Graywinter Properties Pty Ltd v Esplanade Hotel Busselton Pty Ltd [1998] FCA 869

FEDERAL COURT OF AUSTRALIA

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 3077 of 1998

BETWEEN GRAYWINTER PROPERTIES PTY LTD (ACN 051 373 5700)

Applicant

AND: ESPLANADE HOTEL BUSSELTON PTY LTD (ACN 008 673 149)

Respondent

JUDGE(S): NORTH J

DATE OF ORDER: 19/06/98

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: (1) The application to set aside the statutory demand dated 23 February 1998 served by the respondent on the applicant is dismissed. (2) The applicant is to pay the respondent's costs of the application including reserved costs and the costs of the directions hearing on 12 May 1998. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 3077 of 1998

BETWEEN GRAYWINTER PROPERTIES PTY LTD (ACN 051 373 5700)

Applicant

AND: ESPLANADE HOTEL BUSSELTON PTY LTD (ACN 008 673 149)

Respondent

JUDGE(S): NORTH J

DATE: 19/06/98

PLACE: MELBOURNE

EX TEMPORE REASONS FOR JUDGMENT This is an application by the applicant, Graywinter Properties Pty Ltd (Graywinter), to set aside a statutory demand served on it by the respondent, Esplanade Hotel Busselton Pty Ltd (Esplanade). On 4 February 1998, Master Sanderson of the Supreme Court of Western Australia gave a summary judgment in favour of Esplanade against Graywinter in the sum of $475,530.82. On 25 February 1998, Graywinter filed a notice of appeal against this judgment. On 27 February 1998, the statutory demand was served by Esplanade on Graywinter in respect of the judgment. On 13 March 1998, Graywinter applied to this Court to set aside the statutory demand or to have the date for compliance extended. In that application, as it was argued, Graywinter relied upon ss 459H(1)(a) and 459J(1)(b) of the Corporations Law. Section 459H(1)(a) provides that a statutory demand might be set aside if there is a genuine dispute between the company and the claimant about the existence or amount of a debt to which the statutory demand relates. Section 459J(1)(b) provides that, on an application for the setting aside of a statutory demand under s 459G(1), the Court may order the demand set aside if it is satisfied that there is some other reason why the demand should be set aside. On 18 May 1998, the application to set aside the statutory demand came before the Court for the first time. On that occasion, the application was adjourned to allow Graywinter to apply to the Supreme Court of Western Australia for a stay of the judgment. On 29 May 1998, Graywinter made application to the Supreme Court of Western Australia for such a stay. On 8 June 1998, that application was heard and determined by Heenan J, who refused the stay. In his reasons for judgment his Honour said: "When granting the summary judgment on 4 February 1998, the learned Master referred to the merits of the case. In particular, he pointed to what appeared to him - and does appear to me - as being the absence of any substantial defence. Essentially, the claim against the appellants and other defendants was for repayment of a loan. It seems that the appellants and at least one of the defendants did not deny that the loan was made nor that the moneys lent are outstanding. Nor, it seems, have they identified any facts supporting their bald assertion in these proceedings that the moneys are not payable by them. Thus, on the facts available to him, the learned Master had no choice but to accede to the application for summary judgment. The prospects of success on this appeal are remote." His Honour went on later to say: "There are two other aspects of the matter which are of concern. The first is that, although judgment was entered more than four months ago, the appeal has not yet been entered for hearing. Nor does it seem that the appellants have taken any steps towards advancing the appellate process since filing the notice of appeal. Finally, there is some suggestion that unless the respondent is enabled to proceed with enforcement of the judgment, one or more of the appellants is likely to dispose of assets which otherwise would be available to the respondent. In essence, then, my appreciation of the factual situation is that there is no exceptional circumstance demonstrated on behalf of the appellants as to why the judgment should be stayed. Rather, the circumstances show that it is expedient to dismiss the application." In essence, the argument on behalf of Graywinter in support of the application to set aside the demand centres on the existence of the appeal in the Supreme Court of Western Australia. This aspect, it seems, is the basis of the argument both under s 459H and s 459J. In relation to s 459H(1)(a), McClelland J, in the Supreme Court of New South Wales, in Barclays Australia (Finance) v Mike Gaffikin Marine (1996) 14 ACLC 1367, at 1370, said: "The possibility that a presently existing and enforceable debt may be set aside in the future pursuant to a subsisting appeal does not give rise to a genuine dispute about the existence of the debt within the meaning of section 459H (see eg Hoare Bros v Deputy Commissioner of Taxation of the Commonwealth of Australia (1995) 13 ACLC 358; Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1,039). The position would of course be different if there were a stay of proceedings …" His Honour went on to say on the following page, in relation to an argument based on s 459J(1)(b): "It seems clear that the pendency of the appeal would not of itself provide any sufficient reason for setting aside the demand under that provision (see Hoare Bros supra and Wilden supra)." In my view, his Honour's comments are directly applicable to this case. The pendency of the appeal is not, in itself, a basis for holding that there is a genuine dispute within the terms of s 459H(1)(a). The fact that the application for a stay of the order has been rejected reinforces that position. Similarly, the pendency of the appeal alone is not a ground for exercising the discretion under s 459J(1)(b) to set aside the statutory demand. Mr Wawer, who appeared as solicitor for Graywinter, also contended that Graywinter would wish to raise cross-claims in the Western Australian proceedings in the event that the appeal was successful. He contended that, if the Court failed to set aside the statutory demand, Graywinter would be denied the opportunity to pursue those cross-claims and that this provided a sufficient reason for setting aside the demand. In my view, there are a number of answers to this argument. The first is that there is no material whatsoever before the Court as to the existence or nature of the cross-claim. It was first raised by Mr Wawer from the bar table and, even then, was not the subject of any elaboration. But, in any event, the mere existence of a cross-claim would not provide a reason for setting aside this statutory demand. There is no reason why Graywinter cannot pursue any claims it has against Esplanade, whether the statutory demand stands or falls. For these reasons, in my view, the application to set aside the statutory demand should be dismissed. Graywinter has also made application for an extension of time within which to comply with the statutory demand. The Court has power to extend the time under s 459F(2)(a)(i). If no order is made under that section and the application is dismissed, the time for compliance ends seven days after the final determination of this application. In my view, there have been no grounds provided which would justify the Court extending the time for compliance beyond the statutory period of seven days. The history of this matter has been one of delay. The failure of the application for a stay on 8 June 1998 should have transmitted clear notice to Graywinter of the very high likelihood that the application to set aside the statutory demand would be refused. I therefore reject the application for an extension of time. Graywinter must pay the costs of this application including reserved costs. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice North