FEDERAL COURT OF AUSTRALIA

CORPORATIONS - statutory demand - review of Registrar's decision - what is role of court - does the word "is" refer to time of decision? - extension of period for compliance.

Corporations Law - s 459

Cheesman v Waters (1997) 148 ALR 21

D'Antuono v Minister for Health (Federal Court of Australia, Full Court, 5 December 1997, unreported

Harris v Caladine (1991) 172 CLR 84

Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589

Sheahan v Joye (1995) 57 FCR 389

JAGEEV PTY LIMITED v FRANCIS MERVYN DEANE

NG 3302 of 1996

DAVIES J

15 MAY 1998

SYDNEY

mINUTES OF ORDER

THE COURT ORDERS THAT:

1.                     The application to set aside the statutory demand be dismissed with costs. 

2.                     The period for compliance with the statutory demand be extended to 21 days after the day on which this order is made.

Note:                Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

This is a review of an order made by a Deputy Registrar that an application to set aside a statutory demand be dismissed.

The proceedings have their genesis in a statutory demand served by the respondent on the applicant on 1 August 1995.  The demand was based on a default judgment that had been entered against the applicant in favour of the respondent on 19 December 1991 in the Local Court, Downing Centre, Sydney in proceedings No. 21576 of 1991.  The total amount claimed in the demand was $6,328.34, consisting of the judgment debt, costs on the writ and interest on the judgment debt.

The respondent, Mr M F Deane, is a solicitor who had acted for the applicant, Jageev Pty Ltd (“Jageev”), and two of its directors for many years prior to the commencement of the proceedings in the Local Court. Mr Deane commenced proceedings on 16 October 1991 claiming an amount of $4,203.03 for work done and services provided by him to Jageev as set out in a memorandum of costs and fees dated 19 August 1991, plus interest and costs.  A default judgment was entered on 19 December 1991 for $4,800.31.  Jageev subsequently alleged that it did not receive notice of the proceedings.

On 1 August 1995 a statutory demand, in the prescribed form and dated 27 July 1995, referring to the debt due under the judgment of the Local Court, was served on Jageev. By an application dated 22 August 1995, Jageev sought an order that the statutory demand be set aside pursuant to s 459G of the Corporations Law (“the Law”).  The application was heard by the Deputy Registrar on 19 and 29 February 1996.  At the time of the hearing, the Registrar was advised that Jageev had filed a notice of motion in the Local Court to set aside the default judgment, but that it had not yet been heard.  On 30 April 1996 the Deputy Registrar made the order dismissing the application.  In the meantime, the notice of motion before the Local Court had been heard and dismissed.  Jageev had also paid an amount of $900 to Mr Deane on 21 March 1996, being the amount which it alleged had been agreed as the maximum amount the Mr Deane would charge for the legal services provided, the subject of the memorandum of costs and fees dated 19 August 1991. 

On 20 May 1996 Jageev filed an application pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth) seeking to have the decision of the Deputy Registrar reviewed. The hearing of the application was adjourned pending the determination of a second notice of motion to set aside the default judgment filed by Jageev in the Local Court.  On 3 September 1996 Senior Civil Magistrate Dive set aside the default judgment.  The matter was subsequently heard before Magistrate Price and judgment was entered in favour of Jageev on 28 February 1997.  However this was not the end of the matter.  Mr Deane appealed to the Supreme Court of New South Wales by way of stated case.  On 5 December 1997, Dunford J held that the Magistrate had erred and he remitted the matter to the Local Court to be reconsidered.  That decision is reported as Deane v Jageev Pty Ltd (1997) 16 ACLC 248.  After the taking of further evidence, Magistrate Price gave judgment on 9 April 1998 in favour of Mr Deane.  Verdict was entered for the balance of the debt remaining after giving credit for the payment of $900, namely, $3,303.03, together with interest.  The total amounted to $6,263.93, plus costs.

The application for review of the Registrar’s decision came on for hearing on 15 April 1998.

Subsection 459G(1) of the Corporations Law provides:

“459G(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.”

