Lifese Pty Limited v Lee Crane Hire Pty Limited

6 There does not appear to be any evidence as to when the damaged Crane, minus the parts lost at sea, arrived back at Brisbane Wharf or as to the possession and location of the damaged Crane from that time until it was returned to Lee Crane Hire at Biloela, Queensland, in February this year, although the fact of its return to Lee Crane Hire at Biloela in February of this year is also common ground. 7 The debt the subject of the statutory demand corresponds with the final balance referred to in the table in [5(5)] above and is particularised in the schedule to the statutory demand in the following way: Description of the debt Amount of the debt Invoice Number Date Details 39159 30/06/2011 Dry Hire of 280T Sumitomo Crawler Crane on Lihir Island Papua New Guinea & Australia $61,600.00 39951 31/07/2011 Dry Hire of 280T Sumitomo Crawler Crane on Lihir island Papua New Guinea and Australia $77,000.00 39973 31/08/2011 Dry Hire of 280T Sumitomo Crawler Crane - Lihir Island Papua New Guinea & Australia $70,694.50 Total Owing $209,294.50 Total Debt Owing $209,294.50

8 The invoices referred to in the schedule to the statutory demand were in evidence and relate, inter alia, to the hire of the Crane for weeks 16 to 29 inclusive; that is, from 2 June to 1 September 2011. 9 Lee Crane Hire has continued to issue the Company with monthly invoices (September 2011, October 2011, November 2011 and December 2011) for the hire of the Crane. These invoices were not in evidence and there was no evidence to indicate that these had been paid. Indeed, having regard to the earlier unpaid invoices the subject of the statutory demand, I would infer that these later invoices have not been paid. 10 Finally, evidence was given by Mr Gregory Lee (Ex C) of Lee Crane Hire, that on 12 January 2012 Lee Crane Hire invoiced the Company for the replacement of missing or damaged items from the Crane in the sum of $191,224.72. A credit note was issued to the Company in respect of that invoice on 17 January 2012 because an invoice for the same amount was issued to the Company's insurer (Cerno), which has since indicated it has accepted the claim.

Whether there is a Genuine Dispute 11 The first ground on which the Company relied in support of its application was that there was a genuine dispute as to the existence or amount of the debt to which the statutory demand relates. Two of the invoices - #39159 and #39951 - for hire of the Crane for weeks 16 to 24 inclusive had not been paid at all while the third invoice - #39973 - for, inter alia, hire of the Crane for weeks 26 to 29 inclusive had only been paid to the extent of the demobilisation of the Crane from the Lihir Island site to Brisbane Wharf, a fee of $25,000. 12 The Company contended that it was only obliged to pay the hiring charges for the relevant hire period - a period of three months (approximately) from 23 February 2011 (approximately) - and that this period represented "such other earlier date that [was] agreed by the Owner" within those words as they appear towards the conclusion of cl 11 of the agreement. So much is denied by Lee Crane Hire, which maintained throughout the hearing that the provisions of cl 11 prevail in the absence of any "such other earlier date that is agreed by the Owner" and that no other earlier date was agreed by Lee Crane Hire as owner. There is, thus, immediately raised an issue of fact for determination as well as an issue of construction of the agreement. 13 Lee Crane Hire referred to what was said by a Full Court of this Court in Spencer Constructions Pty Ltd v G & M Auldridge Pty Ltd (1997) 76 FCR 452 at 464F: "In our view a 'genuine' dispute requires that: • the dispute be bona fide and truly exist in fact; • the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusionary or misconceived." 14 However, to properly understand the purport of what the Full Court there said, it is necessary to have regard to the context in which it was said and, in particular, what was said beforehand. At 463C-464A, the Court said: "There have been numerous decisions of single judges in this Court and in State Supreme Courts which have analysed, in different ways, the approach a court should take in determining whether there is 'a genuine dispute' for the purposes of s 459H of the Corporations Law. What is clear is that in considering applications to set aside a statutory demand, a court will not determine contested issues of fact or law which have a significant or substantial basis. One finds formulations such as: ' ... at least in most cases, it is not expected that the court will embark upon any extended enquiry 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.' See Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 294-296; (1993) 11 ACSR 362 at 366-367, followed by Ryan J in Moyall Investments Services Pty Ltd v White (1993) 12 ACSR 320 at 324. Another formulation has been expressed as follows: 'It is clear that what is required in all cases is something between mere assertion and the proof that would be necessary in a court of law. Something more than mere assertion is required because if that were not so then anyone could merely say it did not owe a debt ...' See John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250; 12 ACLC 716 at 252-253; 718, followed by Northrop J in Aquatown Pty Ltd v Holder Stroud Pty Ltd (unreported, Federal Court, Northrop J, 25 June 1996). In Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605, Thomas J said: 'There is little doubt that Div 3 is intended to be a complete code which prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a 'genuine dispute' and whether there is a 'genuine claim'. It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. 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).'" (Emphasis added.) 15 Immediately before the passage from the reasons of the Full Court extracted in [13] above, the Full Court said at 464D and E: "In Greenwood Manor Pty Ltd v Woodlock (1994) 48 FCR 229 Northrop J referred to the formulations of Thomas J in Re Morris Catering (Australia) Pty Ltd at 605 and Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia, where he noted the dictionary definition of 'genuine' as being in this context 'not spurious ... real or true' and concluded (at 234): 'Although it is true that the court, on an application under ss 459G and 459H is not entitled to decide a question as to whether a claim will succeed or not, it must be satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt. If it can be shown that the argument in support of the existence of a genuine dispute can have no possible basis whatsoever, in my view, it cannot be said that there is a genuine dispute. This does not involve, in itself, a determination of whether the claim will succeed or not, but it does go to the reality of the dispute, to show that it is real or true and not merely spurious.'" 16 Having regard to the following objective indicia, namely, that - (1) The Company paid the hire charges up to and including week 15, the week ending 01/06/11 - approximately three months after the commencement of the hire; (2) the Company paid the demobilisation charge of $25,000 in invoice #39973 dated 31/08/11; and (3) the terms of the agreement, including, in addition to the provisions already referred to, that there is no definition of "period of repair" in cl 3 of the agreement, I am satisfied that there is a genuine dispute between the Company and Lee Crane Hire as to the company's liability to pay the hire charges beyond week 15, notwithstanding that on the state of the evidence as it stood before the Court on the hearing of the Company's application, I think Lee Crane Hire is more likely than the Company to succeed.

