Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Limited

Judgment 1HIS HONOUR: Following a hearing on 27 and 28 May 2013 and 6 June 2013, Young AJ, as the former Chief Judge in Equity and Judge of Appeal had become, gave judgment [Commonwealth Bank of Australia v ACES Sogutlu Holdings Pty Ltd and Ors [2013] NSWSC 1184] in proceedings brought by the present defendant Commonwealth Bank of Australia against the present plaintiffs A.C.E.S. Sogutlu Holdings Pty Ltd and Ceyser Pty Ltd and two other defendants. His Honour's reasons for judgment concluded as follows (at [74]): It follows that the cross-claim wholly fails, the defence wholly fails and there must be a verdict for the Bank. As at 1 May 2013 I was informed that with interest what was due was $132,858.18. There will be further interest from that day so that I will find a verdict for the plaintiff for that sum plus interest at the rate referred to in the Statement of Claim from 1 May 2013 to today. Order that the cross claim be dismissed. Order that the defendants and cross claimants pay the costs of the plaintiff and order that the exhibits may be returned after 28 days. 2Pursuant to those reasons, judgment was formally entered on 6 September 2013 as follows: (1)Verdict for the plaintiff for $138,850.32; (2)Cross-Claim dismissed; (3)Defendants and cross-claimants to pay the costs of the plaintiff. 3The amount for which the judgment was entered plainly enough reflected what was contemplated in paragraph 74 of his Honour's judgment, namely the amount inclusive of interest as at 1 May 2013, plus interest up to the date of the judgment. 4On 21 October 2013, the defendant served on each of the plaintiffs a creditor's statutory demand addressed to the respective plaintiff, claiming the sum of $138,850.32 which was described in the schedule of each demand as follows: Judgment debt obtained in Supreme Court of New South Wales proceedings number 2012/00208480, made on 5 September 2013 in which the creditor was the plaintiff and the company was the third defendant [or the first defendant, as the case may be]. 5By an originating process filed in these proceedings on 8 November 2013, the plaintiffs applied, pursuant to Corporations Act, s 459G and s 459J for an "order that the statutory demand served on the plaintiffs by the defendant on 21 October 2013 be set aside". 6The s 459G affidavit supporting the application indicates: 2. On 14 July 2012, the defendant commenced in the District Court of New South Wales by way of statement of claim against the plaintiffs in the amount of $114,174.99, the matter was transferred into the supreme Court on application by the plaintiffs. Annexed hereto and mark "E1" is copy of the defendant's statement of claim. 3. On 30 August 2013, Young AJ gave judgment in the amount of $132,838.18 plus interest commencing 1 May 2013 ending on 30 August 2013, and in doing so the Judge manifestly erred in his wrongful calculation. Annexed hereto and marked "E2" is a copy of the judgment dated 30 August 2013. 4. Annexed hereto and marked "E3" is the documents in respect the defendant's statement of claim that the Judge seriously erred in his wrongful calculation. 5. On 29 September 2013 the plaintiffs filed and served Notice of Intention to appeal from the whole decision made by the Judge. Annexed hereto and marked "E4" is copy of the appeal. 6. On 21 October 2013 the defendant served its statutory creditor's demand on the plaintiff. Annexed hereto and marked "E5" is copy of the creditor's demand. 7. I have read the defendant's statutory creditor's demand, it is misleading, very confusing and problematic, and the only way to fix the problem is to set it aside. 8. The plaintiffs do not owed the debt that the defendant claimed in the statutory creditor's demand. 7While the affidavit does not explicitly say so, it is I think a sufficiently clear inference from what is said in paragraphs 3, 4 and 5, coupled with paragraph 8, that the juridical basis for the application to set aside the demand was that there was "some other reason" within the meaning of s 459J(1)(b) of the Corporations Act, namely that the judgment debt on which each demand was founded was the subject of a pending appeal. 8The originating process was signed by Mr Jamal Charara, who also swore an affidavit that he was authorised to commence and carry on the proceedings, in the capacity of the plaintiff's authorised officer. This gives rise to an issue as to whether the proceedings were validly instituted, having regard to the terms of UCPR r 7.1(2) and 7.1(3). As I have concluded that the case can be decided on other grounds, I will assume for present purposes that the Court could dispense with compliance with those rules and treat the proceedings as validly commenced. 9The form of the originating process, brought as it is by two plaintiffs claiming an order expressed to be in respect of only a single statutory demand, but then recognising that the demand was served on both plaintiffs, raises a further question as to whether the originating process complied with s 459G. There is authority that suggests that it might not be compliant; see Golden Plantation Pty Limited v TQM Design & Construct Pty Limited [2010] NSWSC 1279. However, other cases have cast some doubt, or at least some, qualifications on that approach: see the discussion by White J of the Supreme Court of South Australia in Indigo Financial Money Pty Limited v Moustrides & Moustrides [2010] SASC 355 (at [11]-[49]). If it were necessary to do so to decide the case on its merits, I would examine the authorities referred to in those cases very closely to see whether the form of this application could be accommodated within the authorities, as it seems to me to make tolerably clear that each plaintiff was applying to set aside the demand that was served on it. However, because of the conclusion to which I have ultimately come, it is unnecessary to take that matter further. 10Before I turn to the central question, as to whether the pendency of an appeal is sufficient "other reason" to warrant an order under s 459J(1)(b), I will deal with some other issues that were raised by Mr Charara in his skilful and courteous written and oral submissions. 11The first related to the form of the demand, and particularly the date and the amount claimed. It was submitted, in effect, that the plaintiffs had no knowledge of a judgment given on 5 September, or in the amount referred to. However, in the light of the formal judgment that was entered on 6 September, what happened is very plain, namely, that the interest that had accrued from 1 May until the date of judgment was calculated, added to the judgment amount and in the usual way incorporated in the amount for which judgment was given as at the date of the judgment. 