Subsections (2) and (3) set out certain requirements regarding the application.  There is no dispute that the applicant has complied with the requirements of s 459G.  Paragraph (a) of subsection 459H(1) is the key provision for the purposes of this application.  Subsection 459H(1) provides:

“459H(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:

            (a)        that there is a genuine dispute between the company and the                    respondent about the existence or amount of a debt to which                the demand relates;

            (b)        that the company has an offsetting claim.”

(Emphasis added.)

Subsection (2) requires the Court to calculate the “substantiated amount of the demand” in accordance with a given formula.  The effect of s 459H in so far as it is relevant to this application is that the Court must set aside the demand in whole or in part if it is satisfied that there is a genuine dispute about the existence of the debt to which the demand relates or the amount thereof.

The function of the Court, on a review of a decision of a Deputy Registrar, is to rehear that case and decide the facts for itself.  Harris v Caladine (1991) 172 CLR 84 is authority for the proposition that, to be constitutionally valid, powers and functions exercised by officers of a federal court in the exercise of delegated jurisdiction must be subject to review by a judge of the court.  See also Cheesman v Waters (1997) 148 ALR 21.  In D’Antuono v Minister for Health (Federal Court of Australia, Full Court, 5 December 1997, unreported), Burchett J analysed the reasons for judgment in Harris v Caladine (1997) 172 CLR 84 and said, inter alia, at 5:

“...What emerges from this examination of the constitutional position, as declared by the High Court (and see also Cheesman v Waters (1997) 148 ALR 21 at 27), is that the control and supervision of the Court are required to be so real and effective that the decision, which is within the Court’s jurisdiction, though made by an officer who is not a judge, can still be seen to be a decision of the Court.  That would obviously not be so if a resolution of disputed facts which was its foundation were not examinable by the judge.”

Burchett J went on to say, at 6:

“In any case, as Dawson J points out (at 125) ... even in the absence of the constitutional imperative which a delegation of power by a federal court must acknowledge, delegations by courts to registrars and masters, subject to review by a judge, have uniformly been held to involve a complete reconsideration of the case.”

To the same effect, Branson J said in Sheahan v Joye (1995) 57 FCR 389 at 391, in relation to a review under s 35A of the Federal Court of Australia Act:

“In my view this provision provides for the Court to reconsider in the light of evidence before it and the law as at the time of the review, the rights of the parties: (Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 per Mason J at 619-625; Wigg v Architects Board of South Australia (1984) 36 SASR 111.”

On appeal to the Full Court, this approach was not challenged.

It follows that the Court should consider the matter afresh.  A hearing de novo involves a complete rehearing of the facts and the law as they exist when the Court reviews the order made by the Deputy Registrar: per McHugh J in Harris at 164.

Turning to the wording of s 459H(1)(a) of the Law, the question before this Court is whether it “is satisfied ... that there is a genuine dispute” between the applicant and the respondent as to the existence or amount of the debt to which the statutory demand relates.  Given the nature of the review, the Court must, if it is to set aside the statutory demand, be satisfied as at the time of the rehearing that there is a genuine dispute between the parties. In s459H(1)(a) the word “is” refers to the time when the decision is given.  The provision is not concerned with whether there may in the past have been a dispute about the debt, including at the time when the statutory demand was served, but whether there is, in the Court’s view, a dispute about the matter when the issue is determined by the Court.  This interpretation finds support in s 459F which fixes the date of non-compliance and provides that, on an application to set aside a statutory demand, the Court may extend the period for compliance with the demand.

Thus, it no longer matters that there was, in the past, a dispute between Jageev and Mr Deane as to Jageev’s liability to pay the costs claimed by Mr Deane.  I accept that, until the final judgment, the dispute was for the purposes of s 459G a genuine dispute.  Notwithstanding that the evidence of Jageev’s witnesses was ultimately rejected, the dispute existed and had to be resolved by a judicial officer after hearing evidence.

