WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 4]
[2023] WASCA 154
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: WA GLASS PTY LTD -v- AUTO CONTROL SYSTEMS PTY LTD [No 4] [2023] WASCA 154
CORAM: MITCHELL JA
VAUGHAN JA
HEARD: 25 AUGUST 2023
DELIVERED : 26 OCTOBER 2023
PUBLISHED : 26 OCTOBER 2023
FILE NO/S: CACV 74 of 2021
BETWEEN: WA GLASS PTY LTD
Appellant
AND
AUTO CONTROL SYSTEMS PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: MASTER SANDERSON
Citation: WA GLASS PTY LTD -v- AUTO CONTROL SYSTEMS PTY LTD [2021] WASC 187
File Number : COR 42 of 2021
Catchwords:
Appeals - Practice and procedure - Appeal against order dismissing application to set aside statutory demand - Appellant previously sought extension of time to comply with statutory demand pending appeal - Appellant ordered to pay money into court as security for compliance with statutory demand if appeal dismissed - Failure to comply with statutory demand after appeal dismissed - Respondent's application for orders that money paid into court be paid out to respondent - Construction of orders requiring money to be paid into court - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 459E, s 459F
Result:
Respondent's application in an appeal allowed
Category: B
Representation:
Counsel:
| Appellant | : | D H Solomon |
| Respondent | : | S D Majteles |
Solicitors:
| Appellant | : | Solomon Brothers |
| Respondent | : | Mendelawitz Morton Commercial Lawyers |
Case(s) referred to in decision(s):
Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314
Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd [2004] NSWSC 877; (2004) 50 ACSR 544
Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85
Commercial Banking Company of Sydney Ltd v Colonial Financiers of Australia Pty Ltd [1972] VR 702
Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445; (1995) 13 ACLC 1309
Duncan v National Australia Bank Ltd [2006] SASC 239; (2006) 95 SASR 208
Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326; (2014) 49 VR 86
Ex parte Bouchard; in re Moojen (1879) 12 Ch D 26
Flightline Ltd v Edwards [2003] EWCA Civ 63; [2003] 1 WLR 1200
Gas Sensing Technology Corporation v ProX Pty Ltd [2019] WASC 10
Grandview Ausbuilder Pty Ltd v Budget Demolition Pty Ltd (No 2) [2018] NSWCA 341
Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [No 2] [2023] WASCA 108
Harmer v Commissioner of Taxation [1991] HCA 51; (1991) 173 CLR 264
Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd [2006] NSWSC 1378; (2006) 60 ACSR 393
Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214
Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551
Re Grandview Ausbuilder Pty Ltd (Administrator Appointed) [2019] NSWSC 1243
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [No 4] [2014] WASC 405
WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASCA 162
WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] [2023] WASCA 85
REASONS OF THE COURT:
Introduction
On 30 May 2023 this court dismissed WAG's appeal against an order dismissing an application to set aside a statutory demand: WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2].[1] The statutory demand was issued by ACS. It claimed an amount of $248,391.90. Among other things this court considered that the evidence adduced by WAG failed to establish that there was a genuine dispute about the existence or amount of the debt the subject of the statutory demand. Nor had WAG established its alleged offsetting claim.
[1] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] [2023] WASCA 85 (WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2]).
These reasons should be read with the court's reasons in WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2]. For example, abbreviations adopted in those reasons are also used in these reasons.
Shortly after commencing the appeal, WAG sought an extension of time to comply with the statutory demand pending the determination of the appeal. After a contested hearing the court made an order extending the time for compliance with the statutory demand on the condition that WAG pay $248,391.90 into court as security for compliance with the statutory demand.[2] WAG paid the money into court in accordance with the condition. In WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] the court observed that, on delivery of the reasons for judgment, the court would hear from the parties as to any order concerning the money paid into court. On delivery of the judgment each party applied for orders that the money be paid out to its solicitors. For reasons given ex tempore on delivery of the judgment the court declined to make any order for payment out at that time. However, the court ordered that the parties have liberty to apply.
[2] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASCA 162 (WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1]).
By an application in an appeal dated 20 June 2023 ACS applied for an order that the $248,391.90 in court be paid out to its solicitors. WAG did not file any application. However, at the hearing of ACS's application on 25 August 2023 counsel for WAG made an oral application that the $248,391.90 be paid out to WAG (that application having been foreshadowed in WAG's written submissions).
For the reasons that follow, subject to ACS first providing an undertaking in the terms set out at [110] below, on 26 October 2023 we made orders that the money in court should be paid out to ACS.
It should be observed that, following the hearing of ACS's application in an appeal dated 20 June 2023, WAG made application (by an application in appeal dated 11 September 2023) to stay ACS's application as an abuse of process. By that time these reasons had been substantially prepared in draft. It was inappropriate for orders to be made on ACS's application in an appeal dated 20 June 2023 (or for reasons on that application to be delivered) until the court heard and determined WAG's application in an appeal dated 11 September 2023. Accordingly, determination of ACS's application in an appeal dated 20 June 2023 was deferred pending the hearing of WAG's application.
The court heard WAG's application in an appeal dated 11 September 2023 on 26 October 2023. The application was dismissed for reasons that have been provided separately. Immediately thereafter the court pronounced orders determining ACS's application in an appeal dated 20 June 2023. We said that reasons for those orders would follow. These are our reasons for allowing ACS's application in an appeal dated 20 June 2023.
The 6 September 2021 order for payment into court
The contest between the parties turns on the proper construction of the order for payment into court. Accordingly, it is necessary to refer to the circumstances in which that order was made.
The master dismissed WAG's application to set aside the statutory demand on 18 August 2021. At that time the master ordered that the time for compliance with the statutory demand be extended to 21 days after the date of the order. Accordingly, notwithstanding the commencement of the appeal, the time for compliance with the statutory demand would expire on 8 September 2021. It is well established that an order under s 459F(2)(a) of the Corporations Act 2001 (Cth) extending the time for compliance with a statutory demand cannot be made after the period for compliance has expired.[3] To the extent that WAG sought to avoid the consequences of failure to comply with the statutory demand the utility of the appeal depended on WAG obtaining a further extension to comply with the statutory demand.
[3] Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314 [3], [27].
On 25 August 2021 WAG filed an application in an appeal seeking an extension of time for compliance with the statutory demand pending the determination of the appeal. WAG's application was supported by an affidavit sworn by its director, Peter Harkins, on 25 August 2021.
Mr Harkins deposed to a belief that WAG was solvent (par 11). He said, however, that WAG had not paid the amount of the statutory demand pending appeal because he had concerns that ACS was not solvent, meaning that WAG would be at risk of not recovering its payment if successful on appeal (par 6). Mr Harkins, on behalf of WAG, offered to make payment into court, saying:
[WAG] is prepared to pay into Court, as a condition of the extension of time to comply with the statutory demand sought in the interim application, $74,391.91, to be held as security for payment of the amount claimed in the statutory demand pending the final hearing and determination of this appeal. The amount is the total amount claimed in the statutory demand, being $248,391.91, minus the amount of [WAG's] offsetting claim, being $174,000 (par 15). (emphasis added)
Mr Harkins stated that the offer of payment into court was not, and was not intended to be, an admission that any part of the disputed amount was owing by WAG to ACS (par 16).
