New South Wales Supreme Court CITATION : [1] Get'm Pty Ltd v Triulcio & Anor - [2] Chase Property Investments Pty Ltd v Triulcio & Anor - [3] Chase (No 1) Property Investments Pty Ltd v Triulcio & Anor [2004] NSWSC 291 HEARING DATE(S) : 26 March, 2004 JUDGMENT DATE : 26 March 2004 JURISDICTION: Equity Division JUDGMENT OF : Palmer J DECISION : Statutory demands set aside in two out of three applications, without conditions. CATCHWORDS : CORPORATIONS - STATUTORY DEMAND - Applications to set aside - whether genuine dispute - whether conditions should be imposed under s.459M. LEGISLATION CITED : Corporations Act 2001 (Cth) - s.459G, s.459M CASES CITED : - Macleay Nominees Pty Ltd v Belle Property East Pty Ltd (2001) NSWSC 743 - Panel Tech Industries v Australian Skyreach Equipment Pty Ltd (No 2) (2003) NSWSC 896 [1] Get'm Pty Limited - Plaintiff [1] Domenico Triulcio - First Defendant [1] Domenica Triulcio - Second Defendant [2] Chase Property Investments Pty Limited - Plaintiff PARTIES : [2] Domenico Triulcio - First Defendant [2] Domenica Triulcio - Second Defendant [3] Chase (No 1) Property Investments Pty Limited - Plaintiff [3] Domenico Triulcio - First Defendant [3] Domenica Triulcio - Second Defendant FILE NUMBER(S) : SC [1] 5968/03; [2] 5969/03; [3] 5985/03 COUNSEL : J. Steele - Plaintiffs J.P. Conomy - Defendants SOLICITORS : John de Mestre & Co - Plaintiffs Sachs Gerace Lawyers - Defendants Ex tempore 1 Before the Court are three applications to set aside statutory demands under s.459G of the Corporations Act 2001 (Cth). All three applications arise out of common circumstances. I have ordered that all three be heard together, the evidence in one being evidence in the others. 2 The applications arise from loans made by a father and mother, Mr and Mrs D. Triulcio, to companies in which their children were officers, namely, Get'm Pty Ltd ("Get'm"), Chase Property Investments Pty Ltd ("Chase Property"), and Chase (No 1) Property Investments Pty Ltd ("Chase (No 1)"). The loans were undocumented and unsecured. 3 The Defendants say that in January 2001 they lent $110,000 to Get'm, $25,500 to Chase (No 1) and $15,500 to Chase Property. The loans were made by cheques drawn in favour of those companies at the request of Mr Elias. It seems that Mr Triulcio's son, Rocco, asked his father for the loans and his father readily agreed, directing Rocco to make up the cheques which he required. Mr Triulcio then signed them. 4 There is no dispute that the loans were made to the companies in accordance with the amounts shown on the cheques and were paid to those companies. There is no dispute that there were no express terms agreed between the parties as to when the principal of the loans would be repaid. The Defendants assert that in those circumstances the loans were repayable on demand in accordance with a term implied by law. 5 Ms Steele of Counsel, who appears for the Plaintiffs, concedes that there is no evidence of an agreement as to when the loans would be repaid and she concedes that it is difficult to argue that the loans were not repayable on demand. I find that the debts were repayable on demand. 6 By three statutory demands dated 5 November 2003, the Defendants made demand on the Plaintiffs for the repayment of the amounts shown on the cheques made payable to them respectively in January 2001, that is, as to Get'm $110,000, as to Chase (No 1) $25,000 and as to Chase Property $15,000. The Plaintiffs seek to have the statutory demands set aside on the ground that there is a genuine dispute as to the existence of these debts. 7 The only ground upon which Get'm says that there is a genuine dispute is that the debt of $110,000 was not due and repayable by it when the statutory demand was made. As I have said, the debt owed by Get'm was repayable on demand. A demand for repayment was made by the Defendants' solicitors by a letter dated 7 May 2003 addressed to Get'm. No amount has been repaid by Get'm. I am satisfied that the debt owed by Get'm is not the subject of any genuine dispute and I decline to set aside the statutory demand sent to it. Accordingly, the Originating Process filed by Get'm will be dismissed. 