Topfelt Pty Limited v State Bank of New South Wales Limited [1993] FCA 589;

Topfelt Pty Limited v State Bank of New South Wales Limited [1993] FCA 589; - FCA 1993 case summary — Zoe

[17]

PARAGRAPH 459e(2)(e)

CORPORATION LAW

CREDITOR'S STATUTORY DEMAND FOR PAYMENT OF DEBIT

TO: TOPFELT PTY LIMITED (A.C.N. 003 378 596)

of: 1st Floor

Evatt Chambers

19 Mitchell Drive

Greenhills NSW 2323

1. The company owes the State Bank of New South Wales

Limited (A.C.N. 003 963 228) of Level 35, State Bank

Centre, 52 Martin Place, Sydney, Australia ('the

creditor') the amount of One Hundred and Seventy Nine

Thousand Seven Hundred and Twenty Two Dollars and

Seventy Three Cents ($179,722.73) together with

interest from the 11th March, 1993 to date and

continuing being the amount of the debt described in

the Schedule.

2. The amount is due and payable by the company.

3. The creditor requires the company within twenty one

(21) days after service on the company of this demand:

a. to pay to the creditor the amount of the debt,

or;

b. to secure or compound for the amount of the debt

to the creditor's reasonable satisfaction.

4. The creditor may rely on a failure to comply with this

demand within the period for compliance set out in

sub-section 459F(2) as grounds for an application to a

court having jurisdiction under the Corporations Law

for the winding up of the company.

5. Section 459G of the Corporations Law provides that a

company served with a demand may apply to a court

having jurisdiction under the Corporations Law for an

order setting the demand aside. An application must

be made within twenty one (21) days after the demand

is served and, within the same period:

a. an affidavit supporting the application must be

filed with the court; and

b. a copy of the application and a copy of the

affidavit must be served on the person who

served the demand.

6. The address of the creditor for service of copies of

any application and affidavit is Messrs Emery

Partners, Solicitors, 138 Vincent Street, Cessnock.

2325. DX 7832 Newcastle.

Telephone (049) 90 2022 Facsimile (049) 90 3195 or by

their City Agent Messrs Slade Manwaring and Co,

Solicitor, 141 Elizabeth Street, Sydney 2000. DX 248

Sydney Telephone (02) 264 1063.

SCHEDULE

Description of debt: Amount of

debt:

To judgment made in Supreme

$179,722.73

Court of New South Wales together with interest

Registry Equity Division from 11th March, 1993

No S002657 and amounting to date and continuing

to $429,722.73 together

with interest thereon less

amount received on sale of

mortgaged property being

Folio Identifier 12/789884

Dated: 1 September 1993

Signed: Brad Hughes

Print Name:Charles Bradford Hughes

Capacity: Partner of Emery Partners,

Solicitors as Solicitor for Creditor

Corporation or

partnership name:As Partner on behalf of Emery

Partners, Solicitor

for

Creditor

NOTE:

1. THE FORM MUST BE SIGNED BY THE CREDITOR OR THE CREDITOR'S

SOLICITOR. IT MAY BE SIGNED ON BEHALF OF A PARTNERSHIP BY A

PARTNER, AND ON BEHALF OF A CORPORATION BY A DIRECTOR OR BY THE

SECRETARY OR AN EXECUTIVE OFFICER OF THE CORPORATION.

2. THE AMOUNT OF THE DEBT OR, IF THERE IS MORE THAN ONE DEBT, THE

TOTAL OF THE AMOUNTS OF THE DEBTS, MUST EXCEED THE STATUTORY

MINIMUM $2,000.00

3. UNLESS THE DEBT, OR EACH OF THE DEBTS, IS A JUDGMENT DEBT, THE

DEMAND MUST BE ACCOMPANIED BY AN AFFIDAVIT THAT:

A. VERIFIES THAT THE DEBT, OR THE TOTAL OF THE AMOUNTS OF

THE DEBTS, IS DUE AND PAYABLE BY THE COMPANY; AND

B. COMPLIES WITH THE RULES.

4. A PERSON MAY MAKE A DEMAND RELATING TO A DEBT THAT IS OWED TO

THE PERSON AS ASSIGNEE."

[33]

"Division 3 - Application to set aside statutory

demand

685. This Division will implement the Harmer

Report's recommendations in connection with the

setting aside of statutory demands. The Harmer

Report considered that the existing largely

unregulated, procedure in relation to notices of

demand too often produces disputes about the

debt at the hearing of a winding up application.

The Report further noted that companies

presently often need to bring injunction

proceedings where a debt claimed in a demand is

disputed. The Report took the view that the

legislation should specifically provide for the

determination of disputed debt issues and other

disputes in respect of a statutory demand.

