New South Wales Court of Appeal CITATION : Land & National Development Corporation v Tatebrook Pty Ltd [1999] NSWCA 280 FILE NUMBER(S) : CA 40539/99 HEARING DATE(S) : 26/07/99 JUDGMENT DATE : 2 August 1999 PARTIES : Land & National Development Corporation v Tatebrook Pty Ltd JUDGMENT OF : Fitzgerald JA at 1 LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : LOWER COURT JUDICIAL OFFICER : Santow J COUNSEL : D J Fagan SC (Applicant) S M P Reeves (Respondent)) SOLICITORS : Rod J Barnett & Associates (Applicant) Mallesons Stephen Jaques CATCHWORDS : DECISION : Orders made THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA40539/99 FITZGERALD JA Monday, 2 August 1999 LAND & NATIONAL DEVELOPMENT CORPORATION PTY LTD v TATEBROOK PTY LTD JUDGMENT 1 FITZGERALD JA: On 19 January 1999, the respondent served a demand under subs 459E(1) of the Corporations Law of NSW (the "Law") on the applicant. Within the time limited by subs 459G(2) of the Law, the applicant applied to the Court under subs 459G(1) for an order setting aside the demand. As a result, the time for compliance with the demand was extended by subs 459F(2)(a) until the application "… is finally determined or otherwise disposed of …". The present application for an order further extending the time for compliance with the demand was conducted on the basis that that has occurred. 2 Pursuant to subs 459F(2)(a)(i) of the Law, the Court has made orders from time to time extending the time for compliance with the demand. Before me, it was common ground that the time for compliance has been extended in that manner until 28 July 1999. The order extending the time for compliance until then was made by Santow J on 6 July 1999. At the hearing of the present application, despite the respondent's submissions that, as a Judge of Appeal, I have no power to make such an order, I extended the time for compliance with the demand until the delivery of this judgment. 3 I do not propose to delay on the question raised by the respondent concerning a Judge of Appeal's powers. The applicant has filed a notice of appeal but needs leave to appeal. I gave the applicant leave to file an application for leave to appeal at the hearing of this application. The respondent did not dispute that there is therefore a proceeding in this Court. However, it was submitted that my only relevant power to extend the time for compliance with the demand under subs 459E(1) of the Law is to be found in subs 46(2)(b) of the Supreme Court Act 1970, and that an order extending the time for compliance with the demand is outside the ambit of that subsection. I do not agree. In any event, under subs 31(3) of the Supreme Court Act, a Judge of Appeal "… may from time to time sit as or exercise any of the powers of a Judge" of the Supreme Court. The respondent conceded that a Judge of one of the other Divisions of the Court has power to make the order applied for, it is unnecessary to discuss the point further. 4 If the applicant fails to comply with a statutory demand within the time for compliance, the Court must within the ensuing period of three months presume that it is insolvent for the purposes specified in subs 459C(1) of the Law. The Law [1]. Accordingly, as the applicant pointed out, the Court's refusal of an order setting aside a demand has serious consequences. It is appropriate to take those consequences into account when determining whether or not to make an order extending the time for compliance with a demand. 5 On the other hand, when an extension of time for compliance with a demand is sought pending the hearing of an application for leave to appeal, it is also appropriate to take into account the prospects of leave to appeal being granted. That in turn is influenced by whether the judgment in respect of which leave to appeal is sought is arguably wrong. This application was conducted on the footing that an order setting aside a demand should be made when the company to which a demand is directed has "a plausible contention requiring investigation" in answer to the demand [2]. Neither Master McLaughlin, nor Santow J on an appeal from the Master's decision, considered that the applicant had established a sufficient basis for the demand to be set aside. It is that conclusion which the applicant seeks to disturb on appeal if it succeeds in obtaining leave to appeal. I propose to consider whether the applicant has a sufficiently arguable basis for not complying with the demand to justify continuing the status quo until the Court can decide whether to grant or refuse the applicant leave to appeal. 