Abadeen Group Pty Limited v Bluestone Property Services Pty Limited

Supreme Court of NSW|2011-02-11|Before: Ball J, Mr J

Introduction 1This is an application under s 459G of the Corporations Act 2001 (the Act) to set aside a statutory demand dated 23 September 2010 for $740,271.86 which was served by the defendant, Bluestone, on the plaintiff, Abadeen. 2The demand is based on a debt of $600,000 plus interest arising from a judgment obtained by Bluestone against Abadeen in this court on 9 April 2008. 3Abadeen seeks to set aside the demand on two bases. First, it relies on what it says are three offsetting claims. Second, Abadeen says that the court ought, in the exercise of the discretion conferred by s 459J(1)(b) of the Act, set aside the demand because it (Abadeen) has filed an application for special leave to appeal to the High Court in respect of the judgment debt and that application and any resulting appeal has merit.

Background 4Mr Justin Brown and Mr Lance Hodgkinson are both property developers. Through their various companies, and sometimes in conjunction with Mr Daniel Hausman and companies associated with him, they were involved in a number of substantial property developments including one at 282 Oxford Street, Bondi Junction ( the Oxford Street Development ), one at 519-539 St Kilda Road ( the Chevron Development ), and one at Miller Street, Cammeray ( the Cammeray Development ). Abadeen is one of the companies associated with Mr Brown. He remains a director of it and swore the affidavit in support of the current application. Bluestone is a company associated with Mr Hodgkinson. 5In late 2005, Mr Brown, who was under considerable financial pressure from other developments in which he was involved, wanted to sell out of the Cammeray Development. Eventually he, Mr Hodgkinson and Mr Hausman, who also had an interest in the development, met at the Lord Dudley Hotel in Paddington to discuss the terms on which Mr Brown might be bought out. 6Following a lengthy discussion, Mr Brown wrote on a single sheet of paper an outline of what was proposed. The sheet of paper was signed by each of them, although there was a dispute about when the document was signed by Mr Hodgkinson. Mr Brown claimed that the document gave rise to or evidenced an enforceable agreement. 7Some of the payments contemplated by the document prepared at the Lord Dudley were subsequently made. However, a number of the more complicated transactions contemplated by the document were not implemented and ultimately Mr Brown and the companies associated with him commenced proceedings against Mr Hodgkinson and Mr Hausman and companies associated with them to enforce the terms of the agreement he says was reached at the Lord Dudley. Bluestone served a cross-claim seeking to recover $600,000, which had been paid by it to Abadeen following the Lord Dudley meeting. 8Palmer J rejected Mr Brown's claim: Brown & Ors v Hodgkinson & Ors [2009] NSWSC 262. In reaching that conclusion, his Honour preferred the evidence given by Mr Hodgkinson and Mr Hausman over the evidence given by Mr Brown, partly, at least, because, although Mr Brown gave an extensive account of the conversation at the Lord Dudley in his affidavit, he appeared to remember very little about it in the witness box. In doing so, his Honour appears to have accepted (at [58]) evidence given by Mr Hodgkinson and Mr Hausman that there was an express statement by Mr Hodgkinson "that he wished Mr Baxter [the parties' solicitor] to draft an agreement properly". His Honour took the view that no enforceable agreement was reached at the Lord Dudley. In reaching that conclusion his Honour said: 53 In my opinion, it is inherently improbable that Mr Hodgkinson and Mr Hausman would have said anything to indicate an intention to be immediately and unconditionally bound by the terms of the Lord Dudley Agreement. First, they were clearly having difficulty raising the finance for the buy-out of Mr Brown's interest in the Cammeray Development and they had earlier made known those difficulties to Mr Brown. Those difficulties had not been resolved by 12 August. 54 Second, and more importantly, the buy-out of Mr Brown's interest in the Chevron Development was raised for the first time as an afterthought at the tail end of the discussion. It was a complex and very large development and Mr Brown's interest in it, held through Greenberg, was far from transparent. Yet, Mr Brown asserts that, notwithstanding the other parties' difficulties in securing finance for the buy-out of his interest in the Cammeray Development, they agreed almost on the spur of the moment to bind themselves unconditionally and immediately to buy out Mr Brown's interest in the Chevron Development as well. In relation to the subsequent payments his Honour said: 82 I accept, as Mr Durack submits, that what has happened is that those parts of the Lord Dudley Agreement which were easily performable ... were performed in anticipation that the complicated parts of the buy-out transaction would be worked out in detail and embodied in a legally binding document drafted by Mr Baxter. There were many complications to be worked out. When the parties tried to implement the complicated parts of the transaction ... the transactions unravelled because their implications had not been properly thought out and agreed. 