New South Wales Supreme Court CITATION : South Australian Buying Corp v Clarke [2003] NSWSC 801 HEARING DATE(S) : 29/08/03 JUDGMENT DATE : 29 August 2003 JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Application dismissed CATCHWORDS : CORPORATIONS - winding up - statutory demand - application to set aside - genuine dispute not shown - one ground unavailable because not appearing from supporting affidavit LEGISLATION CITED : Corporations Act 2001 (Cth), s.459G Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 CASES CITED : Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1997) 70 FCR 452 Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd [2003] NSWSC 617 POS Media Online Ltd v B Family Pty Ltd (2003) 31 ACLC 533 PARTIES : South Australian Buying Corporation Pty Limited - Plaintiff Souad Clarke - Defendant FILE NUMBER(S) : SC 3168/03 COUNSEL : Ms L.M. Steer, Solicitor - Plaintiff Mr T.A. Alexis - Defendant SOLICITORS : Levitt Robinson - Plaintiff Hazan Hollander - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY 29 AUGUST 2003 3168/03 - SOUTH AUSTRALIAN BUYING CORPORATION PTY LTD v SOUAD CLARKE JUDGMENT 1 The plaintiff, South Australian Buying Corporation Pty Ltd, makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 15 May 2003 served on it by the defendant, Ms Clarke. The ground relied on is that stated in s.459H(1)(a), that is, that there is a genuine dispute between the parties as to the existence of the debt. 2 The debt is identified in the statutory demand as having arisen from a written loan agreement dated 17 January 2002, as supplemented by a document dated 7 May 2002 brought into existence when a further advance was made. The original advance was in the sum of $205,649. The further advance was $5,000. With interest at the contracted rate included, the total claimed in the statutory demand was $232,135.84. 3 There is no dispute as to the amount. The plaintiff's case is there is a genuine dispute as to the existence of the debt. That case is put on two alternative bases. The first is that, at the time of service of the statutory demand, the sum in question was not owed to the defendant by the plaintiff but, rather, by another company called Western Pacific Management Limited. This substitution is said to have been achieved by two further documents, both dated 28 February 2003. One is a loan agreement between the plaintiff as lender and Western Pacific as borrower in respect of a loan of $205,649, being the same principal sum as was referred to in the agreement of 17 January 2002 between the plaintiff and the defendant. The other is a loan agreement between the defendant as lender and Western Pacific as borrower in respect of a sum of $337,649 which, for the purposes of computation of interest, is described by reference to three distinct elements, one of which is a sum of $205,649, that is, a sum that corresponds with the sum in the other two documents. 4 Perusal of these further documents in no way bears out the plaintiff's contention. There is simply nothing to show that the plaintiff was ever released by the defendant from the payment obligations created by the agreement dated 17 January 2002. It is true that, by the second agreement, Western Pacific undertook to the plaintiff a payment obligation in respect of a principal sum corresponding with the principal sum under the first agreement. It is also true that the principal sum under the third agreement has, for interest calculation purposes, a component corresponding in amount with the principal sum under the first two agreements. But those circumstances of coincidence cannot be regarded in any way as having released the plaintiff from the obligations owed by it as borrower under the first agreement. 5 Mr Jones, a director of the plaintiff, has given evidence that it was intended that there should be achieved, by the second and third agreements, a release under the first agreement. That may have been his intention or his understanding or his wish and it may also have been the intention, understanding or wish of the plaintiff that the plaintiff should be released. But, in the absence of anything to show that the defendant shared or joined in that and actually granted a release, there is no basis on which there can be said to be even a plausible contention (to use one of the expressions employed by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785) that the real transaction between the parties differs from that shown by the documents. The first ground relied on by the plaintiff therefore fails. 6 The second ground is, in essence, that the sum claimed in the statutory demand was not, in reality, due and payable at the date of the statutory demand which, as I said, was 15 May 2003. To test this I must go to the terms of the agreement of 17 January 2002. The core provision is as follows: "The lender agrees to advance the sum of $205,649 to the borrower for a period of 12 months from the date of this agreement or for such other period as may be agreed in writing between the parties as an addendum to this agreement at a later time." 7 There follow two paragraphs also dealing with repayment: "The borrower and the lender agree that the sum referred to above shall be repaid on the settlement of the land purchase of 1 Olympia Road, Naremburn, NSW 2065. The settlement fund of the land purchase will be paid direct to the trust account of the borrower's solicitors, Wakling & Associates, who will distribute the repayment to the lender's nominated bank account on settlement. It is a further agreement that the date of the land settlement at 1 Olympia Road has not been set at the date of this agreement, but is expected within 30 days of the DA (Development Approval) being confirmed by the Willoughby Council. A period of three months from the date of this agreement is anticipated for the DA issue." 8 The document of 7 May 2002, referring to the further advance of $5,000, says, in the first place, that that advance is, "to be added to the primary loan of $205,000." There then follows the following paragraph: "All this debt to be repaid as part of the settlement of the property, 1-1A Olympia Road and previously advised to the company's solicitors, Wakling & Associates." 9 For the plaintiff's contentions as to the loans not being due and payable to have substance, it would have to appear that the provisions with respect to payment on a particular property "settlement" event, variously and somewhat confusingly described, prevailed over the twelve months specification in the core paragraph so that, upon a proper construction of the documents, the loan was seen to be repayable on the later of two dates, one being the date twelve months from the date of the agreement and the other being the date of the particular "settlement" event, so that if the settlement event had not occurred at the end of the 12 month period, the loan would continue thereafter until the settlement event subsequently occurred, assuming that it ever occurred. 10 That, quite simply, cannot be gleaned from the agreement. It is inconceivable that a lender contracting mainly by reference to a twelve month term would lend on the basis that repayment might never occur because tied to an uncertain event of a vague commercial description might never occur. Upon its proper construction, the provision about payment on the particular settlement event must have in contemplate that that event will accelerate repayment, not defer it. 11 In any event and regardless of its merits, this second part of the plaintiff's case cannot be advanced. It was in no way flagged in the s.459G(3)(a) affidavit, being the affidavit of Mr Jones of 5 June 2003. The argument based on the proposition that the debt was not due and payable at the time of the statutory demand was referred to for the first time in paragraph 10 of Mr Jones' third affidavit, being the affidavit of 25 August 2003. This means that, on the basis of the so called "Graywinter principle", enunciated by Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1997) 70 FCR 452, that ground of opposition to the statutory demand is not one upon which the plaintiff is entitled to rely on this application. 12 The applicability of the Graywinter principle has recently been reaffirmed in a number of first instance decisions of this Court which are referred to in Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd [2003] NSWSC 617. The matter is discussed in particular in the judgment of Austin J in POS Media Online Ltd v B Family Pty Ltd (2003) 31 ACLC 533. His Honour notes, as has been noted on other occasions, that the Graywinter principle has been recognised on three occasions by the Full Court of the Supreme Court of Western Australia, with the result that it must now be taken to be firmly established. 13 The plaintiff's application for an order setting aside the statutory demand is dismissed with costs. ********** Last Modified: 09/05/2003 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.