South East Asia v It and Law

[2000] NSWSC 1036

CITATION:	South East Asia v IT & Law [2000] NSWSC 1036
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 4116/2000
HEARING DATE(S):	02/11/2000
JUDGMENT DATE:	2 November 2000
PARTIES :	South East Asia Communications Ltd v IT & Law Consultancy Pty Ltd
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr Sirtes (P) Mr Newton (D)
SOLICITORS:	Deacons (P) Minter Ellison (D)
CATCHWORDS:	Corporations Law - application to set aside statutory demand as an abuse and as an unreasonable failure to compound the debt. Summons dismissed.
DECISION:	Paragraph 17

- 1 -

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

THURSDAY 2 NOVEMBER 2000

4116/00 - SOUTH EAST ASIA COMMUNICATIONS LTD v IT & LAW CONSULTANCY PTY LTD

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JUDGMENT

1 MASTER: This is the hearing before me of an application in matter No 4116/00 to set aside a demand under section 459 G of the Corporations Law dated 13 September 2000. 2 The basis of the application to set aside is twofold: Firstly, it is said that there is some other reason under section 459 J(1)(b) to set aside the demand and, secondly, that the debt has been compounded. 3 The matter has some history in that a previous demand had been issued by the defendant. The first demand was issued on 31 July 2000 and that demand seeks recovery of the same debt which is the subject of the demand in the present proceedings. The debt relates to some consultancy services carried out. The application in respect of the setting aside of the first demand was filed on 23 August 2000. That application was returnable on 13 October 2000 before the Registrar. It is apparent that it was agreed that the demand which had been issued, would be withdrawn, apparently because of some defects in the demand. It was agreed to be withdrawn on 12 September, the day before the return date. 4 The demand in the present proceedings was issued on 13 September 2000 and, as I have indicated, it was in respect of exactly the same debt. 5 When the first matter 3705/00 came before the Court on 13 October the notation is that: "Note matter listed 2 November". It is apparent from a letter that it was an issue of costs which was stood over to 2 November 2000. The present proceedings had of course been commenced on 4 October and they were the ones that were returnable on 2 November. 6 It is apparent that the defendant entered no appearance to the first application, and there was no appearance for them on 13 October. It is also apparent that on 13 October no application for costs was made, it having been stood over to 2 November, presumably at the request of the plaintiff. Notwithstanding what has been said in the letter of 16 October, there is no order in the court file showing that the proceedings had been dismissed. 7 The basis upon which it was said there was another reason for the setting aside of the statutory demand is founded upon comments made by Senior Master Mahoney in Central Financial Management v Endcorp Finance (1997) 15 ACLC at 201. That was a case where there were multiple demands issued in respect of separate debts apparently existing between the parties. Senior Master Mahoney held for reasons he expressed in that judgment that there was an abuse by virtue of that procedure and set aside all the demands. 8 The way in which the argument was put in this case is that, because of the way in which the second demand was issued immediately after the first one was withdrawn, the plaintiff had some reason for, sorry, had been prevented from establishing an off setting claim under 459 H. It had an off setting claim in respect of the costs of the first application. It says that, because it has not yet had the opportunity to have a costs order made and to quantify, that maintenance of the second demand is an abuse. 9 There are a number of things that can be said in respect of that claim. First of all, the question of an abuse was not raised in the affidavit in support of the application to set aside the demand. That was an affidavit of Mr Richmond dealing with some matters relating to the arrangements between the parties about the debt. It had nothing to do with whether the proceedings were an abuse. 10 The question of abuse had arisen prior to this time because the demand was withdrawn on 12 September and a fresh demand issued on 13 September. In one sense the abuse did not quantify until 4 October, but that perhaps would leave some time for there to be a further affidavit. 11 I think rather than deciding it on this point I would prefer to decide the matter on the question of whether it might be an abuse to issue another demand, once one has been withdrawn. 12 In the circumstances of the present case, I think there is little merit in that the plaintiff had control of the proceedings. There was no appearance by the defendant and it could have taken steps if it wished, to have a the dismissal of the proceedings with an order for costs. That would have advanced its ability to recover costs. However, it did not take that step and stood the proceedings over. It is apparent that the question of whether there was an abuse is something which was not considered at that stage. 13 Also it seems to me on a different level that there is not necessarily an abuse in issuing a further notice after one has been issued which has had defects in it pointed out. The question of as offsetting a claim obviously requires an appropriate order for costs and it seems to me that until there is an order there is only a possibility of some claim. 14 It seems to me that frequently once demands are issued which seem to be in error, they are withdrawn. It seems to me that there ought not to be any reason for there not to be a fresh demand issued. This is illustrated in the present case when one considers the amount of the demand which is for some $56,221.61. In the first case I have referred to here, matter 3705/00, there has been one appearance, one affidavit and not even an appearance by the defendant so that the costs in the matter would be somewhat minimal. In the circumstances, I am not satisfied there is some other reason for setting side the demand. 15 The other basis on which it is said the demand should be set aside is that there has been a compounding of the debt. An offer of compromise was made today and that offer of compromise is Ex C. The offer has been refused. It says:-

"1. Clients propose to pay the full amount of the demand by instalments.
2. Percentage of the amount to be paid immediately.
3. The balance of the amount to be paid within 30.
4. Summons will be withdrawn, each party will bear their own costs."

16 There is no offer of security and there is no suggestion that there is cash available now by way of bank cheque for instance to make the first payment. All it says is pay it immediately. That has to be seen in the light of the history of the matter where, prior to the issue of the first demand there were promises of payment which were not honoured. 17 Accordingly, having regard to the history, I would have thought it was not unreasonable to refuse the offer to compound. I note that the test is objective on this aspect as referred to in Commonwealth Bank v Parthorn, 1995, 13 ACLC 1309. Accordingly I dismiss the summons and order the plaintiff to pay the defendant’s costs.

(Mr Sirtes made application for costs).

18   HIS HONOUR: In regard to matter No 3705/00 I first dismiss the proceedings, and secondly, I order the defendant to pay the plaintiff's costs. 19   NEWTON: In relation to question of costs I am instructed to make application for indemnity costs, and I have letter setting out the position asking them to withdraw the application.

SUBMISSIONS BY COUNSEL

20   MASTER: I have heard submissions as to whether the costs ought to be on an indemnity basis but, having regard to the submissions, I will not make that order, and the orders I made will stand.

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Last Modified: 11/07/2000