Vertical Telecoms Pty Limited v WRL Pty Limited

[2008] NSWSC 558

CITATION:	Vertical Telecoms Pty Limited v WRL Pty Limited [2008] NSWSC 558
HEARING DATE(S):	3 June 2008
JUDGMENT OF:	Hammerschlag J
EX TEMPORE JUDGMENT DATE:	3 June 2008
DECISION:	Declaratory relief declined. Defendants, their servants or agents restrained from purporting to rely on statutory demand to found winding up proceedings against the plaintiff in any Court pursuant to s 459Q of the Corporations Act 2001 (Cth) or otherwise. The defendants to pay the plaintiff’s costs of the proceedings.
CATCHWORDS:	CORPORATIONS - Creditor's statutory demand - allegation that demand not served - declaratory relief sought - non-service not established - injunctive relief sought on basis that any application for winding up based on present statutory demand an abuse of process - requirement for demand to claim a debt - claim for unliquidated damages for conversion not a debt - plaintiff solvent - defendants use of procedure intended to make plaintiff negotiate - abuse of process - appropriate for injunctive relief
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 39 NSWLR 311 Rothwells v Nommack (100) [1990] 2Qd R 85 HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234
PARTIES:	Vertical Telecoms Pty Limited ACN 086 050 946 WRL Pty Limited ACN 002 687 952
FILE NUMBER(S):	SC 1950/2008
COUNSEL:	J.T. Johnson (Plaintiff) R. Williams - First Defendant and Self Represented as Second Defendant
SOLICITORS:	Eakin McCaffery Cox (Plaintiff)

- 7 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

HAMMERSCHLAG J

3 JUNE 2008

1950/2008 VERTICAL TELECOMS PTY LTD -V- WRL PTY LTD

EX TEMPORE JUDGMENT

1 HIS HONOUR: This is an application brought by summons dated 19 March 2008 for declarations that a creditor’s statutory demand alleged to have been served on the plaintiff on 22 February 2008 was not served. I shall refer to the document as the “WRL demand”.

2 Further and in the alternative, an order is sought that the defendants be restrained from purporting to rely on the WRL demand in winding up proceedings against the plaintiff on the grounds that to do so would be an abuse of process. If the WRL demand was served on 22 February 2008, or at all, the plaintiff has not, within the 21 day period provided for in s 459G(2) of the Corporations Act 2001 (Cth) (“the Act”) brought an application to set it aside.

3 The circumstances which gave rise to the WRL demand are a dispute between the parties arising out of an arrangement between them under which the plaintiff was to supply data burst broadband wireless connections to Time On Systems Pty Ltd (“TOS). One of the connections was to be for the use of Knox Grammar School at Wahroonga, in the State of New South Wales.

4 It is not necessary to deal with the nature of the dispute in any detail, suffice it to say that it is asserted that the plaintiff “illegally converted and used” internet resources belonging to an entity called TCR Holdings Limited (apparently incorporated in Hong Kong) and of which the second defendant, Mr Williams, is the chief executive officer. It is also asserted that the plaintiff illegally converted and used a router belonging to TOS "with no colour of right".

5 Before me the plaintiff was represented by Mr J T Johnson of counsel. The second defendant (or Mr Williams as the case may be) appeared personally and on behalf of the first defendant company of which he is, apparently, the sole director. He did not purport to appear or represent the third defendant named in the summons, TCR Holdings Limited. No objection to his appearance on behalf of the first defendant was taken.

6 In support of its assertion of non-service of the WRL demand, the plaintiff relied on the affidavit evidence of Caroline Margaret Crowe, an erstwhile executive assistant to the plaintiff's managing director, Mr Findlay, the evidence of Mr Findlay himself, and the evidence of a solicitor, Cheryl Anne Weston.

7 Mr Williams cross-examined all three deponents. His own evidence was by way of affidavit of 29 May 2008. He was cross-examined by Mr Johnson.

8 Even though Mr Williams' affidavit evidence concerning delivery of the WRL demand was rejected (with leave to adduce oral evidence which leave was not taken up by him), cross-examination elicited from him evidence to the effect that he personally delivered the WRL demand and a demand by TOS, at the same time, to the plaintiff's offices.

9 Ms Crowe’s evidence on behalf of the plaintiff was that on that date Mr Williams handed to her an envelope, which she almost immediately handed to Mr Findlay.

10 Her affidavit evidence was that she had not seen any demand purporting to be a demand issued by WRL.

11 There is no dispute that on that occasion Mr Williams served on the plaintiff the statutory demand by TOS.

12 Counsel for the plaintiff accepted that the onus, given that the plaintiff is seeking final declaratory or injunctive relief, lay on it to establish on the balance of probabilities that service of the WRL demand did not occur.

13 In order for the plaintiff to succeed in discharging that onus it requires to satisfy me that the evidence of Mr Williams on that question should not be accepted.

