Ryan v Urban Construct (SA) Pty Ltd (No 2)

Case [2012] SASC 193

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

RYAN v URBAN CONSTRUCT (SA) PTY LTD (No 2)

[2012] SASC 193

Reasons for Decision of The Honourable Justice Nicholson

24 October 2012

APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS

CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND

The respondent, as plaintiff, brought proceedings in this court seeking damages from the appellant, as defendant, for breach of contract.  Judgment was entered in favour of the respondent in the amount of $2,263,163.52 on 3 August 2012.  The appellant filed a notice of appeal after which the respondent served a statutory demand upon the appellant demanding payment.  An interlocutory application was filed by the appellant seeking a stay of execution of the judgment pending its appeal.  In addition, the appellant filed an originating application to set aside the statutory demand issued by the respondent.

Held:  Application for stay of execution pending appeal and application for the statutory demand to be set aside both refused.

Corporations Act 2001 s459E, 459F, s459G, s459J, s1335; Enforcements of Judgments Act 1991 (SA) s17; Supreme Court Rules 6R 195, 295, 300, referred to.
Ryan v Urban Construct (SA) Pty Ltd [2012] SASC 128; Hackney Tavern Nominees Pty Ltd v McLeod (1983) 33 SASR 590; Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121, [1997] HCA 24; Landmark Operations Ltd v J Tiver Nominees Pty Ltd & Ors [2009] SASC 14, [2009] SASC 185 (FC); Powerflex Services Pty Ltd v Data Access Corp (1996) 67 FCR 65; Duke Group Ltd v Pilmer (unreported Supreme Court of South Australia, Mulligan J, 16 June 1998); Technilock (Aust) Pty Ltd v Mondami Pty Ltd [1999] SASC 94; Bartley v Myers [2001] SASC 212; Kalifair Pty Ltd & Ors v Digi-tech (Australia) & Ors (2002) 55 NSWLR 737; Constantidis v Land Corp (NSW) Pty Ltd [2011] NSWSC 74; Masri Apartments Pty Ltd (in liq) v Perpetual Nominees Ltd [2004] NSWSC 255; Binetter v Commissioner of Taxation (No 2) [2011] FCA 1214; Young v Annis-Brown (No 3) [2011] NSWSC 1267; Sewell v Zeiden (No 3) [2010] NSWSC 1361; Batterrham v Makeig [2009] NSWSC 295; Highfield Property Investments Pty Ltd v Commercial & Residential Developments (SA) Pty Ltd [2012] SASC 165; Highfield Property Investments Pty Ltd v Commercial & Residential Developments (SA) Pty Ltd (No 2) [2012] SASC 191; Challenge Charter Pty Ltd v Curtain Brothers (Qld) Pty Ltd [2004] VSCA 66; Cook’s Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] 2 Qd R 453; Chrisanthos Kostopoulos v GE Commercial Finance Australia Pty Ltd [2005] QCA 311; Tatlers.com.au Pty Ltd v Davis [2006] NSWSC 1055; Midas v Equator [2007] NSWSC 759; Scope Data Systems v BDO Nelson Parkhill [2003] NSWSC 137; Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237…

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AGLC
Ryan v Urban Construct (SA) Pty Ltd (No 2) [2012] SASC 193
Case
[2012] SASC 193
Decision Date

CaseChat Overview and Summary

In the case of Ryan v Urban Construct (SA) Pty Ltd (No 2), the appellant sought a stay of execution of a judgment obtained by the respondent in a winding up application, as well as an order setting aside the statutory demand that led to the winding up application. The primary dispute centred on whether the respondent's failure to register for Goods and Services Tax (GST) and provide a tax invoice for the sale of property constituted a breach of contract that would entitle the appellant to terminate the contract and seek relief from the statutory demand. The Court of Appeal was tasked with determining whether the appellant had established grounds for a stay of execution of the judgment and whether the statutory demand was validly issued.

The legal issues before the court included whether the respondent's failure to register for GST and provide a tax invoice constituted a breach of contract sufficient to terminate the contract and warrant a stay of execution, as well as whether the statutory demand was properly issued. The court needed to assess the impact of the respondent's non-compliance with GST registration on the enforceability of the contract and the validity of the statutory demand. Additionally, the court had to consider the principles governing the stay of execution of judgments and the appropriate circumstances under which such a stay should be granted.

The court held that the respondent's failure to register for GST and provide a tax invoice did not amount to a breach of contract sufficient to terminate the contract or warrant a stay of execution. The court found that the appellant was estopped from relying on the respondent's failure to register for GST or provide a tax invoice, as the appellant had made representations that led the respondent to believe that settlement would not occur on the original due date. The court further held that the statutory demand was validly issued and that there were no grounds for setting it aside. Consequently, the appellant's application for a stay of execution was dismissed, and the statutory demand was upheld.

The court's decision resulted in the dismissal of the appellant's application for a stay of execution and the refusal to set aside the statutory demand. The respondent was entitled to enforce the judgment obtained in the winding up application, and the appellant's appeal against the primary judgment was not successful in providing grounds for a stay of execution. The court emphasised the need for the appellant to show appropriate reasons and evidence to justify a stay of execution, which was not demonstrated in this case.