9Palmer J concluded that there was no enforceable agreement and consequently Abadeen was liable to repay the $600,000 to Bluestone as money had and received: [2009] NSWSC 262 at [88]. It is that amount and interest on it which is the subject of the statutory demand. 10An appeal from the decision of Palmer J was dismissed by the Court of Appeal. In substance, the Court of Appeal accepted Palmer J's conclusions. The judgment of the court was given by Sackville AJA with whom Hodgson JA and Campbell JA agreed: see Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386. In dismissing the appeal, Sackville AJA observed that "[t]here was no dispute between the parties as to the principles to be applied in determining whether the parties to the Lord Dudley meeting reached a binding agreement ... " (at [110]). After reviewing the facts extensively, his Honour concluded: 148 When the Lord Dudley document is considered in the context of the commercial dealings between the signatories, including the events post-dating the Lord Dudley meeting, a reasonable person would conclude that the parties did not intend to conclude a binding contract. The primary Judge was therefore correct to reach the conclusion he did. And later: 151 In my view, for reasons that have already been explained, the parties did not reach agreement at the Lord Dudley meeting on all matters that were essential to a concluded contract. Basic questions such as the identity of the parties, the terms on which valuable properties were to be transferred to Mr Brown or his companies and the consequences of an inability to secure the consent of mortgagees to the proposed arrangements, were left to future negotiations.

Offsetting claims 11Section 459H of the Act requires the court to calculate the "substantiated amount" of a statutory demand by deducting from the amount which is not genuinely in dispute the total amount of any offsetting claims. If the substantiated amount is less than the statutory minimum in respect of which a statutory demand can be made (that is, $2,000), the court is required to set aside the demand. If the amount is at least as great as the statutory minimum, the court may make an order varying the amount of the statutory demand. "Offsetting claim" is defined in s 459H(5) to mean "a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates)". 12"Counterclaim" and "set-off" have their technical meanings: John Shearer Ltd v Gehl Co (1995) 18 ACSR 780 at 786 per von Doussa, Hill and Tamberlin JJ; National Australia Bank Ltd v Idaport Pty Ltd [2007] NSWSC 1349 at [39]-[56] per Young CJ in Eq. However, "cross-demand" does not. As von Doussa, Hill and Tamberlin JJ explained in John Shearer Ltd v Gehl Co (1995) 18 ACSR 780 at 786: It would seem to follow that in the context of [s 459H], a context similar to that in section 41(7) of the Bankruptcy Act 1966 (Cth), a cross-demand will include any claim for damages which exists at the time the application to set aside the statutory demand is made, which is for a monetary amount capable of quantification whether or not it arises out of the same transaction or circumstances as the debt to which the statutory demand relates. 13In this case, Abadeen relies on three cross-demands. The first two are said to arise out of an assignment by Babcock & Brown Real Estate Finance Pty Limited (as trustee) ( B&B ) to Mr Brown, his wife, Brooke Brown, Sharlotte Pty Limited, another company associated with Mr Brown, and Abadeen, of two debts that were guaranteed by Bluestone, Mr Hodgkinson, Emily Nominees Pty Ltd (a company it appears is associated with Mr Hausman) and Mr Hausman. 14The first debt is said to arise from a facility agreement between B&B and 519 St Kilda Road Developments Pty Ltd ( 519 St Kilda Road ), the company through which Messrs Brown, Hodgkinson and Hausman undertook the Chevron Development. I will refer to this facility as the "Chevron facility" and to the loan made under it as the "Chevron loan". Mr Brown gave evidence that the facility was originally for an amount of $8,640,000. He was unable to provide a copy of the facility agreement, although he gave no explanation of why that was the case or of what steps he had taken to locate it. He did, however, exhibit a copy of a deed of variation dated 15 October 2007 that named 519 St Kilda Road as "the company", B&B as financier and Bluestone, Emily, Mr Hausman and Mr Hodgkinson as the guarantors. That deed of variation purports to vary the terms of a facility agreement dated 23 December 2004 between the parties in a number of minor respects. The deed of variation exhibited to Mr Brown's affidavit was only signed by B&B. 15I accept that the deed of variation provides some evidence that B&B granted a facility to 519 St Kilda Road which was guaranteed by Bluestone, among others. It is not unusual that a document such as the deed of variation was signed in counterparts and, having regard to the relationship between the parties, it does not strike me as odd that Abadeen or Mr Brown only has a counterpart signed by B&B. In addition, it strikes me as unlikely that B&B would provide a counterpart signed by it except in exchange for counterparts signed by the other parties to be bound. Consequently, I think that, for the purposes of this application, the deed of variation provides some evidence that 519 St Kilda Road was granted a facility by B&B which was guaranteed by Bluestone, among others. However, the deed of variation says nothing about the scope of the guarantee given by Bluestone. I return to this point below. 