686. The Harmer Report proposed that a demand

may be set aside if the Court is satisfied that:

. there is a substantial dispute

as to whether the debt is

owing;

. the company appears to have a

counter claim which may exceed the

amount of the debt; or

. the demand ought to be set aside on

other grounds.

687. This last general power would enable the

Court to take account of matters such as

improper or invalid service and mistakes or

misstatements in the notice of demand, in

circumstances where this would significantly

prejudice any party.

688. The provisions in relation to the setting

aside of a statutory demand are intended to be a

complete code for the resolution of disputes

involving statutory demands, and to do so on the

basis of the commercial justice of the matter,

rather than on the basis of technical

deficiencies. In particular it is intended to

remove the present difficulties which are

experienced where difficulties in estimating the

extent of the debt may lead to an invalidating

of the statutory demand on the basis of a minor

overstatement of the amount due. This issue has

been highlighted in recent cases (Ataxtin Pty

Ltd v Gordon Pacific Developments Pty Ltd (1991)

5 ACSR 10; Hassgill Investments Pty Ltd v Newman

Air Charter Pty Ltd (1991) 5 ACSR 321).

689. This proposed Division, together with

proposed Division 4, also provides a means of

dealing with statutory demand disputes in such a

way that an alleged defect in the statutory

demand does not have the effect of prolonging

proceedings leading to the commencement of a

winding up, by requiring debtor companies to

raise genuine disputes (about, for example,

whether a debt is owed) at an early stage,

rather than after winding up proceedings have

commenced."

[68]

"Although there are definite similarities

between a bankruptcy notice and a statutory

demand under the Companies Act 1981 (Cth), there

are obvious differences. Unlike a bankruptcy

notice, a statutory demand under the

Corporations Law need not be preceded by a final

(or any other) judgment. Non-compliance with a

bankruptcy notice has what has been referred to

in many cases as quasi penal consequences. It

constitutes an act of bankruptcy which has a

number of repercussions under the law of

bankruptcy. It is an essential condition of a

court having jurisdiction under the federal law

of bankruptcy to make a sequestration order

against the estate of a debtor, that he has

committed an act of bankruptcy (s. 43). The

bankruptcy relates back to and commences at the

time of the commission of the earliest act of

bankruptcy committed by the bankrupt within the

period of six months immediately preceding the

day on which the creditor's or debtor's petition

is presented (s. 115). The effect of relation

back is to treat all dealings with a person's

property within six months after he has

committed an act of bankruptcy as if his

bankruptcy had taken place at the time of

commission of such act of bankruptcy. One

difference between a bankruptcy notice under the

bankruptcy legislation and a statutory demand

under the Corporations Law is that a creditor

must have obtained a judgment under the law of

bankruptcy, though not under the Corporations

Law. Also, the period for compliance with the

requirements of the notice is determined by the

Registrar, and the parties can by search

ascertain what bankruptcy notices have been

issued in relation to a particular debtor.

Provision is made by s. 40(1)(g) of the

Bankruptcy Act 1966 (Cth) for a debtor, who has

been served with a bankruptcy notice, to assert

a counter-claim, set-off or cross-demand against

the creditor equal to or exceeding the amount of

the judgment debt and which he could not have

set up in the action or proceeding in which the

judgment was obtained against him. There is no

counterpart in winding-up law (but as to

offsetting claims in relation to companies, see

now s. 459H of the Corporations Law).

A statutory demand under the Corporations Law is

essentially a method by which a creditor to whom

the company is indebted in a sum that exceeds

the statutory minimum can establish that the

company is unable to pay its debts and therefore

establish a ground for the winding up of the

company.

It is an essential function of the statutory

demand that it gives the company the opportunity

of paying the sum which it is required to pay or

to secure or compound for it to the reasonable

satisfaction of the creditor. If the company

fails to comply with the demand it will be

deemed to be unable to pay its debts and thus

establish a ground for the winding up of the

company. ...

As Professor H.A.J. Ford recognises in

Principles of Company Law (5th ed., 1990) p 759,

para. 2203, note 5, p 759: the failure of a

company to comply with a statutory demand has

'serious consequences'. ...

There may be severe commercial repercussions.

On the filing of an application to wind up a

company news spreads quickly and the company's

reputation may suffer. There may also be

repercussions at that stage against a company

with its bankers and mortgagees under the terms

of security documents."

At a glance

Court

Decision date

Before

Source

Judgment (101 paragraphs)

Topfelt Pty Limited v State Bank of New South Wales Limited [1993] FCA 589; (1993) 12 ACSR 381 (1993) 120 ALR 155 (1993) 47 FCR 226 (7 December 1993)

Parties

Legislation Cited (2)

Cases Cited (9)