Isaco Pty Ltd v Davey

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

5109/03 - ISACO PTY LIMITED & 8 ORS v TONI BARBARA DAVEY JUDGMENT 1 By an originating process filed on 1 October 2003, nine plaintiffs together seek nine orders, apart from an order for costs. The first order sought by the nine plaintiffs refers to the first of the nine, Isaco Pty Limited. The order is that "The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Isaco Pty Limited be set aside". 2 Each of the other eight orders is an order in the same terms except that it refers, by name, to one of the nine plaintiffs other than Isaco Pty Limited. The situation is thus one in which each order sought by the nine plaintiffs together is an order that a statutory demand served by the defendant on one of the nine be set aside. So that the position I am attempting to describe may be fully understood, I set out in full the relevant part of the originating process in which the nine companies are together designated plaintiffs: "On the facts stated in the supporting Affidavits, the Plaintiffs claim orders that: 1. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Isaco Pty Limited, be set aside. 2. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Maskcode Pty Limited, be set aside. 3. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Pepamall Pty Limited, be set aside. 4. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Setpave Pty Limited, be set aside. 5. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Sterling Estates Corporation Pty Limited, be set aside. 6. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Sterling Estates Development Corporation Pty Limited, be set aside. 7. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Sterling Estates (S.A.) Pty Limited, be set aside. 8. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Sterling Guardian Pty Limited, be set aside. 9. The Creditor's Statutory Demand for Payment of Debt dated 9 September 2003 issued by the Defendant addressed to Yuft Pty Limited, be set aside." 3 The nine statutory demands are in evidence. All are in the same form except for the name of the addressee. Each is addressed by the defendant to one of the nine plaintiffs and requires the payment of a sum of $500,000 "being the amount of the debt described in the schedule". The schedule to each of the nine demands contains, under a heading "Description of the debt", the following: "Money owing pursuant to clause 7.4 of the Deed dated 13 July 2001." 4 The defendant has submitted that the proceedings are not properly constituted under s.459G and, by consent, I am asked to determine that issue as a preliminary to a hearing on the merits. The point is significant since, if there has not already been an application under s.459G in respect of any of the statutory demands, it is now too late for such an application to be made because the period referred to in s.459G(2) has expired and, as the High Court confirmed in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, that period cannot be extended. 5 It is the contention of the defendant that, if any of the nine companies named as plaintiffs is to obtain an order setting aside the statutory demand served on that company, it must do so in a separate and distinct proceeding instituted by it alone and prosecuted independently of any like proceeding that any of the other eight companies may choose to pursue. The plaintiffs say, however, that the relevant debt, if owed at all, is owed by them jointly and severally and that that factor justifies a conclusion that the proceedings are properly constituted for the purposes of s.459G in their existing form. Both Mr Johnson of counsel who submitted on behalf of the defendant that the proceedings are not properly to be regarded as a s.459G application and Mr Cashion SC who, on behalf of the plaintiffs, submitted to the contrary referred to three decided cases, being Help Desk Institute Pty Ltd v Adams (1998) 17 ACLC 18 (Young J), Femley Pty Ltd v Salken Engineering Pty Ltd (1999) 17 ACLC 828 (Santow J) and Calquid Pty Ltd v A & DR Illes Pty Ltd (2000) 34 ACSR 523 (Santow J). I shall come back to these. First, it is necessary to look at the terms of the legislation. 6 Section 459G is as follows: "(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.

(2) An application may only be made within 21 days after the demand is so served.