WAG's application in an appeal dated 25 August 2021 was consistent with Mr Harkins' affidavit. It proposed, as a condition of the order for an extension of time to comply with the statutory demand pending the determination of the appeal, an order that WAG 'pay into this Court $74,391.91, alternatively $248,391.91, as security for compliance with the statutory demand if the appeal is dismissed'. At the hearing of the application, counsel for WAG explained that WAG was prepared to offer to pay some money into court 'knowing what the principle is that [its] concern is a lack of solvency' of ACS.[4] Counsel for WAG stated:
We [ie WAG] pay them [ie ACS] rather than paying into court we - if we win the appeal and we become an unsecured creditor to get the money back if there's an order made by this court to pay us back.
So that's why we brought this application to pay into court. We propose to pay part into court but that's not a concession that that part of the claim is considered weak. It was just knowing that the court's general predisposition is to grant some security.[5]
[4] Application ts 6.
[5] Application ts 6.
Contrary to counsel for WAG's then belief - as evidenced by what counsel said as to the payment into court - the court has no predisposition to require the provision of security as a condition of an order to extend the period for compliance with a statutory demand pursuant to s 459F(2)(a)(i) of the Corporations Act. To the contrary, for the reasons discussed in cases such as Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd,[6] Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd[7] and Re Grandview Ausbuilder Pty Ltd (Administrator Appointed),[8] a requirement to provide security as a condition of obtaining an extension of time to comply with a statutory demand pending appeal will, in many cases, be antithetical to the philosophy that underpins the statutory demand regime.
[6] Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd [2004] NSWSC 877; (2004) 50 ACSR 544 [14] - [16].
[7] Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd [2006] NSWSC 1378; (2006) 60 ACSR 393 [28].
[8] Re Grandview Ausbuilder Pty Ltd (Administrator Appointed) [2019] NSWSC 1243 [39].
In the present appeal, however, WAG itself suggested the security condition. In written submissions in support of the application WAG expressly conceded that payment into court was a reasonable condition to be imposed for granting the extension sought.[9] In effect, the security condition was seen by WAG as preferable to paying the money the subject of the statutory demand to ACS pending the determination of the appeal. Indeed, both Mr Harkins and counsel for WAG saw the payment into court as being an alternative to immediate payment to ACS pending the resolution of the appeal - it was contemplated under that alternate scenario that, if successful on appeal after having made payment, WAG would be seeking restitutionary orders for recovery of the payment pursuant to the statutory demand. (It is evident that both Mr Harkins and counsel considered that the appeal might still be prosecuted, and that WAG could be successful in the appeal, despite payment pursuant to the statutory demand.)
[9] WAG's submissions dated 30 August 2021 par 10.
In the circumstances, given its expressed concerns as to ACS's solvency, it is evident that WAG proposed the security condition to strengthen its position in seeking the order for an extension of time to comply with the statutory demand.
In providing for the extension of time to comply with the statutory demand pending the determination of the appeal this court first confirmed its power to make an order under s 459F(2)(a)(i).[10] It confirmed that there was no dispute that such an order was required to avoid the appeal being rendered nugatory.[11] The court was satisfied that the appeal was arguable.[12] The court then observed that:
Both parties also accept that payment into court should be a condition of the grant of any extension. That is appropriate in this case, when each party refers to some grounds for concern that the other party may not be solvent, and neither party has adduced clear evidence as to its solvency.[13]
[10] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1] [34].
[11] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1] [36].
[12] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1] [37].
[13] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1] [38].
There was, however, a dispute as to the amount that should be paid into court. WAG contended that the offsetting claim was so strong it was not appropriate to require the payment of the whole amount of the statutory demand into court. ACS said the offsetting claim was without merit. The court determined that it was appropriate to order the payment of the whole of the amount of the statutory demand into court as a condition of the grant of the extension. It was said that '[t]his will preserve each parties' position, in circumstances where [WAG] has indicated its willingness and ability to make the payment into court if required' (emphasis added).[14]
[14] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1] [40].
By its reproduction in the court's reasons for decision, the court expressly referred to the part of Mr Harkins' affidavit sworn 25 August 2021 in which Mr Harkins stated that the amount WAG proposed to pay into court was 'to be held as security for payment of the amount claimed in the statutory demand pending the final hearing and determination of [the] appeal' (emphasis added).[15]
[15] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1] [22].
On 6 September 2021, after hearing WAG's application for an extension of time to comply with the statutory demand, the court ordered as follows:
1.Subject to compliance with order 2 of these orders, the time for the appellant to comply with the respondent's statutory demand dated 12 February 2021 is extended to 7 days after the final determination of this appeal or other earlier order.
2.By 4.00 pm on 16 September 2021, the appellant is to pay the sum of $248,391.91 into court as security for compliance with the statutory demand if the appeal is dismissed.
3.Order 1 is discharged if the appellant does not comply with order 2 of these orders.
4.The parties have liberty to apply to vary or discharge these orders on 72 hours' notice to the other party. (emphasis added)
The parties now advance competing positions as to the proper construction of par 2 of the orders made 6 September 2021.
The first applications for payment out of the money paid into court
When this court delivered its reasons for judgment in WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] both parties made application for payment out of the money paid into court pursuant to par 2 of the orders made 6 September 2021. WAG sought payment out to its solicitors. ACS, likewise, sought payment out in its favour via its solicitors. WAG contended that the reason for security was exhausted on judgment in the appeal[16] and that ACS should not now be conferred with further security over the money paid into court.[17]
[16] WAG's submissions dated 29 May 2023 par 2.
[17] WAG's submissions dated 29 May 2023 pars 6, 6.3.
The court (comprised of the present coram) gave ex tempore reasons as follows:[18]
[18] Minor edits have been made to address errors in transcription and infelicities in expression.
The remaining issue between the parties concerns the orders that should be made in relation to the money paid into court by [WAG] as security for compliance with the statutory demand if the appeal is dismissed. Each party proposed that the money be paid out to its solicitors.
The effect of the primary decision and the appeal decision is that there is no genuine dispute as to the existence or amount of the debt claimed in the statutory demand and no offsetting claim. As the court has determined that there is no genuine dispute that the amount is owing, there is no reason why the amount owing should not now be paid to [ACS]. [WAG] did not have to pay the amount into court. It offered payment into court in support of its application for an extension of time to comply with the statutory demand on the basis that it was able to comply with the statutory demand if unsuccessful in the appeal and payment into court was a reasonable condition to be imposed for granting the extension sought. See paragraphs 8 and 10 of [WAG's] submissions for interim order filed in the appeal on 30 August 2021.
The extension was sought on the basis that [WAG] was concerned that there was a real risk [ACS] would be unable to repay the money if [WAG] paid [ACS] and the appeal was allowed. See paragraph 9 of those submissions. The willingness of the appellant to comply with this condition was a factor in this court granting the extension. See the interim decision [2021] WASCA 162, particularly at paragraphs 38 and 40 to 41.
The payment required by the order of 6 September 2021 was in terms payment as security for compliance with the statutory demand if the appeal is dismissed. Those terms of the order are unambiguous and admit of only one construction. The payment was provided by way of security and as security for compliance with the statutory demand.
It is not appropriate to order payment out of court to [WAG's] solicitors at this stage. The payment into court will not operate as security for compliance with the statutory demand if it is repaid to [WAG] in circumstances where there has been no compliance with the statutory demand. It may also be noted that there is no evidence as to [WAG's] current solvency.
