FEDERAL COURT OF AUSTRALIA

 Wylkian Pty Ltd ACN 008 624 379 v Australian Capital Territory

[2006] FCA 1815

WYLKIAN PTY LTD ACN 008 624 379 v AUSTRALIAN CAPITAL TERRITORY

QUD 351 OF 2006

DOWSETT J

24 NOVEMBER 2006

BRISBANE

REASONS FOR JUDGMENT

1                     On 14 August 2006 the respondent served upon the applicant a statutory demand pursuant to s 459E of the Corporations Act 2001 (Cth) (the “Act”).  That statutory demand claimed a total of $105 193.13, comprising two amounts, one in the amount of $60 835.69, described as:

‘... Costs of the Australian Capital Territory in the matter of Wylkian Pty Ltd and Another v ACT (SC 330 of 2001) pursuant to the judgment of the Supreme Court of the ACT dated 30 October 2002 (including interest from date of judgment to date of this demand).’

and the second, in the amount of $44 357.44, described as:

‘... Costs of the Australian Capital Territory in the matter of Wylkian Pty Ltd and Another v ACT (ACTCA 30 of 2002) pursuant to the judgment of the Court of Appeal of the ACT dated 18 July 2003 (including interest from date of judgment to date of this demand).’

2                     The amounts of the two costs certificates were, in fact, $33 148.66 and $42 939.67, the differences being attributable to interest which had accumulated on the amount of costs calculated from the date upon which the orders for costs were pronounced.  Until some time earlier this year, interest accrued in the Act on judgment debts pursuant to rules of court.  The bulk of the interest has been calculated on that basis.  Since the adoption of the new rules in the course of this year, interest has accumulated at the same rate.  The matter has proceeded upon the basis that such right to interest as had accrued prior to the introduction of the new rules was not divested by those rules.  I am satisfied as to that matter.

3                     In the course of argument a question has arisen as to whether it is correct to calculate interest from the date of the judgment, given that the rule speaks of interest accumulating on a “judgment debt”.  There is much to be said for the argument that an order for costs does not become a judgment debt until the amount of the costs has been quantified.  However such an approach is inconsistent with a considerable body of cases, including the decisions of the House of Lords in Hunt v R.M. Douglas Roofing Ltd [1991] AC 398 and Thomas v British Aerospace PLC [1991] AC 362.  The same approach has been taken in the Australian Capital Territory.  See the decision of Higgins J (as his Honour then was) in Hewitt v Queensland Newspapers Pty Ltd [1996] ACTSC 78.  I therefore proceed upon the basis that it was correct to calculate interest from the date of pronouncement of the order for costs, notwithstanding the fact that the costs had not then been quantified.

4                     The applicant seeks an order setting aside the statutory demand.  Pursuant to ss 459F and 459G of the Act, such an application may only be brought within 21 days of service of the notice of demand.  It follows from the decision of the High Court in David Grant and Co Pty Ltd v Westpac Banking Corporation (1994-1995) 184 CLR 265, that there is no jurisdiction to grant an extension after the expiry of that period of time.  This application was not brought within that time limit.  The respondent, for one reason or another, was not inclined to take that point.  It may be that such irregularity goes to jurisdiction and cannot be waived.  However it is not necessary that I decide the question as I am otherwise of the view that the application must fail.

5                     The applicant advances two grounds upon which he says the statutory demand should be set aside.  The first is a matter of form but, by no means, an insubstantial one.  Subsection 459E(3) provides:

‘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.’

6                     The applicant submits that, given that the amounts shown in the costs certificates are not reproduced in the statutory demand, this is a case in which the statutory demand ought to have been accompanied by an appropriate affidavit explaining the part of the claim which relates to interest.  However, the point of the cases to which I have referred concerning interest on costs is that the amount of the order for costs is, itself, a judgement debt from the time that the order is pronounced, even if it has not been quantified, and interest is included in it.  Subsection 459E(3) applies only if the relevant debt is not a judgement debt.  In the present case, both the order for costs and the amount of interest are judgement debts.  The rule therefore has no operation.

