Stack v Elster Metering Pty Ltd [2005] FCA 231

FEDERAL COURT OF AUSTRALIA

CORPORATIONS LAW – applications to set aside two statutory demands – history of litigation between the parties – address of registered office of company at time of service -whether prepaid postage to company’s registered office amounts to service - whether genuine claim exists within the meaning of s 459H(5) because of possibility of pursuing special leave to appeal to the High Court against a decision of the Full Federal Court dismissing the appeal – whether doctrine of res judicata precludes contention that there is a genuine claim – whether pending application for special leave to appeal can amount to “some other reason” for setting aside statutory demand

BANKRUPTCY – application to set aside bankruptcy notice – assertion of cross demand – whether notice otherwise oppressive

Corporations Act 2001 (Cth) ss 109X, 459G, 459H, 459J, 459L

Bankruptcy Act 1966 (Cth) ss 30, 40(1)(g), 41(7)

Patents Act 1990 (Cth)Chapter 17

Evidence Act 1995 (Cth) s 160

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 cited

David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 cited

Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454 applied

Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 applied

GEORGE STACK v ELSTER METERING PTY LTD (ACN 004 088 680) & ORS

Q 129 of 2004

G.S. TECHNOLOGY PTY LTD (ACN 011 062 767) v ELSTER METERING PTY LTD (ACN 004 088 680) & ORS

Q 3006 of 2003

Q 3007 of 2003

SPENDER J

14 MARCH 2005

BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 129 of 2004

BETWEEN:	GEORGE STACK APPLICANT
AND:	ELSTER METERING PTY LTD (ACN 004 088 680) (formerly Davies Shephard Pty Ltd) FIRST RESPONDENT WOODPICKERS AUSTRALIA PTY LTD (ACN 009 738 005) (formerly Davies Shephard (Queensland) Pty Ltd) SECOND RESPONDENT GSA INDUSTRIES (AUST) PTY LTD (ACN 004 784 301) THIRD RESPONDENT
JUDGE:	SPENDER J
DATE OF ORDER:	14 MARCH 2005
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The application to set aside Bankruptcy Notice VN 900/2004 is dismissed.

2. The applicant pay the respondent’s costs of and incidental to this application, to be taxed if not agreed.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 3006 of 2003

BETWEEN:	G.S. TECHNOLOGY PTY LTD (ACN 011 062 767) APPLICANT
AND:	ELSTER METERING PTY LTD (ACN 004 088 680) FIRST RESPONDENT WOODPICKERS AUSTRALIA PTY LTD (ACN 009 738 005) SECOND RESPONDENT GSA INDUSTRIES (AUST) PTY LTD (ACN 004 784 301) THIRD RESPONDENT
JUDGE:	SPENDER J
DATE OF ORDER:	14 MARCH 2005
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The application to set aside the statutory demand is dismissed as incompetent, pursuant to s 459G(2) of the Corporations Act 2001 (Cth).

2. The applicant pay the respondent’s costs of and incidental to this application, to be taxed if not agreed.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 3007 of 2003

BETWEEN:	G.S. TECHNOLOGY PTY LTD (ACN 011 062 767) APPLICANT
AND:	ELSTER METERING PTY LTD (ACN 004 088 680) (FIRST RESPONDENT WOODPICKERS AUSTRALIA PTY LTD (ACN 009 738 005) SECOND RESPONDENT GSA INDUSTRIES (AUST) PTY LTD (ACN 004 784 301) THIRD RESPONDENT
JUDGE:	SPENDER J
DATE OF ORDER:	14 MARCH 2005
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The application to set aside the statutory demand is dismissed.

2. The applicant pay the respondent’s costs of and incidental to this application, to be taxed if not agreed.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 129 of 2004

BETWEEN:

GEORGE STACK

APPLICANT

AND:

ELSTER METERING PTY LTD (ACN 004 088 680) (formerly Davies Shephard Pty Ltd)

FIRST RESPONDENT

WOODPICKERS AUSTRALIA PTY LTD (ACN 009 738 005) (formerly Davies Shephard (Queensland) Pty Ltd)

SECOND RESPONDENT

GSA INDUSTRIES (AUST) PTY LTD (ACN 004 784 301)

THIRD RESPONDENT

BETWEEN:

Q 3006 of 2003

G.S. TECHNOLOGY PTY LTD (ACN 011 062 767)

APPLICANT

AND:

ELSTER METERING PTY LTD (ACN 004 088 680) FIRST RESPONDENT

WOODPICKERS AUSTRALIA PTY LTD (ACN 009 738 005) SECOND RESPONDENT

GSA INDUSTRIES (AUST) PTY LTD (ACN 004 784 301)

THIRD RESPONDENT

BETWEEN:

Q 3007 of 2003

G.S. TECHNOLOGY PTY LTD (ACN 011 062 767)

APPLICANT

AND:

ELSTER METERING PTY LTD (ACN 004 088 680) FIRST RESPONDENT

WOODPICKERS AUSTRALIA PTY LTD (ACN 009 738 005) SECOND RESPONDENT

GSA INDUSTRIES (AUST) PTY LTD (ACN 004 784 301)

THIRD RESPONDENT

JUDGE:	SPENDER J
DATE:	14 MARCH 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 Each of proceedings Q3006 of 2003 and Q3007 of 2003 is an application made under s 459G of the Corporations Act 2001 (Cth) (“the Corporations Act”) by G.S. Technology Pty Ltd (“G.S. Technology”) to set aside a statutory demand.

2 In proceedings Q3006 of 2003, the applicant, in an application filed on 2 December 2003, seeks that the respondents’ statutory demand dated 16 October 2003 for payment of a judgment debt in the sum of $63,947.63 (said by the applicant to have been served by the respondents on the applicant on or after 13 November 2003) be set aside pursuant to ss 459G, 459H and 459J of the Corporations Act.

3 In proceedings Q3007 of 2003, the applicant, in an application also filed on 2 December 2003, seeks that the respondents’ statutory demand dated 10 November 2003 for payment of a judgment debt in the sum of $16,850.88 (said by the applicant to have been served by the respondents on the applicant on or after 13 November 2003) be set aside pursuant to ss 459G, 459H and 459J of the Corporations Act.

4 In each case the applicant seeks that the respondents be restrained from enforcing the costs order that is the subject of the respective statutory demand.

