Collendina Pty Limited v ClarkeKann

REASONS FOR JUDGMENT 1 This is an application under s 459G of the Corporations Act 2001 (Cth) ("the Act") to set aside a statutory demand served on the plaintiff, Collendina Pty Limited ("Collendina"). 2 The matter has been before the Court on a number of occasions. It came before me again this morning when I refused the further adjournment sought by Collendina of the application. 3 The reasons for the refusal of the adjournment ought to be clear enough from the transcript of argument which took place when Mr King of counsel appeared for Collendina. 4 Mr King had only very limited instructions, his instructions being limited to the application for an adjournment of the hearing, and he sought leave to be excused from further attendance if the adjournment was refused. I gave Mr King leave to be excused and there is now no appearance by Collendina. 5 In those circumstances, Ms Obrart, who appears for the defendant, ClarkeKann, asks me to proceed with the matter in the absence of Collendina. I have power to proceed with the hearing in accordance with Order 32 rule 2(1)(d) of the Federal Court Rules. 6 I would also have power under Order 35A of the Federal Court Rules to dismiss the proceeding for want of appearance on the part of Collendina. However, since the matter has been before me on so many occasions, I think that the interests of justice, which I took into account in refusing an adjournment, also point in favour of dealing with the matter at least briefly today in order to address the contentions which have been put in some reasonable detail on the defendant's part. 7 The application was filed on 24 June 2010. It invokes only s 459G and s 459J of the Act. Notably, there is no reference in the application to the provisions of s 459H, which applies where the court is satisfied that there is a genuine dispute between the company and the respondent about the existence or the amount of a debt to which the demand relates, or where the company has an offsetting claim. 8 The provisions of s 459J confer power on the court to make an order under s 459G on the "substantial injustice" ground set out in s 459J(1)(a) or s 459J(1)(b) where there is "some other reason" why the demand should be set aside. 9 It seems to me that the effect of the evidence of Collendina on this application goes to the question of whether there is some other reason in accordance with s 459J(1)(b). 10 I am satisfied that I have jurisdiction to hear the matter, the conditions of s 459G(3) being satisfied. 11 The statutory demand in the present case arises out of a judgment entered in the District Court of New South Wales on 6 May 2010. The judgment is constituted by assessed legal costs pursuant to a cost assessment certificate issued on 12 April 2010. The costs appear to have been incurred by the plaintiff between 2005 and 2007, the work having been carried out by a Mr Andrew Ford, solicitor. The costs were the subject of a costs assessment. 12 The details of the lengthy history which resulted in the costs being assessed are set out in a document called Respondent's Chronology, which I will mark as MFI 1. The chronology shows that Collendina had ample opportunity to object to the assessment, but it failed to do so. 13 Moreover, by 10 May 2010, time had expired for filing an appeal to the District Court from the cost assessor's decision, and by 12 May 2010, time had expired for lodging a review of the cost assessor's decision. 14 In addition, I have before me evidence of a letter dated 1 June 2010 from the Manager, Costs Assessment in the Supreme Court of New South Wales, stating that there were no reasons given by Collendina for seeking a review out of time, and an application for review which was sought by the applicant on 20 May 2010 was refused. 15 The only other factual matter which arises from the chronology to which I need refer is that there was, in evidence before me, a deed of assignment of the debt from Mr Ford to ClarkeKann of debts constituted by legal fees owed to Mr Ford by Collendina. Although the deed bears the date 1 December 2007, it was not executed until 21 July 2009. 16 The deed was executed during the period in which Mr Ford was bankrupt. He was declared bankrupt on 13 October 2008 and was not discharged from bankruptcy until 14 October 2009. However, I have before me evidence which establishes that Mr Ford's bankrupt estate was administered upon the basis that the debt was assigned to ClarkeKann. 17 In that regard, it is relevant to point out that Mr Ford ceased to practice on his own account shortly before the date on the deed of assignment, and the evidence appears to establish that the unpaid fees were assigned to ClarkeKann by Mr Ford when he took up practice with that firm. 18 It is also important to bear in mind that the question of the assignment of the costs was not raised by Collendina at any time during the costs assessment process. It was first raised when the matter came before me on the present application to set aside the statutory demand. 19 It seems to me that s 459H was not invoked by Collendina. However, even if it was, it is well established that the possibility that a presently enforceable debt may be set aside in the future, pursuant to an existing appeal, does not give rise to a genuine dispute about the existence of the debt within the meaning of s 459H. That proposition has been established in a series of authorities: Barclays Australia (Finance) v Mike Gaffikin Marine (1996) 21 ACSR 235 at 238; Eumina Investments Pty Limited v Westpac Banking Corporation (1998) 84 FCR 454 ("Eumina") at 457 - 458; Midas Management Pty Limited v Equator Communications Pty Limited [2007] NSWSC 759 ("Midas") at [12]; Food Channel Network v Television Food Network GP [2010] FCA 403 ("Food Channel") at [14]. 20 Turning then to the provisions of s 459J of the Act, I do not think that there is, in the present case, any other reason why the statutory demand ought to be set aside. 21 The discretion conferred on the court under s 459J has been dealt with in a number of authorities, including those that I have referred to above. In Eumina, Emmett J was of the view that it was open to him to exercise the power to set aside the statutory demand where there was an application for special leave to appeal on foot. His Honour considered the competing summaries of argument, and was of the view that there were reasonable and arguable grounds for the success of the appeal. His Honour pointed to the fairly wide nature of the discretion conferred under s 459J and in that regard, cited the decision of a Full Court in Hoare Bros Pty Limited v Deputy Commissioner of Taxation (1996) 62 FCR 302. 22 Notably in Eumina, Emmett J said that one circumstance where it may be unjust for a demand to stand is where there is a judgment or order which precludes the contention that there is a genuine dispute or an offsetting claim but there is on foot a bona fide appeal from that judgment or order. That was, in effect, the basis upon which his Honour exercised the power to set aside the demand in that case. 23 His Honour's approach was followed by Hammerschlag J in Midas, but in Food Channel at [18], Logan J suggested that the observations made by Emmett J in Eumina may not be able to stand with the decision of the High Court in Deputy Commissioner of Taxation v Broadbeach Properties Pty Limited (2008) 237 CLR 473. 24 Whether or not the remarks made by Logan J are correct, no such question arises in the present case. This is because there is no appeal on foot from the order of the District Court which underlies the statutory demand. Accordingly, in my opinion, s 459J is not enlivened in the present case. 25 I should also point out that, as I mentioned earlier, there was no challenge to the assignment during the costs assessment process, and the administration of Mr Ford's estate proceeded on the basis that the debt had been assigned. I have evidence to that effect before me. It seems to me that if this matter had been raised on the costs assessment, it may have been open to ClarkeKann to have taken steps to deal with the matter at that stage. 26 For the reasons set out above, notwithstanding the fact that Collendina does not appear before me this morning, I have given fairly close attention to the matter, and I am of the view that the application to set aside the statutory demand cannot succeed. I will accordingly order that the application be dismissed. 27 The order I propose to make is that the plaintiff pay the costs of the application as assessed or agreed on a party and party basis. I will order that the funds paid into court pursuant to the orders made by Graham J made on 23 August be paid out to the defendants, ClarkeKann (NSW) Pty Limited. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.