7                     Such an approach is broadly consistent with a number of cases, the earliest of which is the decision of Lockhart J in Topfelt Proprietary Limited v the State Bank of New South Wales Limited, 120 ALR 155.  At [40], his Honour said:

‘It is undoubted that a creditor may claim in a statutory demand the payment of interest upon a judgment debt.  Statutes and rules of court frequently provide for payment of interest upon the amounts of judgment debts.  But, if a creditor claims the payment of interest upon his judgment he must specify the amount of interest in the statutory demand (it may be sufficient if he states as one figure the amount of the judgment debt and the interest due thereon).  It is not sufficient compliance for this requirement for a creditor to claim interest on the amount of a judgment debt by specifying either a rate of interest or a daily or other periodic figure representing the interest component without stating the precise amount of it, and leaving it for the debtor to make the precise calculation of the interest.  It is not the debtor’s obligation to calculate the interest which the creditor calls upon him to pay ... .’

8                     It is true that Lockhart J did not unconditionally accept the proposition that it is sufficient to include the amount of interest in the amount demanded, but his Honour contemplated it as a possibility.  The vice with which his Honour was concerned was failure to calculate the amount of interest claimed.  That criticism cannot be made in this case.  In the Bankruptcy Act 1966 (Cth) there are specific requirements as to the way in which interest claims should be particularised in bankruptcy notices.  No such provisions apply to statutory demands under the Act.

9                     A number of relevant decisions are helpfully summarized in the reasons for judgment of Siopis J in Anderson Formrite Pty Ltd v CASC Hire Pty Ltd [2005] FCA 1424.  His Honour not only examined the authorities, but also the statutory history, including the relevant explanatory memorandum.  At [63], after rehearsing the effect of various authorities and statutory information to which he had referred, his Honour observed:

‘However, once the statutory demand is for a sum different from the sum in the judgment, the rationale for the exemption from the verification no longer applies because extraneous events or circumstances have intervened.  There is then a need to identify the amount claimed by reference to the extraneous intervening events and circumstances.  Further, these intervening events and circumstances are capable of giving rise to disputes as to the amount of an outstanding debt and, also, as to the continued existence of the debt.  Thus, it is possible, depending on the nature of any agreement that the debtor and creditor may have reached in relation to the compromise or further payment of the judgement debt, that liability in respect of the judgment debt may have been discharged, to be replaced by a different contractual obligation ... .  In these circumstances, the same considerations which underlie the introduction of the legislative requirement for verification of statutory demands for amounts that were never the subject of a judgment, apply equally to demands for amounts different from the sum in respect of which a judgement was given.  It follows, in my view, that a narrow construction should be given to the words “judgment debt” in s 459E(3) of the Act so that the exemption is confined to demands for the very amount in respect of which judgment was obtained, and not for any different amount.’

10                  In the present case there is no question of any extraneous circumstances intervening in connection with the amount of the judgment debt.  According to the authorities, the judgment debt, as at the date it was pronounced, was the amount of the order for costs together with interest accumulating pursuant to the relevant rule.  That was merely a matter of calculation,  no more extraneous to the circumstances of the bankruptcy notice than the adding together of two sums, which addition is clearly contemplated by the Act.  I do not consider that there is any substance in the applicant’s submission that there should have been an affidavit accompanying the statutory demand. 

11                  I turn to the other ground of the application, that pursuant to s 459H the applicant has an offsetting claim which, as the applicant would have it, is sufficient to extinguish the whole of the respondent’s debt.   The term “offsetting claim” is defined to mean:

‘A genuine claim that the company has against the respondent by way of counter-claim, 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).’

12                  I give the widest possible meaning to those words.  It seems that any claim sounding in money will be sufficient.  However, in order to perform the function prescribed by s 459H, it is necessary that the claim be capable of calculation in money terms.  The claim must also be genuine.  That does not mean it must be established or that its merits should be assessed.  However it must be capable of identification as a genuine claim.

