Rohanna Pty Ltd v Nu-Steel Homes Adelaide Pty Ltd
[2013] WASC 109
•2 APRIL 2013
ROHANNA PTY LTD -v- NU-STEEL HOMES ADELAIDE PTY LTD [2013] WASC 109
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 109 | |
| Case No: | COR:3/2013 | 7 MARCH 2013 | |
| Coram: | MASTER SANDERSON | 2/04/13 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Demands set aside Injunction granted restraining windingup application proceeding | ||
| B | |||
| PDF Version |
| Parties: | ROHANNA PTY LTD (ACN 008 905 477) NU-STEEL HOMES ADELAIDE PTY LTD (ACN 141 188 374) |
Catchwords: | Corporations law Application to set aside statutory demand Demands used for unlawful purpose Turns on own facts |
Legislation: | Nil |
Case References: | RH Mortgage Corporation Ltd v Kerry Ann Properties Pty Ltd [2011] NSWSC 298 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
NU-STEEL HOMES ADELAIDE PTY LTD (ACN 141 188 374)
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Demands used for unlawful purpose - Turns on own facts
Legislation:
Nil
Result:
Demands set aside
Injunction granted restraining windingup application proceeding
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr G J Douglas
Defendant : In person (Mr W V Pearse)
Solicitors:
Plaintiff : Hotchkin Hanly
Defendant : In person
Case(s) referred to in judgment(s):
RH Mortgage Corporation Ltd v Kerry Ann Properties Pty Ltd [2011] NSWSC 298
(Page 3)
1 MASTER SANDERSON: This looks very much like an attempt by the defendant to extort money from the plaintiff. There may be a more benign explanation for what the defendant has done but it is difficult to see what that might be.
2 On 20 December 2012 the defendant served two statutory demands on the plaintiff's registered office. The first demand was for an amount of $113,296.22. In the schedule the debt was described as follows:
Balance of unpaid commercial trading account subject to terms of trade.
3 Accompanying this demand was a document described as 'Notification and Demand to Debtor'. It would seem the defendant alleged it had taken an assignment of debt from an entity identified as Wrightway Services Pty Ltd.
4 The second demand was for an amount of $106,696.97. The description of the debt appearing in the schedule was as follows:
Interest due and payable on outstanding unpaid commercial trading account subject to terms of trade.
5 That demand was again accompanied by a 'Notification and Demand to Debtor' and the creditor was again said to be Wrightway Services Pty Ltd. Accompanying these documents was a spreadsheet of invoices and interest calculations which presumably related to the amounts claimed in the statutory demands. There was a further document entitled 'Terms and Conditions' which purported to be a copy of terms and conditions governing the relationship between the plaintiff and Wrightway Services Pty Ltd trading as Total RV Sales (Total RV).
6 Prior to receiving these demands the plaintiff had had no contact with the defendant at all. It was in dispute with Total RV. That dispute had been settled. The plaintiff had paid Total RV the sum of $50,000 and that amount was accepted by Total RV in full and final satisfaction of any amount owed to it by the plaintiff. A copy of a signed release from Total RV appears as annexure SLS9 to an affidavit of Mr Stephen Lloyd Strack sworn 10 January 2013 and filed in support of an application to set aside the statutory demands.
7 An application to set aside the statutory demands was issued on 10 January 2013. The defendant's registered office is in South Australia. When it came to serving the application to set aside the demands the plaintiff's solicitors did not include on the service copy of the documents the notices required under the Service and Execution of Process Act 1992
(Page 4)
- (Cth). On behalf of the plaintiff it was accepted there had been no proper service of an application to set aside the demands under the Act. The plaintiff applied to amend their originating process to seek an injunction to restrain the defendant from pursuing a winding-up application. At the final hearing of this matter I set aside the statutory demands and issued an injunction restraining the defendant from pursuing a winding-up application. The reasons why that injunction was necessary will become apparent later in these reasons.