5 Proceedings Q129 of 2004 is an application by George Stack, filed on 14 July 2004, for an order pursuant to ss 30 and 41(7) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) to set aside a bankruptcy notice VN900/2004, which Mr Stack says was served on him on 24 June 2004. The basis of the application is the claim that the applicant has a counter-claim or set-off equal to or exceeding the sum specified in the bankruptcy notice.

6 On 10 August 2004 I directed that the three matters be heard together, because there are common issues involved in each proceeding, each application being connected with long-running litigation between the various parties concerning intellectual property rights for water meter assemblies.

7 The provisions of the Corporations Act which apply to the two applications by G.S. Technology relevantly are:

‘SECTION 459G

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

(2) An application may only be made within 21 days after the demand is so served.

(3) An application is made in accordance with this section only if, within those 21 days:

(a) an affidavit supporting the application is filed with the Court; and

(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.

SECTION 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.

…

(5) In this section:

…

offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).

…

SECTION 459J

(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

(b) there is some other reason why the demand should be set aside.

(2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.’

…

8 Section 459L provides:

‘Unless the Court makes, on an application under section 459J, an order under section 459H or 459J, the Court is to dismiss the application.’

9 In relation to service, s 109X of the Corporations Act provides:

‘(1) For the purposes of any law, a document may be served on a company by:

(a) leaving it at, or posting it to, the company’s registered office; or

(b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory; or

(c) if a liquidator of the company has been appointed – leaving it at, or posting it to, the address of the liquidator’s office in the most recent notice of that address lodged with ASIC; or

(d) if an administrator of the company has been appointed – leaving it at, or posting it to, the address of the administrator in the most recent notice of that address lodged with ASIC.

(2) For the purposes of any law, a document may be served on a director or company secretary by leaving it at, or posting it to, the alternative address notified to ASIC under subsection 5H(2), 117(2), 205B(1) or (4) or 601BC(2). However, this only applies to service on the director or company secretary:

(a) in their capacity as a director or company secretary; or

(b) for the purposes of a proceeding in respect of conduct they engaged in as a director or company secretary.

(3) Subsections (1) and (2) do not apply to a process, order or document that may be served under section 9 of the Service and Execution of Process Act 1992.

(6) This section does not affect:

(a) any other provision of this Act or any provision of another law, that permits; or

(b) the power of a court to authorise;

a document to be served in a different way.’

10 Section 160 of the Evidence Act 1995 (Cth) (“the Evidence Act”) provides:

‘(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.

(2) This section does not apply if:

(a) the proceeding relates to a contract; and

(b) all the parties to the proceeding are parties to the contract; and

(3) In this section:

working day means a day that is not:

(a) a Saturday or a Sunday; or

(b) a public holiday or a bank holiday in the place to which the postal article was addressed.’

11 Section 29 of the Acts Interpretation Act 2001 (Cth) provides:

‘(1) Where an Act authorizes or requires any document to be served by post, whether the expression “serve” or the expression “give” or “send” or any other expression is used, then unless the contrary intention appears the service shall be deemed to be effected by properly addressing prepaying and posting the document as a letter, and unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post.

(2) This section does not affect the operation of section 160 of the Evidence Act 1995.’

Proceedings Q 129 of 2004

12 Bankruptcy Notice VN900/2004 is directed to George Stack (“the debtor”) at 4 Donnington Street, Carindale, Queensland, 4152. The body of the bankruptcy notice recites:

‘1. Elster Metering Pty Ltd (ACN 004 088 680) (formerly Davies Shephard Pty Ltd) of 55 Northcorp Boulevard, Broadmeadows, Victoria, 3047, Woodpickers Australia Pty Ltd (ACN 009 738 005) (formerly Davies Shephard (Queensland) Pty Ltd) of 43 Black Street, Brighton, Victoria, 3186 and GSA Industries (Aust) Pty Ltd (ACN 004 784 301) of Level 54, Rialto Building, 525 Collins Street, Melbourne, Victoria, 3000

(“the creditors”)

claim you owe the creditors a debt of $85,484.45, as shown in the Schedule.

2. The creditors claim that the debt is due and payable by you. A copy of the judgments or orders relied upon by the creditors is attached. At the time of applying for this Notice, execution of the judgments or orders had not been stayed.

3. You are required, within 21 days after service on you of this Bankruptcy Notice:

(e) to pay to the creditors the amount of the debt; or

(f) to make an arrangement to the creditors’ satisfaction for settlement of the debt.

4. Payment of the debt can be made to:

Dale Hudson, Company Secretary, GSA Industries (Aust) Pty Ltd of Level 54, Rialto Building, 525 Collins Street, Melbourne, Victoria 3000

…

7. In addition, within the time specified in paragraph 3 above, you may file an application to the Court for an order to set aside this Bankruptcy Notice on the specific grounds that:

(a) you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in this Bankruptcy Notice as owing to the creditors; and

(b) in the action or proceeding in which the judgments or orders mentioned in paragraph 2 of this Bankruptcy Notice was obtained, you could not have set up that counter-claim, set-off or cross demand*.

*This means that, because of a legal obstacle, you could not have raised that counter-claim, set-off or cross demand in defence of the creditors’ court action against you. It is not enough if, for example, you simply neglected or overlooked the matter.’

13 Schedule 1 to the bankruptcy notice asserts as follows:

‘

Column 1	Column 2
1. Amount of judgments or orders	$78,664.66
plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1 below)
plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2 below)	$6,819.79
4. Subtotal	$85,484.45
Less 5. Payments made and/or credits allowed since date of judgment or orders
6. Total debt owing	$85,484.45

(NB: Amounts, where applicable, are to be inserted in Column 2)

______________________________________________________________

For the Information of the Creditor -

Notes to the Schedule

Note 1: Legal costs (item 2 of the Schedule)

If legal costs are being claimed in this Bankruptcy Notice, a certificate of taxed or assessed costs in support of the amount claimed must be attached to this Bankruptcy Notice.

Note 2: Interest accrued (item 3 of the Schedule)

If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this Bankruptcy Notice. The document must state:

(a) the provision under which the interest is being claimed; and

(b) the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed.

