4827/07 ACN 001 891 103 Pty Ltd v Reiby Street Apartments Pty Ltd
JUDGMENT
1 HIS HONOUR: This is an application to set aside a statutory demand dated 11 September 2007. The service of the statutory demand followed numerous pieces of litigation between the plaintiff and the defendant. The defendant demanded payment of a debt of $310,205.99. This was the balance of a sum claimed to be due pursuant to various awards of costs in different pieces of litigation, from a judgment of the District Court in favour of the defendant, and from an adjudicator's determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) in favour of the plaintiff.
2 The largest component of the claimed debt was an amount of $289,111.50 being an award of damages for which judgment had been entered in the defendant's favour in the District Court on 18 May 2007 plus interest on that sum from 18 May 2007.
3 An appeal has been filed from that judgment. It is listed for hearing in the Court of Appeal on 11 December 2007. In the notice of appeal, the plaintiff seeks an order that, in lieu of the judgment for $289,111.50, there be a substituted judgment of $14,963.14. As an alternative to an order setting aside the statutory demand, the plaintiff seeks an order that the demand be varied so as to reduce the amount of the debt from $310,205.99 to $28,052.42.
4 That order is sought on the basis that the latter amount is not the subject of contest in the appeal. The only ground advanced in support of the application to set aside the statutory demand is the pendency and imminent hearing of the appeal. The defendant did not dispute that the grounds of appeal are fairly arguable.
5 On 18 June 2007, the Court of Appeal ordered that the judgment of the District Court of 18 May 2007 be stayed until the determination of the appeal or further order. The stay was conditional upon the plaintiff procuring an unconditional bank guarantee in favour of the defendant for the judgment sum and such guarantee being lodged with the Court of Appeal within 21 days, to be released to the defendant in the event that the appeal is dismissed. The plaintiff did not provide such a guarantee. Hence the judgment of the District Court is not stayed, and it was not stayed when the statutory demand was served.
6 On the hearing of the application to set aside the statutory demand, the defendant made an open offer. It agreed that it would consent to the setting aside of the statutory demand if the plaintiff procured an unconditional bank guarantee in its favour in the amount of $289,111.50, such guarantee to be lodged with the court and released to the defendant in the event that the appeal is dismissed. Its offer also provided that the plaintiff pay forthwith to the defendant the sum of $13,116.28. This offer was not accepted.
7 The defendant's primary contention on the hearing was that the application to set aside the statutory demand should be dismissed, rather than that the demand should be varied on terms requiring security for that part of the debt which is challenged on appeal and for which the plaintiff contends the demand should be reduced.
8 The existence of the appeal on fairly arguable grounds does not give rise to a genuine dispute about the existence of the debt owing under the judgment (Barclays Australia (Finance) v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235 at 238; Scope Data Systems Pty Ltd v BDO Nelson Parkhill (2003) 199 ALR 56 at 60-61 [17]-[20]; Midas v Equator (2007) 25 ACLC 1038 at 1039; [2007] NSWSC 759 at [12]-[13]).
9 The plaintiff submitted that the demand should be set aside pursuant to s 459J(1)(b) of the Corporations Act 2001 (Cth), namely, on the ground that there was "some other reason why the demand should be set aside." That reason, it was contended, was the pendency of the appeal and the imminence of the hearing of the appeal.
10 In a number of cases it has been recognised that pendency of an appeal may provide some other reason why a statutory demand based on a judgment debt should be set aside, where the Court asked to set aside the demand can see that there are reasonable and arguable grounds for the appeal. Typically, in such a case the demand is set aside on condition that the debt claimed is secured by payment into Court or other means (e.g. Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Ltd at 239-240; Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454; Midas v Equator at 1041 [35] and [36]).
11 Counsel for the defendant submitted that I should follow observations of Santow JA, with whom Tobias JA and Young CJ in Eq agreed, in Meehan & Ors v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 at 239 [51]; [2005] NSWCA 24 at [51]. His Honour there said:
"The position is analogous to the case where a judgment (the basis of the demand) was being appealed. That fact was held not to constitute 'some other reason' within s459J(1)(b) whereby the statutory demand should be set aside, unless the Court of Appeal were actually to stay enforcement of the judgment: Barclays (Aust) Finance Ltd v Mike Gaffikin Marine Pty Ltd (1996) 14 ACLC 1,367, 21 ACSR 235; Sajepe Pty Ltd v Lawler (2000) 18 ACLC 457."