(3) An application is made in accordance with this section only if, within those 21 days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company." 7 The first thing to notice about this section is that it enables a particular company to apply for an order setting aside a statutory demand served on that company. The company that is the object of a statutory demand is the only competent applicant for an order setting aside that demand. It is not open to any other person to seek such an order. Where, as here, nine companies are together plaintiffs, the originating process will be regular, in terms of s.459G, only if it is properly regarded as a means by which the first company makes an application in respect of the demand served on the first company, the second company makes an application in respect of the demand served on the second company, and so forth. 8 The debt alleged in each of the statutory demands referred to in the originating process is said to arise from clause 7.4 of the deed dated 13 July 2001. A copy of that deed is in evidence. Clause 7.4 reads: "Without admissions Sterling and the Sterling Group hereby agree to compromise all claims by Davey for equitable or legal entitlements in the Property by the following payments (in addition to the payments referred to in Clauses 5.1 and 9.1) to Davey or his nominee. (a) $500,000 no later than 31 August 2003; (b) $400,000 no later than 31 December 2003. The parties acknowledge that the amount of $900,000 includes all claims by Davey for management fees, consultancy fees and interest on any monies which may be payable by Sterling to Davey." 9 The deed defines "Sterling" as Sterling Estates Developments Pty Limited "as bare trustee for Sterling Guardian Pty Limited … in its own right and as trustee of the Sterling Guardian Unit Trust". The term "Sterling Group" is defined as meaning, among others, "all related entities of Sterling listed in the Schedule". The schedule to the deed refers to Sterling Estates Developments Pty Limited (being, as already noticed, "Sterling") in several capacities, plus twelve other companies and two individuals. The thirteen companies thus named in the schedule include the nine named in the statutory demands. Clause 1.2(j) says: "In this deed unless the context otherwise requires or permits … every covenant or provision applying to or binding more than one person will bind them jointly and each of them severally." 10 I now proceed to a brief review of the three cases. Help Desk was a case in which two statutory demands were served on a company. Each was served by a separate creditor in respect of a separate debt, one debt being for legal costs allegedly agreed to be paid by the company to one Adams in respect of a particular transaction and the other debt being for purchase moneys allegedly owing by the company to another person in respect of that transaction. The company issued a summons in which it sought two orders, one setting aside the first demand and the other setting aside the second demand. Young J held that the proceeding was irregularly constituted. After referring to the provisions of Part 5.4 of the Corporations Law as a whole (and those of s.459G in particular), the applicable rule of construction under which the singular includes the plural and the decision of the High Court in David Grant, his Honour said: "It seems to me that when one adds all those matters together a contrary indication is given in the statute, that is, there can be only one summons dealing with one demand. In the instant case the two demands deal with similar disputes which might have been joined under Pt8 of the Supreme Court Rules. The case is really one of joinder of causes of action rather than joinder of parties, but it would fit within Pt8 r5 of the Supreme Court Rules. However, despite Mr Warren's submissions that the rules have not been displaced by s459G of the Corporations Law, it seems to me that the approach taken by the High Court in Grant's case (supra) is that the statute has set up a very closely knit regime and that regime does displace many of the ordinary provisions of the Corporations Law and the Supreme Court Rules." 11 In Femley, the debt specified in each statutory demand was a debt allegedly contracted on partnership account in such a way that three companies carrying on business in partnership became jointly and severally liable for the debt. There were three statutory demands, one directed to each company, with the same debt alleged in each. The way in which the proceeding in which it was sought to set aside the statutory demands was constituted was described by Santow J as follows: "[T]he three partnership companies sought to set aside the statutory demand in the one composite application doing so by way of a single summons, rather than by way of multiple applications, one for each alleged debtor company."