(NB: If different rates are claimed for different periods, full details must be shown)

…

Calculation of Interest on principal amount of $61,813.78

From

Number of Days

Interest Rate (per year)

Interest Rate (per day)

Interest

18 June 2003

11 May 2004

329

10.5%

0.0288%

$5,850.29

…

Calculation of Interest on principal amount of $16,850.88

From

Number of Days

Interest Rate (per year)

Interest Rate (per day)

Interest

15 October 2003

11 May 2004

210

10.0%

0.0274%

$969.50’

14 Attached to the bankruptcy notice is a copy of an order of the Full Court of the Federal Court made on 4 May 2001 in proceedings Q243 of 1999 between Davies Shephard Pty Ltd, Davies Shephard (Queensland) Pty Ltd and GSA Industries (Aust) Pty Ltd, Appellants, and George Stack and G.S. Technology Pty Ltd, Respondents and Cross-Appellants, and Brisbane City Council, Respondent. The orders made by the Court were:

‘1. Leave be given, if necessary, to George Stack and G S Technology Pty Ltd to appeal from that part of the judgment of Cooper J given on 15 September 1999 as is specified in their notice of cross-appeal filed on 9 December 1999.

2. The time for filing the notice of cross-appeal be extended to 10 December 1999.

3. The cross appeal be dismissed with costs.’

A Certificate of Taxation in respect of the costs order made by the Full Court dated 17 June 2003 certifies that the Bill of Costs of the appellants filed pursuant to the orders of the Full Court dated 4 May 2001 had been allowed in the sum of $61,813.78. On 19 August 2003 the Court made an order that ‘The cross-appellants pay to the appellants the sum of $61,813.78 being the amount of the Certificate of Taxation issued on 17 June 2003.’

15 Also exhibited to the bankruptcy notice is the order of the High Court of Australia (Gaudron, Gummow and Callinan JJ) of 26 June 2002 in matter B41 of 2001 between George Stack First Applicant and GS Technology Pty Limited Second Applicant, and Davies Shephard Pty Ltd First Respondent, Davies Shephard (Queensland) Pty Ltd Second Respondent, GSA Industries (Aust.) Pty Ltd Third Respondent and Brisbane City Council Fourth Respondent. The High Court ordered that:

‘1. The application for special leave to appeal to this Court from the judgments and orders of the Full Court of the Federal Court of Australia in matters numbered Q243 of 1999 and Q42 of 2000, given and made on the 4^th day of May 2001 be and the same is hereby refused.

2. The applicants pay the respondents’ costs of and incidental to the within application.’

Also attached to the bankruptcy notice is a Certificate of Taxation in the High Court proceedings, where a Deputy Registrar of the High Court taxed the costs of the respondents and allowed the same in the sum of $16,850.88. Those attachments to the bankruptcy notice indicate that George Stack and G.S. Technology are jointly and severally liable in respect of each costs order to Davies Shephard Pty Ltd, Davies Shephard (Queensland) Pty Ltd and G.S.A. Industries (Aust) Pty Ltd, jointly. As a consequence, there are not properly three respondents to the two applications to set aside a statutory demand, but one joint respondent.

16 Section 40(1) of the Bankruptcy Act provides:

‘A debtor commits an act of bankruptcy in each of the following cases:

…

(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

(i) where the notice was served in Australia – within the time specified in the notice; or

(ii) where the notice was served elsewhere – within the time fixed for the purpose by the order giving leave to effect the service;

comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; …’

17 Section 41(7) of the Bankruptcy Act provides:

‘Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.’

18 In an affidavit filed 14 July 2004, Mr Stack deposes that he is a director of G.S. Technology Pty Ltd, and deposes to the fact that G.S. Technology and he are parties to proceedings against Davies Shephard Pty Ltd, now Elster Metering Pty Ltd, Davies Shephard (Queensland) Pty Ltd, now Woodpickers Australia Pty Ltd, and GSA Industries (Aust) Pty Ltd in relation to Petty Patent No. 645740, Petty Patent No. 662284 and Divisional Application 32815/95. Mr Stack says that these Petty Patents and that application for a Standard Patent all arise from a parent application being Patent Application No. 85236/91. The proceedings in relation to Petty Patent No. 645740 were the subject of a decision by Cooper J on 15 September 1999.

19 Mr Stack says that he and G.S. Technology made an application to the Administrative Appeals Tribunal (“the AAT”) for review of a decision of a delegate of the Commissioner of Patents in relation to Application No. 32815/95 to refuse to grant an extension of time for G.S. Technology to pay a renewal fee. The AAT handed down that decision in favour of the respondents on 17 April 2003. An appeal was lodged to the Federal Court from the decision of the AAT. I gave judgment allowing the appeal and remitting the matter to the Commissioner of Patents on 9 August 2004.

20 Proceedings Q3006 of 2003 and Q3007 of 2003 are the applications by G.S. Technology to set aside statutory demands. Those demands are founded on the same costs orders which are the subject of the bankruptcy notice.

21 Mr Stack says that the only trading G.S. Technology undertakes is the sale to the Brisbane City Council of spare parts for water meters, and that G.S. Technology does not hold any substantial assets other than its interest in the intellectual property rights which are the subject of the legal proceedings to which he referred, and any rights flowing from those legal proceedings, including the right to recover from the respondents legal costs incurred by G.S. Technology.

22 Mr Stack says:

‘11. In the event that the Company is wound up or put into external administration I believe that I would lose control of the Company and would lose the ability to continue instructing the Company’s solicitors and Counsel in relation to the conduct of the legal proceedings. I believe that this would have an adverse effect on the conduct of the legal proceedings referred to and on the Company’s likelihood of success in those proceedings.

12. I have no assets which can be realised to pay the debt, the subject of the Bankruptcy Notice.

13. If the Bankruptcy Notice is not set aside I will be unable to prosecute an application for Special Leave to Appeal to the High Court referred to in the Affidavit of Stephen James Fox and filed herein.

14. The Company and I have entered into an arrangement with our legal advisors and Counsel pursuant to which the legal costs due to them have been deferred pending the ultimate resolution of the legal proceedings referred to. In this regard any costs order made in the Company’s favour in other proceedings would be able to be used to satisfy the present costs orders.’

23 In an affidavit filed 14 July 2004, a chartered accountant, Gordon Lambert Miles gave an opinion as to the approximate quantum of damages and/or remuneration payable by the respondents and/or the Brisbane City Council under Chapter 17 of the Patents Act 1990 (Cth)respectively, for the infringement and/or for the exploitation of the inventions claimed in any one or more of the claims of Patent 645740, Patent 662284, and the applications for Patents concerning water meter assemblies PK 2036; PK 5286 (filed 26 March 1991); 85236/91 (filed 30 August 1991) (PCT AU 91/00404); and No. 44897/93 giving rise to divisional patents 645740 and 662284; and Application 32815/95, all of which concern water meter assemblies and component parts manufactured by the patentee.

