4380/06 TATLERS.COM.AU PTY LIMITED v DAVIS DAVIS
JUDGMENT
1 The plaintiff makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant. The claim is based on s.459J(1)(b) of the Act and the proposition that there is "some other reason why the demand should be set aside", that is, some reason other than genuine dispute or offsetting claim within s.459H and defect productive of substantial injustice within s.459J(1)(a).
2 The statutory demand is dated 31 July 2006 and refers to a debt of $55,000 described in its schedule as follows:
"Balance of a judgment debt owed pursuant to orders of the Supreme Court of New South Wales made 5 May 2006 entered 8 May 2006 in matter number 5298 of 2005."
3 Certain orders were made in proceedings 5298 of 2005 by the Chief Judge in Equity on 5 May 2006. They included an order that verdict and judgment be entered for the present defendant in the sum of $75,000 and an order that execution of the judgment be stayed for twenty-eight days. There were two defendants in those proceedings, being the present plaintiff and a natural person. Judgment in the sum of $75,000 was entered against both.
4 On 13 June 2006, a registrar of the court made, upon an application filed on 1 June 2006, an instalment order with respect to the amount owing pursuant to the judgment. The order was made under rule 37.3 of the Uniform Civil Procedure Rules 2005. It related to the whole of the judgment sum of $75,000 and directed payment by monthly instalments of $10,000, commencing on 30 June 2006.
5 The judgment debtors failed to comply with the instalment order in respect of the sum of $10,000 due on 30 June 2006. They attempted to comply and believed they had complied by making a payment of $10,000 on that date at the Supreme Court Registry, for which a receipt was issued. However, the court later returned the $10,000 with a letter explaining that instalments were to be paid direct to the judgment creditor.
6 On 28 July 2006, the solicitors for the judgment debtors sent a cheque for $20,000 to the solicitors for the judgment creditor, explaining the situation that had arisen in relation to the first instalment and stating that the $20,000 cheque represented the first two payments under the instalment order.
7 On 26 June 2006 the present defendant had filed a notice of motion by way of objection seeking to have the first instalment order rescinded. That application came before the registrar on 31 July and it was determined that failure to pay the first instalment to the judgment creditor had produced the result that under the rules the first instalment order had ceased to have effect. This decision was obviously based on rule 37.7.
8 On 11 August 2006, the registrar made another instalment order under rule 37.3. Application for that had been made on 2 August 2006. The new order was expressed to relate to a judgment debt of $75,000 and to require payment by monthly instalments of $10,000, with the first instalment to be paid on 31 August 2006. In the meantime, however, the statutory demand had been served on or about 1 August 2006.
9 The present defendant, as judgment creditor, made an objection to the second instalment order on 24 August 2006. That objection was heard on 29 September 2006 and the registrar's decision was reserved. There has not yet been any decision on that objection.
10 In summary, therefore, the position at the time of issue and service of the statutory demand on 1 August 2006 was that $20,000 of the total judgment debt had been paid and no instalment order was in force but, by the time the originating process was filed, the position had changed to the extent that a new instalment payment order was in force. That latter position continues to prevail today, subject to the possibility that the outcome of the objection that was heard by the registrar on 28 September 2006 may result in a future rescission of the instalment order.
11 The particular sequence of events raises a question of timing relevant to s.459J(1)(b), that is, whether the "other reason why the demand should be set aside" upon which a s.459G applicant relies must be seen to have existed when the statutory demand was served or whether regard is to be had to the position that exists when the court comes to consider the s.459G application. The defendant says that the first approach is the correct one. I do not accept that proposition. Section 459J(1)(b) is a provision that underwrites the statutory purposes reflected in Part 5.4 as a whole. It was recognised as such by the Court of Appeal in Meehan v Glazier Holdings Pty Limited (2005) 53 ACSR 229 where there was express approval of the observation to that effect by Bryson J in Portrait Express (Sales) Pty Limited v Kodak Australasia Pty Limited (1996) 20 ACSR 294.
12 When s.459J(1)(b) is invoked, the court is called upon to decide what will best serve the statutory purpose at the time it considers the question. The court should therefore approach the matter in the light of circumstances prevailing at that time rather than by merely paying attention to some historical snapshot. The question for decision in the present proceeding is whether, having regard to the statutory purpose of providing a means for the creation of a statutory presumption of insolvency by reason of the non-payment of a single debt, the circumstances now prevailing in relation to the particular debt in question are such that the court should allow the presumption to arise or prevent its arising.
13 The Court of Appeal emphasised in the Meehan case that this is not some kind of intuitive exercise based on vague notions of fairness. In a case such as the present, the task is to be undertaken on the footing that a statutory demand should be allowed to create a presumption of insolvency if circumstances can be seen to be such that non-payment of the particular single debt within the prescribed period was unjustified. If there was some sound basis for failure to pay, distinct from genuine dispute as to the amount or existence of the debt or the existence of an offsetting claim, then the situation is one in which the policy of the legislation will be subverted if the presumption of insolvency is allowed to arise.
14 I was referred to a number of cases which tend to support the proposition that events after service of the statutory demand may be relied upon in pursuing a s.459G application based on s.459J(1)(b). In Cempro Pty Limited v Dennis M Brown Pty Limited (1994) 13 ACSR 628, for example, Von Doussa J was influenced in a context involving s.459J(1)(b) by the fact that eleven statutory demands associated with the statutory demand in question had been withdrawn whereas the twelfth had not; and this was in circumstances where all had been served on the same day, so that withdrawal of the eleven occurred after service of the twelfth. In Meehan's case, Young CJ in Eq, in his short concurring judgment, gave as a hypothetical example of circumstances within s.459J(1)(b) those where "the alleged creditor has made a statement or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor's position." This, obviously enough, refers to matters arising after service of the demand.
15 The third case is KC Parksafe (Vic) Pty Limited v Dallbrook Pty Limited (1998) 87 FCR 509, which I mention only because of the possibility recognised there by Finkelstein J at page 515 that a creditor's failure to accept an offer to pay on terms may in a particular case be a reason for setting aside a demand under s.459J(1)(b).
16 The last case to be mentioned is of particular relevance to the present circumstances. It is the decision of Master Macready in Detail Rock Tools Pty Limited v Kleenkut Pty Limited [2003] NSWSC 643. That case, like this, involved a situation where a judgment debtor had obtained an order for payment by instalments. The order in that case was an order made by the Local Court in respect of a Local Court judgment. Under the Local Court (Civil Claims) Rules 1998, the order, while in force, operated as a stay of enforcement of the judgment. The order was made after service of the statutory demand. After deciding that the existence of a stay represented "some other reason" within s.459J(1)(b), Master Macready made particular observations at paragraph 10 of his judgment:
"Although the stay was not in force at the time of the issue of the demand, it did come into effect within twenty-one days after the date of issue. I do not see why that would make any difference. It is apparent the application was made promptly and only a month after the judgment. It was no doubt done as a response to the service of the demand. That does not detract from the clear legislative provision which allows applicants to pay debts by instalments. For those reasons I would propose to set aside the demand but I will briefly refer to the other matters."
17 In the present case, a very important consideration is whether, as a result of the making and continuing subsistence of the second instalment order (that is, the order made on 11 August 2006), execution of the judgment which is the source of the judgment debt is stayed. The plaintiff argues this it is, the defendant that it is not. It is necessary at this point to refer to the relevant provisions. Section 107 of the Civil Procedure Act 2005 is as follows:
" Deferred payment and payment by instalments