Quitstar Pty Ltd v Cooline Pacific Pty Ltd

LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT 1886/02 FILE NUMBER(S) : LOWER COURT Barrett J JUDICIAL OFFICER :

COUNSEL : D Knaggs (S) (Claimant) B J Burke (Opponent) SOLICITORS : D Knaggs (Claimant) AG Corporations Group Counsel (Opponent) CATCHWORDS : CORPORATIONS- Statutory demand- What defects will nullify. (D) LEGISLATION CITED : Corporations Act 2001 ss 459E, 459G, 1370, 1371, 1407 Brownport Management Ltd v Aqua-Tech 21 Pty Ltd [2002] VSC 396 Carolan v AMF Bowling Pty Ltd (C/A - 16.11.1995) CASES CITED: Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 13 ACSR 525 R v Hughes (2001) 24 WAR 536 Topfelt Pty Ltd v State Bank of NSW Ltd (1993) 47 FCR 226 Vicbar Pty Ltd v Development Constructions (Newcastle) Pty Ltd (1995) 13 ACLC 1220 DECISION : Leave to appeal refused with costs ; Time for complying with statutory demand extended to 8 October 2002.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40447/02 ED 1886/02

HEYDON JA HODGSON JA YOUNG CJ in EQ

Monday 30 September 2002 QUITSTAR PTY LTD v COOLINE PACIFIC PTY LTD Judgment 1 HEYDON JA: I agree with Young CJ in Eq. 2 HODGSON JA: I agree with Young CJ in Eq. 3 YOUNG CJ in EQ: This is a concurrent hearing of an application for leave to appeal and the appeal itself in respect of an application refused in the Equity Division by the plaintiff to set aside a document said by the opponent to be a statutory demand. 4 The basal facts are these:

(1) The Corporations Act 2001 (Comm) came into operation on 15 July 2001.

(2) The Corporations Law ceased to have effect on 15 July 2001.

(3) On 21 February 2002, a document headed "Paragraph 459E(2)e) Corporations Law CREDITOR'S STATUTORY DEMAND FOR PAYMENT OF DEBT" was served by the opponent on the appellant. There was no reference to the Corporations Act but paras 4 and 5 of the notice and the important note to the accompanying affidavit refers to the Corporations Law.

(4) The applicant made an application under s 459G of the Corporations Act to set aside the statutory demand.

(5) The applicant asked the Master to set aside the statutory demand on three grounds, only two of which are currently in issue, viz: (i) that the demand did not purport to be a demand under the Corporations Act 2001; and (ii) that the address for service shown in the statutory demand was defective.

(6) Master Macready on 23 April 2002 held that despite the reference to the Corporations Law as opposed to the Corporations Act, the document purported to be a demand under the relevant section of the Corporations Act . He held that whilst there was a defect in the address for service, it did not cause any substantial injustice and should not prevent the enforcement of the demand.

(7) The applicant appealed to a judge and the appeal was decided against it by Barrett J on 10 May 2002, Quitstar v Cooline [2002] NSWSC 402. Although the actual reasons given by Barrett J expand on what Master Macready said, essentially they both come to the same conclusion for the same reasons.

