Moderngarde Pty Limited v Zipangu Corporation Pty Lmited [1999] NSWSC 197 | Case summary

1 MASTER: There is presently before the Court a summons filed on 8 January 1999. The plaintiff in that summons is Moderngarde Pty Limited and the defendant is Zipangu Corporation Pty Limited. By that summons the plaintiff claims an order that the demand for payment served upon it by the defendant be set aside and seeks a consequential order for costs. 2 Although the summons does not have annexed to it a copy of the statutory demand, I have been taken by the defendant to the statutory demand dated 17 December 1998, which claims an amount of $63,437.62, described as "being the amount ordered to be paid to the creditor, such order made by Judge Dent in District Court proceedings No 484/1997". 3 The summons appears to suggest that it was filed by "the authorised officer, Moderngarde Pty Limited, c/- Registered Office 10 Pittwater Road Manly NSW 2095" and the telephone number then following. The document also bears as the plaintiff's address for service "c/- 10 Pittwater Road Manly NSW 2095". It appears to be signed, by someone identifying himself as the plaintiff's authorised officer. 4 When the matter was called on for hearing before me, Mr M Grainger, who stated he was a director of the plaintiff, said that he was appearing for the plaintiff company. Mr Godwin of Counsel appeared for the defendant. I explained to Mr Grainger that he could not appear for the plaintiff in the conduct of the present proceedings, but that I would be prepared to hear what he might wish to say concerning the matter. 5 It is quite clear from the provisions of Part 4, rule 4A of the Supreme Court Rules (which enable a corporation in certain circumstances to commence or carry on proceedings by a director) that, since the circumstances contemplated by that rule have not been complied with in the instant case, the present proceedings have been improperly constituted. For that reason, if for no other reason, it is inevitable that the summons must be dismissed. 6 I gave to Mr Grainger the opportunity of seeking to have cured the procedural problems confronting the plaintiff, which cure would have required at the very least that he be joined as an additional plaintiff in the proceedings. 7 Mr Grainer declined to avail himself of that opportunity and stated that he did not seek to be so joined as a plaintiff. I contemplated the possibility of an adjournment, to enable Mr Grainger to obtain legal advice in the matter. It appears that he has at least at earlier stages had the benefit of legal advice, or indeed of legal representation both for the plaintiff company and for himself personally. That suggestion of a short adjournment was embraced by Mr Grainger but was opposed by the defendant. 8 Since it is likely that the Court would be able to cure the procedural deficiencies in the institution and constitution of the proceedings, were Mr Grainger to consent to being joined as a plaintiff, there now appears to me to be no purpose, in the light of Mr Grainger's presently expressed attitude in granting an adjournment of the present proceedings. 9 The summons states that the plaintiff disputes the existence and/or quantum of the debt to which the demand relates and that the plaintiff has an offsetting claim. 10 In response to an inquiry by me at the outset of the hearing whilst I was attempting to ascertain the attitude adopted by each party, the clear impression given to me by Mr Grainger was that he was totally unaware of any judgment in favour of the defendant against the plaintiff. There has been placed before me by the defendant a judgment dated 25 September 1998 in the District Court of New South Wales in Sydney in file No 484/97. That is a judgment pursuant to Part 31 rule 15 of the District Court Rules, and is in the following form: It is this date adjudged:

(2) that the question of costs and other issues be determined at a date to be fixed. 11 The plaintiff in those proceedings is Zipangu Corporation Pty Limited and the first defendant is Moderngarde Pty Limited. That document bears the seal of the District Court of New South Wales and bears the signature of the Assistant Registrar of that Court. 12 I have been informed that there has been no application made on behalf of the present plaintiff, Moderngarde Pty Limited to set aside that judgment or to appeal against that judgment. It is not open to me in the present proceedings to go behind that judgment. In consequence, there can be no genuine dispute as to the amount of the debt claimed in the statutory demand which is the amount in the judgment to which I have just referred. 13 The present plaintiff to the summons asserts that it has an offsetting claim. The amount of that offsetting claim is an amount of $1805. It appears to relate to a costs entitlement consequent upon a certificate as to a determination of costs issued on 28 May 1998. The present defendant, Zipangu Corporation Pty Limited concedes that that offsetting claim should be taken into account in determining the amount of the indebtedness of the plaintiff to the defendant and that the statutory demand should be varied by substituting for the amount claimed therein the amount of $61,875. 14 I have already recorded that, on account of the improper constitution and institution of the present proceedings, it is inevitable that the summons must be dismissed. But even were I to have proceeded upon the merits of the assertions contained in the summons, it is clear beyond doubt firstly that there is not and cannot be a genuine dispute as to the indebtedness of the plaintiff to the defendant grounded upon the judgment in favour of the defendant against the plaintiff in the District Court of New South Wales on 25 September 1998 in the sum of $63,680. Further that the offsetting claim is in an amount of $1805, which is conceded by the defendant and that the defendant agrees that the amount in the statutory demand should be varied by deducting from the amount of the District Court judgment the amount of $1805. 15 I propose, accordingly, to make an order varying the statutory demand in that fashion. 16 Since both on the ground of the institution and the constitution of the present proceedings and on the substantive ground in relation to the statutory demand itself, the plaintiff has not established that the relief sought in the summons should be granted, I propose to make an order that the summons be dismissed. It is inevitable that that order will attract an order that the plaintiff pay the costs of the defendant. (At this stage Mr Godwin made an application that the costs be paid by Mr Grainger personally. After hearing argument the Court made the following ruling). 17 MASTER: The defendant seeks an order that the costs of the present proceedings be paid not by the unsuccessful plaintiff but by Mr Michael Grainger, a director of the plaintiff company, who it would appear from the matters to have which I have already referred in my judgment on the substantive proceedings, purported to institute the proceedings on behalf of the plaintiff. 18 I have been taken to the provisions of Part 52A rule 4 of the Supreme Court Rules. Subrule (5) provides, relevantly: - Subrule (2) shall not limit the power of the Court to make any order --- (g) against a person who commences, carries on, enters an appearance in, or defends proceedings as the authorised director of a corporation, or purports to do so. 19 I have also been taken to the decision of the High Court of Australia in Knight v. FP Special Assets Limited 1992 174 CLR 178. 20 It seems to me that the Court has express power under the rule to which I have just referred to make an order in a case such as this against Mr Grainger. He has stated that the plaintiff company has no assets and would not be able to meet any costs order which might be made against it. In an affidavit sworn by him on 8 January 1999 and filed on that day Mr Grainger says, in paragraph 2: I am aware that I may be liable to pay some or all of the costs of these proceedings. 21 I have already expressed the view that the claim of the plaintiff to have the statutory demand set aside, quite apart from the procedural defects in the manner in which the proceedings have been constituted and instituted, cannot be sustained on grounds of substance. The defendant is entitled to receive it costs of defending the proceedings. Normally such a costs order would be made against the unsuccessful plaintiff. In the instant case however the unsuccessful plaintiff has purported to bring the proceedings through its director, Mr Grainger. He has stated expressly that the plaintiff has no assets to meet a costs order. In his affidavit he has also stated expressly his awareness that he himself might be liable to pay some or all of the costs of the proceedings. 22 Under those circumstances I consider that it is appropriate that a costs order should be made against Mr Grainger personally. 23 I make the following orders: 1. I make orders as in paragraphs 1,2 and 3 in the short minutes of order dated 15 March 1999 initialled by me and filed in Court this day. 2. I order that Michael Grainger pay the costs of the defendant of the proceedings.

Moderngarde Pty Limited v Zipangu Corporation Pty Lmited

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