24 Subject to qualifications referred to in an annexure to his affidavit, Mr Miles expressed the preliminary view that, in his opinion, ‘the amount payable by the Respondents and the Brisbane City Council to the applicant and/or the patentee for damages for infringement of the patents and/or remuneration under Chapter 17 of the Patents Act 1990 is not less than $23 million.’

Proceedings Q3006 and Q3007 of 2003

25 The statutory demand in respect of the proceeding Q3006 of 2003 recites as follows:

‘1. The company jointly owes Elster Metering Pty Ltd (ACN 004 088 680) (formerly Davies Shephard Proprietary Limited) of 55 Northcorp Boulevard, Broadmeadows, Victoria, 3047, Woodpickers Australia Pty Ltd (ACN 009 738 005) (formerly Davies Shephard (Queensland) Pty Limited) of 43 Black Street, Brighton, Victoria, 3186 and GSA Industries (Aust) Pty Ltd (ACN 004 784 301) of Level 54, Rialto Building, 525 Collins Street, Melbourne, Victoria, 3000 (the “creditors”) the amount of $63,947.63, being the total of the amounts of the debt described in the Schedule.

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

3. The creditors require the company, within 21 days after service on the company of this demand:

(a) to pay to the creditors the amount of the debt; or

(b) to secure or compound for the amount of the debt, to the creditors’ reasonable satisfaction.

…

5. Section 459G of the Corporations Act 2001 provides that a company served with a demand may apply to a court having jurisdiction under the Corporations Act 2001 for an order setting the demand aside. An application must be made within 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 creditors for service of copies of any application and affidavit is:

Blake Dawson Waldron

Lawyers

Level 40, Riverside Centre

123 Eagle Street

BRISBANE QLD 4000

SCHEDULE

Description of debt	Amount of Debt $
Judgment debt under order made by the Deputy District Registrar in the Federal Court of Australia in proceeding number Q243 of 1999, Queensland Registry on 19 August 2003, being the amount specified in a Certificate of Taxation issued on 17 June 2003 in the same proceeding	$61,813.78
Interest on the amount of the Certificate of Taxation, calculated from 18 June 2003 to 15 October 2003 inclusive of both days (120 days) at an interest rate of 10.5% per year in accordance with Order 62 rule 45(6) and Order 35 rule 8 of the Federal Court Rules	$2,133.85
Total Debt Owing	$63,947.63

Dated: 16 October 2003

Signed:

Print Name: Ian Stanley Pascarl Capacity: Solicitor for Elster Metering Pty Ltd (ACN 004 088 680) (formerly Davies Shephard Proprietary Limited), Woodpickers Australia Pty Ltd (ACN 009 738 005) (formerly Davies Shephard (Queensland) Pty Limited) and GSA Industries (Aust) Pty Ltd (ACN 004 784 301)’

26 On 17 October 2003 the first statutory demand was posted by Blake Dawson Waldron to Unit 38, Royal Brisbane Place, 17 Bowen Bridge Road, Herston, Qld 4006. An ASIC search conducted on 16 October 2003 records that address as the registered address of G.S. Technology. The claim by the respondent is that service of the first statutory demand is deemed to have been effected at the latest by 22 October 2003, and the application to set aside that statutory demand was not filed and served until 2 December 2003.

27 Patrick Charles Constable, a Licensed Commercial Sub-Agent, deposes to service on 13 November 2003 at 11.50 am. He says that, at that time and on that date, he served the statutory demand on G.S. Technology ‘by affixing the documents to the front door of Unit 38, Royal Brisbane Place, 17 Bowen Bridge Road, Herston, in the State of Queensland, this address being the registered office for GS Technology Pty Ltd (ACN 011 062 767) as stated in the Company Search.’

28 The statutory demand in proceedings Q3007 of 2003 is in the same terms as the other statutory demand, except that the amount is $16,850.88, ‘being the total of the amounts of the debt described in the Schedule.’ The Schedule provides:

‘SCHEDULE

Description of debt

Amount of Debt

Judgment debt under order made by Justices Gaudron, Gummow and Callinan in the High Court of Australia in matter number B41 of 2001 on 26 June 2002, being the amount specified in a Certificate of Taxation issued on 14 October 2003 in the same proceeding

$16,850.88

Total Debt Owing

$16,850.88

Dated: 10 November 2003

Signed:

29 Mr Constable deposes to service of that statutory demand on 13 November 2003 in the same way of the service on that day of the statutory demand in proceedings Q3006 of 2003.

30 A company search on 16 October 2003, exhibited to the affidavit of Ian Stanley Pascarl filed 15 January 2004, shows under the heading “Company Address”, the Company Address of the “Registered Office” address of the company, being G S Technology Pty Ltd being “Unit 38 Royal Brisbane Place 17 Bowen Bridge Road Herston Qld 4006”. Under the “Details Type (current/ceased/future)” appears the word “Current”. Under a heading “Company Document Listing”, a Document Number 01106276M, noted to have been received on 25 August 2003 with an effective date of 19 August 2003, being an annual return and change of registered office address and change to principal place of business, is noted to be a “Document under Requisition”. A company search of 13 November 2003, exhibited to the affidavit of Mr Constable filed on 15 January 2004, reveals the same information.

31 On 14 September 2004, Mr Stack filed in court an affidavit sworn 17 October 2003. Exhibited to that affidavit was “a copy of an Australian Securities and Investment Commission Historical Extract for the Company”. That extract under the heading “Registered Office” shows “G.S. Technology Pty Ltd, Unit 38 Royal Brisbane Place, 17 Bowen Bridge Road, Herston, Qld 4006” and says the start date is “7 November 1995”. The same address is shown as the Principal Place of Business, the start date being “1 July 1998”. It also records Document 01106276M, being Form Type “Change of Registered Office Address”, received on 25 August 2003, and that the document is “under requisition”.

