “being for the payment of legal costs and disbursements incurred by the first defendant in relation to Supreme Court proceedings 3923/2004, 4638/2002 and 3696/2005 as referred to in paragraph 28 of the affidavit of John Tomaras sworn 12 April 2006”.

6 The statutory demand refers to the costs order of 29 June 2005, the order for assessment and payment forthwith of 11 July 2006, and a supposed agreement of the quantum at $194,267.72 on 13 July 2006, the date of the last of Justice Campbell’s orders to which I have referred. The net result, the defendant seems to say, is that a debt of $194,267.72 became immediately due and payable by the present plaintiff to the present defendant such as to ground a statutory demand.

7 The plaintiff’s case of genuine dispute is based on four propositions: first, that a payment was, on 13 July 2006, made out of monies in court; second, that those monies in court were thereby applied for the benefit of the plaintiff in that they were monies to which the plaintiff was entitled; third, that the payee or recipient of the monies paid out was the firm of solicitors who had acted for the defendant in the proceedings in which orders with respect to costs were made; and, fourth, that the payment was thus in or towards satisfaction of the plaintiff’s debt for costs and represented application of the plaintiff’s money in payment of a liability for costs that the plaintiff owed to the defendant.

8 The identical figures for the amount referred to in the order of 13 July 2006 and the amount in the statutory demand ($194,267.72) are obviously not a matter of chance coincidence. On that basis, it is argued that the debt for costs has been paid.

9 The riposte appears to be, particularly since Tzovaras Legal’s retainer seems to have come to an end at some point, that the payment to Tzovaras Legal did not discharge the debt due to the defendant. Justice Campbell’s judgment of 30 October 2006 suggests that there was some dispute about the authority of Tzovaras Legal.

10 The task of the court on this application is not to come to a conclusion on the ultimate merits of these contentions. It is to decide whether the plaintiff’s case based on the contentions it advances is sufficiently plausible to warrant the conclusion that there is a dispute and that the dispute is genuine. The relevant tests, as they emerge from a number of well-known cases, are referred to in the recent judgment of Debelle J (with whom Doyle CJ and Perry J agreed) in Bentham Management Pty Ltd v Union Finance Pty Ltd [2007] SASC 42 (16 February 2007), particularly at [14] – [15]. I do not need to repeat them here.

11 The real question is whether the plaintiff has shown that there is a cogent and arguable case sufficient to call in question the continued existence of the debt. In this instance, the plaintiff has succeeded in showing that there is an arguable case in support of the proposition that the payment of $194,267.72 out of the monies in court to the solicitors who represented the defendant in the particular proceedings constituted, in the full context of all the orders made, payment of the debt for costs owed by the plaintiff upon which the statutory demand is based. That is the combined effect of the four propositions I have mentioned. Those propositions attract the degree of plausibility necessary to pass the genuine dispute test.

12 I make the following orders:

1. Order that the statutory demand dated 17 November 2006 served by the defendant on the plaintiff be set aside.

2. Order that the defendant pay the plaintiff’s costs of the proceedings.

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