The appeal has been dismissed and the orders made on 6 September 2021 contemplated that the money paid into court will operate as security for compliance with the statutory demand in that event. Payment to [WAG's] solicitors should not be ordered without evidence that [WAG] has complied with the statutory demand.
However, as counsel for [ACS] accepted in oral submissions, it's not appropriate to order payment to [ACS's] solicitors at this stage when the time for compliance with the statutory demand has not expired.
The orders made on 6 September 2021 relevantly extended the time for compliance with the statutory demand to seven days after the final determination of the appeal. That is, seven days from today. As the money paid into court operates as security for compliance with the statutory demand, payment out of the court to [ACS's] solicitors should only be ordered if and to the extent that there is evidence of non‑compliance with the statutory demand. That is, non-payment seven days after the final determination of the appeal.
Rather than ordering payment out of court at this stage, the parties should be given liberty to apply in relation to the amount paid into court pursuant to the orders made on 6 September 2021. Appropriate orders can then be made once the date for compliance with the statutory demand has passed and there is evidence that the amount demanded has or has not been paid. It is to be hoped that the parties would be able to agree on consent orders consistent with these reasons at that time.
Orders were made accordingly. In particular, par 4 of the orders of the court made 30 May 2023 provided that the parties had liberty to apply in relation to the money paid into court pursuant to the orders of the court made on 6 September 2021. ACS relied on the order for liberty to apply in filing its application in an appeal dated 20 June 2023.
The materials on ACS's application in an appeal dated 20 June 2023
ACS applied by an application in an appeal dated 20 June 2023 for the $248,391.90 paid into court by WAG pursuant to the orders of 6 September 2021 to be paid out to its solicitors. The application was supported by an affidavit of Michelle Watts sworn 19 June 2023. Ms Watts explained the background to the application and otherwise simply confirmed that the amount claimed in the statutory demand remained unpaid (par 13).
ACS also filed written submissions in support of the application. The substance of those submissions was amplified by brief oral submissions. ACS submitted that:
1.On the proper construction of the orders made 6 September 2021 the money was paid into court by way of security for payment to ACS on the dismissal of the appeal. According to ACS 'to comply' meant 'to pay'. That construction was consistent with the objective purpose of the orders, namely, to provide a secure source for payment if the appeal was dismissed and WAG did not otherwise comply with the statutory demand.
2.Its construction of par 2 of the orders made 6 September 2021 was consistent with par 15 of Mr Harkins' affidavit sworn 25 August 2021.
3.WAG's opposition to ACS's application for payment out directly conflicted with the court's ex tempore reasons of 30 May 2023.
4.WAG was seeking to advance a perverse construction of the orders made 6 September 2021 and was adopting a position that fundamentally contradicted the basis on which it obtained the favourable grant of an extension of time to comply with the statutory demand
In response to WAG's written submissions, counsel for ACS said there was nothing unfair or unjust in the payment out of the money in court to ACS. Two reasons were advanced for this contention. First, ACS said that this was consistent with WAG's intentions in seeking an extension of time for compliance and proposing the security condition. In this respect ACS relied on par 15 of Mr Harkins' affidavit sworn 25 August 2021.[19] So understood, whether the submission has force depends on the proper construction of the order made 6 September 2021. Second, ACS said that, even if the money was paid out of court to ACS, that would not be determinative of WAG's and ACS's respective rights and liabilities in relation to the claimed debt the subject of the statutory demand. It would, according to ACS, remain open to WAG to seek to recover any overpayment or offsetting claim in a court of competent jurisdiction. That was because the litigation to set aside the statutory demand could not and had not finally determined the dispute about ACS's claimed debt due by WAG and WAG's alleged offsetting claim against ACS.[20]
[19] Appeal ts 72.
[20] Appeal ts 72 - 73. Initially counsel for WAG did not accept this concession on the part of ACS: appeal ts 74 - 75. This appeared to be based on a misconception as to what was stated in this court's ex tempore reasons of 30 May 2023 - counsel contended that this court had found that there was in fact a liability. That, with respect to counsel for WAG, is not what is stated in the court's reasons. See [23] above and WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] [4], [77] - [78], [87] - [101], [105] - [108]. Eventually, however, counsel for WAG said that he did not abandon the possibility of a restitutionary claim: appeal ts 83.
At the forefront of WAG's opposition to the order sought by ACS, and its countervailing application that the money be paid out to WAG, was WAG's contention that the money paid into court was and remained WAG's money.[21]
[21] Appeal ts 70, 75, 84 - 85.
WAG relied on an affidavit of Mr Harkins sworn 4 July 2023. Mr Harkins accepted that WAG had failed to comply with the statutory demand (par 3). He said that, had the money been paid out to WAG before the time for compliance expired, WAG would have made an election whether to comply or not - in the latter case there being no consequences beyond merely becoming subject to a presumption of insolvency in the event that ACS commenced winding up proceedings (par 4). However, due to the court's order of 30 May 2023, WAG did not have the money in court available to apply so as to comply with the statutory demand (par 5) and did not have ready available funds to do so from other sources (par 6). Mr Harkins then outlined the legal argument on which WAG relied to oppose the order sought by ACS (par 7).
Notably, Mr Harkins omitted to state whether in fact WAG would have complied with the statutory demand had the money in court been paid out to WAG on 30 May 2023.
WAG also filed written submissions in opposition. By these submissions, which were developed orally by counsel for WAG, WAG submitted that ACS's interest in the money paid into court was at all times limited to having security for compliance with the statutory demand for so long as compliance remained possible. However, payment out of the money in court would not, in terms of par 2 of the orders made 6 September 2021, bring about compliance with the statutory demand. In that respect, according to WAG, the purpose of the security conferred by the payment into court was incapable of being achieved. WAG contended that the money in court should be refunded to it by analogy to the presumed resulting trust in favour of a settlor where the purpose of a trust cannot be achieved.
Counsel for WAG submitted that there were three possible constructions of par 2 of the orders made 6 September 2021:
1.The money in court will be ordered to be paid out of court to ACS within the time fixed by par 1 of the orders so that WAG will thereby comply with the statutory demand (referred to by WAG as the 'first meaning').
2.The money in court will remain in court until final determination of the appeal and, if the appeal is dismissed, will be immediately ordered to be paid to WAG so that WAG will have that money available to it to be able, if it so elects, to comply with the statutory demand (referred to by WAG as the 'second meaning').
3.If the appeal is dismissed the money in court will remain in court until after the time for compliance with the statutory demand so that the court will know whether WAG has failed to comply with the statutory demand; and, unless WAG has complied with the statutory demand, the court will order that the money in court be paid to ACS (referred to by WAG as the 'third meaning').
WAG contended that the second meaning was correct. It said that the court had provisionally adopted the third meaning in the ex tempore reasons delivered on 30 May 2023. WAG said, however, that the court's provisional view was incorrect. In stating that the reasons of 30 May 2023 had only expressed a provisional view WAG relied on the circumstance that those reasons did not result in a final order for disposition of the money in court.
