Canon Australia Pty Ltd v Yong Bros Pty Ltd [2009] NSWSC 843

New South Wales Supreme Court

CITATION : Canon Australia Pty Ltd v Yong Bros Pty Ltd [2009] NSWSC 843

HEARING DATE(S) : 11 June 2009 JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Brereton J

EX TEMPORE JUDGMENT DATE : 11 June 2009

DECISION : Order that within 21 days the plaintiff file and serve a statement of the nature of the case on which it relies in respect of any offsetting claim that it claims to have against the defendant

CATCHWORDS : CORPORATIONS - Winding up – Creditor's Statutory Demand –defendant seeks order that proceedings to set aside demand continue on pleadings - where plaintiff seeks to set up offsetting claims for damages for breach of contract and fraud - Held: plaintiff not required to plead its case but required to provide statement outlining case in respect of offsetting claims as provided by UCPR r 15.10

LEGISLATION CITED : (CTH) Corporations Act 2001, s 459G (NSW) Civil Procedure Act 2005 r 6.3(c), r 15.10

CATEGORY : Procedural and other rulings

CASES CITED : Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Litmus Australia Pty Ltd (in liq) v Canty [2006] NSWSC 196, (2006) 57 ACSR 71

PARTIES : Canon Australia Pty Ltd (plaintiff) Yong Bros Pty Ltd (defendant)

FILE NUMBER(S) : SC 5805/08

COUNSEL : Mr J K Chippindall (plaintiff) Mr J T Johnson (defendant)

SOLICITORS : McLachlan Chilton (plaintiff) Yates Beaggi (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BRERETON J

Thursday 11 June 2009

5805/08 Canon Australia Pty Ltd v Yong Bros Pty Ltd JUDGMENT (ex tempore) 1 HIS HONOUR: By interlocutory process filed on 28 May or 1 June 2009 the defendant Yong Bros claims an order that the proceedings continue on pleadings. It does so in circumstances where the plaintiff Canon apparently seeks to set up, in respect of Yong's statutory demand, offsetting claims for damages for breach of contract and fraud, in order to contend that it has offsetting claims which exceed the amount of the debt that is able to be substantiated. 2 Proceedings to which the Corporations Rules apply are required to be commenced by originating process. That means that, insofar as UCPR 6.3(c) would otherwise require a Statement of Claim in respect of a claim based on an allegation of fraud, it is not applicable. However, it is open to the Court, in Corporations proceedings, nonetheless to make an order that the proceedings continue on pleadings [Litmus Australia Pty Ltd (in liq) v Canty [2006] NSWSC 196 [10]-[12]]. 3 In the present case, there are two competing considerations. The first is that this is an application to set aside a creditor's statutory demand. Although it seems that allegations of fraud will be raised as founding offsetting claims, it will not be the function of this Court on the final hearing of the present proceedings to try those claims, or to decide whether or not they are made good. In other words, to succeed in its present application, Canon will not have to sustain an allegation of fraud. The issue of whether there is a "genuine dispute" – that is to say, to borrow the words of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787 a plausible contention requiring investigation – raises much the same kind of considerations as the "serious question to be tried" criterion which governs applications for interlocutory injunctions. Resort to pleadings where all that is required is determination of whether there is a plausible contention requiring investigation is, in my view, to be avoided if at all possible. 4 On the other hand, as Yong Bros point out, the affidavit supporting the s 459G application relies upon asserted "multiple breaches" of the contract between the parties; an allegation of "fraud against various customers", particularised only in general terms; allegations in a report said to have been lodged with the police, to which only restricted access has been granted; general allegations regarding "fraudulent claims"; a general claim for damages for breach of the agreement without quantification; and allegations of "apparent fraudulent activities the full particulars of which will be provided in the fullness of time in another venue". 5 These allegations are so general and so vague as to render it unreasonable, particularly given their gravity, to require the defendant to go into evidence to answer them. It seems to me that if the plaintiff is to assert that it has such offsetting claims, it must be in a position, at least to some extent, to formulate and particularise those claims, even if not to fully plead them. It must at least be able to articulate its cause of action and provide some indication of how it formulates its alleged offsetting claims. Without that, the Court cannot possibly determine whether there is an arguable offsetting claim or not. 6 The answer appears to me to be a middle course. I will not require the plaintiff to plead its case: that would be an excessive and wholly undesirable requirement in the context of what is a preliminary application to set aside a demand, in which the issue is whether there is a plausible contention requiring investigation. But as the plaintiff asserts that it has offsetting claims, I will require it to provide a statement of the nature of the case on which it relies in respect of those offsetting claims, as provided for by UCPR, r 15.10. That will assist the Court by requiring the plaintiff to identify how it formulates its offsetting claims, and it will assist the defendant by positioning it to be apprised of the case to which it has to respond in the present application. 7 Pursuant to UCPR, r 15.10, I order that within 21 days the plaintiff file and serve a statement of the nature of the case on which it relies in respect of any offsetting claim that it claims to have against the defendant. I adjourn the proceedings to Monday 8 July 2009, before the Registrar in the Corporations List. Costs of the present application will be costs in the proceedings. **********