16The second debt that is said to have been assigned to Abadeen arises from a facility agreement between Gorcha Pty Ltd and B&B. Gorcha was the company through which Mr Brown, Mr Hodgkinson and Mr Hausman undertook the Cammeray Development. I will refer to this facility as the "Cammeray facility" and to the loan made under it as the "Cammeray loan". The relevant facility agreement is in evidence. It is an agreement between Gorcha, as borrower, B&B as lender and Bluestone, Emily and a company known as Greenberg Investment Development Ltd as guarantors. The agreement in evidence is undated, but it is signed by all the parties. The facility is for an amount of $6,300,000. 17Clause 20.7 of the facility agreement provides: Despite anything else in this document the following applies: (a)the maximum amount recoverable from the Guarantors under the Relevant Agreements will not exceed: (i)the total amount available to the Financier as a result of the sale or disposal of the Share Security (after payment of enforcement expenses and any other money which must or may be paid by the Financier before applying the proceeds against the Money); or (ii)if the Financier consents to a sale or disposal of the Share Security, the total proceeds of that sale or disposal after deduction of the expenses approved by the Financier. The Financier may disregard this restriction when making demands and enforcing the security, but ultimately the Financier can still only recover from the proceeds of realisation of the Share Security. (b)This clause does not apply if: (i)a Guarantor takes any action to prevent the Financier exercising its power of sale or other rights in relation to the Share Security; or (ii)a Guarantor has been fraudulent. (c)This clause does not limit any rights the Financier has under the security to apply amounts which it receives or recovers in respect of the Guarantor's debts to pay off whichever parts of those debts it chooses. 18Te facility agreement was amended by a deed of variation dated 29 June 2007 in a way which is not relevant to this case. However, according to this deed, the facility agreement was entered into on 30 September 2005. 19On 15 December 2009, B&B as assignor signed a deed assigning to Mr Brown, Mrs Brown, Sharlotte and Abadeen its rights in respect of the Chevron and Cammeray loans. 20Clause 3 of the deed provides: 3.1 The Assignee agrees to pay the Consideration in two installments [sic] as follows: 3.1.1 the Deposit on the date of this deed; and 3.1.2 the Balance of the Consideration on or prior to 23 December 2009 and in this respect time is of the essence. 3.2 If the Balance of Consideration is not paid on 23 December 2009 the Assignor may in its absolute discretion terminate this Deed and the Deposit will be forfeited to the Assignor. 3.3 ... 3.4 On the Effective Date, the Assignor assigns and transfers to the Assignee all of its right, title and interest in and pertaining to the Debt and the Securities and all other rights and claims of the Assignor to the Debt and to the Securities. The Assignee accepts such assignment. The "Effective Date" is defined in cl 2.1 to mean "the date the Assignor has received the Balance of the Consideration in full and clear funds". 21The "Consideration" is defined in cl 2.1 to mean $570,000.00 to be paid in two instalments: $50,000 on execution and $520,000.00 on or prior to 23 December 2009. 22Mr Brown in his affidavit asserts that the amount outstanding to B&B in respect of the Chevron loan as at 23 December 2009 was $3,434,586.01 and the amount outstanding in respect of the Cammeray loan at that date was $1,841,850.70. In support of that assertion, he exhibits three documents to his affidavit. However, he gives no explanation of those documents. The first appears to be a summary prepared for the purposes of these proceedings. It is clearly not admissible evidence. The other two documents appear to be computer print outs of some sort. Each is described as a "loan schedule as at October 13, 2010". The schedule in respect of the Chevron loan records repayments and the accrual of interest until 23 December 2009. The schedule in respect of the Cammeray loan records repayments and the accrual of interest until 29 June 2007. Where the documents come from, however, is unclear. 23The deed of assignment was varied by a deed of amendment dated 24 December 2009. That deed of amendment replaced cl 3.4 with the following clause: 3.4 On the Effective Date, the Assignor assigns and transfers to the Assignee all of its right, title and interest in and pertaining to the Debt, Debt Documentation, including any guarantees set out in the Debt Documentation and the Securities and all other rights and claims of the Assignor to the Debt, Debt Documentation, including any guarantees set out in the Debt Documentation and to the Securities. The Assignee accepts such assignment. 