FEDERAL COURT OF AUSTRALIA

Remote Camps Australia Pty Ltd v Hazeldine Pty Ltd [2012] FCA 130

THE COURT ORDERS THAT:

1.    The decision of Deputy District Registrar Stanley made 30 November 2011 that the application to set aside this statutory demand issued by the defendant against the plaintiff and the subject of this proceeding be dismissed, is confirmed.

2.    The application to set aside the statutory demand be dismissed.

3.    The plaintiff pay the defendant’s costs of both the proceeding before Deputy District Registrar Stanley and this review proceeding, to be taxed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

application to review registrar’s decision

1    On 30 November 2011, pursuant to s 35A(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and R 16.1 of the Federal Court (Corporations) Rules 2000 (Corporations Rules), a Registrar of this Court exercised the power of the Court to hear an application made by the plaintiff (Remote Camps) under s 459H and s 495J of the Corporations Act 2001 (Cth) (Corporations Act) to set aside a statutory demand issued by the defendant (Hazeldine) against it, and ordered that:

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

2.    The plaintiff pay the defendant’s costs, to be taxed if not agreed.

2    Pursuant to s 35A(5) of the FCA Act and R 3.11 of the Federal Court Rules 2011 (Cth) (Rules) Remote Camps applied for a review by the Court of the exercise of that power by the Registrar. (As noted in Deputy Commissioner of Taxation v Commercial & General Law (SA) Pty Ltd [2011] FCA 1269 at [97], R 16.1(2) of the Corporations Rules providing for review by the Court or a judge would appear otiose in the face of the provisions I have just mentioned.)

3    The proceeding that now comes before me constitutes a de novo or fresh hearing of Remote Camp’s application to set aside the statutory demand, by reference to the evidence available at the time of the review hearing: see, for example, Fazio (Executor) v Passmore [2011] FCA 273 at [31].

creditor’s statutory demand for payment of debt

4    By creditor’s statutory demand for payment of debt issued under the Corporations Act, dated 3 June 2011, Hazeldine demanded payment of a debt of $320,391.44 claimed to be due and payable by Remote Camps. Payment was required within 21 days of service. The debt for this claimed sum was described in the schedule to the statutory demand by reference to a judgment against defendant after failure to comply with condition for leave to defend obtained by Hazeldine against Remote Camps in the District Court of Western Australia, proceeding number 2008 of 2010. I will refer to the judgment as the “summary judgment”. That summary judgment appeared to be a regularly made and extracted judgment dated 14 April 2011, signed on behalf of the Court by Deputy Registrar Hewitt, in the following terms:

UPON THE APPLICATION of the plaintiff [Hazeldine] by chamber summons filed 11 October 2010 and UPON HEARING Ms Levy for the plaintiff and Mr Rumsley for the defendant [Remote Camps], and UPON the Orders of Deputy Registrar Hewitt on 1 and 15 February 2011, giving the defendant conditional leave to defend this action, and UPON the failure of the defendant to satisfy the condition for leave, IT IS ADJUDGED THAT:-

1.    The defendant do pay the plaintiff the sum of $297,540.34.

2.    The defendant do pay the plaintiff interest on $297,540.34 from 3 January 2010 at 6% until the date of this judgment.

3.    The defendant do pay the plaintiff’s costs to be taxed.

5    It is not in dispute that the statutory demand in the sum of $320,391.44 includes the interest payable on the judgment debt as provided for in [2] of the summary judgment.

basis of application to set aside statutory demand

6    Remote Camps claim that the statutory demand should be set aside in effect because the summary judgment is defective and is the subject of a pending appeal proceeding in the District Court.

7    At the hearing of this review proceeding before me on 8 February 2012, counsel for Remote Camps drew attention to what initially transpired before Deputy Registrar Hewitt in the District Court on Hazeldine’s application for summary judgment on 1 and 15 February 2011, as well as on a review proceeding or appeal before Sweeney DCJ on 25 October 2011 in relation to the summary judgment. Transcripts of those hearings were produced.

8    On behalf of Remote Camps, counsel contended before Deputy Registrar Hewitt that there were issues that precluded Hazeldine from obtaining an immediate entitlement to a money judgment. Deputy  Registrar Hewitt (at transcript 38 and 39) made a number of pertinent observations about his assessment of the material before him and what order he considered appropriate in the circumstances, as follows:

    There were issues about precisely what the contractual terms between the parties were and there were some issues about whether or not Hazeldine would be required to rely on a quantum meruit for work done.

