Vee H Aviation Pty Ltd v BP Australia Ltd

[1995] FCA 557

CATCHWORDS

Corporations - Statutory demand - application to set aside on the basis of existing offsetting claim - whether genuine dispute exists.

Practice and Procedure - Jurisdiction - impermissible to add claim in the general jurisdiction to proceedings in bankruptcy jurisdiction - nature of bankruptcy jurisdiction - inappropriate forum to determine monetary claim - small claims - transfer proceedings to District Court.

Corporations Law - s459G(1), s459H(1), (2) and (5)

Rymark Australia Development Consultants Pty Limited v Mahoney's Constructions Pty Limited [1972] VR 735 - cons.
Aloridge Pty Ltd v West Australian Gem Explorers Pty Ltd (1995) 127 ALR 410 - cons.
Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 - cons.
Classic Ceramic Importers Pty Ltd v Ceramica Antiga SA (1994) 13 ACSR 263 - cons.
Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (1994) 13 ACSR 455 - cons.
Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 - cons.
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 - cons.
Kalamunda Meat Wholesalers Pty Ltd v Reg Russell and Sons Pty Ltd (1994) 128 ALR 149 - cons.
Rohalo Pharmaceutical v R.P. Scherer SpA (1994) 15 ACSR 347 - cons.

VEE H. AVIATION PTY LIMITED v BP AUSTRALIA LIMITED

No. NG 3024 of 1995

BEAUMONT J.

SYDNEY

24 JULY 1995

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )    No.  NG 3024 of 1995
  )
GENERAL DIVISION                 )

BETWEEN:VEE H. AVIATION PTY. LIMITED

Applicant

ANDBP AUSTRALIA LIMITED

Respondent

CORAM:    Beaumont J.

DATE:     24 July 1995

REASONS FOR JUDGMENT

This is an application made under section 459G(1) of the Corporations Law ("the Law") seeking to set aside a statutory demand served on a company.  Before outlining the history of the matter, it will be convenient to outline the legislative scheme in which the dispute has arisen. 

Section 459H(1) of the Law provides that the section and, in particular, the provisions to which I will later refer, apply where the Court is satisfied of either or both of the following:

"459H(1) ...

(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;   

(b)that the company has an offsetting claim."

By s.459H(2), the Court must calculate the
"substantial amount" of the demand in accordance with the formula:  "Admitted total minus offsetting total".  "Admitted total" is defined as the admitted amount of the debt or the total of the respective admitted amounts of the debts as the case requires.  The statutory definition of "offsetting total" is defined in s.459H(2) as:

"(a)if the Court is satisfied that the company has only one offsetting claim - the amount of that claim;  or

(b)if the Court is satisfied that the company has 2 or more offsetting claims - the total of the amounts of those claims;  or

(c)otherwise - a nil amount."

Section 459H(5) defines "admitted amount" in relation to a debt as:

"459H(5)...

(a)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt - a nil amount;  or

(b)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt - so much of that amount as the Court is satisfied is not the subject of such a dispute;  or

(c)otherwise - the amount of the debt..."

Section 459H(5) further defines "offsetting claim" to mean a "genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates)."  
         The history of this matter is as follows: 

On 6 January 1995 the respondent, BP Australia Limited, served a creditor's statutory demand for payment of debt ("the demand") on the applicant company, Vee H. Aviation Pty Limited.  The demand claimed payment of the amount of $78,018.68, being the amount said to be owed for goods supplied.  Particulars of the debt alleged that the amount was owed in accordance with invoices bearing dates between 7 September and 1 December 1994.  Credit was given for a payment of $50,000 made by the applicant, giving a balance, as mentioned, of $78,018.68. 

In seeking to set aside the statutory demand, the applicant contends that the court should be satisfied that it has an offsetting claim within the meaning of s.459H.  This is disputed by the respondent.  The matter came before the Court in the first instance in the Corporations List as a contentious matter.  Affidavit evidence was read on behalf of each of the parties, and some argument was put on that day.  However, there being other matters in the list, it was not possible to complete the hearing on that day, and the matter was adjourned to another hearing day, when further argument was heard.

In the meantime, on 6 June 1995, the applicant paid the respondent the sum of $13,018.68, being the applicant's
estimate of the sum for which the respondent's statutory demand will be allowed to stand. The admitted amount of the debt should , therefore, be adjusted accordingly, and it now totals $65,000.

