New South Wales Supreme Court CITATION : Gale v Gale [2003] NSWSC 930 HEARING DATE(S) : 09/10/2003 JUDGMENT DATE : 6 November 2003 JURISDICTION: Equity Division JUDGMENT OF : Master Macready at 1 DECISION : Paragraph 25 CATCHWORDS : Corporations Law. Application to set aside a statutory demand. Allegations of defects in the demand and affidavit in support not sufficient to set aside demand. Abuse of process in respect of other court proceedings between related parties. Demand set aside on basis of genuine dispute as to identity of creditor. PARTIES : Tooher Gale & Associates Pty Limited v Gale Planning Group Pty Limited FILE NUMBER(S) : SC 3264 of 2003 COUNSEL : G. Bateman for plaintiff G. Moore for defendant SOLICITORS : Helliars City Solicitors for plaintiff Colquhoun & Colquhoun for defendant - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Master Macready Thursday 6 November 2003 3264 of 2003 Tooher Gale & Associates Pty Limited v Gale Planning Group Pty Limited JUDGMENT 1 MASTER: This is an application to set aside a statutory demand under s 459G of the Corporations Act. The demand was issued by the defendant against the plaintiff claiming an amount of $17,000 for what was described in the schedule as "the balance of the bonus consulting fee for the period ended 30 June 1998. The demand was dated 23 May 2003 and the proceedings were commenced within time. The defendant company is a company which was formerly known as "John Gale Consulting Pty Limited" and is a company of which Mr John Leslie Gale was a director. Mr John Gale was formerly a member of the plaintiff company for a number of years and the present dispute is one of a series of disputes arising out of the relationship that did exist between Mr John Gale his companies and the plaintiff company, Tooher Gale & Associates Pty Limited. 2 The plaintiff company says that there are three reasons why the statutory demand should be set aside. They are:- 1. That there is a defect in the statutory demand and that, accordingly, it should be set aside under s 459J(1)(a). 2. That there is some other reason to set aside the demand under s 459J(1) (b), namely, there is a defect in the affidavit in support and also that the service of the demand constitutes an abuse of process. 3. That there is a genuine dispute as to the existence of the debt. 3 I turn to the first matter. That there is a defect in the statutory demand and that, accordingly, it should be set aside under s 459J(1)(a). 4 In paragraph 1 of the Creditors Statutory Demand for payment of debt it is alleged that the plaintiff owes Gale Planning Group Pty Limited the amount of $17,000. That name is repeated in paragraph 6 which gives the address for service. The schedule however describes the debt the way I have referred to earlier as being payable to "Gale Consulting Pty Limited for consultancy services rendered by Gale Consulting Pty Limited to Tooher Gale & Associates Pty Limited at their request". 5 It was submitted that this inconsistency was a defect. It is apparent that what has happened is that in the schedule there has been a wrong description of the company, Gale Planning Group Pty Limited, by referring to a non-existent company but probably a company that was meant to be a reference to the earlier name of the Gale Planning Group Pty Limited, namely, John Gale Consultancy Pty Limited. 6 The parties, by that I mean those in control of the relevant companies, have been in litigation both in the Local Court and the District Court and now in this Court as a result of the issue of the Statutory Demand. All these matters concern the amounts payable as a result of their original association. It was submitted that this defect caused substantial injustice. It is necessary in respect of a defect in a demand to establish substantial injustice because of the provisions of s 459J(2)of the Act. 7 In the present case Mr Tooher of the plaintiff company was in no doubt as he noticed the difference but went on in his affidavit in support to deal with the relevant claim by reference to the earlier proceedings. Nowhere does he say that there were any problems caused by the particular difference in the names shown in the demand. I am not satisfied that there is any substantial injustice and, accordingly, I would not set aside the demand on this ground. That there is some other reason to set aside the demand under s 459J(1) (b), namely, there is a defect in the affidavit in support and also that the service of the demand constitutes an abuse of process. 8 The first matter which I will deal with is the defect in the affidavit. The affidavit in support of the statutory demand contains in its heading a reference to the Supreme Court of New South Wales, Equity Division, Sydney Registry. Under the Corporations Law rules there is a prescribed form for the affidavit accompanying the statutory demand which does not contain that heading. In addition, rule 5.2(c) of the Corporations Law rules provides that an affidavit accompanying a statutory demand relating to a debt or debts owed by the company must "(c) not state a proceeding number or refer to a court proceeding, in any heading or title to the affidavit". Certainly the particular statutory demand does not state a proceedings number nor does it refer to the parties in terms of plaintiff and defendant. In contrast it adopts the description which is in the prescribed form of affidavit which is Form 7 and the Corporations Law rules. Assuming that arguably by reference just simply to the court it refers to what one might be mistaken to be court3 proceedings one must look at the seriousness of this breach of the rule to see whether compliance is important. In many cases non-compliance with the requirements of the affidavit is important particularly where something such as the statement that there is no genuine dispute about the existence or the amount of the debt is omitted from the affidavit. That is an important part of the statutory scheme. 