8 Chase (No 1) and Chase Property say that there is a genuine dispute as to whether, as at the date of the statutory demands served on them, they still owed the money to the Defendants. Mr Anthony Elias, a director of both defendant companies and of Get'm, says that at about Easter 2001 he had a conversation with Mr D. Triulcio in which the following was said. Mr Elias said: "The loan money that you put into Chase in January I have transferred into Get'm. We have a lot of bills to pay and we had to put the money into Get'm to keep the restaurants going." He says that Mr Triulcio said:– "Okay, if that is what we have to do, that is what we have to do." 9 Mr Triulcio says this in respect of that conversation: "Anthony told me many times something like 'We have to put money from Chase into Get'm' but he never told me that the money I gave to Chase was going into Get'm." 10 Ms Steele says that the conversation between Mr Elias and Mr Triulcio in 2001 evidenced an agreement whereby the loans between the two Chase companies and Mr Triulcio were discharged and new loan agreements were entered into between Mr Triulcio and Get'm so that the moneys originally advanced to the defendant companies are now owing by Get'm. She says, therefore, that as at the date of the statutory demands no moneys were owing by the defendant companies so that the demands should be set aside. 11 The Defendants say that there was no agreement to discharge the original loans agreements entered into and no new loan arrangements between Mr Triulcio and Get'm were made. 12 Mr J. Conomy, who appears for the Defendants, says that even taken at its highest, the conversation between Mr Elias and Mr Triulcio is incapable of evidencing any agreement by Mr Triulcio to what is in effect a novation of his loan agreements with the defendant companies. In any event, he says, if there was such an agreement then Mrs D. Triulcio, who was a joint lender with Mr Triulcio, did not consent to the novation. It is convenient to deal with the last point first. 13 The evidence suggests that the decision to advance the loans was made by Mr Triulcio alone pursuant to a request made to him by Mr Elias and that Mrs Triulcio was not consulted prior to the cheques being drawn and delivered. It would be possible to infer from that circumstance that Mr Triulcio had either express or implied authority from Mrs Triulcio to act in their joint names. Consequently, it is possible that Mr Triulcio had authority to enter into a novation agreement such as is asserted by the Plaintiffs. 14 The substance of the issue between the parties is what is to be made of the conversation which occurred between Mr Elias and Mr Triulcio in 2001. It is conceded, I think, by Ms Steele that the conversation does not clearly and unequivocally evidence an intention on the part of both parties that the loan agreements between the defendant companies and Mr Triulcio should be discharged and that new loan agreements between Get'm and Mr Triulcio should thereupon come into existence. However, Ms Steele says that, bearing in mind the informality of the discussion and the relationship between the parties, together with their past course of dealing, this is an inference which could properly be drawn. 15 Mr Conomy, on the other hand, says that all that the conversation evidences is that Mr Elias told Mr Triulcio that money which had been paid into the defendant companies is now needed by Get'm and is being paid across to Get'm by the defendant companies. It goes no further than that, he says, and there is no warrant for any inference that what is being proposed by Mr Elias is some new debt arrangement whereby Mr Triulcio must look to Get'm alone for repayment of the monies paid to Chase. 16 It seems to me that the inference which Ms Steele seeks to draw from the conversation is barely arguable. I have had some considerable doubt in deciding whether such an inference is arguable at all. However, in the end it seems to me that when one looks at the history of the dealings between the parties and the informality with which they have proceeded in their previous loan arrangements, it is arguable that Mr Elias would not be informing Mr Triulcio about his proposal to transfer money into Get'm unless Mr Elias was seeking Mr Triulcio's approval to do that. That approval would only be of any relevance if the transfer of monies to Get'm affected Mr Triulcio in some way. 17 I readily concede that another inference is open, that is, that Mr Elias was simply informing Mr Triulcio in casual conversation of the fact that monies had to be transferred from the defendant companies into Get'm. 18 I am conscious that the terms of the conversation are in dispute. Mr Elias says that he referred to "the loan money that you put into Chase in January" being transferred, whereas Mr Triulcio says that all that was said was, "We have put money from Chase into Get'm" . 19 On an application of this character the Court is not concerned to resolve questions of credit nor to decide which of a number of possible interpretations should be given to the terms of a disputed conversation. The case as put by a plaintiff, particularly in relation to matters which depend upon credit, is generally speaking taken at its highest in favour of the plaintiff and applications to cross examine on credit are usually refused. Of course, there may be circumstances which warrant departure from this general practice. 