Orders

Orders of the court

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Background

Background to the litigation

Counsel for the respondent submitted that, in the event that the appellant were to succeed with its application for a stay of execution, it would be appropriate for an order for security for costs to be made a condition of the stay. Counsel for the appellant conceded that such an order was appropriate and that it had instructions to agree an amount in the order of $22,000 as initially put forward by the respondent. However, it soon became apparent that the respondent had miscalculated this amount. Counsel for the appellant did not have instructions to agree any additional amount, as now sought by the respondent, nor had there been any discussion between the parties as to the appropriate form of any security that might be ordered. I will need to give further consideration to the proper disposition of the respondent’s application for security once I have dealt with the appellant’s applications first, for a stay and second, to have the statutory demand set aside. Summary of the facts and contentions as found at trial relevant to the issues raised by the appeal[11][11] The following summary has been adapted from that set out in the appellant’s written outline of submissions and as taken from the reasons of Peek J, [2012] SASC 128. The trial canvassed a number of other issues not taken up by the appeal. On 18 December 2007, the parties entered into a contract for the purchase by the appellant from the respondent of a property at Glenelg. Settlement was to occur by 31 December 2008. By letter dated 19 December 2008, the appellant advised the respondent that it would not be in a position to settle on 31 December 2008 and sought an extension of the settlement date to 31 December 2009. The respondent rejected that request. Settlement did not occur on 31 December 2008. The respondent issued two notices to complete dated 9 January 2009 and 30 January 2009 respectively. The latter notice required settlement to occur on 6 February 2009. Settlement did not occur on 6 February 2009 and by notice dated 11 February 2009, the respondent terminated the contract. Special Condition 5.3 of the contract provides that, in certain circumstances, the respondent was to deliver to the appellant at the time that the appellant paid the price a tax invoice for the taxable supply made by the respondent.[12] Special Condition 5.2 provides that the amount payable to the respondent under the contract was to be the sum of the price and any Goods and Services Tax (GST) payable or reimbursable by the appellant in respect of the land. Clause 8.8 of the general conditions of contract required the appellant, in certain circumstances, to pay an amount, on account of GST, additional to and at the same time as, payment of the balance of the purchase price at settlement.[12] Whilst Special Condition 5.3 refers to “the taxable supply made by the vendor… under or pursuant to this contract”, it must be read or construed as “any taxable supply…”. The appellant contended at trial that the respondent vendor’s consideration under the contract (the conveyance of the Glenelg property) was a “taxable supply”, under the law relating to payment of GST (the GST law), and therefore the respondent, as supplier, was liable to pay GST. However, at no time was the respondent able to provide a tax invoice because she was not registered for GST. The respondent therefore, was not ready, willing and able to perform the contract because she was in breach of Special Condition 5.3. As such, the respondent was not in a position to issue valid notices to complete or notices of termination.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

NICHOLSON J
No oral evidence, apart from that of a valuer, was adduced by either party at the trial; insofar as the matters now the subject of appeal are concerned, the trial proceeded in reliance on documentary evidence only. Peek J made findings to the following effect.(i)The respondent was not obliged to pass on (that is seek to recover from the appellant) an amount equivalent to any GST payable;[13](ii)The obligation on the part of the appellant to pay the balance of the price on the due date for settlement was independent of any obligation on the part of the respondent to deliver a tax invoice in relation to GST;[14](iii)In any event, the respondent could have been ready, willing and able to settle on 31 December 2008 had she been required to be so. There was no reason to think that she would have failed to register for GST in time for settlement; she was competently represented during the contract negotiations, had been reminded of the need for registration, there was plenty of time between receipt of the appellant’s letter of 19 December and scheduled settlement on 31 December 2008 and it would have been “quick and easy” for her to register;[15](iv)The fact that the respondent was not registered for GST at the time of receipt of the letter from the appellant of 19 December 2008 (in which the appellant indicated that it was not in a position to settle), does not establish that the respondent had not been planning to be registered for GST and would not have carried out that plan but for the letter of 19 December 2008;[16](v)The respondent would not have had any difficulty in performing the minor step of registering for GST in the 12 days between 19 December 2008 and 31 December 2008 and her decision not to further prepare for settlement was taken as a result of her reliance upon statements of the appellant, including in the letter dated 19 December 2008, that it would be unable to settle on 31 December 2008;[17](vi)Similarly, the respondent took the decision not to prepare for settlement (including registering for GST) with respect to the proposed settlement dates of 27 January 2009 and 6 February 2009 as a result of her reliance on the statements of the appellant; she took the view that it was futile to take any further action to prepare for settlement. Therefore, her failure to have registered for GST did not establish that she was not able to have provided a tax invoice;[18](vii)The appellant was estopped and precluded from relying upon the asserted failure of the respondent to produce or tender a tax invoice or to be registered for GST.[19][13] [2012] SASC 128 at [81].[14] At [85].[15] At [101], [102] and [103].[16] At [104].[17] At [116].[18] At [117].[19] At [135].Principles relevant to an application for stay of execution of judgment The starting point is that the filing of a notice of appeal does not operate to stay execution of the judgment subject to the appeal.[20] Ordinarily, a judgment creditor is entitled to the benefit of a judgment properly obtained and notwithstanding a pending appeal. The norm is no stay. If there is to be a stay, cause must be shown. The onus is on the person seeking a stay and the onus is not lightly discharged. … It is, of course, a judicial discretion and not to be fettered by adjectives such as “special” or “exceptional”. It is necessary to show appropriate reasons for a stay and to show that the appeal machinery has not been used as an instrument of oppression or merely as a delaying tactic.[21][20] Supreme Court Rules 6R 300(1).[21] Hackney Tavern Nominees Pty Ltd v McLeod (1983) 33 SASR 590 at 594-595 (White J) citations omitted. And see Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121, text at fn 4.

Ratio Decidendi

Legal Principle Established

Established by: NICHOLSON J

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