Ulithorne Wines Pty Ltd v Ulithorne Vineyard Pty Ltd - [2020] SASC 32

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ULITHORNE WINES PTY LTD v ULITHORNE VINEYARD PTY LTD
[2020] SASC 32
Judgment of The Honourable Justice Doyle
4 March 2020
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENUINE DISPUTE AS TO INDEBTEDNESS - ASSESSING GENUINENESS - GENERALLY
The plaintiff (Ulithorne Wines) and defendant (Ulithorne Vineyard) are related companies. Ulithorne Vineyard served a statutory demand upon Ulithorne Wines, seeking payment of $1,171,084.93 said to be owing on account of an intercompany loan.
Ulithorne Wines has applied under s 459G of the Corporations Act 2001 (Cth) (the Act) to have the statutory demand set aside on the basis either that there is a genuine dispute as to the debt, or that the statutory demand was issued for an improper purpose.
Ulithorne Wines’ contentions include that:
1.      A genuine dispute exists as Ulithorne Vineyard have not put forward evidence to support the contention that the alleged debt is due and payable;
2.      A genuine dispute exists as there is evidence to suggest that the ‘loan’ referred to in the parties’ accounts represents a capital investment;
3.      The statutory demand is an abuse of process, or otherwise improper, as it overlaps with matters in dispute in the main action (which has been stayed) and interferes with related parties’ exercise of their privilege against self-incrimination; and
4.      The statutory demand is an abuse of process because it was issued for the purposes of debt recovery.
Held, per Doyle J, dismissing the application:
1.      Sufficient evidence was tendered to prove the existence of the debt that is due and payable. No genuine dispute has been established.
2.      No improper or abusive purpose has been established.
Corporations Act 2001 (Cth) s 459G, s 459H, s 459J(1); Limitation of Actions Act 1936 (SA) s 42(1), s 42(3), referred to.
Accordent Pty Ltd v RMBL Investments Ltd (2009) 105 SASR 62; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; Genesis Management Services Pty Ltd v Soniclean [2005] SASC 224; John Holland Construction & Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250; John Shearer Ltd v Gehl Co (1995) 60 FCR 136; Ogilvie v Adams [1981] VR 1041; Poonon Pty Ltd v Deputy Commissioner of Taxation [1999] NSWSC 1121; Re Brookers (Australia) Limited (in liq); Brooker v Pridham (1986) 41 SASR 380; Re Eastmark Holdings Pty Ltd [2011] NSWSC 1084; Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (2007) 214 FLR 393; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; GoConnect Ltd v Sino Strategic International Ltd (in liq) [2016] VSCA…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] SASC 32
Decision Date: 4 March 2020

CaseChat Overview and Summary

Ulithorne Wines sought to have a statutory demand set aside, which had been issued by Ulithorne Vineyard. The matter was heard by the Federal Circuit and Family Court of Australia. The primary issue was whether the statutory demand could be set aside as there was a genuine dispute as to the debt, or if it was issued for an improper purpose.

The court considered whether Ulithorne Wines had established a genuine dispute regarding the debt claimed by Ulithorne Vineyard. The debt was evidenced by the financial accounts of Ulithorne Vineyard, which showed the intercompany loan as a current asset. However, Ulithorne Wines argued that the debt was disputed, and the court had to determine if the dispute was genuine. The court noted that there was no evidence of the nature or detail of the parties' respective businesses or any dealings between them, which gave rise to the debt claimed. Despite this, the court found that Ulithorne Wines had not established a genuine dispute as to the debt, and the statutory demand was valid.

The court also examined whether the statutory demand was issued for an improper purpose. The court found that there was no evidence to suggest that the demand was issued for an improper purpose. Therefore, the court dismissed Ulithorne Wines' application to set aside the statutory demand.

The court dismissed Ulithorne Wines' application to set aside the statutory demand issued by Ulithorne Vineyard, and no orders were made for an adjournment of the application pending the determination of the main action.

Orders

Orders of the court

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Background

Background to the litigation

In these proceedings, Ulithorne Wines has applied under s 459G of the Corporations Act 2001 (Cth) (the Act) to have the statutory demand set aside on the basis either that there is a genuine dispute as to the debt, or that the statutory demand was issued for an improper purpose.Background According to the ASIC records in evidence the share capital of both Ulithorne Vineyard and Ulithorne Wines consists of 100 ordinary shares. The companies have common ownership in that the shares in both companies are owned by East Wine Group Pty Ltd and AST Investments Pty Ltd. In the case of Ulithorne Vineyard, its shares are held as to 70 shares by East Wine Group and as to 30 shares by AST Investments; and in the case of Ulithorne Wines, its shares are held as to 30 shares by East Wine Group and as to 70 shares by AST Investments. The effect of this is that the majority shareholder of Ulithorne Vineyard is East Wine Group, whereas the majority shareholder of Ulithorne Wines is AST Investments. The shares in East Wine Group are held by Dong Lyu (as to 20 shares) and his wife Xiaoxin Li (as to 80 shares). Ms Li is the sole director of Ulithorne Vineyard, and is the person who has been providing instructions on behalf of that company, both in serving the statutory demand and in defending these proceedings. AST Investments, on the other hand, is ultimately owned and controlled by Mo Du and Sing Teck Ong. The sole director of Ulithorne Wines is Mr Ong. There is no evidence before me as to the nature or detail of the parties’ respective businesses, beyond the general descriptions at the outset of these reasons. The evidence also does not reveal anything of detail about any dealings between the parties, including the dealings which gave rise to the debt claimed by Ulithorne Vineyard in its statutory demand. Ulithorne Vineyard’s evidence in support of the debt is confined to the references to the indebtedness in the parties’ respective financial accounts. The statutory demand served by Ulithorne Vineyard on Ulithorne Wines was supported by an affidavit of Belinda Xu, who became the accountant for Ulithorne Vineyard on 26 November 2019. The previous accountants of Ulithorne Vineyard were the firm Chong & Harjanta Consultants and Accountants. Chong & Harjanta were also the accountants for Ulithorne Wines, and indeed continue to be its accountants. In her affidavit, Ms Xu deposed that she had inspected the business records of Ulithorne Vineyard in relation to the intercompany loan between the parties. The loan was recorded as a current asset, with the description ‘Loan – Ulithorne Wines Pty Ltd’, in the balance sheet within the accounts of Ulithorne Vineyard for each of the financial years ended 30 June 2014 through to 30 June 2018. It was recorded in the accounts for those years in the amounts of $1,001,463, $1,094,738, $1,034,227, $1,034,227 and $1,184,227 respectively. It was also recorded in the trial balance for Ulithorne Vineyard as at 31 May 2019, with the same description and in the amount of $1,171,084.93. The last of these figures is the one used in the statutory demand.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

I am not satisfied that there is any basis for setting aside the statutory demand under s 459J(1) of the Act.Conclusion For the reasons set out, I am not satisfied that Ulithorne Wines has established a basis for setting aside the statutory demand served upon it by Ulithorne Vineyard. To the extent that the request for an adjournment of this application pending the determination of the main action is pressed, I do not think there is any basis for me to make such an order. It is thus appropriate that I dismiss Ulithorne Wines’ application.

Ratio Decidendi

Legal Principle Established

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