24On the same date as the deed of amendment was signed (that is, 24 December 2009) the original assignees signed a deed by which they assigned to Southern Cross Constructions (NSW) Pty Limited a 50 per cent interest in the debt documentation and securities to be assigned to them by B&B in consideration for half the amount payable by them to B&B. 25According to Mr Brown, Southern Cross Constructions reassigned its interest to the original assignees in or about March 2010. However, the document exhibited to Mr Brown's affidavit in support of that assertion is undated and unsigned. The document purports to annex the original deed of assignment but no document is annexed. 26There is no evidence that the balance of the consideration of $520,000 payable by the original assignees was ever paid to B&B. Mr Brown does not specifically assert that it was, let alone annex any material which would constitute evidence of the payment. 27The third off-setting claim is said to arise in relation to the Oxford Street Development. It appears that that development was owned by a company known as 282 Oxford Street Pty Limited which held the development as trustee of a unit trust. Fifty units in that unit trust were held by Bluestone and fifty units were held by Sharlotte. Mr Brown says that Sharlotte entered into an agreement to sell its units to Bluestone for $450,000 and that Sharlotte then assigned that debt to Abadeen and Mr Brown. 28A signed version of the unit sales agreement is exhibited to Mr Brown's affidavit. Clause 2.1 of that agreement provides: In consideration of the agreement by Bluestone to pay the sum of $450,000.00 contained in this deed, Sharlotte agrees to sell all its interest in the Sale Units in the Trust to Bluestone and to transfer to Bluestone those 50 units (free of Encumbrances and other third party rights and interests). Clause 2.2 sets out a payment schedule. The first payment of $400,000 was due on 15 November 2006. The balance was payable on 31 March 2007. 29Mr Brown exhibited to his affidavit a deed of assignment dated 1 October 2010 by which Sharlotte purported to assign to Mr Brown and Abadeen for the consideration of $1 "all of its right, title and interest in and pertaining to the Debt and all other rights and claims of the Assignor to the Debt". 30"Debt" is defined in cl 2.1 to mean: all moneys owed by the Debtor to the Assignor as referred to in the Loan Agreement and secured by the Securities. However, "Loan Agreement" and "Securities" are not defined, although the expression "Unit Sales Agreement" is defined to mean: the unit sales agreement dated 15 August 2006 between Bluestone Property Services Pty Limited, the Assignor and Lance Vincent Hodgkinson. The deed of assignment exhibited to Mr Brown's affidavit has only been signed by Mr Brown. His signature has not been witnessed. 31In order to attract the operation of s 459H, the off-setting claim must be genuine. In this context, that requirement has two aspects. 32First, there must be some evidence which supports the factual allegations that go to make up the claim: see Macleay Nominees Pty Ltd v Belle Property Easts Pty Ltd [2001] NSWSC 743 at [18] per Palmer J. It is not sufficient simply for the facts to be asserted either in the supporting affidavit or by, for example, annexing a copy of the relevant statement of claim: Endeavour Film Management Pty Ltd v Fox Studios Australia Pty Ltd [2003] NSWSC 831 per Macready M. The relevant evidence does not need to be admissible at a final hearing on the merits of the case: Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 421; 21 ACSR 581 at 587. However, the evidence needs to be sufficient to satisfy the court that the claim has a proper factual basis: John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 (a case dealing with whether there was a "genuine dispute" within the meaning of s 459H(1) of the Act). 33Second, the claim must have some merit. As Barrett J pointed out in Toorallie Pty Ltd v Black [2001] NSWSC 1088 at [14], different judges have expressed this requirement in different ways. So, for example, Santow J in Edge Technology Pty Ltd v Lite-On Technology Corporation (2000) 34 ACSR 301 at [25], said that the claim must be "real and not spurious". Some judges have expressed the requirement in terms of good faith: see, eg, Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (1994) 13 ACSR 787 at [791] per Young J; Macleay Nominees Pty Ltd v Belle Property East Pty Ltd at [18] per Palmer J, although in Intag Microelectronics Pty Ltd v AWA Ltd (1995) 18 ACSR 284 at 289 Young J expressed the requirement in terms of real chance of success. Others have said that the requirement of genuineness raises much the same issues as the "serious question to be tried" criterion which arises in relation to interlocutory injunctions: see Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 at 357 per Beazley J; Royal Premier Pty Ltd v Taleski [2001] WASCA 48 at [63]per Wallwork J. All of these various formulations help to explain what is intended to be conveyed by the requirement that the offsetting claim be "genuine". They are obviously not intended to be a substitute for that requirement.