    When looked at in total, it was clear that Hazeldine would succeed in obtaining a substantial judgment.

    However it was not appropriate to give a money judgment and there were some legitimate concerns about whether the full amount of the invoices claimed could be recovered by Hazeldine.

    Weighing up all matters, the appropriate way to determine the matter was to require a payment into court by the defendant as a condition of leave to defend, although fixing the sum was “extremely difficult in the circumstances, given the vagaries of the case”.

    “But given my impression of the conduct of the defendant, I think the sum should be a substantial one. In my view, a payment into court of some $100,000 will be comfortably less than any amount which the plaintiff is likely to receive, but will require the defendant to demonstrate the bona fides of its belief in its defence as a condition of continuing to defend further”.

    The order should be: “The defendant have leave to defend the action, conditional upon payment of $100,000 into court”.

9    The Deputy Registrar then adjourned the matter to 15 February 2011 to enable Remote Camps to make submissions about the period in which the payment in should be made.

10    The Deputy Registrar indicated he did not want the order extracted immediately and it would constitute “an aide memoire” when he finally decided the appropriate terms of the order on 15 February 2011.

11    On 15 February 2011 the Deputy Registrar required the payment in to be made within 21 days.

12    There is no dispute that Remote Camps knew it should pay $100,000 into Court with 21 days of 15 February 2011.

13    What happened then was that the payment into court was not made and Hazeldine moved for summary judgment to be entered.

14    On 14 April 2011, Deputy Registrar Hewitt signed the summary judgment.

15    On 3 June 2011, Hazeldine issued its statutory demand.

16    Recognising that the judgment entitled Hazeldine to issue the statutory demand, Remote Camps commenced a review or appeal proceeding in the District Court on 17 June 2011 to remove or vary the judgment. The application to extend time to appeal and the appeal came before Sweeney DCJ in the District Court on 25 October 2011. Her Honour extended time to appeal but dismissed the appeal.

17    District Court Judge Sweeney treated the appeal as a review on the merits of the Deputy Registrar’s decision. Having considered what occurred before the Deputy Registrar her Honour said she was not prepared to go behind his ruling that leave to defend should be granted conditionally.

18    Her Honour also noted that no appeal had ever been lodged against the decision made on 1 or 15 February 2011, either on the substantive basis that leave should not have been made conditional, or on the basis that the orders made by the Deputy Registrar did not in some way accurately reflect the Deputy Registrar’s reasons and intentions. While observing there was nothing that precluded Remote Camps from appealing against the orders of 1 and 15 February 2011, her Honour said she was not satisfied, for the purposes of the appeal before her, that the orders made on 1 and 15 February 2011 did not accurately reflect the Registrar’s reasoning in any event.

19    Consequently, Sweeney DCJ extended time within which to appeal but refused the appeal before her.

20    Remote Camps soon after lodged a fresh appeal proceeding to extend time to appeal and appeal against the order made 15 February 2011. By its draft notice of appeal, Remote Camps proposes that, if successful, an order that should be made to the following effect, if the defendant does not pay $100,000 into court within 21 days:

1.    the plaintiff is not entitled to recover a money judgment;

2.    the plaintiff is entitled to enter judgment against the defendant for an unliquidated sum, representing the reasonable amount payable for the work actually and reasonably carried out by the plaintiff and the reasonable costs of materials supplied.

21    Counsel for Remote Camps indicated in argument on 8 February 2012 that the order sought in these terms reflected observations made by Sweeney DCJ in the course of the review appeal concerning the different ways in which a conditional leave to defend could possibly be framed.

22    When all this became clear at the hearing before me on 8 February 2012, including that Remote Camps had further appealed but had not sought any stay of execution of the summary judgment, I adjourned the hearing until 21 February 2012 to permit Remote Camps the opportunity to seek such a stay. I indicated that, in my view, in the circumstances outlined by counsel for Remote Camps, there would be a strong argument that such a stay should not be given unless Remote Camps were to pay $100,000 into the District Court as originally envisaged by the 1 February 2011 order and as proposed by the draft notice of appeal.

23    On 21 February 2012, when the hearing resumed, counsel for Remote Camps advised the Court that Remote Camps had applied for but been refused a stay of the summary judgment.

consideration

24    The application of Remote Camps to set aside the statutory demand is made pursuant to s 459G of the Corporations Act. In the formal application filed 7 July 2011, Remote Camps does not make it clear whether it seeks to set aside the statutory demand under s 459H on the basis that there is a “genuine dispute” between the parties about the existence of the debt to which the demand relates, and/or pursuant to s 459J(1)(a) on the basis that “because of a defect in the demand, substantial injustice will be caused” unless the demand is set aside or under s 459J(1)(b) because there is “some other reason” why the demand should be set aside. However, the written and oral submissions made on behalf of Remote Camps make it clear that the claim is made under both s 459H(1)(a) and under s 459J(1)(b).

