Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd

Judgment (Ex TEmpore) 1HIS HONOUR: On 27 May 2013 Black J heard, and on 28 May determined, an application by the plaintiff Land Enviro Corp Pty Ltd to set aside a creditor's statutory demand served on it by the defendant HTT Huntley Heritage Pty Ltd [In the matter of Land Enviro Corp Pty Limited [2013] NSWSC 731]. His Honour concluded that as the demand in question, was founded on a judgment debt, namely a costs assessment registered as a judgment in the District Court, it was not open to establish a genuine dispute as to the existence of the debt. As to an offsetting claim, his Honour held, as he was bound to by the Graywinter principle, that as the facts supporting the alleged offsetting claim were not disclosed in the s 459G affidavit, it was not open to rely on such an offsetting claim on an application to set aside the notice. 2As to s 459J(1)(b) - that there was some other reason that the demand should be set aside - his Honour had regard to the pendency in the Court of Appeal of an appeal from an earlier judgment which underpinned the original costs liability on which the demand is based. In that respect, his Honour said, conformably with well-established authority in this Court, that the mere pendency of an appeal in the absence of a stay of the underlying judgment or payment into Court of the amount of the judgment debt, was insufficient to amount to "some other reason". 3In addition, his Honour had regard to the plaintiff's argument that "some other reason" was provided by the circumstance that if the demand were not set aside the plaintiff would inevitably be wound up and deprived of the opportunity to pursue the appeal in the Court of Appeal to which I have referred, which I am told is to be heard in September of this year. In rejecting that argument, his Honour held, again conformably with well-established authority, that it was not inevitable in those circumstances that the plaintiff would be wound up, because it could apply for an adjournment of any winding up proceedings on the ground that a viable appeal against the judgment underpinning the claimed debt was on foot. His Honour also recorded that it would have been inappropriate to adjourn the hearing of the s 459G application, as that might prevent the relation back day arising from the filing of a winding up application if the demand were not complied with. 4In dismissing the originating process, his Honour emphasised that that did not prevent Land Enviro from relying on the same matters to seek an adjournment of any winding up application that might be brought upon non-compliance with the creditor's statutory demand. In order to permit Land Enviro an opportunity to bring an effective appeal from his Honour's judgment, his Honour extended the period for compliance with the demand to twenty-one days (in lieu of the statutory seven days) from the date of dismissal of the s 459G application. His Honour recorded (at [22]): In particular, as I pointed out to Mr Zdrilic, it would be necessary in that situation to seek to further extend the time for compliance with the demand until after such an application is determined or the prospects of a successful appeal might be lost by default. In that respect, his Honour referred to Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd [2008] HCA 9; (2008) 232 CLR 314 and NA Investment Holdings Pty Ltd v Perpetual Nominees Limited [2010] NSWSC 373. His Honour therefore made an order under (Cth) Corporations Act 2001, s 459F(2), extending time for compliance with the demand for twenty-one days from "today". "Today" was 28 May 2013. Twenty-one days from that date expired on or about 18 June 2013. 5On 5 June 2013, Land Enviro filed in the Court of Appeal notice of intention to appeal from his Honour's judgment. Being a "holding appeal", the notice presumably does not indicate any grounds of appeal. I asked Mr Zdrilic today to articulate what, if any, his grounds of appeal were, and he indicated in substance that he was not yet in a position to do so, because he had not yet come to preparing for the appeal. While that is understandable, it needs to be appreciated that when one seeks a stay of a judgment, or an application to extend time for compliance pending an appeal, it is imperative to be able to articulate the grounds of appeal, so that the Court can form an assessment of whether there is an appeal that has any prospects of success. 6I do not accept that, in making the order his Honour made extending time for compliance with the demand, Black J is to be taken as indicating that he had formed the view that there were arguable grounds of appeal. In my view, his Honour was simply doing all he reasonably could to afford an opportunity to Land Enviro to make an effective appeal if it wished, lest it otherwise be deprived of that opportunity by the expiry of the time for compliance with the demand. 7Mr Zdrilic then, on 11 June 2013 - still within the twenty-one day period - filed in this Court an interlocutory process claiming the following: That the judgment order entered on 30 May 2013 under case number 2013/115276 be stayed until the appeal proceedings in the Court of Appeal under case number 2013/172953 have been determined and further until the wider proceedings under case no 2012/156726 have been determined. The judgment order was issued on behalf of HTT Huntley Heritage Pty Ltd. The amount of the debt is $138,019.63. Order is sought under r 51.44 Uniform Civil Procedure Rules 2005 (NSW) and/or under any other available rule or act and relying on the principles stated in Alexander v Cambridge Credit Corporation (1985) 2 NSWLR 685. 