32 In an affidavit sworn 1 December 2003, Mr Stack acknowledges that on 14 November 2003, G.S. Technology received by facsimile the two statutory demands. The sum of $63,947.63 in the statutory demand dated 16 October 2003 is referred to as “the first debt”, and the statutory demand of 10 November 2003 in the sum of $16,850.88 is referred to as “the second debt”. Mr Stack says of these:

‘The Debts

6. The first debt arises from an order by the Federal Court in proceedings Q243/99 in which the court dismissed an appeal by me and the Company. By order dated 19 August 2003 the Deputy District Registrar of the Federal Court ordered that the Company and I pay the Creditors the amount specified in the Certificate of Taxation issued on 17 June 2003 in the same proceedings. The Certificate of Taxation is for the sum of $61,813.78. A copy of the order of the Deputy District Registrar dated 19 August 2003 is contained in Exhibit GS4 to this affidavit.

7. The second debt arises from an order by the High Court refusing an application for special leave to appeal by the Company and me in proceedings B41 of 2001. The Deputy Registrar issued a certificate of Taxation dated 14 October 2003 for the amount of $16,850.88 pursuant to the order of the High Court dated 26 June 2002. A copy of the certificate of Taxation dated 14 October 2003 is contained in Exhibit GS4 to this affidavit.’

Mr Stack says:

‘8. The demands are based upon costs orders against the Company [G.S. Technology] arising from litigation between the Creditors and the Company and me in relation to an invention relating to water meter assemblies.’

Mr Stack expressed the belief that the demands should be set aside, for reasons which included:

‘9.2 subject to other litigation between the Company and the Creditors the Company may make application to the High Court of Australia for leave to appeal the decision of the Federal Court (to which the first demand relates). Whilst an application by the Company for such leave has been refused, the High Court did not foreclose the making of a further application for leave to appeal to it. (Emphasis added.)

9.3 The Company and the Creditors are parties to litigation in relation to Divisional Application No. 32815/95. That application lapsed through failure to pay a renewal fee and the Company has appealed to this Honourable Court for an order granting an extension of time in which to pay that renewal fee. That appeal is set down for hearing on 3 February 2004. If that application is enlivened then I believe the Company has good prospects against the Creditors for infringement of a patent maturing from that application or any patent maturing from a divisional application of Application No. 32815/95 (“the prospective patents”). My opinion is based (in part) upon the following:

9.3.1 the prospective patents will be “children” or “grandchildren” of Application No. 85236/91;

9.3.2 the Company and I have previously been successful in relation to most issues of validity raised by the Creditors in relation to Petty Patent No. 645740 and given that the prospective patents will be children or grandchildren of Patent Application No. 85236/91, I believe that the Company will be successful in an action against the Creditors for infringement of a patent arising from Patent Application No. 32815/95; and

9.3.3 I believe that the issue of entitlement can be rectified by simple amendment of Patent Application No. 32815/95 prior to that application or any divisional application maturing to a patent.

9.4 if the demands are not set aside, then the Company is unlikely to be able to continue proceedings in relation to the invention (the water meter assembly) and in particular is unlikely to be able to continue the appeal to this Honourable Court in relation to Application No. 32815/95 which is set down for hearing on 3 February 2004.’

33 Mr Stack refers to a number of costs orders made in favour of G.S. Technology, the total of which is under $10,000, and acknowledges other costs orders in favour of Davies Shephard Pty Ltd,(one only of the present joint creditors) again of the order of $10,000. In respect of the respondent companies, he acknowledges the costs order arising from the Full Court of the Federal Court proceedings in the amount of $61,813.78 and the High Court costs order in favour of the three respondent companies in the amount of $16,850.88.

34 It is helpful to record part of the extensive litigation concerning intellectual property rights that has occurred between the parties, or some of them.

35 In proceedings QG 28 of 1994 and QG 29 of 1996, reported at (1999) 47 IPR 525 Justice Cooper, on 15 September 1999, found and declared, at 578:

‘1. George Stack is not, and was not at any material time, entitled under s 15 of the Patents Act 1990 (Cth) to the grant to him of a patent in consequence of the filing of the provisional specification No PK2036.

2. George Stack is not, and was not at any material time, entitled under s 15 of the Patents Act 1990 (Cth) to a grant to him of a standard patent in consequence of the filing of application No 85236/91.

3. George Stack was not entitled under s 15 of the Patents Act 1990 (Cth) to the grant to him of Australian petty patent No 645740.

4. GST [sic] Technology Pty Ltd was not entitled under s 15 of the Patents Act 1990 (Cth) to a grant to it of Australian petty patent No 645740.

5. GS Technology Pty Ltd is not entitled to Australian petty patent No 645740 within the meaning of s 138(3)(a) of the Patents Act 1990 (Cth).

6. The invention claimed in each of the claims of Australian petty patent No 645740 is a patentable invention within the meaning of s 18 of the Patents Act 1990 (Cth).

7. The specification of Australian petty patent No 645740 complies with the requirements of s 40(2) and s 40(3) of the Patents Act 1990 (Cth).’

36 Mr Stack says:

‘In proceedings Q243 of 1999 the Company and I appealed the decision of his Honour Mr Justice Cooper (which decision was delivered on 15 September 1999) in relation only to the issue of entitlement. That appeal was dismissed by this Honourable Court with costs by a decision dated 4 May 2001. The first demand is based upon that costs order.’

37 The decision of the Full Court is reported at (2001) 51 IPR 513.

38 In the application for special leave to appeal the decision of the Full Federal Court, being the application B41/01, the High Court on 26 June 2002 refused leave to appeal, Gaudron J saying:

‘Among the issues in respect of which the intervention of this Court is sought is the proper construction of section 15 of the Patents Act 1990 (Cth). That seems to us an important question which, in an appropriate case, would attract the grant of special leave. However, the utility of an appeal at this stage is not clear. Moreover, the merits of the application are impaired by the imperfect resolution of a range of factual and other disputes, some of which are still pending in other proceedings.

The appropriate course in these circumstances is to dismiss the application for special leave with costs, but this should be done without foreclosing the making of a further application in respect of the decision of the Full Federal Court, should it appear that an appeal would be of utility and should the applicants be so advised. It would, nevertheless, be necessary to obtain the leave to the delayed institution of any such further special leave application. Accordingly, the order is special leave is refused with costs.’

39 Mr Stack expresses the view that, ‘in the event of a successful appeal to the High Court, I believe that the costs order of the Federal Court would be reversed so as to be favourable to the Company.’ Mr Stack also says:

‘I believe that the Creditors have failed to previously undertake any steps to enforce the certificates [of costs], despite those certificates being dated up to six years ago.’

