SP Hay Pty Ltd ACN 093 703 765 v David Gray & Co Pty Ltd ACN 008 671 127 - [2019] SASC 6

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
SP HAY PTY LTD ACN 093 703 765 v DAVID GRAY & CO PTY LTD ACN 008 671 127
[2019] SASC 6
Judgment of Judge Dart a Master of the Supreme Court
31 January 2019
CORPORATIONS
Corporations Act 2001 (Cth), s 459G, s 459G(2) - 21 days after the demand is served to make application - jurisdiction.
Corporations Act 2001 (Cth), s 459G(3) - service of s 459G application and affidavit in support within 21 days - jurisdiction - service interstate - failure to include SEPA Notice - statutory demand failed to follow paragraph 6 of Form 509H which required the specification of an address for service in the state or territory in which the demand is served on the company - failure to do so - defect or 'null and void' - plaintiff seeks injunction - whether injunction should be made to prevent winding up proceedings relying on failure to comply with demand - whether reliance on failure to comply unconscientious.
Held:
1. Demand contained a defect, but was not invalid.
2. It would be unconscionable for defendant to issue winding up proceedings.
3. Injunction to be made.
Corporations Act 2001 (Cth) s 9, s 459C, s 459E, s 459F, s 459G, s 459H, s 459 J, s 459S; Service and Execution of Process Act 1992 (Cth) s 9, s 16, referred to.
Elan Copra Trading Pty Ltd v J K International Pty Ltd (2005) 226 ALR 349; Slap Corporation Pty Ltd v Civil, Infrastructure and Logistics Pty Ltd [2017] 50 VR 542, applied.
Australian Broadcasting Corporation v O’Neill (2006) 80 ALJR 1672; Bentham Management Pty Ltd v Union Finance Pty Ltd [2007] SASC 42; Beralt v Joe Battaglia Plastering Pty Ltd [1999] QSC 202; Blomley v Ryan (1956) 99 CLR 362; Castanho v Brown & Root (U.K.) Ltd & Anor [1981] A.C. 557; David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; In the matter of International Materials and Technologies Pty Ltd (2013) 282 FLR 362; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 24 ACSR 353; The Commonwealth of Australia v Verwayen [1990] 170 CLR 394; Topfelt v State Bank (NSW) (1993) 12 ACSR 381, considered.

SP HAY PTY LTD ACN 093 703 765 v DAVID GRAY & CO PTY LTD ACN 008 671 127
[2019] SASC 6
JUDGE DART:

This is an application seeking, amongst other things, to set aside a statutory demand (“demand”) served under the provisions of the Corporations Act 2001 (Cth) (“the Act”). Ordinarily, such applications are relatively straightforward and involve a consideration of whether the plaintiff is able to establish a genuine dispute about the existence or amount of debt and/or that it has an offsetting claim.[1]
[1] Section 459H(1) of the Act.
This matter is beset with technical difficulties arising from the address for service contained in the demand. Two issues arise for determination. The first is whether the demand can be said to be valid. The second issue is, assuming the demand is valid, whether an injunction should be granted preventing the defendant from instituting winding up proceedings relying on the plaintiff’s failure to comply with the demand.
In my opinion, for the reasons that follow, the demand is a valid demand. However, to avoid an obvious injustice, I propose to enjoin the defendant from relying on the plaintiff’s failure to comply with the demand.
Factual background
The plaintiff carries on an agricultural business and is based in Western Australia. Its principal business is the sale of hay in domestic and export markets. It also undertakes a grain growing business. Notwithstanding that the plaintiff conducts most of its business in Western Australia, its registered office is situated in Adelaide.
The plaintiff employs more than 40 people and its annual turnover is approximately $50 million per year. The defendant is a company which has, as part of its business, the sale of agricultural chemicals. The parties had a commercial relationship in respect of the sale and purchase of chemicals for use in the agricultural business.