25    So far as s 459H(1)(a) is concerned, the law is crystal clear that a company cannot establish a “genuine dispute” about the existence of the amount of a debt to which the demand relates where there is a judgment debt which, while it may be the subject of an appeal to a higher court, has not been stayed so far as the operation of that judgment is concerned: Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235 (Barclays Australia (Finance)) at 238; Eumina Investments Pty Ltd v Westpac Banking Corporation [1998] FCA 824; (1998) 84 FCR 454 (Eumina) at 457-458; Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759 at [12]; Food Channel Network Pty Ltd v Television Food Network, GP [2010] FCA 403 (Food Channel v Television Food) at [14]; Collendina Pty Ltd v ClarkeKann (NSW)  Pty Limited (No 2) [2010] FCA 949 (Collendina) at [19].

26    As noted above, when the matter was argued before me on 8 February 2012, I adjourned the proceeding to permit Remote Camps to obtain, if the District Court of Western Australia were prepared to grant it, a stay of proceeding on the judgment of the subject of the pending appeal proceeding in that Court. As also noted above, I was advised on 21 February 2012 that the District Court had refused to grant a stay in respect of the summary judgment.

27    In these circumstances the company cannot establish that there is a genuine dispute between it and Hazeldine about the existence or amount of the debt to which the statutory demand relates.

28    The application to set aside the statutory demand pursuant to s 459H therefore fails.

29    So far as the application to set aside the statutory demand under s 459J(1)(b) is concerned, that is to say on the basis that there is “some other reason” why the demand should be set aside, the state of the law is perhaps less clear. The decision of Emmett J in Eumina has for more than 10 years been accepted as supporting the view that “some other reason” may well include the fact that there is an appeal underway in respect of the judgment which is the basis of the debt referred to in the statutory demand, where the appeal may be categorised as a bona fide appeal, the subject of reasonable and arguable grounds. The position in Eumina though was that the company was seeking special leave to appeal to the High Court against the dismissal by the New South Wales Court of Appeal of the primary judge’s decision dismissing the company’s claim against Westpac that could be relied on to offset the debt the subject of the demand.

30    In Food Channel v Television Food, Logan J doubted whether, in light of the decision of the High Court in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473, s 459J(1)(b) could any longer be relied onto this end. This issue was mentioned by Jacobson J in Collendina, but his Honour did not need to consider the matter further because there was no appeal on foot from the order of the District Court which underlaid the statutory demand in that case.

31    In the present case there is an appeal proceeding on foot against the order of the Deputy Registrar of the District Court made 15 February 2011, although it involves both an application to extend time to appeal and, if granted, an appeal.

32    In all these circumstances, I am not satisfied, assuming the principle enunciated in Eumina continues to be good law, that the company has established “some other reason” for the Court to be satisfied that the statutory demand be set aside. Unlike the position ultimately determined by Emmett J in Eumina, I am not satisfied that Remote Camps has identified reasonable and arguable grounds in relation to the appeal proceedings currently pending in the District Court. While I was not given any reasons for the District Court’s refusal to stay the operation of the judgment debt in question by Remote Camp’s counsel, the fact the Court refused the stay does not assist Remote Camps. The reasons given by Sweeney DCJ in refusing to review the decision of Deputy Registrar Hewitt also suggests the grounds for appeal are weak. Moreover, Remote Camps must first obtain an order extending time to appeal before any appeal can be considered. This adds uncertainty to its prospects of overall success.

33    Accordingly, I am not satisfied that there is some other reason why the statutory demand in this case should be set aside.

34    The application to set aside the statutory demand under s 459J therefore fails.

order

35    For these reasons, I would order as follows:

1.    The decision of Deputy District Registrar Stanley made 30 November 2011 that the application to set aside this statutory demand issued by the defendant against the plaintiff and the subject of this proceeding be dismissed, is confirmed.

2.    The application to set aside the statutory demand be dismissed.

3.    The plaintiff pay the defendant’s costs of both the proceeding before Deputy District Registrar Stanley and this review proceeding, to be taxed if not agreed.

Associate:

Dated:    23 February 2012