Supreme Court of WA|2008-04-17

NORILYA MINERALS PTY LTD -v- IRELAND [2008] WASC 53 (17 April 2008)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : NORILYA MINERALS PTY LTD -v- IRELAND [2008] WASC 53

BETWEEN : NORILYA MINERALS PTY LTD (ACN 006 823 730)

Corporations Act 2001 (Cth) - Application to set aside statutory demand - Debt arising from restitution order made by Court of Criminal Appeal - Turns on own facts

1 MASTER SANDERSON: On 16 October 2007, the defendant, together with four other parties (FIM Pty Ltd, Webgo Pty Ltd, Brenda Anne Easterday and Kaylene Holdings Pty Ltd), served statutory demands on the registered office of the plaintiff. The plaintiff, by this application and in four other separate proceedings (one of which was transferred from the Supreme Court of Queensland), seeks to set aside each of the statutory demands. In each case the facts are identical. In each case the plaintiff says that the demand should be set aside because there is a genuine dispute as to the debt and/or there is an offsetting claim and/or there is some other good reason why the demand ought be set aside. The plaintiff relies on s 459H and s 459J of the Corporations Act 2001 (Cth).

2 There is no real dispute between the parties as to the facts. In support of the applications, the plaintiff relies on an affidavit of Robert Henry Neil Symons sworn 2 November 2007, an affidavit of Timothy Maxwell Clifton sworn 1 November 2007 and an affidavit of Jennifer Mary Hill sworn 21 December 2007. The following summary of the facts is drawn from those three affidavits.

3 On 9 July 1990, the plaintiff paid sums totalling $6,013,803.21 for an interest in certain mining tenements. Of that amount, $2,400,000 was paid to Dean Edward Ireland (Dean Ireland), $2,400,000 was paid to Clark Ervine Easterday (Clark Easterday) and $1,200,000 was paid to Leonard Lancelot Ireland (Leonard Ireland). The three individuals who received the money are collectively referred to in these proceedings as the 'Prospectors'. The payments were made in reliance upon certain representations made by the Prospectors in respect of the mining tenements sold to the plaintiff. The plaintiff alleges that the representations were not only false, but were fraudulently made. On 15 August 1990, the plaintiff commenced proceedings in this court - CIV 2232 of 1990. The action was commenced against the Prospectors and on the same day, the plaintiff obtained a Mareva injunction against the assets of the Prospectors.

4 Prior to the granting of the injunction, the Prospectors made payments to or on behalf of the parties who have now issued the statutory demands. The payments that are presently relevant are as follows:

Dean Ireland made payments totalling $323,000 to purchase a property in the name of Kaylene Holdings Pty Ltd;
Clark Easterday made a payment of $227,795.00 to purchase a property in the name of his wife, Brenda Anne Easterday (Mrs Easterday);
Clark Easterday paid the sum of $2,400,000 into a Commonwealth bank account in the names of Webgo Pty Ltd and/or Mrs Easterday;
Leonard Ireland paid $750,000 into an R&I bank account in the name of FIM Pty Ltd; and
Leonard Ireland gave Paul Christopher Ireland (Paul Ireland) (his brother) $60,000.

5 On 10 October 1990, the Mareva injunction was extended to certain of the parties who have issued the statutory demands in respect of moneys that had been paid to them by the Prospectors and assets acquired with those moneys.

6 On 28 July 1993, the Prospectors were found guilty of one count of conspiracy to defraud pursuant to s 411 of the Criminal Code (WA) and 10 counts of false pretences pursuant to s 409 of the Criminal Code in relation to the sale of the tenements. On 30 July 1993, his Honour Judge Hammond made orders for restitution pursuant to the Criminal Code pursuant to which, inter alia:

Kaylene Holdings Pty Ltd was ordered to transfer the Santa Barbara property to the plaintiff;
Mrs Easterday was ordered to transfer 5 Shirley Avenue, Mount Pleasant to the plaintiff;
Webgo Pty Ltd was ordered to transfer the balance of funds in the bank account to the plaintiff;
FIM Pty Ltd was ordered to transfer the balance of funds in the bank account to the plaintiff; and
Paul Ireland was ordered to pay the sum of $60,000 to the plaintiff.