Under cover of a letter dated 2 July 2018 the defendant’s solicitors sent the demand to the plaintiff at its registered office. The total amount claimed in the demand was $627,400.50.
The requirements for a demand are set out in s 459E of the Act, which provides as follows:
459ECreditor may serve statutory demand on company
(1)A person may serve on a company a demand relating to:
(a)a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or
(b)2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.
(2)The demand:
(a)if it relates to a single debt—must specify the debt and its amount; and
(b)if it relates to 2 or more debts—must specify the total of the amounts of the debts; and
(c)must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company; and
(d)must be in writing; and
(e)must be in the prescribed form (if any); and
(f)must be signed by or on behalf of the creditor.
The prescribed form is found in the Corporations Regulations and is Form 509H. The defendant used the correct form. Form 509H specifies that an address for the service of a s 459G application must be provided in the state in which the demand was served. The demand contained, in paragraph 6, an address for service in the following terms:[2]
The address of the Creditor for service of copies of any application and affidavit is Nova Legal, Level 2, 50 Kings Park Road, West Perth in the State of Western Australia.
The statutory demand was therefore not in the correct form, as it failed to give an address for service in South Australia.
[2] Affidavit of Stuart Price (FDN2), sworn 27 July 2018, Exhibit SBP5.
A company upon whom a demand is served may make application to set it aside. The requirements in that regard are set out in s 459G of the Act. An application to set aside a demand must be served within 21 days of the demand having been served on the plaintiff.[3] The authorities make clear that compliance with the 21 day limit is strict and that a court is not able to extend the time limit.[4]
[3] Section 459G(2) of the Act.
[4] David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265.
The plaintiff retained solicitors to deal with the statutory demand. The solicitors issued these proceedings within the 21 day period, but only just. The application to set aside the demand and the supporting affidavit were served, by email, on Nova Legal at their nominated address in Western Australia on the last of the 21 days allowed for that purpose. There is no dispute that the documents were received by Nova Legal and that they were received within the 21 day period allowed for in s 459G of the Act.
The defendant took out two interlocutory applications. The first sought summary dismissal of the proceeding. The issue relied upon by the defendant was that, because proceedings of this Court were served in a different state, it was necessary for the plaintiff to comply with the provisions of the Service and Execution of Process Act 1992 (Cth) (“SEPA"). The requirements of SEPA include the service of a notice in the prescribed form with the court process. Failure to include the prescribed notice makes any attempted service ineffective.[5]
[5] SEPA s 16.
A prescribed notice was not included with the documents served by email. There was no valid service of the application. The defendant submits, correctly, that no valid s 459G application to set aside the demand was made within the permitted time period. It follows that the Court’s jurisdiction to set aside a demand conferred by s 459H and s 459J of the Act is not enlivened. The second interlocutory application of the defendant was an expanded version of the first.
When pressed, counsel for the defendant submitted that, even if the prescribed notice had been emailed with the Court documents, service would not have been effective. That was because the SEPA requires service on a company to be effected at the registered office of the company.[6] The address on the demand was not the registered office of the defendant. To my mind, that makes the situation worse. Not only has the defendant failed to provide an address for service in the correct state, it has provided an address for service at which effective service could not be made.
[6] SEPA s 9.
The plaintiff also filed an interlocutory application, which it subsequently amended. A wide range of orders were sought. As the argument developed, only two of the plaintiff’s proposed orders remained relevant. The first sought a declaration that the demand was null and void. The second sought an injunction preventing the making of a winding up application.
Failure to comply with a statutory demand
A failure to comply with a statutory demand gives rise to a rebuttable presumption. The presumption is that, in proceedings for the winding up of a company, a court must presume the company to be insolvent if, during the period three months prior to the issuing of the winding up proceedings, the defendant company failed to comply with the statutory demand.[7]
[7] Corporations Act 2001 s 459C(2).
The concept of failure to comply with a statutory demand is set out in s 459F of the Act which provides:[8]
[8] Corporations Act 2001 s 459F.