8 The application to set aside the statutory demands was first returned in Chambers on 31 January 2013. As at that date no appearance had been entered by the defendant. That fact was not drawn to my attention (so far as I recall). In any event counsel for the plaintiff appeared as did a Mr W V Pearse. Mr Pearse was a director of the defendant. He did not seek leave to appear on behalf of the defendant company. However, as the parties had agreed programming orders, counsel for the plaintiff did not take the point about Mr Pearse's capacity to appear and I made the orders agreed upon by the parties.
9 On 7 February 2013 the plaintiff's solicitors received a letter from a firm of solicitors styled Commercial and General Law. The letter was signed by a Mr Stephen McNamara. Mr McNamara said he had been retained by the defendant and he asked for a copy of the affidavit of service. This was provided by email. On 11 February 2013 the plaintiff's solicitors wrote to Commercial and General Law. They pointed out the plaintiff was not indebted to Total RV and could not possibly be indebted to the defendant. They pointed out the plaintiff was not insolvent and suggested the demand be withdrawn. On 12 February 2013 Commercial and General Law responded. They pointed out the defect in service of the application and indicated an intention to pursue a winding-up application.
10 This letter provoked further correspondence from the plaintiff's position and, it would seem, a telephone call by the plaintiff's solicitor to Mr McNamara. On 13 February 2013 Commercial and General Law wrote back to the plaintiff's solicitor. In part the letter reads as follows:
Our client will not go into the merits of its debt at this point. Our client's debt is no longer in issue. Your client failed to address any issues relating to our client's debt by filing and serving an application to set aside the Statutory Demands.
(Page 5)
- The letter then went on:
If our client does issue a winding up proceeding, then the conduct of such proceeding is in the hands of the Court, and our client is required to advertise those proceedings so that other creditors of your client have the opportunity to be involved and support the wind up application should they wish. Even if your client does pay our client after the wind up proceedings have been issued, it remains in the discretion of the Court to continue the wind up proceeding particularly if there are supporting creditors. On this basis our client takes the view that any proof of solvency that your client wishes to provide must be available to the public, so that potential supporting credits [sic] may make their own assessment of your client's solvency.
12 On 28 February 2013 he wrote back to the plaintiff's solicitors refusing to withdraw the demand. He made a series of spurious comments about Mr Strack's affidavit and the solvency of the plaintiff and then concluded his letter as follows:
The respondent is entitled to press on with a wind up proceeding, but can see that should your client 'get its act together', it may be able to prove solvency. You will recall we requested evidence of this in our letter to you of 12 February 2013. Had we been provided with this evidence at the time it may have avoided the further expense that our client has had to go to. On this basis our client is prepared to give an undertaking that it will not issue a wind up proceeding based on the current statutory demand provided that your client pay our client its costs to date of $25,000. This offer remains open until 5.00 pm CSST on Friday, 1 March 2013.
13 The matter came on for hearing on 7 March 2013. As at this date the defendant still had not filed an appearance to the originating process. So the defendant had no right to be heard on the application. Mr Pearse did attend and presumably would, if he had been given the opportunity to do so, have made some submissions. In fact written submissions in the name of the defendant had been filed. In the event I did not trouble Mr Pearse and made the orders I have outlined above.
(Page 6)
14 A few further facts are necessary to complete the picture. As I have said the statutory demands which were served on the plaintiff did not specify the defendant's address for service. The plaintiff accepted that such a defect was not such as to warrant, in and of itself, the setting aside of the statutory demands. Without more the failure to specify an address for service could not be regarded as sinister. But there is more.
15 The researches of counsel for the plaintiff turned up a decision of Barrett J in RH Mortgage Corporation Ltd v Kerry Ann Properties Pty Ltd [2011] NSWSC 298. In that case the plaintiff, who was in New South Wales, was served with a statutory demand which did not specify an address. Furthermore when the application to set aside the statutory demand was issued it did not contain the necessary endorsement under the Service and Execution of Process Act when the originating process was to be served in South Australia. In the event the demand was not for a debt but a claim for damages. Barrett J held to issue a demand for a sum that was not a debt was an abuse of process and issued injunctions accordingly.