Service of the first Statutory Demand

40 In respect of the statutory demand to G.S. Technology dated 16 October 2003, the respondents contend that the application to set aside that notice, which was filed on 2 December 2003, is out of time and must fail for that reason. As earlier noted, s 459G(2) of the Corporations Act provides that an application to set aside a statutory demand served on a company may only be made within 21 days after the demand is served.

41 The applicant contends that a posting of the statutory demand to G.S. Technology Pty Ltd, Unit 38, Royal Brisbane Place, 17 Bowen Bridge Road, Herston, Qld 4006 was ineffective service. There are two aspects of that submission: first, whether service by posting a letter to the company at that address constitutes service on the company, it being asserted that it was necessary to bring the demand to the attention of the company and posting of the demand to that address failed in that respect; and secondly, whether, as at the date of posting, Unit 38, Royal Brisbane Place, 17 Bowen Bridge Road, Herston, Qld 4006 was the registered address of G.S. Technology.

42 Mr Vasta QC for each applicant formally admitted on the hearing that the letter [which was addressed to G.S. Technology Pty Ltd], was delivered by post to Unit 38, Royal Brisbane Place, 17 Bowen Bridge Road, Herston, Qld 4006 before 7 November 2003.

43 The evidence shows that that statutory demand was posted by Australia Post some time in October 2003, and the admission is that it was delivered to the address and that that delivery occurred prior to 7 November 2003. During that time, G.S. Technology did not occupy those premises, and they were occupied by a firm of accountants. Mr Vasta said that the statutory demand was redirected [by an employee of the firm of accountants pursuant to an arrangement with Mr Stack], to a Ms Maureen Ryan [who was the real estate agent acting for the owner of Unit 38, which was the superannuation fund of which Mr Stack was trustee], and then directed to the mail delivery centre at Kelvin Grove, and from there returned to the sender, Messrs Blake Dawson and Waldron.

44 If Unit 38, Royal Brisbane Place, 17 Bowen Bridge Road, Herston, Qld 4006 was the registered office of the company at the time the statutory demand was delivered to that address, in my opinion service was effected by such posting, and by virtue of the admission was effected prior to 7 November 2003, with the consequence that the statutory demand is out of time and the application to set aside must be dismissed as incompetent.

45 I do not accept that actual receipt by the company is required by s 160 of the Evidence Act. That conclusion is not supported by the language of the section earlier set out, and is contrary to the conclusion of the High Court in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 97. Section 160 of the Evidence Act provides a presumption of the date a postal article was received at an address. It is not directed at when the person to whom the article is addressed became aware of the contents of the article. Section 160, in its terms, preserves the distinction between delivery to an address, and receipt by an addressee. Service by post in accordance with s 109X of the Corporations Act is in my view sufficient; actual receipt by the company is not required.

46 Concerning the second question of whether the Herston address was the registered office of the company, the company search referred to in par 30 above conducted on 16 October 2003 reveals that the Herston address was listed as the registered office of the company and was said then to be the “current” address of the company.

47 Notwithstanding this record, it was contended by Mr Vasta that that company search under the heading “Company document listing” noted that a document number 01102676M had been received on 25 August 2003 with an effective date of 19 August 2003, which document referred, amongst other things, to a change of registered office address and a change to principal place of business. It is suggested that that noting should have been interpreted as meaning that the earlier record in the company search of the company’s current registered address was inaccurate, and that the Herston address was not then the registered office of the company, and thus service was effected at the wrong address.

48 The evidence shows that a document dated 19 August 2003 had been received by ASIC on 25 August 2003, but that the form did not then show the dates of change of the registered and business addresses of the company. Section 142(2) of the Corporations Act states that the notice of a change of address ‘must be in the prescribed form’. The prescribed form is Form 316. Section 142(3) provides:

‘A notice of change of address takes effect from the later of:

(a) the seventh day after the notice was lodged; or

(b) a later day specified in the notice as the date from which the change is to take effect.’ (Emphasis added.)

49 An affidavit of Mr Stack indicates that the form lodged with ASIC on or around 25 August 2003 did not include information required by the form, namely required information concerning the date of change of the registered and business offices. Mr Stack deposes that he received a letter from ASIC dated 1 December 2003 on or around 27 December 2003 which letter stated:

‘ASIC is of the view that the document has not been properly lodged as required by the Corporations Act 2001. We would appreciate your co-operation in ensuring that document is corrected and returned to ASIC so that its lodgement can be finalised.’

50 For that reason, no doubt, the company search revealed that that document was “a document under requisition”. The applicants’ submissions acknowledge that the Form 316 lodged in August 2003 did not show the date of the change of address, and ‘because this date was not shown on the form, that ASIC did not immediately change the address appearing at the head of the company’s file.’ The defect was not rectified, on the evidence before me, until 2 February 2004, when a properly completed Form 316 was delivered to ASIC. In my opinion, the earliest date on which a change of registered address “takes effect” for the purpose of service is seven days from the date on which a notice is properly lodged with ASIC: s 142(3) of the Corporations Act.

51 In my opinion, the document which was lodged dated 19 August 2003 and lodged on 25 August 2003 could not and did not take effect as changing the registered office of the company. That is so, even though the ASIC records presently record the new “address start date” as being effective from 19 August 2003. At the time the demand was posted to the Herston address, that address was the registered address of the company.

52 It follows, in my opinion, that the application to set aside the statutory demand in respect of the first debt was not made as required by s 459G of the Corporations Act and must be set aside: see David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265.

“Offsetting claim”

53 For the applicants, it was said that the statutory demands should be set aside because G.S. Technology has an off-setting claim against the respondents in proceedings Q243 of 1999 for a ‘costs order in favour of the Company … noting that a decision in relation to costs has not yet been delivered.’ It was further said that, depending on other litigation between G.S. Technology and the respondents, G.S. Technology ‘may make application to the High Court of Australia for leave to appeal the decision of the Federal Court’ in proceedings Q 243 of 1999. (Emphasis added.) The first demand relates to those proceedings.

54 It was further submitted that G.S. Technology may bring patent infringement proceedings against the respondents if it is successful in litigation relating to divisional application number 32815/95. It was said on the applicant’s behalf that if the demands are not set aside the applicant is unlikely to be able to continue proceedings, and it was further submitted that the issue of two separate statutory demands was oppressive and an abuse of process.