459FWhen company taken to fail to comply with statutory demand
(1)If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.
(2)The period for compliance with a statutory demand is:
(a)if the company applies in accordance with section 459G for an order setting aside the demand:
(i)if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand—the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or
(ii)otherwise—the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or
(b)otherwise—21 days after the demand is served.
There is one issue which would appear to arise from the operation of s 459F. It is clear that a valid s 459G application is required before the Court’s jurisdiction to set aside a demand is invoked. Here the defendant says that, correctly, there was no valid s 459G application. Logically the reference to a s 459G application in s 459F, s 459H and s 459J must be a reference to a valid application. That being the case, it would appear that s 459F(2)(a) has no role to play. If that is correct, then the three month period within which to issue winding up proceedings, so as to be able to rely on the statutory presumption, expired before the hearing of this argument. No winding up proceedings had been issued at that time. It is not necessary to decide the point. It would naturally fall for determination in any winding up proceedings that may follow.
The arguments before the Court
Extensive written submissions were prepared by the parties dealing with the service issues and also dealing with the matters that are ordinarily dealt with on an application to set aside a statutory demand. On the oral argument, however, the issues distilled down to the two matters mentioned above.
The first issue pressed by the plaintiff, perhaps not particularly vigorously, was that because of the failure to comply with the requirement to provide an address for service in South Australia, the demand was invalid. There is a difficulty with that argument because the definition of “statutory demand” in the Act is a document that is, or purports to be, a demand served under s 459E of the Act.[9]
[9] Corporations Act 2001 s 9.
The statutory demand served here was in the correct form. The only issue was the failure to provide an address for service in South Australia. It is difficult to argue that it did not at least purport to be a statutory demand and therefore satisfy the definition in the Act.
Notwithstanding the broad definition of statutory demand in the Act, it is possible for a demand to be invalid. In Topfelt v State Bank (NSW) Lockhart J, after considering the definition of statutory demand found in the Act, said as follows: [10]
There may, however, be cases where deficiencies in the form of demands are so fundamental that the demands are incapable of assuming the description of statutory demands within the meaning of the Corporations Law.
[10] (1993) 12 ACSR 381 at 393.
There are a surprisingly large number of cases dealing with demands which failed to provide an address for service in the correct state. What is common to the vast majority of the cases is the court’s acknowledgment of the injustice caused by the failure to provide a complying address for service. What is not common is the approach adopted to try to avoid the injustice.
The plaintiff relied on the decision of In the matter of International Materials and Technologies Pty Ltd.[11] In that case Brereton J was dealing with a demand served in New South Wales that contained an address for service in Victoria. The address for service provided was not the registered office of the creditor. Proceedings were issued and served at the address specified in the demand. The service was not effected in compliance with the SEPA. His Honour said:[12]
More relevantly, in Beralt Pty Ltd v Joe Battaglia Plastering Pty Ltd [2001] 1 Qd R 232, Ambrose J held that the purported statutory demand was fundamentally deficient because it did not contain the requisite words referred to in paragraph 5 of Form 509H "that the application must be made within 21 days after the demand was served". His Honour held that this was a fundamental requirement of a statutory demand in that it informed the debtor company of an essential matter and, in not satisfying that requirement, the demand was ineffective for the purposes of s 459E.
In my view, the defect in the present case is at least as serious and fundamental as the one referred to by his Honour in Beralt. Both of those requirements of Form 509H are intended to enable a debtor to make a valid application to set aside the demand. Just as the failure to include the words referred to in paragraph 5 failed to notify the debtor of that matter in Beralt, so in this case the non-compliance with the requirement to provide an address for service within the state in which the demand was served deprived the debtor company of the ability to make a valid application to set aside the demand, and was calculated to mislead it into making an ineffective application. That defect was in my view so serious and fundamental as to deprive the demand of the quality or character of a demand under s 459E in that it failed, in a material and fundamental way, to comply with the prescribed form referred to in s 459E(2)(e).