16 Mr W V Pearse was the sole director of Kerry Ann Properties Pty Ltd and he appeared for the company at the hearing before Barrett J.
17 All of these matters can then be aggregated. First, the defendant served the statutory demands without any prior consultation with the plaintiff. If it had a genuine belief there was a debt owed it would have been reasonable to write to the plaintiff, make a claim and explain the basis of that claim. That was not done. Instead the demands were sent by post and arrived on the Thursday before Christmas. If ever there was a time when it was difficult to deal expeditiously with a demand which required action within 21 days, that was it.
18 Second, when the solicitors for the plaintiff wrote providing clear evidence the debts, the subject of the demands, had been settled the defendant failed to respond. No explanation why the discharge was not valid was provided. In fact there was a refusal by the defendant to enter into discussions as to the debt.
19 Thirdly, no proper address for service was contained on the statutory demands. In some circumstances that might be seen as an oversight. But Mr Pearse had the advantage of the Kerry Ann Properties decision. The failure to provide an address for service is inexplicable.
(Page 7)
20 Fourthly, faced with clear evidence of the solvency of the plaintiff the defendant determined to press on. No reasonable party properly advised would have done so.
21 Fifthly, the correspondence suggests an attempt to embarrass the plaintiff by advertising the fact of a winding-up application. There was no need to refer to the advertising of a winding-up application in the way Mr McNamara did. The letter strongly suggests the defendant was looking to force the plaintiff into a compromise to serve its own purposes.
22 Sixthly, the defendant actually issued a winding-up application. This was done prior to the application to set aside the demands being heard. It must have been clear there was a live issue as to whether the application to restrain the defendant would succeed. After all in the Kerry Ann Properties case injunctions were issued which effectively restrained Mr Pearse and his company from issuing winding-up proceedings. Once again it looks as though the defendant was attempting to pressure the plaintiff.
23 Seventhly, no appearance to the application to set aside the demands was ever lodged. Mr McNamara in his correspondence said he had been retained by the defendant. As late as 28 February 2013 he wrote to the plaintiff's solicitors on behalf of the defendant. At no time did Mr McNamara indicate his instructions had been terminated and at no time did he give any indication he would not appear at the hearing of the matter on 7 March 2013. Perhaps the defendant was concerned if it did enter an appearance a costs order might be made against it. Or perhaps there was some other reason no appearance was entered. But it does suggest the defendant never took seriously the prospect it could successfully resist the plaintiff's application.
24 Finally, there is the offer to settle on payment of $25,000 for costs. It may be that Mr McNamara is one of South Australia's leading corporate lawyers. If that is so, this case does not represent his finest hour. But even assuming high competence on the part of Mr McNamara there is no possible way the defendant's costs could have amounted to $25,000. No appearance was filed, no affidavits in opposition to the application were lodged, it would appear submissions to be made on behalf of the defendant were drawn by Mr Pearse and the totality of Mr McNamara's involvement was three or four letters. Really this demand for 'costs' is no such thing. It was tantamount to extortion.
(Page 8)
25 The demands were set aside under s 459J(1)(b) of the Corporations Act 2001 (Cth). An injunction issued against the defendant from pursuing any winding-up application based upon the statutory demands. This is a case where indemnity costs should be awarded and the only question is who should pay those costs. Mr Pearse will have 14 days from the publication of these reasons to make submissions as to why he should not pay the costs personally.
26 I intend to refer these reasons to the Western Australian Police Service for such action as they deem necessary in relation to Mr Pearse. I will also refer a copy of these reasons to the authorities in South Australia who regulate the legal profession to take such action as they deem appropriate in relation to Mr McNamara.
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