55 The “off-setting claim” on which the applicants rely is not identified with any precision.

56 Looking at the matter very broadly, the contention for the applicant seems to be that there is a realistic prospect that, at the end of the day, G.S. Technology will obtain judgment against the respondents for a sum greatly in excess of the costs orders, the subject of the two statutory demands and the bankruptcy notice.

57 In my opinion, whatever the ultimate prospects might be in respect of further litigation, the possibility that any such litigation would result in a monetary award in favour of G.S. Technology does not qualify as an “off-setting claim”. In my view it may be that this prospect comes within ‘some other reason why the demand should be set aside’ pursuant to s 459J(1)(b) of the Corporations Act.

58 The second statutory demand, which is in relation to the costs order made by the High Court in refusing special leave to appeal, is based on a final order which cannot be the subject of an appeal. It is unlikely, in my opinion, that any fresh application for special leave to appeal would result in the order for costs made by the High Court in refusing special leave to appeal on 26 June 2002 being set aside. At its highest, the contention by G.S. Technology is that at the end of further litigation, it might be successful in obtaining a money order against the respondents greater than the amounts ordered to be paid by way of costs by the High Court, and by the Full Court of the Federal Court.

59 The Court must set aside a demand if, under s 459H of the Corporations Act, the Court is satisfied that the applicant has an “offsetting claim”. The Court may set aside a demand if, under s 459J of the Corporations Act, the Court is satisfied that a defect in the demand will cause substantial injustice unless it is set aside, or there is some other reason why the demand should be set aside. There is no contention that there is any defect in either statutory demand, so the focus under s 459J is whether there is ‘some other reason’ why the demand should be set aside.

60 An offsetting claim is defined in s 459H(5) to mean:

‘… a genuine claim that the company has against the respondent by way of counterclaim, setoff or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates) …

61 What constitutes a “genuine claim” was considered by Lockhart J in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 where his Honour said at 39:

‘… However, what appears clearly enough from all the judgments is that a standard of satisfaction which a court requires in not a particularly high one. …I

Certainly the court will not examine the merits of the dispute other than to see if there is in fact a genuine dispute. The notion of a “genuine dispute” in this context suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance. …’

62 The applicant submitted that the two statutory demands ‘arise out of a long list of litigation between the Applicant and the Respondents in connection with patents relating to a water meter assembly. All of this litigation may be characterised as parts of a bundle of litigation dealing with a single fundamental dispute.’

63 The declarations made by Cooper J on 15 September 1999 were made in proceedings where, pursuant to orders of Kiefel J, the issues relating to validity were ordered to be tried before issues relating to allegations of infringement.

64 On 10 May 2000, Cooper J revoked petty patent 645740: George Stack and GS Technology Pty Ltd v The Brisbane City Council, Davies Shephard Pty Ltd and Davies Shephard (Queensland) Pty Limited; GS Technology Pty Ltd v Davies Shephard Ltd and GSA Industries (Aust) Pty Ltd [2000] FCA 598.

65 After the decision of the Full Court of the Federal Court on 4 May 2001 and the unsuccessful application for special leave to the High Court on 26 June 2002, Cooper J on 30 March 2004 made final orders in respect of two petty patents, being petty patents numbers 645740 and 662284. The matters had been relisted for the purpose of determining what orders ought to be made to dispose of the proceedings, including in respect of costs, and otherwise to advance the litigation in respect of any remaining issues to be determined between the parties.

66 Cooper J held that the effect of the refusal of the High Court to grant special leave meant that the orders and declarations made at first instance as to the invalidity of petty patent 645740 remained in full force and effect. Any cause of action based on an infringement of that petty patent must fail. The orders made by Cooper J were final orders disposing of any issues relating to petty patent 645740. The respondent companies were ordered to ‘carry 50 per cent of their costs’. The exact order was:

‘Stack and GST pay one half of the costs of DS, DSQ and GSA of and incidental to the claim and cross-claim in the proceedings Nos QG28 of 1994 and QG29 of 1996, to be taxed if not agreed.’

67 In determining what is a genuine claim for the purpose of an offsetting claim in the context of s 459H of the Corporations Act, Emmett J said in Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454 (“Eumina Investments”) at 457:

‘In order to show that the Company’s claim is genuine, it must be shown to be put forward in good faith and there must be something more than a mere assertion: see John Shearer Ltd v Gehl Company (1995) 60 FCR 136 at 143. The references in s 459H to the Court being “satisfied” that there is a “genuine” dispute or that the Company has a “genuine” claim have been the subject of considerable judicial consideration as summarised by Lindgren J in Chase Manhattan Bank Australia Ltd v Oscty Pty Ltd (1995) 17 ACSR 128 at 135-136.

As Lindgren J observed, their meanings have been illuminated by analogies found in applications for injunctions to restrain the commencement, advertisement or prosecution of winding up proceedings predating the enactment of s 459G. They have been further illuminated in the opposing of a notional application by the person who served the statutory demand for summary judgment against the company, the subject of the demand. Lindgren J concluded, consistently with the cases to which he referred, that the question involves considering whether the Court was satisfied that there is a “serious question to be tried” or an “issue deserving of a hearing” as to whether or not the relevant company has a claim.’

68 In that case, Emmett J concluded:

‘The effect of the determination of the Court of Appeal in dismissing the appeal from the decision of Rolfe J dismissing the Company’s claim against Westpac is that, as at the date of service of the demand, as at the date of commencement of these proceedings and as at today, it has been determined that the Company has no claim against Westpac. It is not open to the Company to contend to the contrary because of the doctrine of res judicata since a superior court has conclusively determined that the Company has no claim: see Handley, Res Judicata (3^rd ed, 1997), par 167, p 76. Thus, until the order of Rolfe J dismissing the Company’s claim has been set aside, it is not open to any other court to entertain that claim. Nor, as at any of the three times referred to above, could the Company bona fide maintain as against Westpac that it has such a claim.’

69 His Honour continued:

‘The only bona fide claim which the Company has against Westpac is its claim for special leave to appeal from the decision of the Court of Appeal dismissing its appeal …

[a]ssuming … that the Company’s application for special leave has reasonable prospects of success … that would establish only that the claim for special leave might be characterised as a genuine claim. The determination of Rolfe J, however, conclusively determines, as between the Company and Westpac, that there is no money recoverable by the Company from Westpac arising out of the subject matter of the proceedings before Rolfe J.

