TQM Design & Construct Pty Ltd v M I Kitchen Design Pty Ltd

[2011] NSWSC 800

Supreme Court

New South Wales

Medium Neutral Citation:	TQM Design & Construct Pty Limited -v- M I Kitchen Design Pty Ltd [2011] NSWSC 800
Hearing dates:	21 July 2011
Decision date:	21 July 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Hammerschlag J
Decision:	Statutory Demand set aside
Catchwords:	CORPORATIONS - statutory demand - s 459J(1)(b) Corporations Act 2001 (Cth) - where demand is based on a default judgment debt and the judgment is rescinded - statutory demand set aside
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Scope Data Systems v BDO Nelson Parkhill (2003) 199 ALR 56
Category:	Principal judgment
Parties:	TQM Design & Construct Pty Limited - Plaintiff M I Kitchen Design Pty Ltd - Defendant
Representation:	Counsel: E.N. Gramelis - Plaintiff T. Barber - Defendant Solicitors: Magna Carta Lawyers - Plaintiff Barber Lawyers - Defendant
File Number(s):	2010/418765

ex tempore Judgment

1. HIS HONOUR: The plaintiff is a builder. The defendant is a supplier of kitchens. On 13 July 2006 they entered into a contract which has given rise to controversy between them.

1. On 3 February 2010, the defendant obtained default judgment against the plaintiff in the Local Court at Parramatta for the amount of $21,198.28, which included issue and service costs, and interest and legal costs.

1. The defendant then served on the plaintiff a statutory demand dated 24 November 2010, the schedule to which is as follows:

Description of the debt	Amount of the debt
(Indicate if it is a judgment debt, giving the name of the Court and the date of the orders)
Parramatta Local Court	$21,198.28

1. The demand ought to have specified the date of the order. That, however, is probably a mere defect.

1. The difficulty for the defendant is that on 11 February 2011 the default judgment was set aside by the Local Court, upon which event the judgment debt upon which the statutory demand was based ceased to exist. Proceedings in the Local Court will now ensue.

1. Section 459J(1)(b) of the Corporations Act 2001 (Cth) ("the Act") provides that, on an application under s 459G of the Act, the Court may, by order, set aside the demand if it is satisfied that there is some other reason why the demand should be set aside. Clearly, in the present case, there is such a reason. It would be inimical to the policy lying behind the statutory scheme for the defendant to obtain the benefit of the statutory presumption of insolvency based on a judgment debt where the judgment has been set aside.

1. In Scope Data Systems v BDO Nelson Parkhill (2003) 199 ALR 56, Barrett J dealt with the position where a judgment, upon which a statutory demand was based, was stayed. His Honour expressed the view, with which I respectfully agree, that the legislative policy would be circumvented if the stayed judgment were permitted to be the basis for the statutory presumption of insolvency which would ordinarily arise on the failure to pay an amount demanded in a statutory demand. A fortiori this is so where the judgment has been rescinded.

1. In the circumstances, the statutory demand directed by the defendant to the plaintiff and dated 24 November 2010 is set aside.

1. I record that the parties filed affidavit material going to the existence of a genuine dispute. I determined that there should be decided, before any other issues, whether the demand should be set aside on the basis that the judgment debt had been rescinded.

1. The plaintiff seeks indemnity costs relying on a letter sent on 2 December 2010 by its solicitors to the defendant's solicitors, asserting that the case was bound to fail because of the defects in the demand, and that a genuine dispute existed, and relying also on a document entitled "Offer of Compromise", which was served on 1 June 2011.

1. Both letters called for capitulation on behalf of the defendant and I do not think, having regard to the material before me, that the defendant's case could be seen as hopeless at that time.

1. However, on 12 February 2011, the Local Court gave notice of the fact that the judgment upon which the demand had relied had been set aside. From that point, in my view, it should have been obvious to the defendant that its resistance to the plaintiff's application was hopeless. Indemnity costs are, from that date, warranted.

1. The defendant is to pay the plaintiff's costs of the proceedings on the ordinary basis until 12 February 2011 and, thereafter, on the indemnity basis.

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