Gujarat NRE Australia Pty Ltd v Williams [2006] NSWSC 211 | Case summary

1 The plaintiffs have filed an originating process in which the claims for relief are set out under two headings. The first heading is "Corporations Act Relief". The second is "Non Corporations Act Relief". Under the first heading, the first plaintiff seeks orders that certain statutory demands served on it be set aside (it relies on each ground contemplated by s.459H of the Corporations Act 2001 (Cth), that is to say, the existence of a genuine dispute as to the existence or amount of the debt to which the demand relates, and the existence of an offsetting claim). Under the second heading, both plaintiffs seek damages, a declaration that the first plaintiff is relieved from paying amounts otherwise due under cl 3.6 of a certain agreement and interest pursuant to s.100 of the Civil Procedure Act 2005. 2 I asked Mr Gillard, who appeared for the plaintiffs, whether it was right to characterise the claims under the second heading as claims involving the determination of the genuine dispute that forms one part of the basis of the claims under the first heading, as well as determination of the offsetting claim that forms the other part of the basis for the relief sought under the first heading. He gave an affirmative answer. The court is therefore asked to determine under the first heading whether the genuine dispute and the offsetting claim exist, and it is then asked to determine under the second heading the merits of the dispute and the merits of the offsetting claim. 3 The court has always made it clear that an application under s.459G for an order setting aside a statutory demand is not the vehicle for determining the substantive merits of an alleged genuine dispute or an alleged offsetting claim. The court's task is merely to decide, by reference to the relatively low threshold that applies to such matters, the simple question as to the existence of the genuine dispute or offsetting claim, without being concerned at all to weigh the strengths of the respective contentions with respect to the dispute or claim. Once it is determined that a genuine dispute or an offsetting claim exists, that is the end of the matter so far as the s.459G application is concerned. 4 In support of these propositions, one may refer to one of the leading authorities on s.459G, Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, where McLelland CJ in Eq observed that, upon an application under that section based on genuine dispute, the court will not, except in an extreme case, embark upon an inquiry into the credit of a witness. His Honour continued (at p.787): "There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute." 5 McLelland CJ in Eq quoted with approval a passage in the judgment of Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1994) 2 VR 290 at p.295: " These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute." 6 The matter was put thus by Thomas J in Re Morris Catering (Aust) Pty Ltd(1993) 11 ACSR 601 at p.605: "The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it)." 7 These observations caused me to say of s.459G applications in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411: "The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger." 8 Section 459G proceedings are thus an inappropriate vehicle for consideration of the substantive merits of disputes and offsetting claims which are of such a kind that their mere existence forms a basis for the setting aside of the statutory demand. A proceeding of the dual nature now contemplated would, unless separated in some appropriate way, have the unfortunate and undesirable effect of causing the s.459G application to be delayed and to move at the slower pace that would inevitably be involved in determination of the substantive merits of the dispute or offsetting claim. 9 Division 3 of Part 5.4 aims to ensure that questions about statutory demands are dealt with in a relatively summary way, so that it can be seen quickly and conclusively whether the particular ground for the pursuit of winding up proceedings exists. It would be contrary to that aim to allow the s.459G application to be determined with and as part of a single proceeding also encompassing determination of the substantive dispute and the substantive offsetting claim. 10 Proceedings in which winding up on the grounds of insolvency is sought and generally regarded as an inappropriate vehicle for the agitation of other claims. This is because such an application generally should be determined without undue delay and raise considerations of the public interest: see generally Re National Computer Systems & Services Ltd (1991) 6 ACSR 133; Aloridge Pty Ltd v West Australian Gem Explorers Pty Ltd (1995) 15 ACSR 645. The first of these considerations (but not necessarily the second) applies alike to an application for an order setting aside a statutory demand. 11 It was suggested that although the present proceeding has been commenced under, as it were, two headings in the way that has been described, it might somehow be separated into two hearings. To my mind, the appropriate resolution is that it be separated into two proceedings, each of which can be dealt with in the ordinary course, but no doubt with the parties ensuring that to the extent necessary the court is able to keep track of such aspects of one as might affect the due prosecution and determination of the other. 12 I should add that the circumstance that claims for relief in addition to Corporations Act relief are included in an originating process in the form called for by the Supreme Court (Corporations) Rules 1999 is not a reason for separating the two parts of the proceedings in the way I have described. [Addendum on revision of ex tempore judgment: The reasons for this are those expressed in reasons for judgment in Litmus Australia Pty Ltd v Canty [2006] NSWSC 196, delivered the day after the ex tempore judgment in the present proceeding.] My decision rests solely on the incompatibility of determination of a question of the existence of a genuine dispute or offsetting claim and parallel or contemporaneous determination of the actual dispute or claim. 13 There is also another minor matter to be dealt with which involves typographical anomalies in the originating process. It is proposed that this uncontroversial aspect be dealt with by the filing of an amended originating process in the form annexed to Mr Gillard's affidavit of 23 March 2006. The convenient course to give effect to my decision about the proper constitution of the proceedings is to grant leave for the filing of an amended originating process in that form, but with the heading "Non Corporations Act Relief" and the five numbered paragraphs following it omitted therefrom. I grant that leave. 14 The proceedings are dismissed as against the seventh defendant. The plaintiff is to pay the seventh defendant's costs. The plaintiff is to pay the costs of the first, fourth and fifth defendants of today and Friday last. 15 I note that the solicitor for the first, fourth and fifth defendants has acknowledged service of the amended originating process.

Gujarat NRE Australia Pty Ltd v Williams

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