In written and oral submissions WAG relied on a number of contextual matters in support of its preferred construction:
1.First, that an extension of the period for compliance with the statutory demand was essential for the appeal to have utility. That may be accepted. There is intermediate appellate authority to the effect that, once the time for compliance with a statutory demand has expired, an appeal against an order dismissing an application to set aside the statutory demand is incompetent.[22]
However, this contextual matter does not detract from what was evinced by WAG's director and counsel at the time the court made the 6 September 2021 orders, as has previously been referred to (see [11], [13] - [16] above). WAG considered that the order for payment into court was a preferable alternative to paying the amount claimed pursuant to the statutory demand, nevertheless proceeding with the appeal, and then seeking a restitutionary order if successful in reversing the master's order.
2.Second, the relevant statutory context. Specific mention was made of s 459C and s 459S. In this respect there is, as counsel for WAG submitted, ordinarily no statutory or other obligation to comply with a statutory demand. It is simply that failure to comply with a statutory demand will have consequences for the conduct and determination of a subsequent winding up application; for example, it has consequences for the burden of proof on the issue of insolvency.
3.Third, the settled position that dismissal of an application to set aside a statutory demand does not determine whether the company is liable to pay the debt claimed in the demand. That must be accepted - indeed the proposition is uncontroversial. Nothing in WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] or the ex tempore reasons of 30 May 2023 suggested to the contrary. And, as mentioned at [27] above, ACS accepted that payment out of the money in court to it by order of this court would not be determinative of WAG's and ACS's respective rights and liabilities in relation to the claimed debt the subject of the statutory demand.
4.Fourth, the limited circumstances in which a litigant will usually be ordered to pay money into court as a condition of an order extending the period for compliance with a statutory demand pending determination of an appeal.
[22] Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85 [1], [9], [19].
In the latter respect, WAG cited Grandview Ausbuilder Pty Ltd v Budget Demolition Pty Ltd (No 2).[23] There Beazley P referred, with approval, to authorities which suggested that the imposition of a security condition to obtain an order to extend the time for compliance with a statutory demand pending determination of an appeal could operate unfairly or, at the least, inconsistently with the philosophy underpinning the statutory demand regime.[24] Nevertheless, in Grandview Beazley P made an order for payment into court. In doing so her Honour observed that 'a payment into court will not necessarily give [the claimant] any priority interest, nor would it constitute [the claimant] a secured creditor'.[25]
[23] Grandview Ausbuilder Pty Ltd v Budget Demolition Pty Ltd (No 2) [2018] NSWCA 341.
[24] Grandview Ausbuilder Pty Ltd v Budget Demolition Pty Ltd (No 2) [13] - [15]. See also [8].
[25] Grandview Ausbuilder Pty Ltd v Budget Demolition Pty Ltd (No 2) [17].
This line of authority is of limited, if any, contextual significance in the present case. It is to be remembered that WAG itself suggested the security condition. Accordingly, the circumstances of the present case are outside the line of authority addressed in Grandview.
The substance of WAG's preferred construction, and the argument for it, has already been referred to (see [31] - [33] above).
In answering the alternate constructions, counsel for WAG sought to deal with the words 'as security for compliance with' the statutory demand. Counsel said that this could not mean security for performance of an obligation - there was, in WAG's submission, no relevant obligation to perform. This was because compliance with a statutory demand was always a voluntary act. Nor, in counsel's submission, was there a basis to provide for payment of a liability - there had never been a binding determination that WAG was liable to pay to ACS the amount claimed in the statutory demand. Counsel relied on the distinction in the statutory demand regime between debts based on a judgment debt and debts based on non-judgment debts. ACS self-evidently did not rely on a judgment debt to ground its statutory demand.
Counsel for WAG submitted that acceptance of the construction contended for by ACS (which counsel referred to as the 'third meaning' - see [32.3] above) had the effect of inferring that WAG had agreed that the dismissal of the appeal would effectively determine that WAG was liable to pay the claimed debt to ACS. Counsel argued that the unfairness of that effect of applying the third meaning showed that WAG's construction should be preferred. Counsel drew the court's attention to Mr Harkins' insistence that the offer to pay money into court was not to be taken as an admission (see [12] above).
Counsel for WAG referred to authorities in support of the proposition that it was essential for a 'security' that there be a performance obligation that the grantor was or might become liable to perform.[26] Counsel also referred to authorities on the rights of and the interests of parties in money paid into court.[27] Based on those authorities, counsel submitted, in substance, that par 2 of the 6 September 2021 orders was not provided by way of security but was instead analogous to a freezing order. It ensured that the funds the subject of the order would remain intact in court so that, in the event WAG lost the appeal, the money was available to allow WAG to comply with the statutory demand if it so elected. The order simply prevented misapplication of the funds pending the determination of the appeal. No security right was created in favour of ACS.
[26] Counsel for WAG referred in particular to: Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214, 226; Flightline Ltd v Edwards [2003] EWCA Civ 63; [2003] 1 WLR 1200 [37].
[27] Counsel for WAG referred in particular to: Flightline Ltd v Edwards [43] - [47] (esp. at [47]); Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326; (2014) 49 VR 86 [37] - [86], [92] - [94] (esp. at [72] - [75], [86](g)). Counsel for WAG also, by letter, directed the court to: Harmer v Commissioner of Taxation [1991] HCA 51; (1991) 173 CLR 264, 272 - 273; Duncan v National Australia Bank Ltd [2006] SASC 239; (2006) 95 SASR 208 [30], [44] - [46]; Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [No 4] [2014] WASC 405 [17] - [24]; Gas Sensing Technology Corporation v ProX Pty Ltd [2019] WASC 10 [226] - [253].
Finally, counsel for WAG submitted that:
[A] material effect of applying the Third Meaning is that, although the full amount of the debt claimed in the statutory demand ('Claimed Debt') was paid into Court by [WAG] pursuant to Order 2, [WAG] would be unable to comply with the statutory demand during the Compliance Period (7 days after final determination of the appeal) by paying the Claimed Debt using the Money in Court, if [WAG] should elect to pay the Claimed Debt during the Compliance Period. Hence, [WAG] could only comply with the statutory demand if it should have other immediately available funds to pay the Claimed Debt in that 7 day period, which it ultimately did not have. The unfairness of that effect of applying the Third Meaning shows the Third Meaning should be rejected if an alternative construction is available.[28]
[28] WAG's submissions dated 21 July 2023 par 5.1.
Consideration and disposition
Three preliminary observations
Three things should be said at the outset. First, contrary to WAG's insistence, there was nothing provisional about the construction that the court determined in the ex tempore reasons of 30 May 2023. That being the case we have considered whether WAG ought to be precluded from re-litigating the issue in the context of ACS's present application.
In opposing ACS's application, counsel for WAG essentially sought to advance the same position as WAG contended for at the hearing on 30 May 2023. Counsel did so relying on additional legal arguments and referring to many additional authorities. Those matters could and should have been advanced at the hearing on 30 May 2023. It is regrettable that counsel for WAG did not raise all of WAG's available arguments at the hearing on 30 May 2023. There is, however, no criticism that can be levelled at WAG itself for the way things have eventuated. The issue is purely legal. Responsibility for the way in which things have eventuated rests elsewhere.
Allowing a disappointed litigant to reagitate a question of construction will seldom be appropriate. However, in the circumstances of the present matter we would - if persuaded that the court's earlier construction was wrong based on WAG's new arguments - ultimately be prepared to make orders consonant with the correct position rather than perpetuate an incorrect construction. In that respect it is material that ACS has not contended that WAG should be precluded from re-litigating the issue. Moreover, it should be acknowledged that WAG had limited time to prepare its argument for the hearing on 30 May 2023. The advance reasons were provided to the parties the day before judgment delivery. With the benefit of time counsel for WAG has prepared and presented a more thorough argument which should be considered on its merits in the interests of justice.