20 Accordingly, taking the conversation as reported by Mr Elias at its highest, against the background of the relationship between the parties, I think it is arguable, but barely arguable, that the conversation with Mr Triulcio amounted to a statement by Mr Elias of what the companies intended to do with the loans from Mr Triulcio and Mr Triulcio understood that his agreement was being sought to what was proposed and he gave that agreement. 21 I take into account also, as possibly some corroborative evidence of the parties' understanding at the time of this conversation, that subsequently interest on the loans originally made to the Chase companies was paid by Get'm and accepted by Mr Triulcio. On its own, that evidence would go nowhere but it may be of relevance in an enquiry as to what was the intention of the parties at the time of this conversation in January 2001. 22 Accordingly, it seems to me that there are sufficient grounds, but only just sufficient grounds, to make out the existence of a genuine dispute. As is so often said in cases in which a statutory demand is sought to be set aside, the test for satisfying the existence of such a dispute is a low one indeed. I need not recount the authorities which establish that proposition. 23 I conclude that the dispute as formulated by the defendant companies is one which satisfies the test of warranting further investigation or enquiry or raising an issue be tried. It seems to me, therefore, that the two Chase companies have made out a case to set aside the statutory demands served on them. 24 Mr Conomy says that the case advanced by the Chase companies is so tenuous that the Court should, in the exercise of its discretion under s.459M of the Corporations Act , impose conditions upon an order setting aside those statutory demands. He relies upon what was said by me in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd (2001) NSWSC 743 in that regard. In that case, the debtor did not contest that it was indebted to the creditor. What was set up by way of a genuine dispute was an offsetting claim which the debtor sought to raise against the creditor such as was said to exceed the original debt. The particulars of the alleged claim giving rise to an offset were nebulous indeed and were barely sufficient to satisfy the Court that there was a genuine dispute. Of course at that stage, nothing having been formulated by the debtor other than somewhat vague allegations, it was quite possible, as matters then stood, that the statutory demand could be set aside on the basis of the postulated claim by the defendant but the defendant thereafter would do nothing to advance its case or prosecute its claim so that the creditor would be stultified, perhaps indefinitely, in endeavouring either to obtain its money by recourse to service of a statutory demand or else to bring the dispute to a resolution. 25 In those circumstances, I deemed it appropriate to impose conditions on the setting aside of the statutory demand, those conditions being, firstly, an undertaking on the part of the debtor to prosecute its claim diligently and, secondly, an undertaking to pay into Court a substantial sum to meet the creditor's claim since it was clear that the debtor was unlikely to establish its cross claim in an amount sufficient to extinguish wholly the debt of the creditor. 26 Those circumstances, as I have recounted them, are obviously very different from the circumstances of the present case. In the present case, the dispute goes to the existence of any indebtedness at all on the part of the Chase companies. Although the dispute is, as I have said, one that barely succeeds in attracting the description of "genuine" it is, nevertheless, sufficient to get the Chase companies across the threshold. Accordingly, in my opinion, they must have the benefit of s.459G without the addendum of any conditions imposed under s.459M. It is up to the creditors alone in this case to prosecute their claims for repayment of the debt against the defendant companies, unlike the situation in Macleay where the creditor alone could do nothing to bring the whole of the dispute to crystallisation. The remedy for prompt payment of the creditors' claims lies in their hands in this case. 27 Mr Conomy has urged upon me the decision in Panel Tech Industries v Australian Skyreach Equipment Pty Ltd (No 2) (2003) NSWSC 896. In that case the applicant succeeded in demonstrating that there was a genuine dispute as to a substantial part of the debt it claimed in the statutory demand. There was no offsetting claim asserted but the existence of the debt itself was in issue. Barrett J said that he had significant doubt, based on the quality of the plaintiff's evidence, whether the contest between the parties as to the existence of the debt would eventually be resolved in favour of the plaintiff. His Honour said: "This, in my view, makes it appropriate that the order setting aside the statutory