9 Equally if a party might be misled by a non-compliance that also would be important. In the present case there is nothing to suggest that the recipient of the demand was misled as it has been able to successfully institute appropriate proceedings within time to set aside the demand. Accordingly, I would not in these circumstances set aside the demand because of this default. 10 I turn to the question of whether there is an abuse of process. The plaintiff referred to a case of Perlake Pty Limited v Finance & Mortgage Corporation (NSW) Pty Limited (1997) 15 ACLC 76 where Master McLaughlin set aside a statutory demand where a demand was issued in respect of a debt which was the subject of separate proceedings against two individuals. The Master did not refer to authority but there is a related line of authority that deals with separate proceedings where a party makes inconsistent allegations in each of the different proceedings. The authorities in this respect were recently collected in a decision of Rippon v Chillcotton Pty Limited (2001) 53 NSWLR 198. The original identification of the nature of the abuse of process was in Reichel v Magrath (1889) 14 App Cas 665 where the House of Lords held that the defence which was not barred by res judicata or estoppel may none the less be struck out as an abuse of process. Lord Halsbury LC said at 668:- "I think it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing he form of the proceedings to set up the same case again. … there must be an inherent jurisdiction in every Court of Justice to prevent such an abuse of its procedure…" 11 In Sea Culture International Pty Limited v Scholes 1991 32 SCR 275 at 279 French J described the jurisdiction in these terms:- "An attempt to litigate in the court a dispute or issue which has been resolved in earlier litigation in this or another court or tribunal may also, according to the circumstances, constitute an abuse of process even if not attracting the doctrines of res judicata or issue estoppel. Underlying the power that courts have assumed to stay or dismiss proceedings for abuse of process is a policy of preventing waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes. There is, in my opinion, another element to be considered and that is the necessity to maintain confidence in and respect for the authority of the courts. If a party in litigation in this Court makes a formal and public allegation by way of its pleading which is inconsistent with a formal and public allegation in another forum, then such an issue may arise." 12 There were proceedings brought in the Local Court at Balmain by Gale Planning Group Pty Limited against the present plaintiff, Tooher Gale & Associates Pty Limited. They were commenced on 16 November 2001 claiming consultancy services from 1 January 1999. In a cross claim the defendant, the plaintiff in the present action, conceded it should allow credit for the 1998 bonus of $17,000. This certainly would seem to be an admission that it owed that amount to that particular company. Those proceedings were however disposed of by the plaintiff discontinuing its proceedings and the defendant discontinuing its cross claim. 13 The particular proceedings which are of concern are the next set of proceedings, namely, the District Court proceedings which were commenced in 2002. In the third amended statement of liquidated claim which was the final claim before the court the plaintiff in those proceedings, Mr John Leslie Gale, claimed against the defendant company, which is the plaintiff in these proceedings, and also its director and another company on a number of different causes of action which included a claim to entitlement of certain profits as a shareholder of the first defendant, namely, the plaintiff in these proceedings. In paragraph 13 Share of Profits which was claimed and which was particularised for the year ended 30 June 1998 it was fixed at $17,000. That entitlement was denied in the defence. 14 The District Court proceedings were settled on 25 March 2003 in terms of a consent order in these terms:- "1. Judgment for the plaintiff against the defendants in the sum of $65,000. 2. Cross claim dismissed. 3. No order as to costs." 15 In the cross claim that was dismissed the present plaintiff once again conceded an amount for the 1998 bonus of $17,000. In this case of course conceded it as against John Leslie Gale rather than his company. 16 There are a number of different admissions in the accounts of the plaintiff which go either way as to whether the 1998 bonus of $17,000 was owed to Mr Gale personally or to his consulting company which is the present defendant. All of these matters, of course, pre-date the settlement of the District Court proceedings. 17 The question therefore is whether the District Court proceedings included a claim for the 1998 bonus and, if so, they having been settled it is now an abuse of process for the present statutory demand to be relied upon by the defendant. There is no doubt that some other reason in s 459J (1)(b) can comprehend within it an abuse of process. 