7 Restitution orders were also made in favour of the plaintiff against the Prospectors. On 18 August 1994, in reliance on the convictions, the plaintiff obtained summary judgment in CIV 2232 of 1990.

8 On 28 March 2003, the Court of Criminal Appeal overturned the convictions of the Prospectors. Following the overturning of the convictions, the plaintiff consented to the summary judgment obtained in CIV 2232 of 1990 being set aside. That occurred on 7 December 2005. On 8 February 2006, orders were made for the plaintiff to repay to the parties who have issued the statutory demands the sums it received by reason of the restitution order made in July 1993. The sums ordered to be repaid were as follows:

to Kaylene Holdings Pty Ltd - $206,000;
to Mrs Easterday - $294,340.42;
to Webgo Pty Ltd - $344,430.48;
to FIM Pty Ltd - $1,012,247.74; and
to Paul Ireland - $65,000.

9 The orders that were made on 8 February 2006 were made by consent. The Court of Appeal had delivered a decision on 28 October 2005 which dealt with the order for restitution as between the Prospectors and the plaintiff, rather than as between the plaintiff and the parties who have issued the statutory demands. Not surprisingly, the plaintiff saw no point in taking the matter back to the Court of Criminal Appeal. The orders were always going to be that the plaintiff make restitution to the present defendants and there would have been no point in doing anything other than finalising the matter by way of consent orders.

10 At present, the plaintiff is proceeding in CIV 2232 of 1990 against the Prospectors. It wishes to join the defendants in this action as defendants to that action. It is worth observing that if the plaintiff was successful in its actions against the Prospectors, there is no doubt that the present defendants would have to repay to the plaintiff any money that they received consequent upon the decision of the Court of Criminal Appeal. Each of them are volunteers and they have received the funds with knowledge of the circumstances in which the money was obtained. I did not understand counsel for the defendants to suggest otherwise.

11 After the Prospectors' convictions had been overturned, there was a hearing before the Court of Criminal Appeal in which the court gave consideration to what orders should be made as a consequence of the judgment in favour of the Prospectors. In particular, whether or not the restitution orders made by Judge Hammond ought be overturned. Of course, being a criminal proceeding, that was, strictly speaking, a matter between the State and the Prospectors. But the plaintiff as an interested party was permitted to appear and make submissions. Counsel for the plaintiff submitted that restitution orders ought not be made pending the finalisation of the civil proceedings as between the plaintiff and the Prospectors or, alternatively, that there should be a stay of execution of any restitutionary order. Both of those arguments were rejected. But no restitution has been made either to the Prospectors, or the present defendants. The plaintiff has simply ignored the orders of the Court of Criminal Appeal.

12 Quite why it has ignored those orders is not clear from the papers and is probably not relevant to the present application. However, it would appear, both from what was said by counsel during submissions made to the Court of Criminal Appeal and from submissions made during the course of this hearing, that the plaintiff does not have presently available funds to meet the restitutionary orders. The plaintiff is a subsidiary of a large mining house and when it originally paid over the funds to the Prospectors, it did so using a loan facility provided by its parent. When the money was repaid to it pursuant to the restitution orders made by Judge Hammond, it used the money to repay that loan. It would appear that the company's only role at present is as plaintiff in the civil proceedings it has issued against the Prospectors. Someone is meeting the costs of maintaining those proceedings and someone has provided security for costs in those proceedings. But there is no indication that if the Prospectors (and the defendants) were successful in defending the action, the judgment would be paid. To that extent, the plaintiff is engaged in a forensic game in which, more than likely, it has nothing to lose.

