Wingstar Investments Pty Ltd v MT. VETTERS PASTORAL CO. (1966) Pty Ltd

[2021] WASC 316

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

CITATION:   WINGSTAR INVESTMENTS PTY LTD -v- MT. VETTERS PASTORAL CO. (1966) PTY LTD [2021] WASC 316

CORAM:   MASTER SANDERSON

HEARD:   6 SEPTEMBER 2021

DELIVERED          :   6 SEPTEMBER 2021

PUBLISHED           :   17 SEPTEMBER 2021

FILE NO/S:   COR 57 of 2021

BETWEEN:   WINGSTAR INVESTMENTS PTY LTD

Plaintiff

AND

MT. VETTERS PASTORAL CO. (1966) PTY LTD

Defendant

Catchwords:

Corporations Law - Application to set aside statutory demand - Demand misstated time limited for compliance - Whether 'substantial defect'

Legislation:

Corporations Act 2001 (Cth)
Coronavirus Economic Response Package Omnibus Act 2020 (Cth)

Result:

Statutory demand set aside

Category:    A

Representation:

Counsel:

Plaintiff	:	P Dobson
Defendant	:	C Mckenzie

Solicitors:

Plaintiff	:	Hotchkin Hanly
Defendant	:	McKenzie & McKenzie

Case(s) referred to in decision(s):

GT's Cooking Oils Pty Ltd trading as Filtafry Newcastle [2021] NSWSC 93

MHC Pathology Pty Ltd v Midway Trial Pty Ltd [2020] VSC 789

Re Remolink Pty Ltd (Unreported, 19 October 2020)

MASTER SANDERSON:

1. This was the plaintiff's application to set aside a statutory demand.  At the conclusion of the hearing, I indicated to the parties I would set the demand aside.  These are my reasons for doing so.

2. The plaintiff's application to set aside the demand raised two main issues. First, it was said there was a genuine dispute in relation to the demand and it should be set aside under s 459H of the Corporations Act 2001 (Cth). In the alternative, it was said there was a defect in the demand and it should be set aside under s 459J. I set the demand aside under that latter section. The section itself reads as follows:

   459J. Setting aside demand on other grounds

   (1) On an application under section 459G, the Court maybe order set aside the demand if it is satisfied that:

   (a)because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

(b)there is some other reason why the demand should be set aside.

(2)Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

1. The defect in the demand is found in par 4.  It says the creditor is required to make payment of the debt 'within 21 days' after the service on the company of this demand.  It was common ground between the parties that by reason of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) the time for compliance with the demand was six months. The question then is whether or not the misstatement as to the period for compliance within the demand amounts to a 'substantial injustice' within the meaning of s 459J(1)(a).

2. There are two decisions on this issue which are in conflict.  The  first in time is the decision of Associate Justice Hetyey in MHC  Pathology Pty Ltd v Midway Trial Pty Ltd [2020] VSC 789. In that case as here, there were a number of grounds upon which the plaintiff sought to set aside the demand. His Honour accepted there was a genuine dispute and was prepared to set the demand aside on that ground. However, he went on and dealt with the defect in the demand. He was of the view the defect would not cause substantial injustice and the demand would not be set aside. His Honour said:

   72.The plaintiff submits that the reference to a 21-day period for compliance as opposed to the extended 6-month period is a defect for the purposes of s 459J(1)(a)  Further, it argues that it has suffered substantial injustice because it was compelled to make an application to set aside the statutory demand within 21 days, rather than the extended period of six months allowed by Parliament under the Coronavirus Legislation.  Whilst I accept the reference in the statutory demand to 21 days for compliance is a defect under s 459J, I am not convinced that it has occasioned any substantial injustice. The following question can be posed: is the plaintiff any worse off as a result of filing its s 459G application within 21 days as opposed to the extended period of 6 months? The answer must be in the negative. There is no evidence before the Court to suggest the plaintiff would have acted any differently had the correct statutory period of 6 months been referred to in the statutory demand.[1]

   73.The increase of the statutory period to 6 months was an important amendment to the statutory demand regime contained in Part 5.4 of the Corporations Act. It provides companies with a regulatory safety net during a period of enormous economic and social disruption. The failure to refer to this extended period is undoubtedly a significant defect for the purpose of s 459J(1)(a). However, as there is no substantial injustice, s 459J(2) makes clear that the demand cannot be set aside on that basis.[2]

   [1] MHC Pathology Pty Ltd v Midway Trial Pty Ltd [2020] VSC 789, 72.