Does the guarantee of the Cammeray loan give rise to an offsetting claim? 34It is convenient to deal first with the debt which is said to arise from the assignment of the Cammeray loan and the guarantee of that loan given by Bluestone (among others). In my opinion the guarantee of the Cammeray loan cannot give rise to an genuine offsetting claim because it is clear from the terms of cl 20.7 of the Cammeray facility that that guarantee was limited to the amount of the security taken by B&B in respect of the loan. The guarantee was not in respect of any outstanding liability in relation to the loan. Abadeen did not assert that B&B had not realised the security it held in respect of the loan; and, in any event, it is difficult to see how the assignment of a limited recourse guarantee of the type in question could give rise to an offsetting claim. Mr Donohoe, who appeared for Abadeen sought to answer this point by saying that cl 20.7(a) provides that the financier (that is, B&B and therefore any assignee) may disregard the limitation on the guarantee when making demands and enforcing the securities. However, I cannot see how this helps when the clause goes on to say that "the Financier can still only recover from the proceeds of the realisation of the Share Security".

Does the guarantee of the Chevron loan give rise to an offsetting claim? 35The position in relation to the Chevron loan is more complicated. 36Bluestone submitted that the assignment of that loan and the corresponding guarantee were ineffective or did not give rise to a genuine offsetting claim for three reasons. First, it submitted that the assignment was not effective because notice of the assignment had not been given in accordance with the requirements of s 12 of the Conveyancing Act 1919. Second, it submitted that there cannot be a genuine offsetting claim because the guarantee is a joint guarantee. Third, it is submitted that the evidence in support of the offsetting claim is inadequate. 37I do not accept the first or second of these submissions. 38As to the first, there is a question about the scope of s 12 of the Conveyancing Act 1919: for discussion, see R Meagher, D Heydon and M Leeming, Meagher Gummow & Lehane's Equity Doctrine & Remedies, LexisNexis, 4th ed, para [6-025]ff. However, for the purposes of determining whether there is a genuine offsetting claim, it is at least arguable that the assignment is effective in equity even if notice of it has not been given; and there is no reason why notice of it cannot be given now. In those circumstances, I do not accept that absence of notice of the assignment means that the claim is not a genuine one. 39As to the second submission, even assuming that the liability of the guarantors is a joint liability, there is nothing to prevent one guarantor from enforcing that liability. It would, of course, be necessary for that guarantor to join the other guarantors as parties to the proceedings - either as plaintiffs or, if they refuse to be joined as plaintiffs, as defendants: see UCPR r 6.20. But there is clearly a mechanism by which Abadeen alone could seek to obtain the benefit of the guarantee; and for that reason it seems to me that the fact that the guarantee is given to Abadeen jointly with others does not mean that Abadeen does not have a genuine claim. It is true that the value of that claim is not the whole amount of the debt. However, in the absence of any evidence, I think that it would be reasonable to infer for present purposes that each assignee is entitled to an equal share of the guaranteed amount. 40On the other hand, I accept Bluestone's third submission. In order for Abadeen's claim in respect of the Chevron loan to be genuine, there must be sufficient factual material to support the essential elements that go to make up that claim. In my opinion, there are three essential elements that go to make up Abadeen's claim. First, it must establish that it has a genuine claim that 519 St Kilda Road owed B&B at the time of the assignment $3,434,586.01 (or some other amount) and that that amount (or some other amount) remains owing. Second, it must establish that it has a genuine claim that Bluestone guaranteed the repayment of that amount. Third, it must establish that it has a genuine claim that the assignment of B&B's rights to Abadeen (and others) took effect. 