Solicitors:
Juris Col Legal (plaintiff)
Lawside Lawyers (third defendant)
File Number(s): 2017/00117386
[2]
Judgment (EX TEMPORE)
The first defendant company Italasia Pty Ltd was registered in New South Wales on 8 March 1995 and deregistered on 22 May 2013 pursuant to the (CTH) Corporations Act 2001, s 601AA, on the application of its then director, the third defendant Xin Mei He who had been a director of the company from its incorporation on 8 March 1995 until 14 March 2011 and again from 1 November 2011 until deregistration on 22 May 2013. It would seem that the third defendant was also the sole shareholder in the company at least during the last period of her directorship, as she is shown as holding five ordinary shares in the company, the share capital in which comprised only five issued ordinary shares.
The plaintiff Hiromichi Kure claims that he lent Italasia and/or Xin Mei He three sums of money: the first an advance of $633,774 on or about 6 May 2008; the second of $312,000 on or about 25 March 2009; and the third of $159,738 on or about 1 May 2009. On 17 March 2017, the present plaintiff commenced proceedings 2017/83339 in this court against Xin Mei He as first defendant and Italasia as second defendant, claiming judgment for the sum of $1,105,513 being the total of those loans, together with interest and declarations that the plaintiff was entitled to equitable charges over certain property of Xin Mei He.
As I have said, the company was deregistered on the application of Xin Mei He as its then director on 22 May 2013, pursuant to an application made by her on 14 March 2013 in which it was declared that the company's assets were worth less than $1,000 and that the company had no outstanding liabilities and was not a party to any legal proceedings. By the originating process in these present proceedings, 2017/117386, Hiromochi Kure seeks orders that the second defendant, ASIC, reinstate the registration of the first defendant, Italasia, pursuant to Corporations Act, s 601AH(2), that Italasia be wound up, and that he be given leave pursuant to Corporations Act, s 471B to continue proceedings 2017/83339 against Italasia in liquidation.
ASIC has indicated that it does not oppose the application for reinstatement upon its usual conditions, including relevantly that the company reinstated be wound up and Domenic Calabretto who consented to act as liquidator be appointed liquidator.
Although, at first, I was concerned as to why it was necessary or desirable to proceed against the company Italasia when relief was also sought personally against Xin Mei He, and where it appeared that Italasia had no assets, the documentation that evidences at least the second and third of the loans is, at best, ambiguous as to the identity of the borrower. So far as the first loan is concerned, there is evidence adduced by the third defendant which shows that it appears to have been paid into Italasia's account. In those circumstances it seems to me there is sufficient doubt as to who is liable for the loans as to warrant suing Italasia as well as Ms Xin Mei He.
Moreover, it is possible that a liquidator of Italasia would be able to make recoveries for the benefit of the liquidation if, as appears at least possible, Italasia had assets at or not long before the time of its deregistration which were effectively given to Xin Mei He. In that respect, it is notable that the third defendant has adduced no evidence to explain what became of the proceeds of sale of the factory property which Italasia sold on or about 29 June 2010 for $765,000, save that there is some evidence that not long thereafter - namely on 14 July 2010 - $700,000 was deposited into a personal account of Xin Mei He. If all of that could be established, and it could be established that the plaintiff is a creditor of Italasia, a case for reinstatement would be made out.
Xin Mei He contends that the loans have been repaid. She has adduced some evidence in that respect on this application and it may well be that at this early stage that evidence, on balance, so far as it goes, favours the view that the first loan has been repaid, though the same cannot be said in respect of the second and third loans. However, even if that be so, the fact that a preponderance of evidence at this early stage indicates that the plaintiff's claim might fail, would not be enough to deter the Court from reinstating the company so that the claim could be agitated. But it is a different matter where it appears that the claim is doomed to fail. In such a case it would be vexatious to reinstate a company in order to permit proceedings that were doomed to fail to proceed against it.
There is a fundamental problem so far as the viability of the plaintiff's claim to be a creditor is concerned. Unsurprisingly, given the dates to which I have referred, Xin Mei He pleads in her defence in proceedings 83339 that the alleged debt did not accrue within six years before the commencement of the action and is barred by (NSW) Limitation Act 1969 s 14.
In the statement of claim in proceedings 83339, Mr Kure's cause of action is relevantly pleaded as follows:
5. Each of the said payments was made on the following terms agreed with the First Defendant on her own behalf and as a director and agent of the Second Defendant in 2007 and on or about the dates each of the payments was made:
…
c) The monies were repayable by the First and Second Defendants on demand by the Plaintiff.
…
f) The First Defendant undertook, if necessary, to sell any real property owned by her to repay the monies borrowed with interest, when demanded.