For those reasons, I consider that the Company does not have a genuine claim against Westpac. It would follow that s 459H(1) does not apply and, unless there is some other basis for setting the demand aside, the Court is bound by s 459L to dismiss the application.’

70 In my opinion, the effect of the judgments of Cooper J at first instance and of the Full Court is a conclusive determination by the Federal Court that G.S. Technology has no claim against the respondent, and the doctrine of res judicata prevents the applicants from contending otherwise. The only bona fide claim which the applicants may have against the respondent is the foreshadowed further application for special leave to appeal to the High Court from the judgment of the Full Court of the Federal Court. In my opinion, G.S. Technology and Mr Stack do not have any offsetting claim because it may make a further application for special leave to the High Court from the Full Court judgment.

71 In my judgment, G.S. Technology has no offsetting claim for the purposes of s 459H of the Corporations Act.

72 I turn now to consider whether there is “some other reason” for the Court to set aside the statutory demands.

73 Emmett J noted in Eumina Investments at 459:

‘One circumstance where it may be unjust for a demand to stand, in my opinion, is where there is a judgment or order which precludes a contention that there is a genuine dispute or an offsetting claim but there is on foot a bona fide appeal from that judgment or order. In those circumstances, the Court may, if justice requires, and subject to the possibility of imposing conditions as contemplated by s 459M, set aside a demand which is based on the judgment or order which is subject to appeal or in respect of which, if an appeal succeeds, there would be an offsetting claim.’

74 In the event of a successful further application for special leave to appeal, I can see that the costs orders made by the Full Court, which is the basis of the first statutory demand, might be set aside. There is no realistic prospect, in my opinion, that the costs order made by the High Court on the unsuccessful application for special leave would ever be set aside, regardless of the success of any foreshadowed further application for special leave.

75 The prospect of G.S. Technology, at the end of the day, receiving any monetary award for infringement of any patent is highly speculative and contingent. G.S. Technology would successfully have to pass a number of very significant litigious hurdles. The prospects of success in that regard, in my opinion, is not such that allowing the demand to stand would be unjust.

76 In the circumstances, I do not see that the respondent’s conduct in serving either statutory demand was in any way unconscionable or an abuse of process, or that it gives rise to substantial injustice which would warrant the Court setting aside the statutory demand, or that the Court would, for any other reason, set aside either statutory demand.

77 The demands in this case were issued pursuant to orders for costs in favour of the respondents, which they were entitled to execute after G.S. Technology failed to satisfy them. There can be no suggestion that the issuing of those demands was oppressive or undertaken in bad faith, especially when no stay of execution was sought from the relevant courts making those orders. I do not accept the assertion by the applicant that the respondents are not attempting ‘to recover a debt but to coerce the applicant from pursuing a genuine claim’. Where a company is impecunious but has claims that a liquidator considers meritorious, the liquidator is best placed to apply to the court for approval to enter into a litigation funding agreement.

78 For these reasons, I will dismiss the application to set aside the second statutory demand, with costs. I would, for those same reasons, dismiss the application in respect of the first statutory demand, if I be wrong in my conclusion that application is for other reasons incompetent.

79 Finally, in respect of the application to set aside the bankruptcy notice, any future monetary payment that might be awarded in respect of infringement of any patent will not inure to the benefit of Mr Stack, but to G.S. Technology. As earlier indicated, that prospect is highly speculative and contingent, and must be regarded as remote, having regard to the decision by Cooper J on G.S. Technology’s lack of entitlement.

80 Any claim that Mr Stack may have is really based on his hope that a further application for special leave to appeal from the Full Court’s dismissal of Cooper J’s decision will succeed, as will the consequent appeal. It is likely that were that to occur, the costs order by the Full Court would be extinguished, but it is almost impossible to believe that the costs order of the High Court in respect of the unsuccessful application for special leave would ever be expunged.

81 I do not think that the possibility that the costs order made by the Full Court might be reversed constitutes a counterclaim, setoff or cross-demand, as is referred to in s 40(1)(g) of the Bankruptcy Act. In Re Thompson; ex Parte Thompson v Grimley Pty Ltd and Others (1995) 61 FCR 554 I noted, in the context of the facts of that case, at 552, concerning the costs ordered to be paid by the Queensland Court of Appeal:

‘If he succeeds in his application for special leave and subsequent appeal, the debt on which the bankruptcy notice is founded will have been extinguished. It does not seem apt to describe an appeal from the proceeding in which an order was made, particularly a costs order, as a cross-demand for the purposes of s 40(1)(g). The existence of an appeal may be a very good reason for considering whether there is, in truth and reality, a debt on which a petition might be based (see Corney v Brien (1951) 84 CLR 343).

If the application for special leave to appeal is bona fide and there are some prospects of success on the appeal, it would, in my view, ordinarily provide a sound basis on which a petition might be adjourned pending the prosecution of the application for special leave and appeal. I do not think it can constitute a cross-demand for the purposes of s 41(7).’

82 The position is even stronger in respect of that component of the bankruptcy notice which seeks demand for the costs ordered by the High Court.

83 I am not satisfied that Mr Stack has such a counterclaim, setoff or cross-demand as is referred to in s 40(1)(g) of the Bankruptcy Act. The consequence of s 41(7) of the Bankruptcy Act is that the time for compliance with the bankruptcy notice is extended until, and including, the day when the Court has determined that it is not so satisfied.

84 In my opinion, there is no basis to set aside the bankruptcy notice on the basis that failing to do so would impact on Mr Stack’s ability to further litigate. The position in respect of a bankruptcy notice is not the same as the consequences of a successful creditor’s petition. Further, in my view, there is no evidence to suggest that the bankruptcy notice was issued to stifle Mr Stack’s further ability to litigate, or for any other improper purpose.

85 The application to set aside Bankruptcy Notice VN 900/2004 is dismissed with costs.

I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender .

Associate:

Dated: 14 March 2005

Counsel for the Applicant:	Mr A. Vasta QC

Solicitor for the Applicant:	Fox Lawyers

Counsel for the Respondent:	Mr S. O'Bryan SC

Solicitor for the Respondent:	Blake Dawson Waldron

Date of Hearing:	14 September 2004

Date of Judgment:	14 March 2005

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