DUX v HIG [2006] NSWSC 312

New South Wales Supreme Court

CITATION : DUX v HIG [2006] NSWSC 312

HEARING DATE(S) : 12 April 2006

JUDGMENT DATE : 12 April 2006

JURISDICTION : Equity Division

JUDGMENT OF : Associate Justice Macready at 1

EX TEMPORE JUDGMENT DATE : 04/06/2006

CATCHWORDS : Corporations Act. Application to set aside statutory demand under 459G of Corporations Act. No matter of principle.

PARTIES : Dux Holdings Pty Ltd & 2 Ors v HIG Holdings (Aust) Pty Ltd HIG Holdings (Aust) Pty Ltd v Dux Holdings Pty Ltd & 2 Ors

FILE NUMBER(S) : SC 1459/06; 5489/05

COUNSEL : Mr S. Jacobs for Dux Holdings Mr D. Ash for HIG Holdings

SOLICITORS : SL Lawyers for Dux Holdings Licardy, Harris & Company for HIG Holdings

- 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

ASSOCIATE JUSTICE MACREADY

WEDNESDAY 12 APRIL 2006

001459/06 - DUX HOLDINGS PTY LTD & 2 ORS v HIG HOLDINGS (AUST) PTY LTD

005489/05 - HIG HOLDINGS (AUST) PTY LTD v DUX HOLDINGS PTY LTD & 2 ORS

JUDGMENT

1 HIS HONOUR: There are presently two matters before me for hearing. I have ordered them to be heard together with the evidence in one is evidence in the other. 2 One matter is proceedings HIG Holdings (Aust) Pty Limited v Dux Holdings Pty Limited which seeks to set aside a statutory demand. The other proceedings are proceedings before me brought up from the District Court. In those proceedings Dux Holdings Pty Limited is the plaintiff and HIG Holdings (Aust) Pty Limited is the defendant. They are proceedings which deal with the underlying liability sought to be recovered in the statutory demand. 3 There is before me in the second set of proceedings a notice of motion which was filed in the District Court on 11 November 2005 seeking to set aside default judgment given on 24 June 2005 in the sum of $211,774.73, and for leave to file a defence. 4 The circumstances surrounding the signing of that judgment have been investigated in part, and the defendant seeks to raise a defence in his motion, although really it is properly a claim by way of cross-claim. 5 It is trite law to say that to set aside a default judgment it is necessary to explain the delay and establish that there is a defence on the merits, that expression being somewhat generic in its terms which would also include a cross-claim. 6 So far as delay is concerned, the statement of liquidated claim was served on 24 May 2005 by post. The actual judgment was signed on 23 June 2005, which would probably be the first available day for the signing of judgment after the 28 days after service expired. 7 The evidence as to explaining the delay is sparse in the extreme. There is a letter of 17 June 2005 from White & Strickland, solicitors, who were then acting for the plaintiff in the District Court. It has apparently resulted from a conversation a few days before with the solicitor for the defendant. It said: "We enclose copy of notice of Listing for Directions and Statement of Liquidated Claim as requested. If a defence is to be filed, we ask that you fax us a copy urgently." 8 From that one can assume the defendant's solicitors did not have a copy of the statement of claim and was seeking to put on a defence. The statement of claim indicated that the matter was in the Commercial List for directions on 19 August 2005 at 9.30 am and a note was included to the effect that the matter would be listed notwithstanding a notice of defence has yet to be filed. 9 The solicitors for the defendant endeavoured to file a notice of grounds of defence at 2 pm on 24 June in the District Court Registry and found that judgment had been signed that morning. He then immediately sought to have the judgment set aside by consent and offered to pay costs and when an oral statement of the account of the costs was given, asked that it be in writing so he could get instructions. 10 He tried on a number of occasions to address the matter that way, having made some six phone calls, which were not responded to, and eventually in due course the motion was brought. The delay in the bringing of the motion is not a critical thing. What is critical is that the 28 days allowed expired without there being a defence. 11 There is no evidence by the defendant as to what happened and why the time was allowed to pass, nor is there an affidavit by Mr Licardy, the solicitor, as to the difficulties he had and why he did not appreciate that there was a time limit. That would normally be sufficient to refuse the application but, in this case, there is another aspect to it which is important, particularly in relation to the Practice in these matters. 