8That claim for relief is somewhat confusing. The judgment of 28 May was not one for a debt, but one dismissing the originating process claiming an order setting aside the statutory demand. The application was also misconceived, in that it is not possible to stay a dismissal, and what Land Enviro ought to have sought was an order further extending time for compliance with the creditor's statutory demand. This was expressly referred to by Black J in paragraph 23 of his Honour's judgment, where he said that the order he made was desirable so as to allow the opportunity for LEC to consider whether it seeks leave to appeal from my decision and, if so, whether it wishes to make an application to extend the time to comply with the demand while such an appeal is on foot. 9The interlocutory process to which I have referred was first returnable on 26 June, when it was adjourned to today. It seems that on that occasion counsel for the defendant informed Mr Zdrilic, who appears as director of the plaintiff without legal representation, that no such application of the type contemplated by Black J or required by s 459F had been made, with the consequence that the creditor's statutory demand had not been extended but had expired. No doubt in response to that, Land Enviro on 27 June filed a further interlocutory process which, is presently returnable before the Registrar this Friday 19 July, relevantly seeking an extension of time for compliance with the demand, in the following terms: 2. Land Enviro Corp seeks an extension of time and/or a further extension of time to preserve its right to appeal against the judgment of Justice Black entered 30 May 2013 and to comply with the Demand Notice. The extension and/or further extension is required to provide sufficient time for the appeal to be filed and determined. The judgement order and the Demand relates to a debt in the amount of $138,019.63 3. Land Enviro Corp seeks confirmation that the filing of the application on 11 June 2013 for a stay of Justice Black's judgment/order was an attempt by Land Enviro Corp Pty Ltd to seek leave to appeal against the judgment/order of Justice Black. 10It seems, from Mr Zdrilic's evidence and submissions, that he was under the impression that, by making the "stay" application of 11 June 2013, he was effectively making an application for an extension of time for compliance with the demand, as now contained in the application filed on 27 June. In any event, that was his intention. I accept that this was so, not only on the basis of his evidence, but also that because the only practical purpose of making the stay application of 11 June could have been to seek an extension of time. I am prepared to treat the interlocutory process filed on 27 June as an amendment of the process filed on 11 June to more precisely and particularly and accurately characterise the relief sought. I will, therefore, proceed on the basis that I could make an order permitting the amendment of the 11 June 2013 interlocutory process in terms of the 27 June process, and treating the relief claimed in the latter process as having been effectively claimed by the process filed on 11 June. 11However, the critical difficulty is that no order extending or further extending time for compliance with the creditor's statutory demand was made before it expired on 18 June. As the decision of the High Court of Australia in Aussie Vic Plant Hire v Esanda establishes, it is not open to the Court in those circumstances to make an order further extending time after the time for compliance has expired [see also NA Environment Holdings Pty Ltd v Perpetual Nominees Limited]. In order to secure such an extension, it was necessary, not only to file an application before 18 June, but to bring that application before the Court on an urgent basis, in order to obtain an order extending time. That was not done and, though I have considerable sympathy for the position in which Mr Zdrilic finds himself, that sympathy cannot confer jurisdiction on the Court to make an order that the High Court has held cannot be made in the present circumstances. 12Accordingly, it seems to me that the interlocutory process of 11 June 2013 must be dismissed, and that that filed on 27 June 2013 is doomed to the same fate. It would achieve nothing - except to incur further costs which would be ordered against Mr Zdrilic - to permit that application to proceed on 19 July, and it is in the interests of all parties that I dispose of it also today. As Black J did, so will I emphasise that this does not mean that it is inevitable that the plaintiff will be wound up before the hearing of its appeal in the event, as is likely, that it is unable to comply with the creditor's statutory demand. That is because, as Black J pointed out, the pendency of its appeal in the Court of Appeal, especially given the proximity of the hearing, would provide a ground for an application for the adjournment of the winding up proceedings until that appeal had been heard and determined. If and when any winding up application is brought prior to the hearing of the appeal, Mr Zdrilic will have the benefit both of Black J's observations and of my observations to that effect, which he will be able to present to the Registrar on an application for an adjournment of the winding up proceedings or, to the Corporations Judge upon referral from the Registrar. 13However, it is clear that I must dismiss both interlocutory processes. My orders are that the interlocutory process filed on 11 June 2013 be dismissed with costs and that the interlocutory process filed on 27 June 2013 be dismissed with costs. 14The defendant has submitted that the costs order I have made should also be made against Mr Zdrilic, who appears as director of the plaintiff personally. In opposition to that it was submitted, first, that the defendant has known for a long time that the plaintiff is impecunious. That is not a ground for not making such an order. Secondly, it was submitted that the defendant has refrained from seeking such an order previously. Again, that is not a reason for not making such an order now; rather, it is an indication of tolerance and reasonableness in the defendant's approach to the conduct of the proceedings. 15However, I think that there is a fundamental reason why the order should not be made. That is connected with the purpose for which the director of a company who obtains leave to appear for the company without legal representation is expected to acknowledge that the director may be made personally liable in respect of costs orders. The rationale for that practice is to ensure that, so far as possible, the opposing party is, from a costs perspective, in a position equivalent to that which would prevail were the company represented by a lawyer. The Court may, in certain limited circumstances, make an order personally against the lawyer, but such orders are made uncommonly, and not on the grounds that the company is insolvent, but on grounds concerning the manner of conduct of the proceedings by the lawyer. The requirement that a director acknowledge potential liability for a costs order is not intended to operate as a de facto order for security for costs. No application for security was made, and the director's acknowledgement should not be used as a de facto means of obtaining security. I do not think there is anything in the way in which the application has been conducted that would justify making an order personally against Mr Zdrilic, and I decline to so order.