Supreme Court New South Wales Medium Neutral Citation: In the Matter of Brighten Pty Limited (Receivers and Managers Appointed) [2011] NSWSC 801 Hearing dates: 19 July 2011 Decision date: 19 July 2011 Jurisdiction: Equity Division - Corporations List Before: Hammerschlag J Decision: Proceedings are dismissed with costs Catchwords: CORPORATIONS - Corporations Act 2001 (Cth) ss 459G(1), 459J(1)(b) - statutory demand for judgment debt - where recipient has on foot an application for preliminary discovery which if it succeeds might indicate the possibility of a cross claim for damages against a third party - recipient seeks adjournment until after preliminary discovery application, alternatively contends that these circumstances constitute some other reason why the demand should be set aside - no basis established for the adjournment and no reason why the demand should be set aside Legislation Cited: Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Category: Principal judgment Parties: Brighten Pty Limited (Receivers and Managers Appointed) - Plainitff Bank of Western Australia Limited - Defendant Representation: Counsel: C.L. Lonergan - Plaintiff N.C. Bearup - Defendant Solicitors: Jackson Lalic Lawyers - Plaintiff Gadens Lawyers - Defendant File Number(s): 2011/132706 EX TEMPORE Judgment 1HIS HONOUR: The plaintiff company guaranteed to the defendant bank ("the bank") the obligations of Noble Growth Investment Limited ("Noble Growth") under a loan agreement pursuant to which the bank lent Noble Growth $32,150,000. 2As security for its obligations under the guarantee, the plaintiff mortgaged to the bank a resort known as the Fairmont Resort at Leura, New South Wales ("the resort"). 3Noble Growth defaulted on the loan and on 26 February 2010 the bank appointed receivers to the plaintiff who took control of the resort. 4On 28 April 2010, a solicitor then acting for the plaintiff and taking instructions from Mr Kwok, the plaintiff's sole director, wrote to the receivers' solicitors expressing concerns with respect to the receivers' management of the resort. 5On 23 December 2010, the receivers sold the resort. The proceeds were applied in reduction of the debt owed by Noble Growth (and guaranteed by the plaintiff) leaving a shortfall of $13,583,412.13, for which amount the bank obtained judgment against the plaintiff on 16 March 2011. 6On 5 April 2011, the bank served a statutory demand on the plaintiff for the judgment amount. 7On 21 April 2011, the plaintiff sued out an Originating Process in the Corporations List seeking an order under s 459G(1) of the Corporations Act 2001 (Cth) ("the Act") that the statutory demand be set aside. 8On the same day, the plaintiff sued out a Summons in the Commercial List seeking an order under Pt 5, r 5.3 of the Uniform Civil Procedure Rules 2005 (NSW) that the receivers give it preliminary discovery of documents which it says, if provided, might reveal that the plaintiff has a claim for damages against the receivers in negligence for loss suffered as a consequence of the way in which the resort was managed and of its sale at the price obtained. Those proceedings have been set down for hearing tomorrow. 9The plaintiff puts that the present proceedings should be adjourned to await the outcome of the preliminary discovery application. In the alternative, it puts that the statutory demand should be set aside under s 459J(1)(b) of the Act which provides that: (1) On an application under s 459G, the Court may by order set aside the demand if it is satisfied that: ... (b) there is some other reason why the demand should be set aside. 10The plaintiff accepts that the bank's claim against it is unassailable. It does not put that there is an offsetting claim. It also accepts that the material before the Court does not reveal, even on a prima facie basis, that it has any claim against the receivers. It puts the position no higher than that it has a preliminary discovery application on foot which is not on its face an abuse of process and that if the application succeeds, it may obtain documents which might reveal the basis for a claim against the receivers. It puts that if such a claim is brought and ultimately succeeds, any amount recovered may be applied to reduce its debt to the bank. 11These considerations provide no basis, either for adjourning these proceedings, or for the exercise of the Court's power and discretion to set aside the statutory demand pursuant to s 459J(1)(b) of the Act. 12The bank's debt is undisputed and there is no offsetting claim. The preliminary discovery application (if it succeeds) will do no more than to reveal documents which may assist the plaintiff in determining whether to sue the third party receivers. Even if thereafter it were to sue and succeed, this would not give rise to any defence which would avail it against the bank. The bank is entitled to avail itself of the statutory demand procedure contained in Div 2 of Pt 5.4 of the Act. 13The result is that the proceedings are dismissed with costs. ********** 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. Decision last updated: 28 July 2011