It was submitted on behalf of the creditor that such a procedure did not accord with the legislation and therefore that no application in conformity with s.459G had been made within the period allowed by that provision 12 Santow J distinguished Help Desk on the basis that each demand there related to a different debt owed by the one company to a different person, whereas in Femley itself there was one debt, albeit a single debt for which the three companies were jointly and severally liable. The view of Santow J as to the way in which s.459G applied to the case before him was as follows: "Put shortly, there is nothing in those provisions which prevent a composite application operating as intended in relation to a joint alleged debt, even if there be a separate statutory demand for each alleged joint debtor, so long as the application is expressed so it can be read distributively, along with the accompanying affidavit." 13 Santow J also said: "Here, where the debt in question is a joint debt, rendered such by s9 of the Partnership Act 1892 (NSW) (as affected by s97 of the Supreme Court Act 1970 (NSW)), I can find nothing in s459G(1) or s459G(2) which would preclude such a composite application being made on behalf of each of the joint debtors in sufficient conformity therewith, provided the application is expressed so as to be capable of being read distributively as applicable to the relevant statutory demand applicable to the relevant Plaintiff. I am satisfied that it can and should be so read; further, that s467A directs that any irregularity or defect in expression be ignored in reaching that conclusion. S459G does impose a strict time requirement on the filing of an application. That presupposes only that there is an application meeting the general description in s459G(1) for s459G(1) does not lay down any detailed mandatory description as to content. This application does meet that general description, allowing as regards its formal expression similar latitude as applies to affidavits in support. The mandatory directive in s467A can be called in aid to disregard any irregularity or defect that does not rise to the level where the application is no longer 'under' Pt5.4, in circumstances where, as here, no substantial injustice results." 14 The third case, Calquid, concerned two statutory demands, each issued by the same creditor and addressed to the same company, although in respect of separate debts arising out of the same building contract but for different parts of the overall works. Santow J held that a single summons and supporting affidavit did not constitute an application conforming with s.459G in respect of the two statutory demands. His Honour saw the reasoning in Help Desk as applicable, particularly since the two demands had been served on different days. 15 In the present case, the plaintiffs say that, because of clause 1.2(j) of the deed, the debt created by clause 7.4 (assuming any debt is so created) is a joint and several debt of the kind with which Santow J dealt in Femley. The defendant's contention is that this is too simplistic an approach and that clause 7.4 really concerns a compromise between Davey and Sterling alone, with the "Sterling Group" cast in the role of indemnifiers or guarantors rather than parties to a sole obligation that is joint and several. 16 On this, I prefer the submissions of the plaintiffs. The parties who, according to clause 7.4, "agree to compromise" are "Sterling and the Sterling Group", the means of compromise being "by the following payments", being, clearly enough, payments that all of them agree to make so that clause 1.2(j) is brought into operation. I therefore accept that the obligation in question, to the extent that it exists, is of a joint and several character, so that the reasoning in Femley is in that respect applicable and the circumstances are distinguishable from those in both Help Desk and Calquid. 17 The crucial question, it seems to me, is whether the proceeding is constituted in such a way that, in conformity with s.459G, each of the nine plaintiffs is the applicant for an order setting aside the statutory demand served on that plaintiff. It is, of course, clear as a matter of general principle that, in a proceeding in which there are several plaintiffs, each may pursue some independent claim of its own. Considerations of efficiency often cause a number of such claims to be brought under the umbrella of a single proceeding pursuant to Part 8 rule 2 of the Supreme Court Rules or to be effectively consolidated by orders that several proceedings be heard together with evidence in each being evidence in the others. In the present case, it is necessary to find that the single originating process, in the words of Santow J in Femley, "is expressed so it can be read distributively, along with the accompanying affidavit" and "is expressed so as to be capable of being read distributively as applicable to the relevant statutory demand applicable to the relevant plaintiff". 18 There is no doubt, on the face of the originating process, that a separate and distinct order is sought in relation to each statutory demand. Each such order is fully and separately set out against its own identifying number. To that extent, the pleading is capable of being read distributively in the manner referred to by Santow J. There are, however, nine claimants for each order, being the company named in the statutory demand to which the order refers and having standing accordingly to seek an order setting the demand aside, plus eight other companies none of which has any standing to make that particular claim. It is therefore necessary to consider whether the presence, in each case, of the other eight and the omnibus nature of the claims of the nine ("the Plaintiffs claim orders that") mean that the originating process is not, in relation to any of the nine companies, an application by the particular company "for an order setting aside the statutory demand served on the company". 19 There can be no doubt that Isaco Pty Limited has applied to the court for an order setting aside the statutory demand served on Isaco Pty Limited. The fact that eight other companies are also included in the group of nine that together seek that order concerning Isaco Pty Limited does not detract from the fact that the application is made by Isaco Pty Limited. The other eight, lacking standing, may simply be ignored. And the same analysis holds good, of course, in relation to the other eight orders. 20 The fact that eight of the nine plaintiffs are, in relation to each of orders 1 to 9, incompetent applicants yet apply along with the sole competent applicant seems to me to be a defect or irregularity of the kind contemplated by s.467A, with the result that it does not represent grounds for dismissal of the application. On general principles, the court would be minded to allow amendment of the originating process so as to make one of the plaintiffs only the applicant for whichever of orders 1 to 9 referred to it, such amendment relating back, in the normal way, to the date of the original pleading. However, as Young J observed in Help Desk, the strictures of s.459G, considered in the light of David Grant, may displace the operation of some procedural rules. Part 20 of the Supreme Court Rules must be regarded as potentially affected by any such displacement and, as the question of amendment has not been argued (and on the view I have taken, does not need to be), I say no more about it 21 It is sufficient to record, at this point, the conclusion that the originating process filed on 1 October 2003, upon its proper construction, includes:

(a) an application by Isaco Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Isaco Pty Limited by the defendant; and

(b) an application by Maskcode Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Maskcode Pty Limited by the defendant; and

(c) an application by Pepamall Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Pepamall Pty Limited by the defendant; and

(d) an application by Setpave Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Setpave Pty Limited by the defendant; and

(e) an application by Sterling Estates Corporation Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Sterling Estates Corporation Pty Limited by the defendant; and

(f) an application by Sterling Estates Development Corporation Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Sterling Estates Development Corporation Pty Limited by the defendant; and

(g) an application by Sterling Estates (S.A.) Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Sterling Estates (S.A.) Pty Limited by the defendant; and

(h) an application by Sterling Guardian Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Sterling Guardian Pty Limited by the defendant; and

(i) an application by Yuft Pty Limited for an order setting aside the statutory demand dated 9 September 2003 served on Yuft Pty Limited by the defendant. 22 Since the matter with which I have dealt was raised and argued as a preliminary question, it is appropriate that matters now be formalised by an order for separate determination under Part 31 and an answer in terms of the conclusion I have expressed (plus, if the plaintiffs press for it, an order that the defendant pay the plaintiffs' costs of and incidental to the hearing before me on 10 November 2003). I direct that short minutes be brought in accordingly. **********

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