His Honour decided that the demand was not valid.
[11] (2013) 282 FLR 362.
[12] In the matter of International Materials and Technologies Pty Ltd (2013) 282 FLR 362 at [19]-[20].
In this Court, in the Full Court matter of Elan Copra Trading Pty Ltd v J K International Pty Ltd,[13] the same issue arose. An argument was pursued that the demand was ineffective. White J, with whom Doyle CJ and Perry J agreed, said:[14]
It cannot be concluded that this departure from the terms of the prescribed form made the demand served ineffective as a statutory demand for the purposes of the Corporations Act. Such a conclusion is precluded by the definition of “statutory demand” in s 9 of the Corporations Act:
Statutory demand means:
(a) a document that is, or purports to be, a demand served under section 459E; or
(b) such a document as varied by an order under subsection 459H(4).
The document served on the appellant was, at the least, a document purporting to be a demand served under s 459E. Section 459J is also relevant in this context because it provides relevantly that a statutory demand is not to be set aside merely because of a defect. However, if the defect causes substantial injustice, the statutory demand may be set aside on that ground. Thus, in most cases, the existence of a defect will not make a statutory demand ineffective, and can be a ground for the setting aside of the statutory demand only in limited circumstances, and then only on an application made within the prescribed 21 day period.
[13] (2005) 226 ALR 349.
[14] Elan Copra Trading Pty Ltd v J K International Pty Ltd (2005) 226 ALR 349 at [19].
The different outcomes in International Materials and Technologies Pty Ltd and Elan Copra Trading Pty Ltd appear to be irreconcilable. In Slap Corporation Pty Ltd v Civil, Infrastructure and Logistics Pty Ltd[15] Randall AsJ considered both authorities, together with a detailed consideration of a number of other authorities across the country. His Honour said:[16]
[15] [2017] 50 VR 542.
[16] Slap Corporation Pty Ltd v Civil, Infrastructure and Logistics Pty Ltd [2017] 50 VR 542 at [69] and [73].
Elan Copra and possibly Spencer Constructions, which although not expressly considering the issue of validity, stated that the incorrect use of an interstate address on a statutory demand was a defect, leaves no room for a finding that that such a deficiency results in invalidity of the demand for the purposes of the Act.
…
I am not technically bound to follow Re International Materials as it is not a case that falls within the court’s appellate hierarchy. Ordinarily, on principles of judicial comity, I should follow the decision unless consider it to be clearly or plainly wrong. In the current circumstances though, factors indicate that I should not follow the decision:
(a)    the decision did not consider the earlier case of Sustainable Organics which it conflicts with. In the context of two conflicting authorities, each a decision of a single judge in courts of equal rank, it is open to me to reconsider the issue;
(b)    at the very least, I should follow the broad interpretation of the definition of ‘statutory demand’ and Part 5.4 as espoused in Topfelt, Spencer Constructions, Elan Copra and Crema.[17] On one view, Re International appears inconsistent with comments in Elan Copra and Spencer Constructions, which were not considered in detail by Brereton J. I opt to follow those appellate decisions, as was analogously done in Inter Mining and Poolrite in the context of omissions of the prescribed warning;
(c)    I have particular regard to the statement by Black J in Re Urban Solutions Group Pty Ltd:
... Brereton J took that course where there was an issue as to the validity of an address for service specified in a creditor’s statutory demand. However, it seems to me that position is the exception rather than the rule, and cannot be permitted to become the rule, lest the time limit within which an application to set aside a creditor’s statutory demand under s 459G of the Act must be brought is subverted and the legislative purpose which it is intended to achieve is defeated. For reasons that will emerge below, it does not seem to me that this case engages that exceptional jurisdiction.[18]
(d)    to follow Re International, directly or indirectly subverts the legislative purpose of Division 3 of Part 5.4;
(e)    any injustice can be explored or overcome in any injunction application;
(f) the validity of the demand is best dealt with in a s 459S in the event that the debtor misses the 21 day period under s 459G; and
(g)    the validity of the demand might be considered in a winding up application under s 459A.