Second, it is a misnomer to describe WAG's three suggested meanings of par 2 of the orders made 6 September 2021 (see [32] above) as possible constructions. Rather, WAG was describing consequences of suggested constructions. WAG never explicitly addressed what construction of the words 'as security for compliance with the statutory demand if the appeal is dismissed' resulted in the consequence that it described as the third meaning. Essentially, however, it required the court to accept that, properly construed, par 2 meant no more than that the payment into court was to be available for compliance with the statutory demand if WAG elects to comply with the statutory demand on dismissal of the appeal.
Third, there is no merit in WAG's complaint that it was unable to comply with the statutory demand because it did not have the money paid into court pursuant to the orders made on 6 September 2021. Indeed, the implicit suggestion that WAG was deprived of an opportunity to elect to either comply with the statutory demand or, upon being taken to have failed to comply with the statutory demand, to become subject to a presumption of insolvency, is quite hollow.
At all material times it was obvious that WAG could have brought about compliance with the statutory demand before the end of the period for compliance. Moreover, the available mechanisms to do so were self-evident at the time the orders for payment into court were made. Accordingly, the availability of mechanisms to apply the money so as to comply with the statutory demand if the appeal was dismissed forms part of the context in construing par 2 of the orders.
It is well understood that the practice of this court is to provide the parties, by their legal representatives, with an advance copy of reasons for judgment before judgment delivery. The court does so to facilitate the taking of instructions and the making of orders at judgment delivery.[29] Having been provided with an advance copy of the reasons for judgment in WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2], WAG could have consented to an order that the money be paid out to ACS. Alternatively, even if it did not do so immediately, WAG could have consented to such an order in the period before it failed to comply with the statutory demand (ie between 30 May 2023 and 6 June 2023). That possibility was expressly raised at the hearing before the court on 30 May 2023.[30] WAG chose not to do so and, to the contrary, persisted in its contention that the money paid into court could only be paid out to WAG.
[29] See Consolidated Practice Directions PD 8.1 par 10.
[30] Appeal ts 62.
Accordingly, this aspect of WAG's argument in support of the second meaning may be put to one side. There is no unfairness in the contrary construction.
In any case, the suggestion that the money in court should have been paid out to WAG so that WAG could elect whether or not to comply with the statutory demand presupposes that WAG's preferred construction is correct. For the reasons that follow WAG's preferred construction must be rejected. We adhere to the construction as accepted by the court on 30 May 2023.
The authorities relied on by WAG
Before turning to the question of construction we will deal with the authorities that WAG relied on. In one sense it is not necessary to address these authorities. None deal with the situation presently before the court, let alone the precise point of construction that arises for determination. And, for reasons we will come to, WAG's contended for construction is not open on the text of par 2 in any event. However, for completeness something should be said of the authorities relied on by WAG.
WAG's argument had minimal engagement with the text of par 2 of the orders made 6 September 2021. Instead counsel for WAG sought to draw assistance from authorities which considered whether, following a payment pursuant to a court order by one party, the other party obtained a security interest in the funds - although some of the cases are more concerned with the related question of whether the money constituted property of the company for the purpose of insolvency clawback provisions. WAG relied in particular on the freezing order cases.
This, it must be acknowledged, is a much-vexed area. More than 50 years ago it was stated:
[I]t is not easy to analyse the respective property rights of the plaintiff, the defendant and the court or the Crown in a fund in court either before or after the decision in the case has been made.[31]
[31] Commercial Banking Company of Sydney Ltd v Colonial Financiers of Australia Pty Ltd [1972] VR 702, 706.
It should also be said that the determination of ACS's application in an appeal dated 20 June 2023 does not require this court to determine the respective proprietary interests of the parties in the money paid into court. That is the context in which most of the authorities relied on by WAG arose. By contrast, as ought to be apparent, the issue before this court is what order ought to be made in relation to the money held in court. This turns on the proper construction of the orders made 6 September 2021 rather than examination of what, if any, proprietary interests are enjoyed by WAG or ACS in the funds in court.
In the circumstances we do not intend to rehearse the analysis in the authorities WAG relied on. There is, in both Duncan v National Australia Bank Ltd and Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd, a comprehensive discussion of numerous cases in which courts have been called upon to determine the rights and interests of parties in money paid into court or pursuant to an order of a court. No clear principle emerges from the review of the authorities.[32] The rights and interests are not uniform. They differ depending on the multiple different situations in which money is paid into court and the terms of the order pursuant to which money is paid into court or elsewhere.
[32] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [92].
In any event, none of the cases referred to in Duncan or Dura (or, indeed, the other cases referred to by WAG) concern money paid into court as a security condition to support an order extending the period for compliance with a statutory demand pending determination of an appeal.
It is, however, helpful to repeat the following statement made by White J in Duncan v National Australia Bank Ltd:
Given the variety of circumstances, it is to be expected that the decision by the court as to payment out in a particular case is to be determined by a consideration of the relevant statutory or rule regime governing the payment in, the rule regime concerning the holding of the moneys in court, the purpose for which the moneys have been paid in, any relevant decision of the court concerning the legal or beneficial ownership of the moneys or the entitlement to them, and any relevant event in the litigation in relation to which the moneys have been paid, rather than by reference to any rule of general application.[33]
[33] Duncan v National Australia Bank Ltd [30]. See also at [39] ('whether or not the payer or another party has a beneficial interest in the moneys will depend upon all the circumstances to which I have already referred').
In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd Santamaria JA (Maxwell P & Whelan JA agreeing) repeated that passage with approval.[34] Santamaria JA later said there was much to be said for the observation that the analysis depended on the various circumstances adumbrated in Duncan.[35] Moreover, in a particular case, close consideration had to be given to the circumstances in which the payment was made and the court order pursuant to which the payment was made.[36]
[34] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [81], [92].
[35] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [85].
[36] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [93].
Santamaria JA was, however, able to extract seven propositions from the authorities.[37] These included that, where a freezing order is made or money is paid into an account as an alternative to a freezing order, the applicant for the freezing order acquires no interest in the assets or the funds in the account.[38] While there is no reason to doubt the correctness of that proposition it does not assist in the present case. By contrast to the freezing order cases - where any purpose of security is disclaimed - this court is dealing with an order expressly providing for payment into court as security for compliance with a statutory demand. For that reason we reject WAG's contention seeking to draw an analogy between the freezing order cases and the present case. The freezing order cases are to be distinguished.
[37] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [86].
[38] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [86](f).
In a moment we will turn to the proper approach to the question of construction with which the court is concerned. That is a necessary precursor to giving close consideration to the circumstances in which WAG made payment into court and the meaning of par 2 of the orders. Something should, however, be said in relation to the other circumstances referred to by White J in Duncan.
Dealing with the circumstances referred to by White J in order:
1.There is nothing further of consequence that may be derived from the statutory or rule regime governing the payment into court of the $248,391.90. We have, in this respect, already dealt with the matters of context relied on by WAG.
2.Nor is there anything of consequence arising from the rule regime concerning the holding of the $248,391.90 in court.
3.The purpose for which the money was paid into court is all important - it is something that readily emerges from the close consideration that must be given to the text of the orders and the context in which the orders were made.