14 In the plaintiff's favour is the fact that shortly after 22 February 2008, that is on 26 February 2008, by email, the plaintiff gave the TOS demand to its solicitors. In the covering email the plaintiff referred to the 21 day period allowed for an application to be made to set it aside.

15 The email was from Janette Berberian, whose designation on the email is reflected as credit manager. An application to set aside the TOS demand was made within time and, I was informed from the bar table, is pending.

16 In contrast with what it did with regard to the TOS demand, the plaintiff took no such action with respect to the WRL demand.

17 This would support the conclusion that the WRL demand was not received.

18 On the other hand, Mr Williams' evidence in cross-examination was, in my view, unshaken on the question of service. No other challenge which would have impeached his credit was made, or at least successfully made.

19 In addition, Janette Berberian, who furnished the TOS demand to the plaintiff's solicitors was, despite the fact that she was during the course of today available, not called. This, in my view, gives rise to an adverse inference against the plaintiff that her evidence would not have assisted it.

20 Moreover, I did not consider that either the evidence of Miss Crowe nor of Mr Findlay was entirely satisfactory.

21 Miss Crowe, during her cross-examination, referred to documents having been received, whereas her evidence on affidavit referred to an envelope or a document.

22 Mr Findlay was, I agree with Mr Williams' submission on this point, not an entirely satisfactory witness. He displayed a reluctance to answer, or answer directly, the questions that Mr Williams put.

23 However, I do not consider that their evidence was unsatisfactory to the point that I should reject it. But taking all matters into account, it is my view that the plaintiff has failed to discharge the onus of establishing on the probabilities that the WRL demand was not received.

24 Its claim to a declaration of non-service accordingly fails. However, that is not the end of the matter.

25 The jurisdiction to restrain a party who might move for a winding up in circumstances which would constitute an abuse of the process of the Court is well established: see e.g. Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 39 NSWLR 311.

26 For the reasons which now follow, I consider that the plaintiff has established that for any of the defendants to rely on the WRL demand as founding an application to wind the plaintiff up would constitute such an abuse.

27 Firstly, the evidence established that whilst the WRL demand claims a debt owed to it in the amount of $1,576,000, the evidence established that no such money is owed to it but rather, according to Mr Williams, to the Hong Kong entity (which he expressly disavowed before me to represent). He did not put (and in fact disputed) that there had been any assignment of the debt to the first defendant.

28 In those circumstances the WRL demand is made by a person who is not the creditor with respect to the claim (whatever its status), and who would not have standing to move for a winding up order.

29 Secondly, the WRL demand describes the so-called debt in the following terms:

"The debt is for the illegal conversion and usage of ip Address invoiced to the company on 11/02/2008 (invoice 1003) and due for payment within 7 days, a dispute was lodged and that dispute was settled by way of a credit. No other dispute has been made or forwarded".

30 Invoice number 1003 was in evidence and the description of the claim said to be reflected in it is in the following terms:

"To the illegal conversion and usage of internet resources namely IP addressing belonging to Tcr Holdings Limited From 9:26pm on 29/01/2008 (at $1,000 per hour per IP Address) until 3pm On 05/02/2008 221 hours times 8 times 1768000.”

31 It has been established by persuasive authority that a debt for the purposes of a statutory demand is a liquidated sum in money apparently due and owing and payable by one person called the debtor to another person called the creditor; Rothwells v Nommack (100) [1990] 2Qd R 85 at 86; HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234; Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd at 317 and following.

32 The claim here is one for unliquidated damages arising out of an asserted tort committed by the plaintiff on, in the present instance, TCR Holdings. It is not a debt which can legitimately be the basis of a statutory demand.

33 Thirdly, although I have significant reservations about the conduct of the plaintiff in producing financial material which was the subject of a Notice to Produce directed to it by the defendants last week, the material in evidence and not challenged by the defendants shows that the plaintiff is clearly well solvent.

34 Fourthly, it is also not part of the winding up jurisdiction for commercial pressure to be exerted when the threat of it refers to a request that other creditors join in the winding up application. From correspondence which is in evidence this is what the defendants threatened.

35 Fifthly, during the course of his oral evidence Mr Williams candidly informed the Court that there was no present intention to rely on the WRL demand to found an application for winding up, but rather that what lay behind it was a desire on his part to bring the plaintiff to the table to negotiate an outcome of the dispute between them.

36 These considerations drive to the inexorable conclusion that a winding up application by the defendants of the plaintiff would, in the circumstances of this case, constitute an abuse of the process of the Court to bring about an outcome which those processes are not intended to achieve.

37 It follows, in my view, that the plaintiff is entitled to an order restraining the defendants and each of them from relying on the WRL demand to commence winding up proceedings against the plaintiff in any Court pursuant to s 459Q of the Act or otherwise and I will so order.

38 A submission was made on behalf of the defendants that there should not be an order for costs in favour of the plaintiff. The plaintiff, having succeeded, the costs should follow the event. The defendants are ordered to pay the plaintiff’s costs of the proceedings.

**********