(8) It should be noted that Master Macready gave leave to amend the summons before him to seek a declaration that the document was not a document purporting to be a statutory demand. The learned Master refused to make that declaration. 5 As to the application for leave to appeal, it should be first said that the whole spirit of the Corporations Act respect to statutory demands is that there should be early finality. An appeal is permitted as of right between the decision of a Master before whom such proceedings would normally be returnable, and a single Judge in the Equity Division. There are very strong public policy reasons why the matter should go no further. Furthermore, the statutory demand is only in respect of $17,140, well below the $100,000 limit on appeals as of right to this Court. It has been a long standing practice which is enunciated in Carolan v AMF Bowling Pty Ltd (C/A 16.11.1995, unreported), that it will be very difficult to obtain leave to appeal in matters involving less than $100,000. In that case Cole JA said: "It should be recognised that where such small claims are involved there must be an early finality and determination of litigation otherwise the costs which will be involved are likely to swamp the money sum involved in the dispute." 6 All these factors tend against granting leave to appeal. 7 To this should be added the fact that Barrett J's decision in the instant case was followed by Hansen J in Brownport Management Ltd v Aqua-Tech 21 Pty Ltd [2002] VSC 396 at [69]. 8 On the other hand, Mr Knaggs, the solicitor for the applicant, says that because there are so many statutory demands issued in this State every day and because there are fundamental misconceptions in the judgments below as to the operation of the savings and transition provisions in the Corporations Act, leave to appeal should be given. 9 Despite the submissions of Mr Knaggs, I am not at all inclined to the view that the decisions on the points raised by him before Master Macready and Barrett J were not properly decided by both of them. 10 The second point can be disposed of very quickly. The notice was badly drawn in stating that the address for service was "Corporations Group Counsel, GPO Box 2926, Sydney" where the notice should have said "AG Corporations Group Counsel" with a street address. However, the applicant duly communicated with the proper person within the proper time and clearly no substantial injustice was caused. Mr Knaggs submits that the mis-statement caused the company trouble in finding out where to serve and that it should follow from the approach of Lockhart J in Topfelt Pty Ltd v State Bank of NSW Ltd (1993) 47 FCR 226, that there was good reason to set the demand aside. With respect, I disagree and do not consider that the Topfelt case leads to any other result. 11 The first point is more substantial. The basal question is whether the document purports to be a demand served under the Corporations Act. 12 Mr Knaggs says that to qualify as a document which purports to be a demand the document must claim s 459E of the Corporations Act as its authority, and be served within the meaning of s 459E of the Act. 13 This submission derives from the definition of statutory demand in s 9 of the Corporations Act, term being said to mean "(a) a document that is, or purports to be, a demand served under s 459E …". 14 Hill J considered that definition in Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 13 ACSR 525, 531. He said that a document purports to be a demand if it claims to be a demand made under, in that case, the Corporations Law, and it was irrelevant that it omitted some material which should have been inserted in the demand. 15 As recognized by Lockhart J in the Topfelt case, there may be situations where there are such deficiencies in the form of demand which are so fundamental that the demands are incapable of assuming the description statutory demands (p 238). A couple of examples are given including a situation where the document may mislead the company into believing that it is merely a demand for payment of money and not a statutory demand under the Act; see also Vicbar Pty Ltd v Development Constructions (Newcastle) Pty Ltd (1995) 13 ACLC 1220, 1224. However, as Lockhart J points out in the Topfelt case, the Corporations Act makes it tolerably plain that the legislature did not want any subtle distinctions being made between big defects and little defects and so raise the problems between nullities and irregularities that had plagued bankruptcy law. It thus gave a wide definition as to what was a statutory demand and provided machinery to deal with defects big and small. The cases which might fall into the category of fundamentally flawed documents that fail to answer the description would be very low indeed. 16 When one adds to that consideration the consideration that within the business community there would be little heed paid to the difference between "Corporations Law" and "Corporations Act" it would seem to me that the decision below was clearly correct. 17 Mr Knaggs spent considerable time discussing the transitional provisions of the Corporations Law/Corporations Act and particularly ss 1370, 1371 and 1407 of the Act. He also referred to the decision of the Western Australian Full Court in R v Hughes (2001) 24 WAR 536. 18 However, if the sections do have some relevance to the instant case, the submissions were properly rejected by Barrett J for the reasons he gives. 19 The Court at the end of the argument ordered that the time for compliance with the notice of demand be extended to 30 September. We extend that time to 8 October 2002 to enable the applicant to comply with the statutory demand. However, otherwise I am of the view that the application for leave to appeal should be dismissed with costs.

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