On the same day as the filing of the present application, the applicant also purported to file, in these proceedings, a statement of claim in the General Division of the Court.  A copy of the statement of claim is attached to these reasons.   I say "purported to file" because, as a matter of form as well as substance, it is not permissible, at least without the leave of the Court, to seek to add claims in the general jurisdiction, to proceedings in the court's bankruptcy or corporate insolvency jurisdiction (see Rymark Australia Development Consultants Pty Limited v Mahoney's Constructions Pty Limited [1972] VR 735; Aloridge Pty Ltd v West Australia Gem Explorers Pty Ltd (1995) 127 ALR 410 at 413). This general topic will be discussed in greater detail below, but it should be noted at this stage that the amount of the claim made in the statement of claim is well within District Court limits, and, prima facie, this claim should be transferred to the District Court as the appropriate Tribunal to entertain it.

It will be seen from the statement of claim that a number of causes of action are relied upon, arising out of the business relationship between the parties.  Under that relationship, and this at least is common ground, between 1972 and September 1994, the applicant carried on business at Canberra Airport as the respondent's agent for the purpose of selling the respondent's aviation fuel.

The causes of action alleged in the statement of claim were the subject of the affidavit evidence read in this application.  Although there is common ground in some limited areas to which I will refer shortly, on the major aspect of the litigation, the evidence appears, at this stage, to be contentious. 

It is convenient, for present purposes, to divide the causes of action alleged in the statement of claim into two groups: First, the claims for breach of contract and, secondly, the claim of misleading conduct contrary to s.52 of the Trade Practices Act 1974 and the claim in negligence in the form of the allegation that the respondent negligently made the statement or representation there relied on.

Turning to the contractual claims in the first instance, the respondent does not dispute that the applicant has a genuine cross-claim for the $1000 security deposit.  With respect to the electricity rebate, the respondent is prepared to accept that this claim is genuinely advanced on behalf of the applicant, but disputes its amount, stating that there was no evidence other than an estimate of the amount expended.  Nonetheless, in this regard, the respondent is prepared to accept that there is a genuine dispute in an amount of $9,200.   With respect to the claim for the rebate for fuel evaporation, the applicant failed to produce any evidence on this matter, and I see no basis for taking it into account for these purposes. 

The second aspect of the case sought to be made in the statement of claim, that being the misleading or negligent conduct alleged, raises more difficult questions for present purposes.  There appears to be little common ground in this area, both on the issue of liability and on the question of the amount of any compensatory damages, should that issue arise.  The respondent sought to approach this question in a very thorough way, as if the Court were entertaining the final hearing of the claims made in the statement of claim.  For its part, the applicant took a very different approach.  Its stance was to submit that the threshold, from its point of view, was a low one; and that all that it needed to show was that it had a genuine claim.  As a consequence, counsel for the applicant declined to cross-examine witnesses whose evidence was tendered on behalf of the respondent. 

There is some merit in the approach taken by each of the parties, but not much.  Clearly, the Court is placed in an unsatisfactory position which could well lead to an unsatisfactory and unjust outcome.  In my opinion, the overriding consideration for present purposes is to take into account the true nature of the jurisdiction which is now invoked.  This is an insolvency or bankruptcy jurisdiction.  It is not a jurisdiction for the final determination of any  monetary claim. 

Support for this approach may be found by analogy in the line of authority of which Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 is an example. In that case, Gibbs J. held that where, in proceedings for sequestration upon a creditor's petition, the debtor claims in defence of the proceedings to be entitled to unliquidated damages in tort against the petitioning creditor, the Bankruptcy Court is not, as a general rule, an appropriate forum to decide such a claim. As his Honour said (at 116):

"In many cases it would be more convenient, assuming that the debtor showed that he had a real claim to litigate, to adjourn the proceedings to enable his claim to be tried in the ordinary courts..."

The report of that case indicates that the matter was before his Honour on no less than nine hearing days.  The report of the judgment also illustrates the degree of detail of the evidence adduced before the Court.  As a matter of policy, as well as for practical reasons, it usually will be appropriate to allow such claims to go forward, in the ordinary way, before a court of general jurisdiction.  In my view, that is the course which should be followed in the present case.