Whether the Statutory Demand is an Abuse of Process 17 On the hearing of the Company's application to set aside the statutory demand, there was no evidence before the Court that the Company was insolvent. Moreover, Lee Crane Hire put nothing in the way of submission before the Court, either orally or in writing, to the effect that the Company was insolvent. In those circumstances, the only inference open is that the issue of the statutory demand was for a collateral purpose, namely, to put pressure on the Company to pay the debt the subject of the statutory demand. Counsel for Lee Crane Hire steadfastly refrained from addressing that proposition, even though I expressly put it to him. 18 In Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, Martin CJ, presiding in the Court of Appeal of Western Australia, said at [2]: "The issue of the statutory demand, and the appeal from the decision of the master setting it aside, reflect a fundamental misconception as to the purpose of the statutory demand process created by Pt 5.4 of the Corporations Act. That purpose is to provide a means whereby the insolvency of a company may be established for the purposes of an application to wind up that company. Its purpose is not to provide a means whereby those claiming a genuinely disputed debt can avoid the obligation of establishing their entitlement to that debt in a court of appropriate jurisdiction by placing commercial pressure on the party resisting payment. There is a clear inference from the evidence that Createc's purpose in issuing the statutory demand was the improper purpose of using the statutory demand process to enforce payment of a debt which it knew to be genuinely disputed. That is an abuse of process." 19 Later at [48]-[50], his Honour said: "[48] Following the introduction of Pt 5.4, doubts were expressed as to whether the statutory procedures provided an exclusive code for the resolution of proceedings brought as a result of the issue of a statutory demand. However, in David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; 131 ALR 353; 18 ACSR 225; [1995] HCA 43 (David Grant), Gummow J, with whom the other members of the High Court agreed, expressed the following view (at CLR 279; ALR 362; ACSR 234): 'It also may transpire that a winding-up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz. However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction. [Footnotes omitted.]' [49] Since that decision, it has generally been accepted that the court retains a residual jurisdiction to restrain reliance on the statutory demand procedure on the ground of an abuse of process: see House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 21 ACSR 527 at 528; SMEC at [35]; Roberts at [54]-[58]; and State Bank of New South Wales v Tela Pty Ltd (No 2) (2002) 188 ALR 702; [2002] NSWSC 20 at [5]. In Roberts, the jurisdiction was exercised on the grounds of impropriety of purpose, and a winding-up application was dismissed with costs. Similarly, in Old Kiama Wharf Co Pty Ltd v DCT (2005) 55 ACSR 223; [2005] NSWSC 929, an application to set aside a statutory demand was upheld because the court concluded that the process was being used to 'attempt to apply pressure to a taxpayer to force payment of a debt': at [42]. [50] Adopting the criterion from Williams v Spautz (1992) 174 CLR 509; 107 ALR 635; [1992] HCA 34; (Williams), suggested by Gummow J in David Grant, there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers - such as the application of pressure to compel payment of the disputed debt." 20 On this ground alone, the statutory demand must be set aside. 21 Lee Crane Hire submitted that if the Court was not minded to dismiss the application then the Court had power to set aside a statutory demand on conditions that may include the Company paying the amount of the alleged debt into court: see Natcraft Pty Ltd v Win Television Pty Ltd [2001] 1 Qd R 196 per Muir JA (with whom Williams JA and Atkinson J agreed). Further, the power to impose conditions is "as the Court thinks fit": see Natcraft, above, per Williams JA at [2]. As such it is within the Court's power to set the statutory demand aside on condition that the debt is paid into Court and that the Company commences proceedings. 22 This exemplifies what the true purpose of Lee Crane Hire's recourse to the statutory demand process is all about; to secure payment of the outstanding amounts alleged to be owing on the invoices referred to in the schedule to the statutory demand. It leaves undetermined, the liability of the Company on the invoices for hire charges for the months of September to December 2011 (see [9] above), for which a further statutory demand might be issued. So much exemplifies the inappropriateness of the procedure in a case such as this when alternative proceedings in another court could bring all matters in dispute between the parties to a head for resolution. 23 The statutory demand must be set aside and Lee Crane Hire must pay the Company's costs of this application. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.