12Contrary to Mr Charara's submissions, it is not usual in those circumstances to separately specify in a judgment the interest accrued up to the date of judgment. Where a demand is made for a judgment and post-judgment interest, that is a different matter, and the post-judgment interest is or should be separately specified. But this was simply a case of a claim for the principal amount of the judgment, and there is no defect in not specifying in the demand how much of that was attributable to prejudgment interest. 13As to the date of the judgment, it is clear enough that the calculation to bring the interest up to date was made after the reasons for judgment were delivered in Court, so that the formal minute of judgment was signed by the judge on 5 September, and entered in the registry on 6 September. I do not think there is any relevant defect in the demand in that respect, let alone that it could have been productive of injustice for the purposes of s 459J(1)(a). 14That then brings me to the principal ground of the application, which is the pendency of the appeal. As the s 459G affidavit establishes, a notice of intention to appeal was filed within time on 29 September 2013. Subsequently, a summons for leave to appeal and notice of appeal were filed on 6 December 2013. The notice of appeal specifies the grounds of appeal relied on. The requisite supporting documents in the form of the white folders have been filed. The Court was informed that the appeal is to be called over in April, and a hearing date is anticipated thereafter. 15It is relevant also to note that as well as serving creditors' statutory demands on the plaintiffs who were the corporate defendants in the proceedings before Young J, the present defendant also served a bankruptcy notice issued on 17 October 2013 on Mr Sogutlu, one of the personal defendants in those proceedings. An application to set aside that bankruptcy notice was filed in the Federal Circuit Court on 6 January 2014, and on 21 January 14 a registrar of that court made an order extending time for compliance with the bankruptcy notice to and including 4 March 2014. 16Let me say at the outset that it cannot be contended that, by seeking to enforce a judgment that has not been stayed, notwithstanding that an appeal is pending, a judgment creditor thereby engages in an abuse of process or unconscionable conduct. To the contrary, prima facie a judgment creditor, even pending an appeal, is entitled to the fruits of the judgment, and a judgment debtor that wishes to procure a different position is bound to apply to the Court in which the judgment was given, or its appellate division, for a stay of the judgment pending appeal. No such application has been made in this case. 17In Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Limited (1996) 21 ACSR 235, it was said that in a case where a judgment that founded a creditor's statutory demand was being appealed, the pendency of an appeal did not constitute "some other reason" within s 459J(1)(b) whereby the statutory demand should be set aside, unless the Court of Appeal were actually to stay enforcement of the judgment; see also Sajepe Pty Limited v Lawler (2000) 18 ACLC 457; [2000] NSWSC 262. 18In Meehan v Glazier Holdings Pty Limited [2005] NSWCA 24; (2005) 53 ACSR 229, Santow JA in the Court of Appeal cited those cases and said: Glazier has to date held back from seeking any stay of the costs order. It instead participated in the costs assessment. Even if it might now belatedly engage in yet further litigation by seeking to persuade the Court of Appeal to grant a stay, that consideration carries little weight. There is, of course, no certainty that the Court of Appeal would grant any such stay. The position is analogous to the case where a judgment, the basis of the demand, has been appealed. That fact was held not to constitute some other reason within s 459J(1)(b) whereby the statutory demand should be set aside unless the Court of Appeal were actually to stay enforcement of the judgment. 19In Timberland Property Holdings Pty Limited v Schindler Lifts Australia Pty Limited [2011] NSWSC 466, Barrett J, as his Honour then was, referred to those decisions and to the judgments of Hammerschlag J in Midas Management Pty Limited v Equator Communications Pty Limited [2007] NSWSC 759 and of Ward J in Cranney Farm Pty Limited v Corowa Fertilizers Pty Limited [2011] NSWSC 9, as establishing that the existence of arguable grounds of appeal did not, in the absence of a stay, constitute "some other reason" within s 459J(1)(b), but that such reason would exist if the amount of the judgment were paid into Court. His Honour said: As things stand 'some other reason' within s 459J(i)(b) does not exist, but if the amount of the judgment debt is deposited so as to be available to meet the judgment if the Court of Appeal proceedings extinguish the possibility of the judgments being set aside, then 'some other reason' will exist. 20The cases therefore establish that a pending appeal (or application for leave to appeal from, or to set aside) a judgment, even one in which the grounds are considered arguable, does not of itself provide sufficient reason to set aside a creditor's statutory demand; see Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd, [18]; Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Limited; Midas Management Pty Limited v Equator Communications; Timberland Property Holdings v Schindler Lifts. 21Relevant considerations include whether reasonable and arguable grounds for the application to set aside the judgment for the appeal have been shown, whether a stay is available and, if so, has been sought or refused, and whether there has been an offer to pay into Court the amount of the demand pending the outcome of the application or appeal. In short, the Court will at least ordinarily require either that a stay have been granted, or that the moneys be paid into Court pending the outcome of the appeal. There may be an exception to this where the judgment is not amenable to a stay. 22In this case let it be accepted, although I am far from convinced, that there are at least arguable grounds of appeal. The fact is that no stay has been sought and there is no offer to pay the amount of the judgment into Court. In those cases, on the authorities, I am bound to hold that no sufficient other reason to set aside the demand has been established. 23Accordingly, I must order that the originating process be dismissed with costs.