13                  The applicant, in fact, advances two claims:  one is said to have arisen in 1993 and the other in 1999.  The applicant previously carried on the business of conducting fireworks demonstrations.  At some stage he came into conflict with the government of the Australian Capital Territory.  I offer no opinion as to the merits of the dispute.  In 1993 a fairly substantial quantity of fireworks was seized by the government.  Whilst in its possession the fireworks were substantially damaged by water.  At least, that is my understanding of the claim as it has been explained in the course of the hearing.  The evidence as to the claim is rather scanty.  In par 14 of his affidavit, the applicant identified both claims as follows:

‘The plaintiff has two outstanding damages claims against the defendant before the ACT Supreme Court being matters SC 705 of 2001 (The Tender); and SC 224 of 2001 (The Damaged Goods) ... .’

14                  At paragraph 26(a) he said of the “Damaged Goods” claim:

‘The significant facts in the Damaged Goods matter are:

(i)        the goods were seized under the Dangerous Goods Act 1984;

(ii)       the goods were flood damaged whilst in the custody of the Territory; and

(iii)      the goods were prescribed as exempt from the Dangerous Goods Act by the regulations.’

15                  It is extremely difficult to give great weight to such bald assertions.  The very best that one could do would be to say that they might go towards establishing a claim on negligence or on the basis of bailment.  That would be putting the case at its highest.  In par 34, the applicant said, concerning the Damaged Goods claim:

‘The damage to illegally confiscated goods occurred some 12 years ago and whilst only valued at best case by Mr Bayliss during our negotiation discussions at a little over $120,000 would, with Supreme Court interest of 11%, be worth nearly $500,000 if awarded next year.’

16                  To state the value of the goods in this way hardly offers a basis for inferring genuineness.  There is no allegation that all of the goods were lost or were, after damage, of no value, but it may not be difficult to infer as much.  However the reference is not to any valuation by the applicant or any officer of the applicant.  It is, rather, a reference to some discussion which occurred with Mr Bayliss, an officer of the ACT government, in which he offered an opinion.  He was, as far as one can see, unqualified by any appropriate experience.  One would not expect that many officers of the ACT government would know much about the price of fireworks.  It is impossible to infer that there is a genuine claim for $120,000 or any other sum.

17                  There may be a claim which the applicant, or Mr Upton who appears for the applicant, believes to be genuine but I am not persuaded that it is of that nature.  This is firstly because of the very bald nature of the alleged facts and, secondly, because of the lack of evidence as to value. 

18                  The second claim concerns a tender.  Mr Upton says, at par 26(b):

‘The significant facts in the Tender matter are: 

(i)        The winning tender included a statement of fact that its tender was non-complying;

(ii)       The tender documents and process prescribed that non-complying tenders were to be immediately excluded from the process;

(iii)      The scores awarded to the plaintiff, Wylkian, were reduced after the tender was completed and after questions were asked within the ACT Legislative Assembly.’

19                  These assertions hint at an assertion that the contract was awarded to somebody other than the applicant, which person had submitted a non-complying tender.  There is also an implied invitation to infer that the non-complying tender was accepted, and that these circumstances gave rise to a cause of action in the applicant.  It is not possible to conclude that these invited inferences are available, given the state of the evidence.

20                  Once again, there is a problem with damages.  At par 35 it is said that:

‘The tender (loss of revenue only) was about $400,000, again with Supreme Court interest of 11 % it would be worth $830,000 if awarded next year.’

21                  Loss of revenue, which I take to mean loss of the amount to be received by way of payment, gives no indication of actual loss.  It was said in the course of argument that all outgoings had already been incurred.  It is difficult to understand why the applicant would have expended money without knowing that it had been awarded the contract.  Mr Upton said in argument that he was aware of all competitors, and that none was available at the relevant time.  None of this is in the material, and it all sounds very speculative.  Once again, I am unpersuaded that there is a genuine claim.  In those circumstances, the application must be dismissed.  I order that the applicant pay the respondent’s costs of the application.

Associate:

Dated:         22 December 2006