By originating process filed on 25 November 2021, C88 Project Pty Ltd ACN 165 409 003 (C88) applies pursuant to s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand issued to it on 8 November 2021 by the defendant, The Property Investors Alliance Pty Ltd ACN 117 017 302 (TPIA).
TPIA was the plaintiff and C88 was the defendant in proceedings 22126 of 2021 in the Commercial List of the Equity Division of this Court. On 13 September 2021, Hammerschlag J gave judgment in those proceedings in favour of TPIA against C88 for $18,055,076.20. His Honour also made an order against C88 for interest at the rate of 10% per annum from 1 October 2019 "up to the date of judgment": The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd [2021] NSWSC 1175.
The statutory demand is for an amount of $21,586.941.46, being the judgment sum of $18,055,076.20 plus $3,531,865.26 in respect of the interest ordered by his Honour. The calculation of the interest is set out in the affidavit accompanying the statutory demand. The amount has been calculated on the basis of 10% per annum (amounting to $4,946.59 per day) payable for the period of 714 days from 1 October 2019 to 13 September 2021, inclusive.
C88 applies to set aside the statutory demand on two grounds.
First, the statutory demand omitted five notes that are part of the prescribed form in which a statutory demand must be made. It was common ground that this is a defect in the demand: Corporations Act, s 9; Kalamunda Meat Wholesalers Pty Ltd v Reg Russell and Sons Pty Ltd (1994) 51 FCR 446 at 452 (Hill J); Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd [2002] NSWSC 219 at [10] (Barrett J, as his Honour then was). C88 contends that the demand should be set aside under s 459J(1)(a) of the Corporations Act because substantial injustice will otherwise be caused.
Second, as I have already mentioned, the calculation of interest included 13 September 2021, being the date on which judgment was given in favour of TPIA. C88 contends that the order for interest was for the period up to, but not including, the date of judgment. It submits that the amount of $4,946.59 included in the demand in respect of interest for 13 September 2021 is not due and payable and that the demand should be set aside under s 459J(1)(b) of the Corporations Act for that reason.
At the conclusion of the hearing of the application on 17 February 2022, I made orders dismissing the application with costs on the basis that I would publish my reasons at a later date. These are my reasons for making those orders.
[2]
Omission of the notes
As C88 submitted, s 459E(2)(e) of the Corporations Act provides that a statutory demand must be in the prescribed form. The form prescribed by the Corporations Regulations 2001 (Cth) is Form 509H.
Consistently with the prescribed form, the statutory demand:
1. stated the amount owed by C88 ("the Company") in paragraph 1, and identified those debts in the Schedule to the demand as the judgment debt in the Commercial List proceedings referred to above of $18,055,076.20 plus interest of $3,531,865.26;
2. stated in paragraph 3 that TPIA ("the Creditor") required C88 to pay the total amount of the debt "within the statutory period after service on the Company of this demand" (my emphasis);
3. stated in paragraph 4 (my emphasis):
"The creditor may rely on a failure to comply with this demand within the period for compliance set out in subsection 459F(2) as grounds for an application to a court having jurisdiction under the Corporations Act 2001 for the winding up of the company."
1. stated in paragraph 5 (my emphasis):
"Section 459G of the Corporations Act 2001 provides that a company served with a demand may apply to a court having jurisdiction under the Corporations Act 2001 for an order setting the demand aside. An application must be made within the statutory period after the demand is served and, within the same period:
(a) an affidavit supporting the application must be filed with the court; and
(b) a copy of the application and a copy of the affidavit must be served on the person who served the demand"
1. contained the following warning statement immediately following paragraph 5:
"A failure to respond to a statutory demand can have very serious consequences for a company. In particular, it may result in the company being placed in liquidation and control of the company passing to the liquidator of the company."
1. set out TPIA's address for service.
The notes to Form 509H state:
"1. The form must be signed by the creditor or the creditor's solicitor. It may be signed on behalf of a partnership by a partner, and on behalf of a corporation by a director or by the secretary or an executive officer of the corporation.
2. The amount of the debt or, if there is more than one debt, the total of the amounts of the debts, must exceed the statutory minimum. The statutory minimum is $2,000 or a greater amount prescribed by the regulations. From 1 July 2021, a greater amount of $4,000 is prescribed. However, for a 7‑month period in 2021, a greater amount of $20,000 is prescribed in relation to a company that is eligible for temporary restructuring relief (see the Corporations Amendment (Corporate Insolvency Reforms) Regulations 2020).
3. Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:
(a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and
(b) complies with the rules.
4. A person may make a demand relating to a debt that is owed to the person as assignee.
5. The statutory period is 21 days or a longer period prescribed by the regulations. For a 7‑month period in 2021, a longer period of 6 months is prescribed in relation to a company that is eligible for temporary restructuring relief (see the Corporations Amendment (Corporate Insolvency Reforms) Regulations 2020)."
Those notes were omitted from the statutory demand.
As counsel for C88 acknowledged, that omission is not a basis for setting aside the demand under s 459J(1)(a) unless substantial injustice will otherwise be caused: Corporations Act, s 459(2); Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229; [2005] NSWCA 24 at [26] (Santow JA, Tobias AJA agreeing) and at [58] (Young CJ in Eq).
As Barrett J (as his Honour then was) held in Randall Pty Ltd v Chepan Pty Ltd [2009] NSWSC 848 at [15]: "the question of substantial injustice posed by s 459J(1)(a) is to be addressed by reference to the circumstances of the particular case. The injustice that must be considered is any injustice that arises in the totality of the circumstances of the particular case".
C88 submitted that, in the circumstances of the present case, the defect will cause substantial injustice if the demand is not set aside because, following the Coronavirus Economic Response Package Omnibus Act 2020 (Cth), note 5 informs the debtor company of the time by which it must either comply with the demand or apply to have it set aside. Previously, paragraph 4 of the prescribed form of demand (not the notes) had informed the debtor company that the time for compliance with the demand was 21 days. Now, paragraphs 3, 4 and 5 of the demand in the terms set out above inform the debtor company of the need to comply with the demand or apply to set it aside within the statutory period. Note 5 contains further information about the statutory period.
It is true that note 5 contains further information about the statutory period. However, note 5 does not provide a definitive answer about the statutory period that applies to the company that has received the statutory demand. Rather, note 5 directs the company to the legislation and regulations to ascertain whether the statutory period is 21 days or a longer prescribed period, and whether a different period is applicable to the company's particular circumstances (which turns on whether the company is eligible for temporary restructuring relief). Thus, irrespective of whether the debtor company has the benefit of the notes, it must revert to the legislation and regulations to determine the period within which it must act. Section 459F(2) (referred to in paragraph 4 of the demand) is the starting point, followed by the definition in s 9 of the term "statutory period" that is used in s 459F(2) and also in the demand. That definition directs the debtor company to the regulations to check if a period longer than 21 days is prescribed. Regulation 5.4.01AAA provides that, for statutory demands served prior to 1 August 2021, the statutory period is 6 months for a company that is eligible for temporary restructuring relief and otherwise 21 days. For statutory demands served on or after 1 August 2021, the statutory period is 21 days.
The present statutory demand was issued on 5 November 2021. The six month period for companies eligible for temporary restructuring relief under reg 5.4.01AAA(2)(a) was not applicable because the demand had been issued after 1 August 2021. The information contained in the demand required C88 to revert to the provisions of the Corporations Act and Corporations Regulations referred to above in order to ascertain the period of time within which it needed to either pay the amount claimed or apply to set aside the demand. If the demand had included the prescribed notes, C88 would have needed to read those same provisions in order to understand the period of time available to it to take action on the demand. The warning contained within the demand alerted the company to the potential consequences of failing to take action within the statutory period.
In those circumstances, I am not satisfied that substantial injustice will flow from the omission of the prescribed notes if the statutory demand is not set aside. Because note 5 requires the company to consult the legislation and regulations to ascertain the applicable statutory period, there is no difference in substance between the matters notified to C88 by the statutory demand and the matters that would have been notified in the demand had included the notes: Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd [2002] NSWSC 219 at [21]-[23] (Barrett J, as his Honour then was). The circumstances of the present case are readily distinguishable from cases in which the demand wrongly stated that a 21 day statutory period applied: see Re GT's Cooking Oils Pty Ltd (2021) 149 ACSR 659; [2021] NSWSC 93 (Black J).