   [2] Ibid, 73.

3. In GT's Cooking Oils Pty Ltd trading as Filtafry Newcastle [2021] NSWSC 93 Black J took a different view. This was an application to wind up a company based upon a failure to comply with a statutory demand. His Honour referred to his earlier decision in Re Remolink Pty Ltd (Unreported, 19 October 2020) and referred to the MHC Pathology decision.  His Honour concluded:

   11.Although it is not necessary for me to reach a final decision in this matter, because this is not an application to set aside the Demand, I would be inclined to take a somewhat different view as to the Court's ability to draw an inference as to that matter, absent evidence of the debtor company. It seems to me that the Court might reasonably infer that, in the ordinary course of human experience, a demand to pay an amount of some $41,471.99 in 21 days in the midst of a global pandemic and economic recession likely has a significantly different character from a demand to pay that amount within six months.  A debtor company which receives a demand for a large amount, payable within a short period in the midst of a global pandemic, might well consider that the task of raising those funds within that short time hopeless or not worth the attempt while its business is under pressure, whereas a claim for payment within a longer period would allow some prospect of recovery of the economy and that company's business within that longer period.  That difference seems to me to be implicit in the approach taken by the Omnibus Act, since there would have been little point in extending the time for payment from 21 days to six months if the difference between the two was not a significant one. I would therefore be inclined to take the view that a Court might well infer that a misstatement that an amount was payable within 21 days rather than six months would often cause substantial injustice to a debtor company.[3]

   12.In Re MHC Pathology Pty Ltd above, Hetyey J (rightly, in my view) also recognised that the increase of the statutory period to six months was an important amendment to the statutory demand regime and that it provided companies with a 'regulatory safety net during a period of enormous economic and social disruption'.  The Associate Justice also there noted that a failure to refer to that extended period was undoubtedly a 'significant defect' for the purposes of s 59J(1)(a) of the Act but observed that, where there was no substantial injustice, s 459J(2) of the Act made it clear that a creditor’s statutory demand could not be set aside on that basis. For the reasons noted above, I am not persuaded of the premise that, as a general matter, a misstatement of the extended period for payment provided under the Omnibus Act would not give rise to substantial injustice. It also seems to me that the regulatory safety net to which the Associate Justice referred may well be undermined if a creditor could serve a creditor’s statutory demand which did not fairly disclose the extended time available to pay the debt to the debtor company.[4]

   [3] GT's Cooking Oils Pty Ltd trading as Filtafry Newcastle [2021] NSWSC 93, 11.

   [4] Ibid, 12.

4. Neither of these two decisions constitutes binding authority - although it is arguable that the MHC Pathology decision could be seen as a decision on point.  It is true his Honour had already determined the demand ought be set aside on the basis there was a genuine dispute.  But he also found affirmatively that if called upon to do so he would not have set aside the demand on the basis of s 459J.

5. In my view the decision of Black J is to be preferred.  With respect, I endorse what his Honour had to say.  I would add no more.  To do so might be taken to in some way suggest there is something more to be said on the issue.  In my view there is not.

6. For completeness I should note that this application to set aside the demand was brought one day before the expiration of the six month period.  In other words, although the demand itself said the alleged debtor had 21 days to apply to set the demand aside, one way or another it discovered it had in fact six months and it took full advantage of that six month period.  In her submissions, counsel for the defendant said this clearly demonstrated the plaintiff did not suffer any prejudice let alone substantial injustice, and the demand should not be set aside.

7. But the fact remains there was a 'defect in the demand'.  Black J focused on the legislative intent of the amendment to the period for compliance.  That I think is the important point and in this case is decisive.

8. For these reasons I set aside the demand.  If no agreement can be reached as to costs the parties should file short submissions on that issue within 7 days of the date of these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

MM

Court Officer

17 SEPTEMBER 2021