Application for leave under s 440D of the Corporations Act
By Amended Originating Process filed on 25 November 2019, the Plaintiff, Aerodrive Australia Pty Limited ("Aerodrive") seeks, inter alia, leave under s 440D(1)(b) of the Corporations Act 2001 (Cth) to continue proceedings by which it applies to set aside a creditor's statutory demand ("Demand") served by the Defendant, PJM Fleet Management Pty Ltd (rec and mgr apptd) (admins apptd) ("PJM").
The need for such leave arises because PJM has been placed in administration since the proceedings were commenced. Section 440D of the Act relevantly provides that, during the administration of a company, a proceeding in a court against the company cannot be proceeded with except with the administrator's written consent or with the Court's leave. Aerodrive, by its solicitors, has sought the administrators' consent to the continuance of the proceedings against PJM but they consider that they are unable to give it where PJM is in receivership. The receiver has not provided such consent or indicated that the administrators may do so.
Mr McMeniman, who appears for Aerodrive, relies on the affidavit of Ms Nguyen, a solicitor acting for Aerodrive in respect of the application for leave and to set aside the Demand. That affidavit annexes a company search which indicates that PJM was placed in administration on or about 22 October 2019.
Aerodrive's solicitors, on 14 November 2019, sought an indication from the administrators as to their position. The administrators responded on 14 November 2019 by noting that a receiver and manager had been appointed to PJM and control of PJM rested with them. Also on 14 November 2019, the solicitors for Aerodrive sought information from the receiver as to whether he intended to defend the proceedings. The receiver responded by email dated 14 November 2019, referring to a communication with a director of Aerodrive, who had confirmed that Aerodrive owed money, and referring to a discussion as to a commercial resolution of the matter which does not appear to have occurred. The receiver then suggested that the matter be adjourned, as appears to have occurred.
By a further email dated 21 November 2019 the solicitors for Aerodrive noted the further listing of the matter, and anticipated that the Court would set the matter down for hearing and noted the receiver's position that he did not "adopt" the proceedings. The solicitors also sought confirmation as to the receiver's position in that respect. The receiver responded by an email dated 22 November 2019 indicating that he did not want to appear to attend in the proceedings, but did not waive any rights that PJM had against Aerodrive in respect of the "outstanding debt". The receiver expressed a view that Aerodrive should put all relevant material before the Court and requested that an email dated 21 November 2019 marked "without prejudice" be tendered, although Mr McMeniman has not done so where the claim for without prejudice privilege is maintained by Aerodrive. The receiver also observed, perhaps presciently, that it was apparent from the evidence led by Aerodrive that only a small amount of the amount claimed by PJM was in dispute, and that, on the basis of the evidence before the Court, the Court might vary the amount of the Demand, with the receiver calculating the varied amount as $271,623.48. Whether that will occur will emerge in due course. The administrators in turn maintained the position that they could not consent to the relevant proceedings where a receiver and manager had been appointed by their email dated 22 November 2019.
Mr McMeniman fairly refers in submissions to the decision of Barrett J in Greenaways Australia Pty Limited v CBC Management Pty Limited [2004] NSWSC 1186, where his Honour granted leave to continue proceedings against a company in liquidation in similar circumstances. His Honour there noted (at [22]) that:
"… the provisions precluding, without the court's leave, continuation of legal proceedings against a company once a relevant form of external administration is imposed is to create a screening mechanism to ensure that the proceedings do not interfere unduly with the due progress of the administration."
Here, the setting aside of the Demand so that PJM, through its administrators and receiver, does not have the benefit of a presumption of insolvency, if and when it comes to initiate winding up proceedings, will have no impact on the orderly conduct of the administration and the performance of the administrators' functions in that respect.
It seems to me, for several reasons, it is appropriate that leave should be granted so that the status of the Demand can be determined and Aerodrive should only face a presumption of insolvency if the Demand should be permitted to remain on foot, either in whole or in part, and the Demand is not then met. There is no prejudice to the administration in that question being determined, particularly where the administrators will not take an active role in the application and the receiver does not seek to appear. For these reasons I grant leave nunc pro tunc to the extent necessary for the Plaintiff to continue these proceedings.
[3]
Whether the Demand should be set aside
Aerodrive sought an order setting aside the Demand issued to it by PJM on the bases that there was a genuine dispute as to the debts claimed; or there is a defect in the Demand as to which substantial injustice would be caused unless the Demand was set aside; or that the debts were not due and owing and that the Demand would otherwise be set aside under s 459J of the Act. Those grounds cover all available bases to set aside the Demand.
The Demand in turn is dated 6 September 2019 and referred to amounts owed for vehicle rental hire fees for vehicles apparently used by Aerodrive in a car rental business for July 2019 and August 2019 by reference to specified invoice numbers in specified amounts. The Demand also included an amount described as a "towaway fee" issued by NSW Roads and Maritime Services and paid by PJM relating to a leased vehicle, and to two amounts being insurance excesses paid by PJM in respect of vehicles which were total losses, each of $7,500.