18 It will be noted from my recounting of the District Court proceedings that the claim is for a loss of profits. It was sought to suggest that this was not a claim for a bonus and that therefore the present claim was not one comprehended within the District Court proceedings. There is in evidence before me the affidavit of Mr Gale in the District Court proceedings. In paragraph 29 of his affidavit he refers to an agreement for a separation payment, which was contained in a directors minute. In paragraph 30 he referred to an entitlement to profits by a reference to a schedule of shareholders' bonuses which were set out in annexure "O". In that annexure he identified the relevant payments both for the years, ended 30 June 1999 and 2000 by reference to the dollar amounts due to him, which appear at paragraph 12 of the Statement of Claim. It would seem therefore that the claim advanced in paragraph 12 and particularised in paragraph 13 was in respect of something, which although claimed as a share of profits was somehow described in evidence as a bonus. 19 There is however a threshold issue, namely, that the plaintiff in the district court proceedings was Mr Gale and he is not the person who has issued the demand. In R v O'Halloran 36 ACSR 315 at 344 Heydon JA discussed the submission that Giles J in State Bank of NSW v Stenhouse Ltd (1997) Aust Torts Reports 81-423 had extended the principles to where a new party sought to relitigate the issue. He said: "109 In all these cases the person whose role in later proceedings, whether as moving party or defendant, was characterised as an abuse of process was a person who had been a party to the earlier proceedings. The Director of Public Prosecutions was not party to the civil proceedings before the Supreme Court. In all of these cases, too, the persons said to have abused process had lost on an issue in the earlier proceedings. The fact that some arguments of the Australian Securities Commission advanced by it in furtherance of the public interest of having the "legal issues of concern to it clarified" (see 28 ASCR 58 at 59 per Gleeson CJ) were not accepted by Cohen J does not necessarily mean it suffered "loss" or had an "issue" decided against it. No relief was sought against it; it sought no relief; it filed no cross claim (13 ACLC 1334 at 1,338). It filed a Notice of Cross-Appeal, but did not pursue it in the Court of Appeal. 110 Further, the appellant's submission does not refer to a statement by Hunt CJ at CL, as construed by, and evidently approved by, Giles CJ Comm Div in State Bank of New South Wales Ltd v Stenhouse Ltd at 64,088 that "there will not be abuse of process if someone not a party to the earlier case wishes to re-litigate an issue decided in that case in favour of the opposite party" (emphasis added). The criteria set out by Giles CJ Comm Div quoted in the appellant's submission must be read in the light of these matters." 20 This would seem to indicate that the issue of a demand by a different person could not amount to an abuse of process. It is to be noted that in Perlake Master McLaughlin was not dealing with the situation occurring here, as the company issuing the statutory demand was the same company that had sued in the Local Court. That there is a genuine dispute as to the existence of the debt. 21 I had the benefit of having a number of submissions in respect of the principles to be applied and I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments respect of the expression "Genuine dispute": "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s.459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.' In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: 'There is little doubt that Division 3 . . . prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim". It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simply - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).' I respectfully agree with those statements." 22 It is clear that the plaintiff's case was in substance that the claim for the bonus was included in the claim brought by Mr Gale personally in the District Court. Although the issuing of the statutory demand by his company does not amount to an abuse of process nevertheless the matters that I have referred to in discussing the question of abuse of process indicates a variety of different items of evidence which point either towards the debt being to Mr Gale personally or some entity. In the accounts of the company when there was reference to a debt being due to "Gale Planning Group" that is not an accurate description of a precise entity. Indeed, earlier versions of the accounts suggest it was due to Mr Gale personally. 23 Mr Gale's affidavit in the District Court which was annexed to Mr Fitzgerald's affidavit of 23 September 2003 presents a somewhat confused picture of as to how the agreement related to the bonuses. Exhibit Q said to be a claim for bonuses that was issued on letterhead which described the entity as "Gale Consulting". There was no evidence of who was the owner of this business name although the affidavit in paragraph 4 somewhat misleadingly describes the claim as one for payment by "Gale Consulting dated 24 December 1997 a company established by myself". 24 As I have said earlier there is a variety of evidence going both ways on the question of who is the correct party and to whom the amount is owing. As I have said even the plaintiff company has admitted it owed the money to the defendant in the Local Court proceedings and again admitted that it owed it to Mr Gale personally in the District Court proceedings. In these circumstances it seems to me that there is a genuine dispute in respect of the debt. 25 I make orders 1 and 3 in the Summons filed herein on 12 June 2003. ********** Last Modified: 11/10/2003 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.