[17] [2006] VSC 338.
[18] [2015] NSWSC 1940 at [3].

In the circumstances, I am bound to follow the decision in Elan Copra. Further, the consideration of the various authorities referred to in Slap Corporation suggests that the Elan Copra approach is more widely adopted. Therefore, whilst the demand contains a defect, it is not such as to make the demand invalid. The plaintiff fails on its first argument.
Should an injunction be granted?
The second argument pursued by the plaintiff was that the Court should grant an injunction to prevent the defendant commencing a winding up application relying on its failure to comply with the demand.
The plaintiff submitted that the matter should be treated as a case of misrepresentation. It relied upon the approach in The Commonwealth of Australia v Verwayen.[19]The argument was developed that the address for service should be treated as a representation and that it was, in all the circumstances, a misrepresentation because service could not have been lawfully effected at the address given. It was argued, therefore, that an estoppel would arise to prevent the defendant profiting from its misrepresentation. An injunction should be granted, to prevent an injustice.
[19] [1990] 170 CLR 394.
In response, the defendant submitted that the grant of a final injunction was rare and should be limited to cases where an abuse of process was involved.
Separately, there was also some discussion by counsel about the concept of inhibiting orders. An example of an inhibiting order is found in Beralt v Joe Battaglia Plastering Pty Ltd[20] where Ambrose J was again dealing with a statutory demand which did not contain an address for service within the correct state. The alleged debtor did not comply with the SEPA in respect of service of the s 459G application. Ambrose J noted that, in the circumstances, the Court lacked jurisdiction to set aside the statutory demand because there was no valid s 459G application. His Honour also referred to the expense and adverse commercial consequences if a winding up application was issued. His Honour held as follows:[21]
If during that period the respondent does not undertake not to make application to wind up the applicant under s. 459Q, in my view it will be open to the applicant to seek an injunction to restrain the respondent from making such an application to avoid the commercial consequences of such an application being made irrespective of the result of its outcome.
I declare that the statutory demand dated 14 April 1999 served by Queensland Trade and Services Pty Ltd as agent of the respondent upon the applicant on 19 April 1999, does not substantially comply with the essential requirements of s.459E of the Corporations Law and Form 509H, and non compliance with it is insufficient to support an application to wind up the applicant.
In the event that the respondent does not by Tuesday, 7 September 1999 undertake not to apply to have the applicant wound up for non compliance with that statutory demand, I give the applicant leave to apply forthwith for an injunction restraining the respondent from making such an application.
I will hear submissions on the question of the costs of the application.
[20] [1999] QSC 202.
[21] Beralt v Joe Battaglia Plastering Pty Ltd [1999] QSC 202 at [73] – [76].
During the argument counsel for the plaintiff referred to Beralt as a relevant authority, but did not press the Court to make a declaration of the type made in that case. It is appropriate to note that Ambrose J invited an application for an injunction. In Elan Copra the availability of an injunction was also mentioned.[22] Neither case discussed the nature of the injunction that might be available.
[22] Elan Copra Trading Pty Ltd v J K International Pty Ltd (2005) 226 ALR 349 at [45].
The injunction sought by the plaintiff is a final rather than interlocutory injunction. The familiar criteria for the grant of an interlocutory injunction, as re‑stated by the High Court in Australian Broadcasting Corporation v O’Neill,[23] have no application. The injunction sought is quia timet in nature. The injustice which the plaintiff seeks to avoid is the issuing of the foreshadowed winding up application based on its failure to comply with the demand.
[23] (2006) 80 ALJR 1672.