The application to set aside the Demand was supported by an affidavit of Mr Arrum Stones, who is a director of Aerodrive. In respect of the amount claimed for the July invoice, Mr Stones' affidavit was carefully phrased. Mr Stones noted that the Demand referred to a July invoice for $122,422.29 and that there was no invoice issued by PJM with that invoice number for that amount. That was correct because, as Mr Stones' affidavit made clear, there was an invoice with that invoice number issued for a higher amount which had been partly paid, and PJM had fairly allowed credit for the amounts paid in respect of the amount claimed in the Demand. Mr Stones accepted, fairly, in his affidavit that the amount of $114,422.29 remained outstanding in respect of that invoice, and that position was supported both by a remittance advice issued by Aerodrive showing the relevant part payments, and by further email exchanges which were said to be annexed to Mr Stones' affidavit but were omitted and separately tendered as Exhibit P1. Mr Stones contended that the Demand had overstated the amount owed in respect of the July invoice by $8,000 and it appears that that proposition is at least genuinely arguable for the purposes of this application. Mr Stones also identified the somewhat ambitious submission that there was a defect in the description of the debt, so far as the Demand had overstated the amount claimed by that $8,000. That proposition, if correct, plainly does not lead to any reason to set aside the Demand on the basis of substantial injustice, since Mr Stones has not had the slightest difficulty reconciling the amount claimed in response to the amount owed.
Mr Stones in turn refers to an August invoice for $152,091.19 and, again, indicates, somewhat carefully, that he does not have a record of an invoice for that amount. He does fairly acknowledge that Aerodrive has a copy of an August invoice of the same invoice number for an amount that is approximately $5,000 higher. Mr Stones notes that the Demand does not explain the discrepancy between the amount claimed and the invoiced amount, although it would not be difficult to infer that the amount has been understated for whatever reason.
Mr Stones identifies two further defects in the Demand, namely, that the Demand does not identify a basis on which the "towaway fee" and the two excess amounts are payable by Aerodrive to PJM. It seems to me that a genuine dispute exists as to those amounts. Notwithstanding that there appears to be no particular contest that PJM has incurred those amounts, it has not identified why it has a right to recover those amounts against Aerodrive, whether on the basis of some contractual basis to do so, or a claim for unjust enrichment or otherwise. In these circumstances it seems to me that a genuine dispute as to those amounts is established.
As I noted above, the first basis on which the Demand was sought to be set aside was that a genuine dispute existed. It seems to me that a genuine dispute does exist in respect of only a small part of the amount claimed in the Demand, and that supports an order under s 459H of the Act varying the Demand rather than setting it aside. The second basis, which I have addressed above, is that there was a defect in the Demand and substantial injustice would be caused unless the Demand was set aside. For the reasons noted above, that claim is not established because any defect in the Demand plainly cannot cause substantial injustice to Aerodrive, which had a clear understanding of what was claimed and why it was due. The final proposition, that the debts are not due and owing and the Demand should otherwise be set aside under s 459J(1)(b) of the Act cannot be accepted where the debts are largely due and payable, and the position where the amount in a creditor's statutory demand is overstated is specifically addressed by the provisions in s 459H of the Act.
Turning now to the application of s 459H of the Act, that section provides that, where the Court is satisfied that there is a genuine dispute as to the existence or not of a debt to which a demand relates, it is required to calculate the
"substantiated amount" of the demand by deducting any disputed amounts from the admitted amount of the debt, being that part of the debt as to which no genuine dispute exists. The Court must then set aside the demand if the substantiated amount is less than the statutory minimum. If the substantiated amount is at least as great as the statutory minimum, the Court may make an order varying the demand as specified and declaring that the demand have effect as and from when the demand was served on the company under s 459H(4).
In Re Morris Catering (Australia) Pty Limited (1993) 11 ACSR 601 at 605, Thomas J observed that the intention of these provisions is that:
"… a company should pay the undisputed part of a demanded debt even if the demand may have been excessive, but that it should not be placed under pressure of being wound up with respect to any part of the debt that is genuinely disputed, or where there is any genuine contra-claim, whether or not it arises out of the same transaction as the debt to which the demand relates."
That observation is plainly apposite here so far as a relatively small part of the debt claimed was genuinely disputed by Aerodrive. In Re Tetbury Pty Limited [2017] NSWSC 37 at [43], I observed, with reference to authority, that the Court would generally vary a demand pursuant to s 459H(4) unless it was so grossly inflated or claimed amounts which were so obviously in dispute that the service of the demand amounted to an abuse of the regime under Pt 5.4 of the Act and should be set aside for some other reason under s 459J of the Act. That is not the case here.
But for a concession made by Aerodrive to which I will shortly refer, I would have varied the Demand under s 459H(4) of the Act by excluding the amount of $8,000 from the July invoice, being the amount of the overstatement of that invoice identified in Mr Stones' affidavit, and excluding the amount of the tow away fee and two excess claims, resulting in a total of $266,513.48. However, Aerodrive fairly recognises that that would not be a wholly satisfactory result, because the Demand has also understated the amount payable in respect of the August invoice by $5,000 and, if that course were taken, Aerodrive would potentially be exposed to a further statutory demand in respect of that unpaid amount. By reason of Aerodrive's concession, I consider that I can properly vary the Demand by excluding the amounts as to which a genuine dispute exists, less the additional amount that Aerodrive accepts is properly payable, pursuant to s 459H(4) of the Act. That will in turn, in accordance with the concession made by Aerodrive, result in a variation of the Demand to the amount of $271,623.48 as set out by the receiver in his email dated 22 November 2019 to Aerodrive's solicitors.
For these reasons I make an order under s 459H(4) of the Act as follows:
The amount of the creditor's statutory demand dated 6 September 2019 issued to Aerodrive Australia Pty Limited by PJM Fleet Management Pty Ltd (rec and mgr apptd) (admins apptd) be varied to the amount of $271,623.48, and declare the demand to have had effect as so varied as and from when the demand was served on the company.
The Plaintiff, by its solicitors, communicate the result of this application, including order 1 made above, to the receiver and manager and administrators of the Defendant by 4pm on 27 November 2019.
I note that, fairly, Aerodrive did not seek an order for costs in respect of the application.
[4]
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Decision last updated: 30 December 2019