Paragraph 1 of the statutory demand stated:

“1. The Company owes FRANCIS MERVYN DEANE of 122 Castlereagh Street, Sydney (“the Creditor”) the amount of $6,328.34 being the amount of the debt described in the Schedule.”

The Schedule read as follows:

                                                            SCHEDULE

Description of the debt                                               Amount of the debt

Judgment debt. Local Court Downing

Centre, Sydney, No. 21576 of 1991 dated

19th December, 1991                                                             $4,800.31

Costs on Writ (including execution fee)                                      98.00

Interest on Judgment debt:-

a) from 19.12.91 to 16.2.92 at 15%               $116.39

b) from 17.2.92 to 31.8.93 at 11.25%                        828.55

c) from 1.9.93 to 28.2.95 at 10.5%                249.94

d) from 1.3.95 to date at 12%                                    235.15             $1,430.03

                                                                        ------------------------------                                                                                                           $6,328.34

                                                                                                ------------

Interest continues to accrue at $1.58 per day.”

The effect of a judgment is that the underlying debt, which was the basis of a legal proceedings, merges in the judgment.  This is expressed in the principle of res judicata.  As Brennan J said in Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589 at 611:

“The foundation of the rule, whether it be termed res judicata, or cause of action estoppel or judgment recovered, is the merging of the cause of action in the judgment.  In reference to res judicata, Dixon J. said in Blair v. Curran (1939) 62 CLR 464, at p 532:  ‘the very right or cause of action claimed or put in suit has ... passed into judgment, so that it is merged and has no longer an independent existence ...’.”

At the present time, there is no longer any dispute about the original debt, that is Mr Deane’s  entitlement to legal costs for the work done.  That dispute has been resolved and the original debt has merged in the judgment given on 9 April 1998.  The only issue in this present review seems to be whether the statutory demand fails because it referred to a judgment debt, that under the judgment of the Local Court given on 19 December 1991, and that judgment has been set aside.

Section 459E of the Corporations Law provides, inter alia:

            "459E(1)         A person may serve on a company a demand relating to:

                                    (a)        a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or

                                    (b)        2 or more debts that the company owes to the person that are due and payable and whose amounts total at least the statutory minimum.

                        (2)        The demand:

                                    (a)        if it relates to a single debt - must specify the debt and its amount; and

                                    (b)        if it relates to 2 or more debts - must specify the total of the amounts of the debts; and

                                    (c)        must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor's reasonable satisfaction within 21 days after the demand is served on the company; and

                                    (d)        must be in writing; and

                                    (e)        must be in the prescribed form (if any); and

                                    (f)        must be signed  by or on behalf of the creditor."

In my opinion, these provisions do not require such particularity in description that a reference to a judgment debt will not also encompass the underlying debt or a description of the underlying debt will not also encompass any judgment obtained for the debt prior to the hearing of the application to set aside. This interpretation of the Act finds support in the provisions of s 459H where the Court is required to determine the substantiated amount of demand.  These provisions show that the Court is concerned not with technicalities such as the description of the amount due but with ascertaining how much is unarguably due to the person who served the statutory demand by the corporation which has received it.

Of course, a statutory demand will not be valid if it is uncertain or confusing.  But, in the present case, there was no confusion and the debt as it stood at the time of the service of the statutory demand was accurately described.  In my opinion, that description was sufficient to encompass the underlying debt in the judgment and it matters not that the original judgment was later set aside and a subsequent judgment for the amount was obtained. 

Accordingly, the position that there is no dispute as to the debt which was the subject of the statutory demand.  I have not been asked to adjust the statutory demand by reason of the slight difference between the amount claimed in the demand and the amount of the judgment of 9 April 1998.  I assume that interest on the judgment would be sufficient to make up the difference.

There being no present dispute that the amount claimed in the statutory demand in this case is due by Jageev to Mr Deane, the application to set aside the statutory demand must be dismissed with costs.  However, in the light of the events which have occurred, I think it
proper to order, under s 459F(2), that the period for compliance with the statutory demand be extended to 21 days after the day on which this order is made.

Associate:

Date:                15 May 1998