41As to whether the amount of $3,434,586.01 remains owing, as I have said, Mr Brown does not explain where the schedules exhibited to his affidavit in support of that amount come from. However, it appears that on the face of it that the schedule in relation the Chevron loan is some sort of computerised ledger that was produced on 13 October 2010 and which records the position of the Chevron loan as at 23 December 2009. It seems clear that the Chevron Development faced considerable financial difficulties and it is not surprising in those circumstances that a substantial amount remained owing to B&B in respect of it, or that B&B was willing to take a very substantial discount on its assignment. Consequently, although the evidence is scant, I am prepared to accept that Abadeen has a genuine argument that the amount of the debt owed by 519 St Kilda Road is $3,434,586.01. 42I am not, however, prepared to conclude that Abadeen has a genuine claim that payment of the $3,434,586.01 was guaranteed by Bluestone. I accept that the deed of variation in respect of the Chevron loan establishes that Bluestone provided some form of guarantee. However, as the Cammeray facility demonstrates, the guarantee could be a limited recourse one which does not give rise to an offsetting claim. In the absence of any other evidence, it may be possible to infer that, if a guarantor has provided a guarantee in respect of a facility, then there is at least a genuine claim that the guarantee extends to all amounts repayable under the facility. In this case, however, both the Chevron and Cammeray loans were provided by B&B to essentially the same parties approximately a year apart. Both loans were provided for property developments. Moreover, the deeds of variation in respect of both facilities were drafted by Minter Ellison and, although Minter Ellison's name does not appear on the Cammeray facility, it seems clear from the layout and font of the document that it, like the deeds of variation, was drafted by Minter Ellison. I think therefore that it can be inferred that Minter Ellison also drafted the Chevron facility. It cannot, however, be inferred that the two facility agreements were in the same terms. That is because the deed of variation in respect of the Chevron facility makes amendments to clauses which clearly do not correspond to similarly numbered clauses in the Cammeray facility. However, given the other similarities between the two loans, I am unwilling to infer that the guarantee in the Chevron facility was not a limited recourse one. All that can be inferred is that Bluestone gave some type of guarantee. However, in circumstances where nothing can be inferred about the nature of the guarantee, I do not think that it can give rise to a genuine offsetting claim. 43Nor am I prepared to conclude that Abadeen has a genuine claim that the guarantee was assigned to it. In some cases the existence of an assignment agreement may be sufficient to establish that there is a genuine claim that the assignment occurred. Here, however, the assignment was not to take effect until the payment of the second tranche of $520,000. That amount had to be paid by 23 December 2009. However, it is clear that that payment was not made by that date. Instead, the assignees agreed to assign half their interest in the Chevron loan and guarantee to Southern Cross Constructions in return for half the consideration payable to B&B. In my opinion, where the due date had passed and time was of the essence, it was necessary in order for Abadeen to establish that it had a genuine claim for it to produce at least some evidence that it made the payment required to make the assignment effective. The agreement with Southern Cross Constructions does not do that; nor does any other evidence produced by Abadeen.

Does the transfer of units give rise to an offsetting claim? 44The last offsetting claim relied on by Abadeen is the claim said to arise from the assignment of the units in the unit trust relating to the Oxford Street Development. In my opinion, there are two reasons why that claim is not genuine. 45First, there is no evidence that Sharlotte has ever been in a position to transfer its units to Bluestone free of any encumbrances and other third party rights and interests, let alone that it has done so. What evidence there is suggests that Sharlotte has not transferred the units to Bluestone and has not been in a position to do so. Bluestone was due to pay the first instalment of the purchase price on 15 November 2006. Despite that, and despite the fact that companies associated with Mr Brown are facing financial difficulties, there is no evidence that Sharlotte has done anything to recover the amount due to it. Instead, it simply assigned its rights to Abadeen on 1 October 2010 for $1. In the absence of any other evidence, the inference is that Sharlotte did not seek to recover the money under the agreement because it had not and could not transfer its units to Bluestone. 46Secondly, there is no evidence of a valid assignment to Abadeen of Sharlotte's rights. In particular, the assignment relied on by Mr Brown is not signed by Sharlotte and there is no evidence that Sharlotte has signed that document.

