HIS HONOUR: Before the Court for hearing today are four applications which have proceeded together with evidence in one being evidence in the other. In each of them the plaintiff company seeks an order setting aside a creditor's statutory demand said to have been served on the plaintiff by the relevant defendant on 18 July 2016. The originating process was filed 21 days thereafter on 8 August 2016. Prima facie, and in the absence of any evidence to the contrary, that establishes jurisdiction; if the statutory demand was in fact served on an earlier date, then an objection to jurisdiction could have been mounted supported by evidence.
There are many problems with the present application. In each case the plaintiff sought to contend, first, that there was a genuine dispute as to the existence or amount of the debt claimed; secondly, that the plaintiff had an offsetting claim; and thirdly - although perhaps more by inference than expressly - that there was "some other reason" for setting aside the demand. None of this was facilitated by the circumstance that the plaintiff did not put into evidence the demand. However, it can be inferred from the supporting affidavits that the demands were founded on judgments of this Court constituted by White J in the proceedings Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 904, the formal judgment in which was tendered by the defendant. Because each of the debts claimed is a judgment debt, it is not open to the plaintiff to mount a case of "genuine dispute" within (CTH) Corporations Act 2001, s 459H. That is because it is well-established that a judgment debt - even one given by default, and even one subject to appeal - is not capable of genuine dispute, but so long as it stands, binds the parties and concludes any dispute as to the existence or amount of the debt [see Douglas Aerospace Pty Ltd v Industri Engineering Albury Pty Ltd [2015] NSWSC 167 at [53] and the cases there cited].
BBB Constructions Pty Ltd v Frankipile Australia Pty Ltd [2016] NSWSC 1772 | Case summary | Zoe
Insofar as an offsetting claim is concerned, as was explained in BBB Constructions Pty Ltd v Frankipile Australia Pty Ltd (2008) 68 ACSR 1; [2008] NSWSC 982 (at [4]):
The test for determining whether there is a genuine offsetting claim is whether the Court is satisfied that there is a serious question to be tried that a party has an offsetting claim or the claim is not frivolous or vexatious. In other words, the claim must be bona fide and a truly existing fact and not spurious, hypothetical, illusory or misconceived.
In Macleay Nominees v Bell Property East [2001] NSWSC 743, Palmer J put it in the following terms (at [18]):
In my opinion, a genuine offsetting claim for the purposes of CA s.459H(1) and (2) means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. "Good faith" means arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages … [i]f such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s.459H(1) and (2).
When one has regard to the affidavits of Mr Dimitriou in each matter, and the amounts to which they refer by way of an offsetting claim, it becomes apparent that those amounts correspond with the amounts of the judgment debts on which the plaintiffs rely; in other words, the offsetting claims appear to be intertwined with the matters the subject of the judgment debts. It is evident from the judgment of White J that offsetting claims were adverted to and in play in the course of the proceedings before his Honour which culminated in the judgment. Mr Dimitriou says that the present plaintiffs did not then have the evidence necessary to make their offsetting claims good; but that affords no reason why the plaintiffs in these proceedings would not be estopped by way of an issue estoppel or an Anshun estoppel from now seeking to agitate claims, the proper time and place for which was in the proceedings before White J. As it seems to me, the plaintiffs have not before me shown that there is a genuine offsetting claim because the very slight evidence adduced - which goes no further than their assertion - tends to indicate that those claims are intertwined with the substantive proceedings that resulted in the judgment debt, and the plaintiffs would now be estopped from mounting them.
The affidavit in support of the application in each case adverted to an intention to appeal from the judgment and also to apply for a stay. So far as an appeal is concerned, and so far as the evidence discloses, all that had been done is a bare notice of intention to appeal. No grounds of appeal have been identified, and no basis has been demonstrated before me for thinking that an appeal has prospects of success.
However, at the last moment - that is to say at two minutes past 10 this morning, in circumstances where on 17 August the Registrar had adjourned the proceedings to the Judge's list on 29 August, and on 29 August Mr Dimitriou had informed the Court that the plaintiff's evidence was complete, and the matter was adjourned to 12 September with a view to proceeding or being dismissed that day, and on 12 September, the proceedings were on Mr Dimitriou's application adjourned to today for hearing - Mr Dimitriou nonetheless filed, in the proceedings in which the judgment had been given, a notice of motion for leave to pay by instalments. The effect of the filing of that motion is, pursuant to (NSW) Uniform Civil Procedure Rules 2005, r 37.5, that execution of the judgment is stayed from the time the application is made until the time the application is dismissed. In Scope Data Systems Pty Ltd v BDO Nelson Parkhill [2003] NSWSC 137; (2003) 199 ALR 56, and in Blazai Pty Ltd v Palasty [2011] NSWSC 225, Barrett J (as he then was) took the view that where an instalment order was made causing execution of a judgment to be stayed, that provided "some other reason" under Corporations Act, s 459J(1)(b), for the setting aside of a statutory demand - essentially because, as his Honour explained in Scope Data Systems, that if legislative provision was made to the effect that in certain events a creditor was not to be allowed to exercise ordinary creditor remedies by proceeding to execute the judgment, it would be inconsistent with that position if the creditor could nevertheless proceed with impunity to initiate winding-up proceedings on the basis of the mere existence of the judgment debt, even though its execution was stayed.
It is not yet known whether an instalment order will be made. It is quite conceivable that it may not be made, but at present the position is that there is a stay of execution, and the possibility that an order might be made cannot be foreclosed.
In those circumstances, it seems to me that the best course is to adjourn the disposal of the present application in order to enable the instalment application to be determined. For that reason, I propose to adjourn the matter at this stage to Monday week, with liberty to apply if necessary in the meantime.
But for this last-minute development, the defendants would otherwise have succeeded today and the application would have been dismissed. The costs they have incurred today have been more or less entirely wasted by the late making of the instalment application, and the plaintiff must bear those costs. Given the financial position to which the plaintiffs have deposed in their instalment application, I propose to fix a short time for payment of those costs, and the plaintiffs will not be heard on the next occasion if the costs have not been paid.
Accordingly, the Court orders that:
1. The proceedings be adjourned to 26 September 2016 at 9.45am in the Corporations List.
2. In each matter, the plaintiff pay the defendant's costs of today fixed in the sum of $1,375, inclusive of GST. That is a total of $5,500, such amount to be paid to the defendant's solicitors within seven days of today.
[3]
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Decision last updated: 09 December 2016