13 The answer to this case is, I think, provided by the decision of Hammerschlag J in Ozy Homewares Pty Ltd v Wesgordon Pty Ltd (2007) 25 ACLC 1239. Although it is not entirely clear from the report, it appears that Wesgordon was a builder who had undertaken certain work for Ozy Homewares. Wesgordon made a progress claim under the building contract for an amount of $48,737.79. Under the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act), Wesgordon was entitled to recover the claimed amounts from Ozy as a debt due to it because it had served a payment claim as provided in s 13 of the Act and Ozy had not responded as provided for in s 14(4) of the Act. The object of the Act, as set out in s 3, was to ensure that an entity such as Wesgordon would receive a progress payment by way of a statutory entitlement regardless of whether the relevant construction contract made provision for progress payments. By s 15(4)(b) of the Act, Ozy was precluded from bringing any cross-claim against Wesgordon in proceedings issued by Wesgordon to obtain payment. Section 32(3) of the Act provides, in effect, that in any proceedings before a court in relation to any matter arising under a construction contract, the court must allow for any payment which has been made in consequence of the operation of the Act and may make such orders for restitution of any amount so paid. Based upon the provisions of the Act, Wesgordon had obtained summary judgment in the Local Court for the amount of its claim. Hammerschlag J was of the view there was no doubt as to the correctness of the magistrate's decision.

14 During the course of his reasons, his Honour had this to say:

Having regard to the provisions for restitution in the Act, it seems to me doubtful that a judgment which comes about because of the statutory regime in the Act in circumstances where a defendant cannot raise a defence or any cross-claim which might nullify it is a final judgment creating a res judicata between the parties so as to preclude a genuine dispute in relation to the judgment debt for the purposes of s 459H (as opposed to not precluding the raising of an offsetting claim).

It is not necessary to decide that question now because, in my view, the present circumstances are 'some other reason why the demand should be set aside' within the provisions of s 459J(1)(b) of the Corporations Act 2001 [26] - [27].

15 A reading of the judgment of the Court of Criminal Appeal dealing with the restitution question makes it plain that the court anticipated civil proceedings taking place. Indeed, they left open the question of whether interest was payable on the sums the subject of the restitution order pending the hearing of the civil proceedings. So, as was the case in the Ozy Homewares decision, it is difficult to see how the judgment of the Court of Criminal Appeal, even the judgment entered by consent in favour of the defendants, could create a res judicata.

16 But more to the point, it would, I think, be inappropriate for me not to follow the decision in the Ozy Homewares case. The decision makes it plain that there have been a number of cases involving the Act in New South Wales, and it would appear that the approach adopted by Hammerschlag J has been adopted by other members of the New South Wales Supreme Court. In the interests of consistency if nothing else, it would not be appropriate for me to take a different view.

17 The remaining question is whether or not setting aside the demand ought be on conditions. In the Ozy Homewares case, his Honour did not impose conditions. However, in the case of Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759, his Honour did impose conditions. The difference between the two cases was that in the Midas Management case, the defendant had a final judgment and had appealed to the Supreme Court. The judgment was given after a full hearing inter partes in the Magistrates Court. Presumably that is the point of difference which his Honour considered significant.

18 In my view, this is a case where it would not be proper to impose conditions under s 459M. Here, the defendants have a judgment in their favour, but in circumstances where any cross-claim could not be ventilated. Furthermore, a reading of the Court of Criminal Appeal's decision makes it plain the plaintiff has a strong case - there is no suggestion of a shadowy or contrived case being put by the plaintiff.

20 I will hear the parties as to the precise form of orders and as to costs.

Construction Industry Security of Payment Act 1999

NORILYA MINERALS PTY LTD -v- IRELAND [2008] WASC 53 (17 April 2008)

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NORILYA MINERALS PTY LTD -v- IRELAND [2008] WASC 53 (17 April 2008)

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