[3]
Interest calculation
Relying on r 1.11(2) and r 36.4(1)(a) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), C88 contends that the terms of the order made by Hammerschlag J for interest required interest to be paid up to, but not including, the date of judgment.
TPIA relies on the notation that accompanied his Honour's orders to the effect that judgment was stayed until 15 September 2021. TPIA also relies on evidence that judgment was entered on 15 September 2021. TPIA submits that UCPR r 36.4(2)(a) and/or r 36.4(3) apply so that the order is for interest up to and including 14 September 2021, being the last day before entry of the judgment and expiry of the stay. As I have already mentioned, the interest component of the amount in the statutory demand was calculated up to and including 13 September 2021.
It is not necessary for present purposes to resolve this dispute. I assume in favour of C88 that there is a genuine dispute about the meaning of the order for interest. That is to say, as counsel for C88 very properly conceded, if the order was for interest only up to (and not including) 13 September 2021, the inclusion of interest for that date in TPIA's calculation of the amount due and payable was a genuine error and not a deliberate overstatement of the debt.
As TPIA submitted, the power to set aside a statutory demand under s 459J(1)(b) "exists to maintain the integrity of the process provided under Pt 5.4 of the Corporations Act and is to be used to counter an attempted subversion of the statutory scheme, but is not exercised by reference to subjective notions of fairness": see Rinfort Pty Ltd v Arianna Holdings Pty Ltd (2016) 306 FLR 413; (2016) 111 ACSR 607; [2016] NSWSC 251 at [84] (Black J), citing Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746; Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 132 FLR 300; (1996) 20 ACSR 746; [1996] NSWSC 199, Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229; [2005] NSWCA 24 and CP York Holdings Pty Ltd v Food Improvers Pty Ltd [2009] NSWSC 409.
The statutory scheme was described in the following terms in Meehan v Glazier Holdings Pty Ltd, supra, at [47] (Santow JA, Tobias AJA and Young CJ in Eq agreeing):
"Its essence is to be found in the proposition that a winding-up application is not to be used for the improper purpose of compelling a solvent company to pay a disputed debt."
In the present case, I do not consider that the inclusion of interest in respect of 13 September 2021 in the amount of the debt specified in the statutory demand involved an attempted subversion of the statutory scheme of Part 5.4.
The amount of interest is clearly stated separately from the amount of the judgment sum in the Schedule to the demand, and the manner in which interest has been calculated is set out in sufficient detail in the affidavit accompanying the demand for C88 to ascertain whether it disputes the amount of the debt. C88 disputes $4,946.59 only, being the interest for the day of 13 September 2021.
C88 does not dispute the balance of the $21,586.941.46 debt. It was open to C88 to make an application under s 459H of the Corporations Act to vary the demand by deducting $4,946.59 on the grounds of a genuine dispute about that amount. Such an application is a means by which C88 could have avoided being compelled to pay the disputed component of the debt in order to avoid a winding up application based on its non-compliance with the demand. C88 did not make an application under s 459H.
Having regard to all of those matters, the issue of the demand for $21,586.941.46, including the amount of $4,946.59 that is now known to be disputed by C88, did not involve any subversion of the scheme of Part 5.4 and I am not satisfied that there is some other reason why the demand should be set aside under s 459J(1)(b). Other cases relied on by C88 in which statutory demands have been set aside under s 459J(1)(b) on the grounds that the debt was not due and payable when the demand was issued turn on their own particular facts. For example, Re Tuffrock Pty Ltd [2015] NSWSC 738 involved a dispute about whether the whole amount in the statutory demand (to the extent that it was pressed by the creditor) was due and payable as at the date of issue of the demand. As counsel for C88 fairly conceded, the present case is distinguishable because only one component of the debt is the subject of dispute. The present case, in substance, is merely a dispute about the amount of the interest component of the debt.
[4]
Conclusion and orders
For the foregoing reasons, I made the following orders on 17 February 2022:
1. Order that the proceedings are dismissed.
2. Order the plaintiff to pay the defendant's costs of the proceedings.
[5]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 17 February 2022
Parties
Applicant/Plaintiff:
CP York Holdings Pty Ltd
Respondent/Defendant:
Food Improvers Pty Ltd
Legislation Cited (4)
Coronavirus Economic Response Package Omnibus Act 2020(Cth)