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Judgment - ex tempore (revised 23.10.17)

1. By Notice of Motion filed by leave on 23 October 2017, the Plaintiff, EPAQ International Pty Ltd ("EPAQ"), initially sought an order extending the time for compliance with a creditor's statutory demand dated 18 June 2017 ("Demand") up to and including 10 November 2017. Following the submissions of Mr Johnson, who appears for EPAQ, it is common ground between the parties that, if an order extending the time for compliance with the Demand is to be made, then it should be made only up until 4pm on 1 November 2017, that is, for a little more than a week from today. That timing reflects the fact that the solicitor acting for EPAQ expects to obtain instructions about commencement of an appeal from my judgment in the matter by Wednesday, 25 October 2017 and, if such instructions are obtained, the matter could then be brought before the Court of Appeal, and any further extension of time could be sought from 1 November 2017 from the Court of Appeal.
2. That approach reflects the approach to which I referred, in dealing with a similar application for extension of time, in Re Britten-Norman Pty Ltd [2013] NSWSC 424, where I noted that the usual course is for such an application for extension of time initially to be brought before the trial judge and then for the trial judge to grant a short extension (if satisfied that there is sufficient basis to do so) to allow the matter to be brought before the Court of Appeal for it to consider whether to grant a longer extension.
3. Turning now to the substance of the application, s 459F(2) of the Corporations Act 2001 (Cth) defines the period for compliance with the Demand, which was extended once by consent and would now expire late today. In determining whether further to extend the time for compliance with the Demand, I should have regard to the prospect of success in the appeal and whether an arguable case has been shown; second, whether the appeal will be rendered nugatory unless the extension is granted; and, third, the prejudice the respective parties will suffer in the alternative eventualities: Re Britten-Norman Pty Ltd above at [4] and see the authorities there cited.
4. The first matter which needs to be considered is whether the appeal has prospects of success and whether an arguable case has been shown. Mr Beazley's affidavit dated 23 October 2017, in support of EPAQ's application for an extension of time, does not go very far to establish the prospects of an appeal, and, indeed, does not establish that a decision to appeal has yet been made. Mr Johnson indicated that any such decision to appeal would be made on Wednesday after a director of EPAQ returned from China. Mr Johnson also identified the basis of the appeal as turning, in effect, upon whether a genuine dispute about the existence or amount of the debt which was the subject of the Demand could be established, where the witness whose evidence EPAQ relied upon, Mr Brown, had not been cross-examined as to his evidence. That had arisen in circumstances where the Defendant had not given notice requiring Mr Brown to be available for cross-examination; I had declined to adjourn the matter to permit such notice to be given; and the hearing had then proceeded to completion.
5. Mr Cornish, who appears for the Defendant, responds that there is no arguable basis for an appeal, having regard to the findings that I had reached, and refers to the Court of Appeal's decision in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344; (2013) 85 NSWLR 601 ("Britten-Norman") in that regard. Mr Cornish refers to several matters addressed in that decision (at [61]ff) as reasons to set aside the judgment at first instance, which included that evidence did not have to be supported by contemporaneous documentation to establish a genuine dispute or offsetting claim and that there was evidence that had not been refuted as to a system maintained by the plaintiff which had also not been challenged by cross-examination in that case. Mr Cornish submits, with substantial force, that Mr Brown's account of the critical conversations was here refuted, not only by its inconsistency with contemporaneous documents, but also by the fact that it could not be correct so far as it referred to brand names which did not then exist and a dealing with an Internet provider who was only later to become EPAQ's anticipated Chinese distributor. It was, of course, for those reasons, inter alia, that I did not find a genuine dispute to be established in the relevant circumstances.
6. It seems to me that, notwithstanding Mr Cornish's submissions, there is nonetheless an arguable question for appeal as to the impact of the Court of Appeal's decision in Britten-Norman on matters of this kind, including as to the effect of the absence of cross-examination. The traditional position in cases of this kind was, for many years, that cross-examination was rarely permitted, although the Court of Appeal noted that in some circumstances it could be permitted. The Court of Appeal did not, in my view, go so far as to say that cross-examination was essential in order to negative a genuine dispute or offsetting claim, but it did rely on the absence of cross-examination in that case as a matter that supported the existence of an offsetting claim. While Mr Cornish submits that the other matters that refuted Mr Brown's account in this case were sufficient that his account could not establish a genuine dispute as to the existence or amount of the debt, and I accepted that submission, the approach adopted by the Court of Appeal in Britten-Norman is such that it seems to me the challenge to that approach foreshadowed by Mr Johnson may be arguable. To put that proposition another way, a question arises following Britten-Norman as to the circumstances in which a trial judge can find, absent cross-examination and more generally, that an oral contention that a debt was not to be paid is not sufficient to give rise to a genuine dispute, or, conversely, whether a creditor's statutory demand must always be set aside if a representative of the debtor contends the creditor had orally represented that it need not be paid and is not cross-examined about that contention. Plainly, as my judgment indicated, my view is that the latter proposition would significantly undermine the creditor's statutory demand regime. Nonetheless, it seems to me that an arguable question for appeal arises as to the impact of the absence of cross-examination in this case, although I found that, for a range of other reasons, there was no genuine dispute as to the debt.
7. The second question in such an application, as Barrett J noted in NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd [2010] NSWSC 373, is whether an appeal would be rendered nugatory unless the time is extended. I would reach the same conclusion as his Honour, that such an appeal would be rendered nugatory, unless that time is extended, having regard to the High Court's decision in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd [2008] HCA 9; (2008) 232 CLR 314. I did not understand Mr Cornish to contend to the contrary.
8. The third issue is the question of prejudice to the respective parties in the alternative eventualities, namely, of an extension of time being granted on the one hand and being declined on the other. It seems to me that the short extension of time which I would grant raises no real question of prejudice to the Defendant, although that question may present in a more acute form if the appeal is pressed and a longer extension of time is then sought from the Court of Appeal for it to be heard. It seems to me that, where only a short extension is now sought, then the prejudice to EPAQ of not granting it would exceed the prejudice to the Defendant of it being granted.
9. I would, subject to hearing from counsel, propose to take the same approach as I adopted in Britten-Norman, namely, to order that the costs of the application today be reserved pending the outcome of any application for leave to appeal and, if brought, any appeal.
10. In this matter I make the following orders:
11. Pursuant to s 459F(2)(i) of the Corporations Act, the time for compliance with the creditor's statutory demand dated 18 June 2017 be extended up to and including 5pm on Wednesday, 1 November 2017.
12. The costs of today be reserved pending the outcome of any application for leave to appeal and, if such leave is granted, any appeal.