6 The dispute between the parties centres upon a number of documents which they and others executed on 17 September 1997, steps taken pursuant to some of those documents, and a further document dated 18 November 1998, a "Summary of Current Status", which was taken for present purposes as having been written on behalf of the respondent. The only document placed before me was a Deed of Acknowledgment, and I was left to glean the material provisions of the other documents from Santow J's judgment. 7 One of the documents executed on 17 September 1997, the Tatebrook Deed of Release, provided for the respondent to release the debt to which the demand relates if a certain condition was fulfilled. That condition was not fulfilled. As a result, a large debt from the applicant to the respondent became due on 18 November 1997. It is common ground that, under another document executed on 17 September 1997, the Idogear Deed of Assignment, part of that debt ($600,000) was assigned by the respondent to a company which can be broadly described as associated with the applicant, Idogear Pty Ltd, on 3 December 1997. The applicant's contention is that the respondent waived, or is estopped from relying on, the non-fulfilment of the condition to which its release of the applicant's debt was subject, and that the balance of the debt (in excess of $1.7 million) is accordingly not payable. 8 The principal argument for the applicant, which Santow J considered and rejected as "patently feeble", was that the Summary of Current Status effected the waiver or gave rise to the estoppel for which the applicant contends. That argument has insufficient prospects of success in this Court to warrant a further extension of the time within which the applicant must comply with the demand. The contents of the Summary of Current Status, if significant, are material as evidence against the respondent of what has occurred. 9 The applicant's other argument is founded on conduct by the respondent on 3 December 1997, the date of the assignment of part of the applicant's debt from the respondent to Idogear. 10 The Tatebrook Deed of Release, by which the respondent conditionally released [3] the applicant from its debt, provided for the release to take effect "[o]n and from the date of (but subject to) completion of the Lidoform Share Sale Agreement". 11 Completion of the Lidoform Share Sale Agreement was conditional on, and subject to, the satisfaction of each of a number of conditions contained in subcl 13.3 of another document, the Deed of Acknowledgment. Santow J recorded that it was common ground "that there has in actuality been no completion" of the Lidofrom Share Sale Agreement, and the applicant did not dispute the correctness of that statement before me. As I understand the applicant's argument, the non-completion of the Lidoform Share Sale Agreement is not conclusive because the reason for its non-completion is the respondent's wrongful refusal to do so. It was required to do so because, although one of the conditions provided for in subcl 13.3 of the Deed of Acknowledgment had not been complied with, the respondent waived, or is estopped from relying on, that non-compliance. 12 The broad effect of subs 13.3(a)of the Deed of Acknowledgment was that completion of the Lidoform Share Sale Agreement was "conditional on and subject to" the applicant's completion of the sale of "Gordon Shops" by 31 October 1997 and its payment of half of a defined surplus to the respondent's solicitors trust account to be invested by them in accordance with the Deed of Acknowledgment. 13 Another provision of the Deed of Acknowledgment , subcl 8.3, provided: "8.3 The sale [of the Gordon shops] may only be completed if the Carwoola Street Sale Agreement is simultaneously completed." 14 The Carwoola Street Sale Agreement, which was also entered into on 17 December 1997, provided for the sale of land by Idogear to the respondent. Under subcl 3.1 of the Idogear Deed of Assignment, the purchase price of the land payable by the respondent under the Carwoola Street Sale Agreement was to be paid by the respondent's assignment to Idogear on 31 October 1997 of part of the debt owed by the applicant to the respondent, which occurred with the respondent's assignment to Idogear of $600,000 of the appellant's debt on 3 December 1997. 15 The terms of cl 3.1 of the Idogear Deed of Assignment were as follows: "3.1 On [31 October 1997] but subject to the Conditions Precedent, in full and finals satisfaction of its obligation to pay the Unpaid Purchase Price, Tatebrook assigns to Idogear all of its right, title and interest in [$600,000] of the [applicant's debt] to Tatebrook …" Clause 1 of the Idogear Deed of Assignment defined "Conditions Precedent" to mean "completion of the sale … of Gordon Shops according to cl 8 of the Deed of Acknowledgment". 