12 It is perfectly plain that the letter of 17 June 2006 did not indicate that default judgment would be signed unless a defence was filed in the time limit. It was a classic case of "snap on a judgment" as is reported in the cases. In those circumstances I would be minded to set aside the judgment provided that there is an appropriate defence on the merits. I use that expression in the widest meaning of that term. 13 I turn to that matter. The dispute between the parties concerns a contract of sale of land. The contract for sale is a development block of rural land in western Sydney for a purchase price of $4.15 million. The parties are experienced developers and the matter has to be seen in that context. 14 It seems Mr Niaz, on behalf of the purchaser, had discussions with a surveyor who introduced him to the principal of the vendor, Mr d'Agostino. Mr Niaz well appreciated he was buying land for which there was a potential for future rezoning. The land was currently zoned rural but there was a plan to develop it as high density urban and the question is, was there any rezoning in any proposed local environment plan put forward by the council for those purposes? 15 There was such a plan and it was available in draft at the council and apparently Mr d'Agostino had a copy of it. 16 The basis of the representations appears in paragraph 27 of Mr Niaz's first affidavit: "Mr D'Agostino said to me to the effect, 'I own this one. It is approximately 50% in the town centre. It is evident that the zoning is in high density.' As Mr D'Agostino said this, he pointed with his finger. I observed where he pointed, and observed him to place his finger at or over the lot I now know and believe to be lot 26." 17 As it can be seen this was a clear indication, according to Mr Niaz, pointing to a particular place which was then within the zoning for future development rather than, for instance, parks or open space. That is the basic representation which is set out in the affidavit. 18 The contract required a 5 percent deposit and, after a certain time, a further 5 percent. 19 The judgment has been given to recover the balance of the 10 percent deposit, which is now due. However, in the meantime, Mr Niaz found out that in fact in the proposed plan it had never been proposed to be zoned as "high density" as he put it, and, accordingly, he said he was misled in this respect and the representation made to him by virtue of the actions on that day was quite plain. 20 Naturally, of course, the contract made it perfectly clear what land was being purchased, what its then zoning was, and it had the usual clause 10.1, clause 5, which provided the purchaser cannot make a claim or requisition or rescind or terminate in respect of a promise or representation or statement about the contract, relating to the property of the title not set out in the contract. Subclause (3) of the contract amplified that provision. 21 In these circumstances the representation which is said was innocent is one which would not normally be available in a suit in equity to set aside the contract, nor would it be available by way of defence. 22 However, it is suggested that there would be a cause of action based upon the representation which could be categorised as misleading and deceptive. The parties are agreed for the purposes of this application that the representation was made in the course of trade and commerce and, accordingly, there is a remedy under section 52 of the Trade Practices Act. That would allow the proceedings to be brought based upon the misrepresentation. 23 The merits of these proceedings obviously are extremely debatable. The details of the way in which the contract was structured and the inspection before of the block all might well ultimately defeat the reliance which is alleged by Mr Niaz. 24 Normally, of course, in Trade Practices Act claims the question of misrepresentation is approached on similar lines to the principles applied in equity. However, it seems to me that at least on the sworn information which has not yet been replied to, that there is some basis for a claim under section 52 of the Trade Practices Act. 25 In those circumstances I would be prepared to give some relief in respect of bringing a cross-claim. But the cross-claim which is sought to be brought was annexed to the affidavit of Mr Niaz of 3 April 2006. That cross-claim in my view is deficient in many respects. In many respects it does not plead the necessary material facts and the representations are confusing in that they are easy to interpret as a representation as to a future fact. 26 It seems during the course of argument that the plaintiff's case is that the representation alleged is not that in the future the land would be rezoned in a particular way, but that at the time of the representation the draft plan zoned it in a particular way. This was obviously because Mr Niaz was prepared to take his chances on that zoning surviving until he eventually purchased the land. So to that extent the representation was not properly pleaded. 27 There is in paragraph (e) an unfortunate reference to "mistake", which also is a reference to a fundamental term of the contract which has led certainly the other side into error in trying to perceive what the nature of the claim is. Paragraph (f) talks about repudiation of the cross-claim, the cross-claim being entitled to repudiate the contract. It does use the word "rescind" but plainly it was a rescission which occurred. As far as paragraph (g) is concerned, it is hard to see what the restoration is that the defendant is ready and willing to make. 28 There is then an allegation of damage flowing from the making of the representation. I would have thought a correct characterisation would be that there is no liability to make the contract that is sought to be set aside. 29 The relief is made clear in the earlier part of the proposed pleading, and seeks orders that the contract be declared void according to the Act. If the Court were persuaded to do that, plainly the balance of the deposit would not be due, or at least there would then be a ground to make an application to set aside the District Court judgment. 30 The other proceedings which is in respect of the statutory demand are based upon a judgment debt. The only substantial point in relation to the defects in the demand relate to the fact that paragraph 2 in the prescribed form which provides that the demand is obliged to state that the debt is due and payable, has been totally omitted. 31 Because it is a judgment debt there is no affidavit verifying and, accordingly, one is referred to the schedule where one sees it is a District Court debt on a named date for a particular sum with interest at a claimed rate. 32 Normally the omission of those words has serious consequences. In Main Camp Teatree Oil Limited v Australian Rural Group [2003] WASC 120 and Panel Tech Industries v Australian Skyreach [2003] NSWSC 619, Barrett J has dealt with the importance of these statements in that a party is able to know that the amount is said to be due and payable. 33 In this case it is sought to set aside the demand as there is no affidavit in support. The setting aside of the demand has an additional requirement and that is that because of the defect in the demand, substantial injustice will be caused unless the demand is set aside. 34 In the circumstances here, where there is a judgment debt clearly specified, the law being that a judgment debt is payable unless and until there is a stay, I would have thought there is no substantial injustice identified and, accordingly, I would refuse to set aside the demand on this ground. 35 The question remains as to what should happen in respect of the motion and the foreshadowed cross-claim? The judgment which has been obtained and the application to set aside the judgment are also matters for consideration. It is perfectly apparent that the cross-claim has as its support section 87 which refers to setting aside the contract ab initio. That is the effect of what is sought. 36 If that order is made then there would be grounds for setting aside the judgment debt and then grounds for setting aside the statutory demand, although there may well be problems in that respect. 37 So far as the leave which I ought to give, it is plain that there should be leave granted to file a cross-claim but that leave I think should be limited in a way which gives the plaintiff in the former District Court proceedings an opportunity to peruse the cross-claim before it is filed, and take any objection to it. In the event the parties cannot resolve that matter, then I would give leave to the defendant to make an application to the Court for leave, and for the Court to finally determine that matter. 38 Accordingly, I direct that the defendant in matter 1459/06 serve on the plaintiff a proposed form of cross-claim relating to its cause of action under the Trade Practices Act within fourteen days of today's date. 39 I direct the defendant to consider that matter and advise the plaintiff within seven days thereafter whether it consents to the filing. In the event that such consent is not forthcoming, the plaintiff is to have leave within 28 days or such later date as the Court may deal with the application for leave to file the cross-claim to make application for leave to file the cross-claim in the proceedings. 40 I stay the judgment obtained by the plaintiff in the proceedings up until 4 pm 28 days from today's date. In the event that a cross-claim is filed with consent of the plaintiff, or alternatively, the plaintiff obtains the leave of the Court to file a cross-claim, the plaintiff's judgment is stayed up until the hearing of the cross-claim or further order of the Court. 41 In respect of the statutory demand, there is a stay now as a result of my order in respect of the judgment debt. In those circumstances it seems to me, having regard to the comments in Gaffkin Marine and other cases of a similar nature, that the proceedings should be set aside as there is presently not a judgment debt as the judgment is subject to a stay. 42 Accordingly, I set aside the demand.