There is nothing, in my opinion, in the more recent authorities which is inconsistent with this approach (see, e.g., Classic Ceramic Importers Pty Ltd v Ceramica Antiga SA (1994) 13 ACSR 263 at 268-9; Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (1994) 13 ACSR 455 at 462; Re Morris Catering Australia Pty Ltd (1993) 11 ACSR 601 at 605; Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 at 356-7; Kalamunda Meat Wholesalers Pty Ltd v Reg Russell and Sons Pty Ltd (1994) 128 ALR 149 at 151; Rohalo Pharmaceutical v R.P. Scherer SpA (1994) 15 ACSR 347). It is true that those authorities hold that, for these purposes, a cross-claim which is frivolous should be ignored. With respect, I agree, but this is no novel principle. Any such claim would, in any event, be an abuse of the Court's process and should be stayed immediately whatever its form. This is really no more than another way of saying, as Gibbs J stated in Re Schmidt (at 116) that the debtor must show that he had "a real claim to litigate". 

In the present case, on the issue of liability, there is a dispute as to the terms of the critical conversations;  indeed, from the respondent's point of view, there is a real question as to the timing of these conversations.  However, I do not think that it can be said, to this extent, that the applicant has no real claim to litigate.  So far as the measure of damages is concerned, assuming that this question were to arise, the position is more troubling.  There is little force in the applicant's assertion that the circumstance that it made a capital sum payment of $30,000 to the outgoing Mobil agent has a relevant or material connection in law with the measure of compensatory damages to be paid, even if it were to establish the causes of actions which it now asserts against the respondent.  On the other hand, where, as here, a claim is made for damages which have, as a major component, compensation by way of loss of opportunity, there must necessarily be a strong element of judgment involved in assessing damages on that footing; and it is impossible for a firm conclusion now to be made, on the material that I presently have, that the cross-claim was either of no, or nominal, value.  It must follow, I think, that the matter should be allowed to go forward in the ordinary way, and I will deal with a procedure for that purpose shortly.

Before doing that, I should indicate, however, that this Court should not abdicate its insolvency, or potential insolvency, jurisdiction in the present context.  Whilst I propose to order that the matter be transferred to the District Court, I do not propose to order that the demand be set aside at this stage.  Rather, I propose to stand the application over until the matter has been dealt with by the District Court, or otherwise, so that it will then be possible to know the amount of any cross-claim.  With the benefit of that knowledge, this Court may then proceed to address its statutory function under s.459H.

I propose to order that the matter, being the proceedings purportedly brought in the General Division of the Court, be transferred, but with the number of this corporate proceeding.  In so ordering, I will follow my usual practice when transferring small claims to the District Court, and that is to place the matter before a Registrar for mediation or directions as are appropriate.  The jurisdiction of the Court to order mediation is, of course, dependent upon the consent of both parties, but if that consent is not forthcoming, the Registrar may give directions so that the matter can be prepared in terms of the filing of the defence and any other directions that are necessary.

In the meantime, it would be appropriate to suspend the order for transfer to the District Court for a short period, so that the procedure I envisage will be as follows. 

I will order that the matter be fixed for hearing before a Registrar at a date to be fixed for mediation and/or for the giving of directions as may be appropriate.  I will then order, but suspend that order, to transfer to the District Court.  I will suspend the operation of that order for a period of one month and reserve liberty to apply in that connection, the matter being the claim made of course in the statement of claim.  Otherwise, I will stand this application over for a period of three months before a Registrar.  I will reserve all costs.

The formal orders I make are as follows:

With respect to the application under s.459G(1), I stand that application over before a Registrar on Friday, 20 October. I reserve liberty to apply on seven days' notice, and I reserve the costs of the present application.

So far as the purported proceedings filed in G3024 of 1995 are concerned, being the statement of claim filed on 20 January 1995, I fix that matter for directions and/or mediation, if appropriate, before a Registrar of the Court on Wednesday, 16 August at 9.30 am.  With respect to that statement of claim, I further order that those proceedings be transferred to the District Court of New South Wales, but I suspend the operation of that order up to and including 31 August, and I reserve liberty to apply on three days' notice to vary or discharge that order of transfer.

I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Beaumont.

Associate

Dated:     24 July 1995

Counsel and Solicitors      Mr. S. Walmsley instructed by

for Applicant:              Erlington Boardman Allport (by their city agents, Cowley Hearne)

Counsel and Solicitors      Mr. R. Dubler instructed by

for Respondent:             Dunhill Madden Butler

Date of hearing:            12 May, 9 June 1995         

Date Judgment delivered:         24 July 1995