demand not be unconditional. Because a genuine dispute has been established, action by the defendant to vindicate the rights it considers itself to have as a creditor of the plaintiff must be by way of debt proceedings at common law. In the particular circumstances to which I have referred, however, the defendant should not have to pursue those proceedings on an entirely speculative basis, assuming it chooses to pursue them at all. It is appropriate that they be pursued in a context where the plaintiff causes funds sufficient to meet the claim to be set aside and held pending its resolution. This should be achieved by making the s.459H order subject to an appropriate condition under s.459M." 28 The order which his Honour formulated was to the effect that the statutory demand would be set aside if, within 28 days after making the order, the defendant served on the plaintiffs an originating process filed in a court of competent jurisdiction by which the defendant sued the plaintiff to recover the debts claimed, in which case the plaintiff was required to pay into court, in the proceedings initiated by that process, a certain sum to be held to abide the outcome of the proceedings. 29 I think that what his Honour had in mind was to formulate orders, which would be effective immediately, setting aside the statutory demand and compelling the plaintiff to pay into an appropriate court the sum required if the defendant commenced proceedings of the character described. 30 His Honour's decision was founded upon "the particular circumstances" to which he had earlier referred in his judgment. I do not think that his Honour intended to lay down a general proposition that orders for payment into court should readily be made as a condition of setting aside statutory demands. If this became the practice, then this Court, in the process of exercising its jurisdiction under the Corporations Act would, in effect, become a small claims court because creditors would routinely serve statutory demands intending to seek an order that, even if the demand is set aside because of the existence of a genuine dispute, the debtor nevertheless pay into Court a substantial amount. If such applications were routinely entertained, this Court would frequently have to embark on the question of "degree of genuineness" of disputes and would be compelled to investigate the merits of the dispute to a depth which it refuses to do, as the law presently stands. I would prefer to reserve a decision as to whether conditions should be imposed pursuant to s.459M to a case-by-case consideration based upon the particular facts of the case, as Barrett J did in Panel Tech Industries . 31 As I have said, in Macleay Nominees the creditor was left in the position of being confronted with a nebulous claim for the offsetting against the debt without any means of prosecuting the matter to finality, either by enforcing a statutory demand or by compelling the debtor to make good its claim by commencing proceedings. That was a special situation which, in my view, called for the imposition of conditions under s.459M. I do not think that the circumstances of the present case justify a similar order despite the fact that, as I have said, I think that the dispute made out by the Chase companies, although genuine, is tenuous. In those circumstances, I do not think it proper to impose conditions upon the dismissal of the statutory demands. 32 In the matter of Get'm Pty Ltd, No 5968 of 2003, the order of the Court is that the Originating Process is dismissed with costs. 33 In the other two matters, the Defendants submit there should be no costs order made against them, or there should be only a partial costs order. The basis of that submission essentially is that there were grounds raised in respect of the existence of a genuine dispute by the plaintiffs which they did not pursue to final hearing. That seems to be correct. However, it seems to me that the issues raised and abandoned were very subsidiary issues and would not have occupied either a great deal of the parties' time in preparation or the Court's time in hearing the matter. 34 It seems to me to be an artificial and probably relatively pointless exercise, if it can be done at all, to try to segregate the costs attributable to the issues abandoned. The fact remains that the principal issue raised by the Chase companies, namely, whether they were indebted at all, was the substantial issue which always had to be dealt with and it was confronted by the parties at length. In those circumstances I think that the Chas companies should have the costs of the Originating Process. 35 The orders will be, in matters 5969 and 5985 of 2003, the statutory demand is set aside. The Defendants are to pay the Plaintiffs' costs. – oOo – Last Modified: 04/16/2004 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.