4.There is no relevant decision of the court concerning the legal or beneficial ownership of the money.
5.However, the order for payment out is sought in circumstances where the appeal has been dismissed. That is not surprising. It is the event provided for in par 2 of the orders. The implications of this for the proper construction of par 2 are considered at [78] below.
The final consideration has a significance over and above its impact on the proper construction of par 2 of the orders made 6 September 2021. That is the circumstance that WAG has not been successful in establishing a genuine dispute about the existence or amount of the debt to which the statutory demand related. Nor has WAG established an offsetting claim.
Approach to the question of construction
WAG's argument in support of the second meaning centred on authorities dealing with rights and interests in relation to money paid into court. Little attention was given to the text of the 6 September 2021 orders. That was so despite the well-established approach that exists in construing written instruments.
The court determines the meaning of words in written instruments by reference to text, context and purpose. The starting point is the language used. It is necessary to identify the possible meanings that the words chosen may bear. The process is objective. Ascertaining meaning requires a determination of what a reasonable person in the position of the parties would have understood the words to mean. That inquiry requires consideration of the language used, the circumstances addressed and the purpose or object to be secured.
The purpose or object will often be apparent from a consideration of the instrument read as a whole. Knowledge of surrounding circumstances known to the parties may nevertheless assist where the task is facilitated by an understanding of the genesis of the instrument, its background, the context and the environment in which the parties are operating.
In relation to the construction of orders of a court, as opposed to written instruments generally, this court has recently said:
In determining the meaning of … orders, on their proper construction, it is permissible to have regard to context including surrounding circumstances (much the same as it is permissible to have regard to the surrounding circumstances known to the parties and to the purpose and object of a transaction when construing a commercial contract). However, in having regard to surrounding circumstances, it is relevant to keep in mind that orders are generally framed with a view to their being self-contained and self-explanatory. Also, the surrounding circumstances are not admissible to contradict the language of the orders where that language is unambiguous or susceptible of only one meaning. In this respect the position is no different to the position pertaining to the construction of a commercial contract.[39] (citations omitted)
[39] Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [No 2] [2023] WASCA 108 [157].
It should also be remembered that, ordinarily, the purpose of a court order is to give effect to reasons for decision - the reasons for decision are the source of the order. As the order is derived from the reasons the order must conform with the reasons. Hence it is said that reasons for decision have 'primacy' as a source for interpretation of an order.[40]
The text of the 6 September 2021 orders
[40] Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [No 2] [169].
Three textual matters in the orders of 6 September 2021 should be mentioned. First, the payment into court is to be made 'as security for compliance with the statutory demand if the appeal is dismissed' (emphasis added). The word 'security' is important. The ordinary and natural meaning of the term 'security' is well understood. Ordinarily a purpose of providing security may be identified where one person (here WAG) procures the provision of something (here the payment into court) to benefit a second person (here ACS) to assure the payment of an amount or the performance of an obligation by furnishing the second person (ACS) with a bundle of rights, powers and remedies to be enforced or exercised in a particular event.
The designation that the money is to be paid into court 'as security' in the event that the appeal is dismissed distinguishes the order made 6 September 2021 from the freezing order cases relied on by counsel for WAG. It is quite clear that a freezing order does not create a security right; but, in expressly providing that the money was to be paid in 'as security', the intended purpose of the order was to afford ACS an element of security in respect of WAG's compliance with the statutory demand in the event that the appeal was dismissed.[41] The contrary position is not arguable given the express use of the word 'security'. The obvious and natural purpose of the condition was to secure - for ACS's benefit - WAG's compliance with the statutory demand in the event that the appeal was dismissed.
[41] Compare Flightline Ltd v Edwards [47]. See also Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [74] - [75].
There are cases where it has been held that the effect of payment into court by one party is to provide a security in favour of the other party.[42] It is, however, not necessary to infer the purpose of security in the present case. That purpose is expressly provided for by the terms of the order. In that respect the case is akin to that of Ex parte Bouchard; in re Moojen.[43] There a debtor facing a bankruptcy petition paid money into court. The relevant legislation entitled a debtor denying a debt to obtain a stay of proceedings upon giving security. In holding that the equitable title of the petitioner to the money was complete on the payment into court the Court of Appeal of England and Wales gave effect to the use of the word 'security' in the legislation.
[42] See eg the cases cited in Duncan v National Australia Bank Ltd [40].
[43] Ex parte Bouchard; in re Moojen (1879) 12 Ch D 26.
So too, the words 'for compliance' are integral to par 2 and are a critical textual indicator to the meaning of the order. The word 'for' is used as a function word to indicate the purpose or object of the payment into court as security. It is security with the purpose or object of 'compliance with' the statutory demand if the appeal is dismissed. There is no qualification to the expressed purpose or object of the payment; for example, it is not provided as security for compliance if WAG elects to comply as is implicit in WAG's second meaning as comprises its preferred construction. On the contrary, par 2 of the orders contemplates compliance with the statutory demand in the event provided for in par 2 (ie on dismissal of the appeal) and, in support thereof, the provision of security to assure compliance. That appears from the use of the term 'for' compliance as opposed to, say, 'to facilitate' compliance, or some other permissive modifier.
This is not to say that, by par 2, WAG agreed that the appeal would determine the question of liability; or that par 2 provides for payment of a liability without any binding determination of the existence of a liability (compare WAG's submissions as recorded at [38] - [39] above). It is simply to give effect to the express terms of par 2 without the introduction of words of extension not found in the text of the order. In any event, as has been seen at [27] above, even if the compliance with the statutory demand is effected by payment of the amount claimed, ACS accepts that it remains open to WAG to seek to recover any overpayment or offsetting claim.
These two textual matters - the words 'as security' and the words 'for compliance' - are insurmountable obstacles to WAG's preferred construction. WAG's construction gives no or no adequate recognition to the central feature that par 2 provides for a payment into court 'as security' for a particular purpose or object, namely, 'for compliance' with the statutory demand if the appeal is dismissed. WAG said that there is no obligation to comply with a statutory demand - it could elect not to comply whereupon particular statutory consequences might follow (see [34.2] and [38] above). That is true. But the statutory context that is generally applicable to the statutory demand regime does not control the meaning of par 2 of the 6 September 2021 orders. There is, in par 2, no carve-out preserving an election. WAG's preferred construction introduces a condition (one which is within WAG's exclusive control) not found in the text of par 2. In that respect, as we have said, par 2 contemplates compliance with the statutory demand in the event the appeal is dismissed. WAG's preferred construction also reads down, to the point of elimination, the use of the term 'as security'.
The use of the words 'as security' in combination with the words 'for compliance' strongly supports the conclusion that, on the proper construction of par 2 of the orders made 6 September 2021, the payment into court was intended to provide a source of funds to put ACS into the position it would have been in had WAG complied with the statutory demand on dismissal of the appeal.
This begs the question of what is meant by 'compliance' with the statutory demand. That is answered by s 459E and s 459F of the Corporations Act 2001. Section 459F(1) explains that a company is taken to fail to comply with a statutory demand if, as at the end of the period for compliance, the demand is still in effect[44] and the company has not complied with it. Whether the statutory demand has not been complied with depends, in turn, on what is required by a statutory demand. This is provided for in s 459E(2)(c). A statutory demand:
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 …
[44] See Corporations Act 2001 s 459K (a statutory demand is of no effect if an order under s 459H or s 459J setting it aside is in force).