The grant of an injunction is an exercise of the Court’s equitable jurisdiction. It is necessary to consider the principles that guide equitable relief when determining whether it is appropriate to grant an injunction in this matter. The circumstances in which it may be appropriate to grant an injunction are not capable of exhaustive definition. Differing facts and circumstances will arise from time to time and it is necessary to apply equitable principles by analogy.
The starting point is that the injunction should not be granted to restrain a particular act if damages are a proper remedy.[24] It is obvious that damages are not an adequate remedy in this matter.
[24] London and Blackwell Railway v Cross (1886) 31 Ch.D 354 at 369.
A more fundamental approach to the question of whether or not an injunction should be granted than suggested by the parties should be adopted. The question is simply whether, in the circumstances of this matter, it would be unconscientious for the defendant to rely on the plaintiff’s failure to comply with the demand in a winding up application.
In Castanho v Brown & Root (U.K.) Ltd & Anor[25] the House of Lords was considering whether to grant an injunction to prevent particular proceedings being conducted in the United States following the discontinuance of an identical action in an English court. It was submitted to the House of Lords that there were only two classes of cases in which, on the facts before the Court, it was appropriate to grant an injunction. Lord Scarman said in respect of that submission:[26]
No doubt, in practice, most cases fall within one or other of these two classes. But the width and flexibility of equity are not to be undermined by categorisation. Caution in the exercise of the jurisdiction is certainly needed: but the way in which the judges have expressed themselves from 1821 onwards amply supports the view for which the defendants contend that the injunction can be granted against a party properly before the court, where it is appropriate to avoid injustice.
The decision shows the flexibility of equity and its ability to mould a remedy to suit the circumstances of a matter.
[25] [1981] A.C. 557.
[26] Castanho v Brown & Root (U.K.) Ltd & Anor [1981] A.C. 557 at 573.
The courts of equity have long exercised a jurisdiction to intervene where the exercise of the legal right or entitlement in particular circumstances would be unconscientious. Often the critical issue will be the circumstances by which the right or entitlement was acquired.
In Blomley v Ryan Fullagar J said: [27]
It is a case, I think, in which relief could be obtained by the defendant, if at all, only in equity. And, when we look for the principle on which equity did grant relief in such cases, we find as so often in equity, only very wide general expressions to guide us. There was, I think, a typical difference in approach between equity and the common law. To the common law the transaction in question might be void or voidable, but the primary question was as to the reality of the assent of the person resisting enforcement of the contract. Equity traditionally looked at the matter rather from the point of view of the party seeking to enforce the contract and was minded to inquire whether, having regard to all the circumstances, it was consistent with equity and good conscience that he should be allowed to enforce it.
[27] (1956) 99 CLR 362 at 401-402.
As a result of the failure of the plaintiff to comply with the demand, the defendant has obtained a right or entitlement to rely on the presumption of insolvency in the foreshadowed winding up application. The question is whether, on the facts of this matter, it would be unconscientious for the defendant to do so. The answer to the question requires a consideration of the manner in which the right or entitlement was acquired and the injustice the exercise of it would cause the plaintiff.
The plaintiff submits that it lost the opportunity to have the Court set aside the statutory demand. It says that, in respect to a large portion of the claimed debt, there is a genuine dispute. It also asserts that it has an offsetting claim greater than the total of the amount claimed in the demand. To determine whether the plaintiff has suffered an injustice, it is necessary to ascertain whether, at least arguably, the plaintiff would have established a genuine dispute or offsetting claim.
There are many judicial pronouncements setting out the test to be applied in determining whether or not a plaintiff has established that a genuine dispute exists. While the formulations differ slightly, a fair summary would suggest that the test is not particularly onerous, so long as there appears to be a proper evidentiary basis for the assertion that there is a genuine dispute.
A widely-adopted definition was provided by the Full Federal Court in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd which said: [28]
In our view a “genuine” dispute requires that:
·the dispute be bona fide and truly exist in fact;
[28] (1997) 24 ACSR 353 at 365.