Particulars of the loan agreements were said to be as follows:
i) The loan agreements were partly oral and partly in writing.
ii) The oral part consisted of conversations between the Plaintiff and the First Defendant in 2007 and on or about the dates each of the payments was made.
iii) The written part consisted of payment receipts:
A. from Citibank Pty Ltd confirming payment upon a request for a bank cheque in favour of the Second Defendant drawn on the account of the Plaintiff in the amount of $633,774.87 plus a figure $15.00 on 6 May 2008,
B. from the First Defendant on the letterhead of the Second Defendant dated 25 May 2009 (written in Chinese), and
C. from the First Defendant on the letterhead of the Second Defendant dated 1 May 2009 (written in Chinese).
I interpolate that in those proceedings, Ms Xin Mei He is the first defendant and Italasia the second defendant. It is subsequently pleaded:
10. On or about 28 March 2011 the Plaintiff demanded repayment of his loans with interest.
Particulars of the demand are then given. Finally, it is pleaded:
14. The First and Second Defendants have failed to repay the loans or to pay any interest on the loans since at least 25 June 2009.
It will be apparent from what I have set out above that what is pleaded is that the loans were "repayable ... on demand by the plaintiff".
In Ogilvie v Adams, [1] Fullagar J held that when money is advanced on terms that it is to be repayable on demand, then the cause of action for recovery accrues on the date of the advance without the need for any demand. In this respect, his Honour was following the authority of the High Court of Australia in Young v Queensland Trustees Ltd. [2] His Honour said (at 1043):
[T]he common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor's money and this is whether the creditor brought an action of debt or an action in indebitatus assumpsit. Therefore, if A lends money to B then instantly B is detaining A's money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words, clearly and consistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call), is not sufficient to contract out of that situation where all that is known is the terms of the contract is that A has paid money to B by way of loan. The lender's cause of action still arises instanter on the receipt of money by the borrower, so that the lender's course of action becomes statute barred at the expiry of six years after receipt of the money.
In Young v Queensland Trustees Limited, the High Court said (at 566):
Speaking of a promissory note payable on demand, Parke B. in Norton v. Ellam [3] said: "It is the same as the case of money lent payable upon request, with interest, where no demand is necessary before bringing the action. There is no obligation in law to give any notice at all; if you choose to make it part of the contract that notice shall be given, you may do so. The debt which constitutes the cause of action arises instantly on the loan. Where money is lent, simply, it is not denied that the statute begins to run from the time of lending.
Ogilvie v Adams has been followed by the Queensland Court of Appeal in Haller v Ayre, [4] by Young J in Drinkwater v Caddyrack Pty Ltd (No 3), [5] and by Ward J (as her Honour the Chief Judge then was) in Chidiac v Maatouk. [6]
In order for a special term of a loan contract to prevent the cause of action from arising instantly on the loan being made, there needs to be something from which the Court can see that the parties, had made provision inconsistent with the ordinary position. In Fischer v Nemeske Pty Ltd, [7] Stevenson J was able to do so where there were words in the charge that provided that moneys were payable "without the necessity for any demand or notice" in certain circumstances, and that such words had the consequence that in other circumstances it could be inferred that demand was necessary.
In the present case, there is nothing in the pleading that would support any such special condition in the relevant loan contracts. The pleading does no more than plead that the loan was one payable on demand, which brings it within the ordinary rule and not the exception. Nor does the evidence, so far as it goes, provide any basis for supposing that there was such a condition. The documents referred to in particulars B and C - which evidence the second and third loans - refer to the loan amount, the purpose or application of the loan, and the interest payable (including the rate), but are silent as to the duration of the loan or any requirement that there be a demand before it would be repayable. It is, I suppose, theoretically possible that oral evidence might be adduced of an oral term to that effect, but there is nothing in the particulars so far provided that would support one; and it would be surprising if that were so in light of the matters that are covered in the written receipts.
In those circumstances, it seems to me that the plaintiff's claim in proceeding 83339, at least as presently pleaded, is one that cannot succeed in light of the limitation defence. In those circumstances, there is no utility in reinstating the company. If the case changes in the future, then a further application for reinstatement is not precluded; but at this stage the case for reinstatement of the company is not made out. The Court orders that the originating process be dismissed, with costs.
[3]
Endnotes
[1981] VR 1041.
(1956) 99 CLR 560.
(1837) 2 M. & W. 463; 150 E.R. 839.
[2005] 2 Qd R 410 at [26]-[30].
(SC(NSW), Young J, No 3970/1996, 28 November 1997)
[2010] NSWSC 386 at [234]-[239].
[2014] NSWSC 203 at [49], [180].
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Decision last updated: 20 June 2017