Should an order be made under s 459J? 47The second ground on which Abadeen seeks to set aside the statutory demand is that it has lodged an application for special leave to appeal against the judgment debt on which the demand is based. 48Section 459J of the Act provides: (1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that: (a)... (b)there is some other reason why the demand should be set aside. 49In Eumina Investments Pty Ltd v Westpac Banking Corporation [1998] FCA 824 (1998) FCR 454 at 459 Emmett J said: It is, in my opinion, appropriate for a Court to exercise the discretion conferred by s 459J(1)(b) where the Court is satisfied that there is an appeal based on reasonable and arguable grounds which, if successful, would result in the existence of an offsetting claim. In that case, the offsetting claim had failed but was the subject of an application for special leave to appeal to the High Court. Emmett J, after considering the applicant's summary argument in support of the special leave application and the respondent's summary argument in response, concluded that the application was based on reasonable and arguable grounds. Consequently, his Honour concluded that there was some other reason within the meaning of s 459J why the demand should be set aside. However, his Honour, was only prepared to set aside the demand on condition that the amount in dispute should be paid into court or secured in some other way. 50In Eumina Investments , Emmett J expressed the view that, in exercising the discretion conferred by s 459J(1)(b), it may be appropriate to draw a distinction between an appeal in respect of the debt which is the subject of a statutory demand and an appeal in respect of an offsetting claim. In the former case, it is always open to the judgment debtor to apply for a stay of the judgment pending an appeal - in which case, there is no current debt that can be the subject of a statutory demand. An order under s 459J(1) is, in effect, simply another means of achieving that result. However, that is not so in the case of an offsetting claim. A stay of a judgment holding that there is no offsetting claim (even assuming it could be obtained) would not have the effect of a stay of the judgment debt that is the subject of the statutory demand. That result can only be achieved by an order under s 459J(1). Nonetheless, in Midas v Equator [2007] NSWSC 759, Hammerschlag J took the view that Emmett J's reasoning applied equally to a claim that was the subject of a statutory demand; and in that case, his Honour was prepared to make an order under s 459J(1) in respect of such a claim even where a stay application had been refused. Again, his Honour's order was conditional on the amount in dispute being paid into court. 51On the face of it, s 459J(1) confers a broad discretion and there is no reason in principle why it should not apply where there is an appeal against the judgment debt which is the subject of a statutory demand. However, in my opinion, a very relevant factor to whether the court should exercise that discretion is whether an application for a stay is available and, if so, whether it has been made and refused. 52In any event, in this case, I do not think that Abadeen's application for special leave to appeal provides a ground for making an order under s 459J(1). It is, of course, a matter for the High Court whether it grants special leave or not - as Emmett J acknowledged in Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) FCR 454. However, in my opinion, the grounds that Abadeen advances in the Summary of Argument it has filed with the High Court in support of its application for special leave are weak. Abadeen does not identify any error of principle said to have been made by the Court of Appeal. It appears to accept that the matters considered by the Court of Appeal were relevant. Its complaint appears to be that the Court of Appeal placed too much weight on gaps in the agreement and inadequate weight on what were said to be substantial acts of part performance. That complaint, however, does not strike me as one that is likely to attract special leave, even assuming that it could be made out. In addition, it is clear from the judgments at first instance and the Court of Appeal that one of the reasons Abadeen failed was that the courts found as a fact that the parties did not intend to enter into a binding agreement at the meeting at the Lord Dudley. That conclusion was supported by evidence given by Mr Hodgkinson and Mr Hausman (which Palmer J preferred over the evidence given by Mr Brown), the circumstances of the meeting and the complexity of the proposed agreement. In my opinion, those considerations make it unlikely that the High Court will conclude that the appeal was a suitable vehicle for any issue of principle that Abadeen may be able to identify.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 March 2011

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (8 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (11)

Cited By (5)