JUDGMENT No. scl. Qel wd Lome RIBUTION IN_THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NG 3442 of 1994 ) VISI ) N_ THE MATTER OF YCAM P IAN ANY NUMBER 74 BETWEEN: LY! PTY LIMITED Applicant AND: GRAEME SOLJAN Respondent CORAM: Burchett J. PLACE: Sydney DATE : 14 October 1994 R } R E BURCHETT J. In this matter my mind has fluctuated somewhat during the course of the hearing, but I have come now to a firm conclusion. The application relates to s. 459G of the Corporations Law, and the question is whether there is a genuine dispute about the alleged debt. I have been referred to the case of Mibor Investments Pty Ltd v. Commonwealth Bank of Australia (1993) 11 ACSR 362, and particularly at 365. I have also been referred to orris i ust ja) Pt td, in the same volume, p. 601, where Thomas J made it clear that my task is to determine whether or not the dispute is genuine, and not to enter upon the actual resolution of it. 2. The present is a case where that observation is peculiarly apt, since I have finally come to the view that the resolution of the dispute will depend, in large part, on a precise understanding of the circumstances which surrounded the meeting of the persons involved in the company at which it was decided that the payment would be made, the character of which is now under debate. Those circumstances must, I think, have an important bearing on the terms upon which the moneys were paid. The notice was served on the footing that the moneys constituted a loan repayable on demand. The present application put in issue the question of whether there was a loan at all, or whether there may have been a contribution towards capital in some form other than a loan. There never seems to have been any dispute that the moneys were in fact paid; however, it should be noted that the company's response was couched in terms wide enough to embrace even the payment, and some adverse comment was made on this by counsel for the respondent to the application. But I have some sympathy with the company in this regard, since there is no doubt that the demand was couched in terms which were not precise and accurate. The amount claimed was not a single loan on the date specified; it was a series of three loans on different dates, although the bulk of the money was lent, according to the respondent's case, on a date close to the date specified. There was no prior demand of any kind - no letter requesting the company to arrange for repayment of the moneys - and there are some curious features of the company's 3. banking records for which the respondent himself was responsible. Indeed, it appears on the basis of an affidavit, which was filed by leave only during addresses, that an explanation of apparent problems with those records, given by the respondent himself, is that he made entries ex post facto in some cases. I now come to what are, I think, the really important matters bearing on any conclusion as to the true characterisation of the payments. There was an agreement by which the respondent sold some shares in the company to a Mr O'Callaghan who became, together with the respondent and another person, one of the three holders of the shares in the company. By that agreement, there was a provision acknowledging the intention of the company, which seems to have been a new enterprise as at its date, namely, 25 March 1994, to purchase a restaurant business in Taylor Square, Sydney. It was provided, and I quote: "The purchaser agrees to contribute by way of loan funds to Plycam [that is, the company] when called upon to do so an amount equal to one third of legal costs and expenses, one third of any bond required in relation to the lease and one third of any advance rental required in relation to the lease as well as one-third of the lessor's solicitor's costs and disbursements." Having regard to this clause, and the material now on affidavit, it does seem to me there is a very strong inference that the bulk of the moneys referred to in the demand were advanced to the company pursuant to an arrangement between the three parties which was of the very kind contemplated in that clause. The clause, of course, was directed specifically to one 4. of those three shareholders. However, the very fact that it refers to one-third as the proportion of the sums for which the advance was to be made seems clearly to imply that it is concerned with the provision of a portion by one of the three parties, and that the other two would, it was contemplated, be providing the other two-thirds. Viewed in that light, the clause is significant because it makes it clear that the contribution is to be by way of loan funds. Accordingly, if this case were to be resolved only by reference to the question whether the moneys demanded were loan moneys, there would be much to be said for the proposition that there is no genuine dispute about that. I say this having regard to the broad generality of the affidavit filed on behalf of the company, which does not condescend to give a version of the arrangements in answer to the version which is put forward by the respondent. However, the question that arises in my mind is whether it is equally clear that the loan is repayable on demand. Counsel for the respondent referred me to Bradford Old Bank Limited v. Sutcliffe [1918] 2 KB 833 at 840, where Lord Justice Pickford used, I think, plainly obiter language, which counsel suggested indicated that once a payment was shown to have been by way of loan, and to have been made without an express term for its repayment upon some other conditions, it must be regarded as repayable on demand. I do not think that is what Lord Justice Pickford meant, and I think the reference to repayment on demand in his judgment is there because what he was concerned with was 5. an obligation to make a payment on demand, that obligation being provided by express words. The question remains whether there is here a genuine dispute about the terms on which this sum of money, if repayable, is to be repaid. It seems to me there is. The circumstances raise a real possibility that the intention to be imputed to the parties, or which may be implicit in what they said or did as a matter of fact, was an intention that repayment would be effected upon a demand made giving a reasonable time, as distinct from simply on demand, or even that repayment was to be effected when the company was in a position reasonably to do so. There is reference in the evidence to discussion about the possibility of some repayment being made "before any dividends are paid", a proposition which might lend some support to the last view of the intention of the parties. In all the circumstances, I am satisfied that there is a genuine dispute of fact and law in respect of the alleged debt, and that this application should be disposed of accordingly. I make the order sought in paragraph one of the application, and I order that the respondent pay two-thirds of the applicant's costs. If that has the flavour of cutting the baby, I think it is the fairest order I can make, in all the circumstances. I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett. Associate: Pricnppe OWA) 2A Date: 27 October 1994 Counsel for the Applicant: Mr C.D. Freeman Solicitor for the Applicant: C.R. Fitzsimons Counsel for the Respondent: Mr L. Aitken Solicitors for the Respondent: Holman Webb Date of hearing: 14 October 1994