In Eyota Pty Ltd v Hanave Pty Ltd[29] it was stated that the expression “genuine dispute” connotes a plausible contention requiring further investigation.[30]
[29] (1994) 12 ACSR 785.
[30] (1994) 12 ACSR 785 at 787.
The Court’s function on an application to set aside a statutory demand is limited. In Bentham Management Pty Ltd v Union Finance Pty Ltd Debelle J stated:[31]
In short, the Court’s task is not to seek to resolve the competing claims of the applicant or respondent but to resolve whether a genuine dispute exists or whether there is a genuine counterclaim, set-off or cross-demand. It is not to try the claim but merely to establish its genuineness.
[31] [2007] SASC 42 at [15].
The purpose of the statutory demand regime is to act as a filter. That is, to separate out those disputes which are genuine and those disputes which are not. If there is a genuine dispute, the demand is set aside and the matter is left to be litigated in the usual manner. If there is a genuine offsetting claim, the demand is adjusted accordingly. Where neither exists, the demand is not set aside or varied.
I have considered the affidavit material filed by the plaintiff in support of the proposed s 459G application. The relevant supporting affidavit filed by a director of the plaintiff establishes a genuine dispute in respect of whether or not goods in the amount of $384,710.66 were in fact actually delivered. The affidavit contains an analysis of invoices and consignment notes, and concludes that some goods for which the defendant seeks payment were not delivered. I am satisfied that the affidavit material supports the proposition that the plaintiff has established a genuine dispute in the amount of $384,710.66.
The position in respect of the proposed offsetting claim is less clear. The plaintiff’s affidavit deposes that the parties had an agreement that chemicals would be provided by the defendant to the plaintiff with a maximum markup of 7%. It is asserted in the affidavit material that over a period a greater markup was applied. The plaintiff claims an entitlement to offset the overcharged amount, which it says is $978,750, against the sum claimed in the demand. The position in respect of the offsetting claim is not as convincing as the evidence in respect of the genuine dispute. Nonetheless, for present purposes it is adequate. I am satisfied that the offsetting claim is arguable.
I am satisfied that the plaintiff suffered an injustice by being denied the opportunity to have its application to set aside the demand heard.
In response to the suggestion that the plaintiff has suffered an injustice, the defendant says that the plaintiff could seek leave pursuant to s 459S of the Act on the winding up proceedings to pursue the question of genuine dispute or offsetting claim. The provision provides as follows:
459SCompany may not oppose application on certain grounds
(1)In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:
(a)that the company relied on for the purposes of an application by it for the demand to be set aside; or
(b)that the company could have so relied on, but did not so rely on (whether it made such an application or not).
(2)The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.
The entitlement to raise an issue that could have been raised on an application to set aside a statutory demand is limited to situations where the Court grants leave. The Court’s ability to grant leave is restricted to disputes material to the question of solvency. In practical terms, that will usually mean that the debt in dispute is the difference between the company being solvent or insolvent. The plaintiff here asserts that it is solvent in any event. That means the Court could never grant leave under s 459S.
An injunction should be granted, if necessary, to avoid injustice. It is clear that the plaintiff will suffer reputational and other harm if winding up proceedings are issued. Equity looks to the party seeking to enforce a right of entitlement to ensure that it is doing so conscientiously. In doing so, it is imposing a standard of conduct on the exercise of legal rights or entitlements. Equity will intervene when there is a falling short of the standard.
In my opinion, it would be unconscientious of the defendant to issue winding up proceedings founded on the plaintiff’s failure to comply with its demand. It served a demand containing an address for service at which valid service in compliance with the SEPA could never have been effected. The requirement to provide an address for service in the state in which the demand is served facilitates compliance with the tight time limits in s 459G. A party should not be lightly excused from a failure to comply with the requirement to provide an address for service in the correct state. Nor should it be entitled to benefit from the consequential failure of the plaintiff to comply with the demand.
I am satisfied it is appropriate to grant an injunction. I will hear the parties as to the terms of the order that should be made.