16 By the Summary of Current Status, the respondent acknowledged that the sale of the Gordon Shops and the Carwoola Street Sale Agreement were "completed simultaneously", as in fact occurred on 3 December 1997, and that the "conditions precedent (as defined in the Idogear Deed of Assignment) have been satisfied …".The latter statement accepted that the sale of the Gordon Shops had been completed "according to clause 8 of the Deed of Acknowledgment", notwithstanding that completion had taken place on 3 December, not 31 October 1997. 17 In essence, the applicant's argument is that it is not open to the respondent to assert that the sale of the Gordon Shops was completed "according to clause 8 of the Deed of Acknowledgment" for the purpose of obtaining the land the subject of the Carwoola Street Sale Agreement in return for the assignment to Idogear of part of the debt owed by the applicant to the respondent while denying that the sale of the Gordon Shops was completed "according to clause 8 of the Deed of Acknowledgment" for the purpose of repudiating its obligation to complete the Lidofrom Share Sale Agreement and denying that it had released the applicant's debt under the Tatebrook Deed of Release. 18 Both the Lidoform Share Sale Agreement and the Deed of Acknowledgment contained provisions expressed to limit, qualify or exclude waiver. The effect of those clauses is not a matter which should be decided against the applicant on this application. 19 Santow J also referred to authorities in support of the proposition that a waiver must be an intentional act with knowledge. Whether the respondent's conduct on 3 December 1997 satisfies such a test is, likewise, not a matter which should be decided against the applicant on the present application. 20 Further, especially without the material documentation, I do not consider that I should embark upon a consideration of other difficulties which might confront the applicant; for example, arising out of a lack of identity of relevant parties for purposes of estoppel. 21 It is not for me to decide whether the applicant should, or will, be granted leave to appeal. However, subject to conditions indicated below, I am of opinion that the circumstances are such that the status quo should be preserved until its application for leave to appeal has been heard. 22 The extension of time granted by Santow J when he dismissed the applicant's application for an order setting aside the demand was granted on the applicant's undertaking to the Court that it will not during the period for which time for compliance with the demand is extended: "(a) Dispose of it assets other than in the ordinary course of business; (b) charge any of its assets; (c) enter into any contract for sale or otherwise deal with any real estate." 23 The applicant offered a similar undertaking in support of its application that I further extend the time for compliance with the demand. 24 During the hearing, I expressed concern that the present application is unsupported by any evidence concerning the applicant's financial position, so that it is unknown whether, for example, the applicant is insolvent even if it is not indebted to the respondent for the amount which it has demanded. The applicant offered to file an affidavit with respect to its financial position and to serve a copy on the respondent, so that it could make application for the discharge of a an order extending the time for compliance with the demand if it considered that the applicant's financial position warranted such an application. An undertaking to furnish such an affidavit within 14 days is required. 25 Further, the applicant should undertake to prosecute its application for leave to appeal with diligence and expedition. 26 Pursuant to subs 459F(2)(a)(i) of the Corporations Law of NSW, I order that the time for compliance with the statutory demand the subject of these proceedings be extended for 14 days and, subject to the undertakings referred to above being made to the Court by the applicant in an affidavit sworn by a director of the applicant and filed within 14 days, that the time be further extended until the hearing of the applicant's application for leave to appeal filed in this court pursuant to leave granted by me on 26 July 1999 or further or earlier order. 27 Neither party made submissions in relation to costs. In my opinion, the appropriate order is that the costs of the present application be reserved to the Court which determines the applicant's application for leave to appeal and, in the event that that application is discontinued, be paid by the applicant to the respondent. END NOTES 1. subss 459C(2)(a) and 459F(1) 2. Eyota Pty Ltd vHanave Pty Ltd (1994) 12 ACSR 785, 787 3. See also subcl 13.2 of the Deed of Acknowledgment and subcl 3(b) of the Lidoform Share Sale Agreement. Revision Reasons Hyperlinked End Notes added - 30/04/07 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.