The company does not comply with the statutory demand when the company does not do what is required by the demand. Accordingly, compliance with a statutory demand requires one of: (1) payment of the amount claimed in the statutory demand; or (2) the securing or compounding of the amount claimed in the statutory demand to the creditor's reasonable satisfaction. To 'pay' or to 'secure' requires no explanation. To 'compound' is to accept an arrangement for payment of the amount of the debt or of a different amount.[45] 'To the creditor's reasonable satisfaction' imposes an objective test as to whether the arrangement was satisfactory.[46]
[45] Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445; (1995) 13 ACLC 1309, 1311.
[46] Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551 [28].
As will be seen, the multiple ways in which a company may comply with a statutory demand has implications for the proper construction of par 2 of the orders made 6 September 2021.
Staying with the immediate text of par 2 of the orders, the relevant event is the dismissal of the appeal. This ties in with the earlier textual indicators in the words 'security' and 'compliance'. The grounds of appeal were identified at the time the 6 September 2021 orders were made.[47] For the appeal to be dismissed this court had to be satisfied that there was no genuine dispute about the existence or amount of the debt to which the statutory demand related and that WAG had not established an offsetting claim. In those circumstances it was appropriate that WAG comply with the statutory demand. Mr Harkins recognised as much in his affidavit in support of the application to extend the time for compliance with the statutory demand (see [11] above). Indeed, Mr Harkins put it in terms of 'payment' of the amount claimed in the statutory demand rather than simple compliance with the statutory demand.
[47] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 1] [25].
Secondly, in terms of textual matters, the word 'compliance', in par 2, is also used in par 1 of the orders made 6 September 2021 - the time for WAG to comply with the statutory demand is extended 'subject to compliance' with par 2 of the orders. In par 1, if the relevant condition is to be satisfied, the word 'compliance' does not encompass an election. There will only be compliance if the money is paid into court by the time nominated. Accordingly, in par 1 'compliance' is used in accordance with its ordinary and natural meaning of 'obeying' or 'acting in conformity' with the requirements of par 2. It contemplates positive action on the part of WAG. Prima facie the word 'compliance' has the same connotation and meaning in par 2. The orders contemplate that there will be compliance with the statutory demand in the event that the appeal is dismissed.
Thirdly, and finally, as to the textual matters, the orders do not provide for the terms on which the money is to be paid out of court. The most that can be said is that by par 4 the parties had liberty to apply to vary or discharge the orders. Once paid into court, the money was under the control of the court. It became subject to the regulations contained in sch 3 of the Rules of the Supreme Court 1971 (WA).[48] Relevantly, the money stood to the credit of the Supreme Court rather than WAG.[49]
[48] Rules of the Supreme Court O 24 r 12.
[49] Rules of the Supreme Court sch 3 reg 11.
Accordingly, contrary to what was asserted by counsel for WAG, the money paid into court did not remain WAG's money - WAG no longer held legal title to the chose in action. The money was received and held by the Accountant to be applied in accordance with the orders ultimately made by this court. The money became subject to the order for payment out that the court saw fit to make - such order for payment out being largely determined by the proper construction of the orders made 6 September 2021.
There is, however, no general rule that, on payment into court, the payer necessarily loses all interest in the funds. A distinction is drawn between those cases in which money paid into court remains subject to a pre-existing trust and those cases where a beneficial interest is dependent on a further order being made by the court.[50] An interpleader is the paradigm example of the latter kind of case. After payment in, each competing claimant has an interest in the money in the sense that each is entitled to insist that the money be properly administered and applied for the purpose for which it was paid into court. But neither claimant is beneficially entitled to the money. Their respective interests are, at best, contingent.[51]
The available constructions
[50] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [63], [82].
[51] Harmer v Commissioner of Taxation (272 - 273).
WAG's contended for construction is not open on the text of par 2 of the orders made 6 September 2021.
For the reasons we have previously stated, the construction advanced by WAG: (1) fails to give effect to the central feature of the text of par 2, namely, that the money is paid into court 'as security' for a particular purpose if the appeal is dismissed; and (2) impermissibly introduces words of extension by introducing a right of election not found in the text of par 2 - thereby watering down the contemplated 'compliance with' the statutory demand on dismissal of the appeal. WAG's construction also necessarily requires that the money paid into court be repaid to WAG on the determination of the appeal. It matters not whether the appeal succeeds or is dismissed. That is, as ACS contended, a perverse outcome. The payment into court could not operate as security for compliance with the statutory demand on dismissal of the appeal if the money in court is to be paid back to WAG in circumstances where there has been no compliance with the statutory demand and it is entirely a matter for WAG to elect whether or not it chooses to comply with the statutory demand.
The contextual matters relied on by WAG cannot affect this conclusion. Context may sometimes favour an ungrammatical or linguistically awkward legal meaning. But the construction must be open on the text. WAG's contended for construction is not.
In any case, WAG's resort to context ignores what was said by Mr Harkins and repeated by this court in its reasons providing for the security condition - it was contemplated that the money paid into court was to be held as security for payment of the amount claimed in the statutory demand. The money was to be security for compliance with the statutory demand not merely to be available so that WAG could elect whether or not to comply with the statutory demand.
By contrast, on an ordinary and natural reading of the orders as a whole, par 2 of the orders made 6 September 2021 provides in terms that the payment into court was security for compliance with the statutory demand if the appeal was dismissed. Two things follow from that ordinary and natural reading. First, the payment was provided by way of security. Second, the payment secured compliance with the statutory demand.
In the latter respect there is a latent constructional issue.
ACS initially sought payment out of the $248,391.90 with the order dismissing the appeal. This was before the end of the period for compliance with the statutory demand. This court refused the initial application on the basis that it was premature. The time for compliance had not expired. The court said that, as the money paid into court operated as security for compliance with the statutory demand, payment out in favour of ACS should only be ordered if and to the extent that there had been non-compliance with the statutory demand.
WAG now says that - as payment out of the money in court cannot result in compliance with the statutory demand - the purpose of par 2 of the orders cannot be achieved and the money should be refunded to WAG.
This raises for consideration whether, on its proper construction, par 2 of the orders only authorises payment out in favour of ACS if it brings about actual compliance with the statutory demand. The alternative construction is that par 2, in providing for the payment into court as security for compliance with the statutory demand, authorises payment out to put ACS into the same position as if WAG had brought about compliance with the statutory demand on dismissal of the appeal. The latter alternative is open on the text of par 2. The purpose or object of the provision of security in accordance with par 2 is achieved if either there is compliance with the statutory demand or ACS is put in the same position it would have been in had WAG complied with the statutory demand.
In the latter respect, security is commonly provided by one party to furnish another party with a resource to be used as a functional equivalent in the case of failure of a principal obligation. Take, for example, the payment of an amount into a stakeholder's account as security for compliance with a covenant to complete building works by a certain time. It could not reasonably be thought that the purpose of the provision of the security had failed if it was not applied before the time for completion of the works. On the contrary, the application of the security after the time for completion is the expectation.
The failure of the obligation the subject of the security satisfies the condition for the application of the security. Were it otherwise - because compliance with the covenant could no longer be achieved - the security would be pointless. There could be no resort to the security in the very circumstance that the security was intended to safeguard the secured party. Any apparent linguistic incongruity between the non‑compliance and the application of the security is easily resolved. The application of the security is not to bring about actual compliance with the covenant to complete building works by a certain time. Instead it is to put the secured party in the same position as if there had been compliance with the covenant.
Determination
The rejection of WAG's preferred construction leaves either the so-called first or third meanings.
We are satisfied that, on the proper construction of par 2 of the orders made 6 September 2021, the payment into court was as security to put ACS into the same position as if WAG had brought about compliance with the statutory demand on dismissal of the appeal. That construction is open on the text of par 2. It is consistent with the relevant context. And, in our opinion, it better effectuates the purpose of the security condition. As to context and purpose it should be recalled that in its reasons for the 6 September 2021 orders the court was mindful of what would preserve each parties' position. In this respect a proper understanding of the concept of compliance with a statutory demand explains why the construction we favour better effectuates the purpose of the security condition.
There are two practical difficulties with the operation of the first meaning which, in combination, compel the conclusion that this is not the objective intention of the security condition.
The first difficulty is that, on the first meaning, in the absence of an order for a further extension under s 459F(2)(a) there could only ever be an order for payment out in favour of ACS within the seven days after the dismissal of the appeal. The security would be worthless if no immediate application was made or if the court was not in a position to hear and determine an application for payment out of the money in court in a timely manner. It is objectively unlikely that the security to be afforded by par 2 of the orders made 6 September 2021 was intended to be circumscribed by the necessity for the court to come to a determination and make an order within seven days. WAG would be able to thwart the intended security purpose by raising matters that delayed the determination of any application for payment out of the money in court. The objective unlikelihood of a construction having this effect is all the more so where, as is shown by these reasons, there was significant potential for substantial argument.
The second difficulty arises from the circumstance that there is more than one way to comply with a statutory demand.
WAG's first meaning assumes that the money in court was to be ordered to be paid out of court to ACS within seven days after the dismissal of the appeal so that WAG would thereby comply with the statutory demand. Payment was, however, only one of the ways in which WAG might have complied with the statutory demand. WAG might also have brought about compliance with the statutory demand by securing or compounding the amount claimed in the statutory demand to ACS's reasonable satisfaction. It is possible to envisage scenarios in which WAG might have done so employing the money held in court. It is objectively unlikely that, on its proper construction, par 2 of the orders made 6 September 2021 was intended to circumscribe the means available to WAG to bring about compliance with the statutory demand. Yet that is the necessary consequence of WAG's insistence that on its proper construction par 2 required that the money was to be ordered to be paid out of court to ACS within the time fixed by par 1 of the orders so that WAG would thereby comply with the statutory demand.
There is a further timing difficulty consequential upon the alternative means available to WAG to bring about compliance with the statutory demand.
There is, reading pars 1 and 2 of the orders made 6 September 2021 together, seven days after dismissal of the appeal for WAG to bring about compliance with the statutory demand. On what basis could the court make an order for payment out on, say, day three, when WAG might still seek to bring about compliance with the statutory demand by securing or compounding the debt claimed up until the end of day seven? Logically that issue remains an impediment to the making of an order for payment out until the end of day seven. But, on the end of day seven, if WAG's first meaning is to be accepted, the court becomes unable to make an order for payment out. The security condition becomes worthless. That is self-evidently contrary to the purpose of the security condition.
The third meaning provides for a certain and sensible operation of the security condition. It avoids the emasculation of the security condition while enabling WAG to bring about compliance with the statutory demand by whatever means it wishes within the seven days provided for compliance. So understood the third meaning best achieves the purpose or object of the security condition. It is objectively likely that this is what was intended by par 2 of the orders made 6 September 2021.
WAG's first meaning must be rejected. Paragraph 2 of the orders made 6 September 2021, on its proper construction, does not mean that payment out may only be ordered within the seven days after dismissal of the appeal so that WAG will thereby comply with the statutory demand. Rather, on the proper construction of par 2, the payment into court was as security to put ACS into the same position as if WAG had brought about compliance with the statutory demand on dismissal of the appeal.
It follows that par 2, in providing for the payment into court as security for compliance with the statutory demand, authorises payment out to put ACS into the same position as if WAG had complied with the statutory demand on dismissal of the appeal. In the events that have happened the court should act conformably with that authorisation by making an order for payment out of the money in court in favour of ACS.
Conclusion and orders
For these reasons the terms of par 2 of the orders made 6 September 2021, properly construed, have the consequence in the events that have happened that this court should order the payment out to ACS of the money held in court.
The order for payment out is consequent on the orders made 6 September 2021 and the dismissal of the appeal. It does not mean that this court has finally determined the dispute about ACS's claimed debt due by WAG or WAG's alleged offsetting claim against ACS. ACS has confirmed that these matters may still be agitated in a court of competent jurisdiction. The effect of the order for payment out will simply be that ACS, rather than WAG, will be put in the money pending the determination of any dispute as to the claimed debt or the alleged offsetting claim (assuming WAG, properly advised, wishes to pursue either matter). It may be acknowledged that this is an unusual situation. ACS gains a commercial benefit from its use of the statutory demand procedure which would not usually be enjoyed on the issue of a statutory demand. But it is a benefit obtained as a result of a security condition that WAG itself proposed in order to obtain an order extending the period for compliance with the statutory demand.
There is, however, one respect in which an order for payment out simpliciter will operate unjustly.
It is one thing to put ACS into the same position as if WAG had complied with the statutory demand on dismissal of the appeal. That being done, as a matter of justice, ACS should not also be able to enjoy the procedural advantages that accrue to it on non-compliance with the statutory demand. ACS should not, for example, be allowed to rely on any presumption of insolvency on an application to wind up WAG in insolvency. True it is that WAG could have brought about compliance with the statutory demand within the seven days after dismissal of the statutory demand. But, WAG not having done so and the court then making orders having the effect of putting ACS into the same position as if WAG had complied with the statutory demand, it cannot be right as a matter of justice that ACS gets the benefit of both an order for payment out of the $248,391.90 and the procedural advantages that accrue following non-compliance with the statutory demand. If ACS is to take the benefit of the order for payment out it must be prepared to forego the procedural advantages that accrued on non-compliance with the statutory demand.
The present application for an order to pay out the money held in court involves the exercise of a judicial discretion. We would, in the circumstances, impose a condition in the exercise of the discretion to order that the money in court be paid out to ACS. The order for payment out will be subject to and conditional on ACS proffering an undertaking to the court to the effect that it will not rely on WAG's failure to comply with the statutory demand at the hearing of any application under one or more of s 234, s 459P, s 462 or s 464 of the Corporations Act 2001.
Accordingly, for these reasons, we made orders as follows on ACS's application in an appeal dated 20 June 2023:
1.Subject to and conditional upon compliance with par 2 of these orders, the amount of $248,391.90 paid into court by the appellant pursuant to par 2 of the orders of the court made 6 September 2021 be paid out of court to the respondent (by its solicitors).
2.By 4.00 pm on 2 November 2023, the respondent is to file an undertaking to the court that it will not rely on the appellant's failure to comply with the statutory demand dated 12 February 2021 at the hearing of any application under one or more of s 234, s 459P, s 462 or s 464 of the Corporations Act 2001.
We also made an order that the appellant pay the respondent's costs of the application to be assessed if not agreed.
The order as to costs followed the event.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MD
Associate to the Honourable Justice Vaughan
26 OCTOBER 2023
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