Supreme Court New South Wales Medium Neutral Citation: In the matter of Britten-Norman Pty Limited [2013] NSWSC 424 Hearing dates: 18 April 2013 Decision date: 18 April 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Time for compliance with statutory demand extended. Orders made in accordance with short minutes of order with specified amendments. Catchwords: CORPORATIONS - Winding up - Statutory demand - Application for extension of time to comply with statutory demand - Whether appeal has prospects of success and whether arguable case has been shown - Whether potential prejudice to the parties - Considerations relating to leave to appeal. Legislation Cited: - Corporations Act 2001 (Cth) ss 459F, 459F(2)(a)(i), 459F(2)(a)(ii), 459H(1)(b), 459J(1)(b) Cases Cited: - Aussie Vic Plant Hire v Esanda [2008] HCA 9; (2008) 232 CLR 314; (2008) 64 ACSR 249 - Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd [2004] NSWSC 877; (2004) 50 ACSR 544 - Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd [2006] NSWSC 1378; (2006) 60 ACSR 393 - Kallawar Holdings Pty Ltd v Commonwealth Bank of Australia (No 2) [2010] VSC 362 - NA Investment Holdings Pty Ltd v Perpetual Nominees Limited [2010] NSWSC 373 Category: Interlocutory applications Parties: Britten-Norman Pty Limited (Plaintiff) Analysis & Technology Australia Pty Limited (Defendant) Representation: Counsel: J.S. Emmett (Plaintiff) D. Stewart (Defendant) Solicitors: McMahon Broadhurst (Plaintiff) Ken Cush & Associates (Defendant) File Number(s): 2012/388436 Judgment - EX TEMPORE 1By Originating Process dated 13 December 2012 the plaintiff, Britten-Norman Pty Limited ("BN") sought orders under sections 459H(1)(b) and 459J(1)(b) of the Corporations Act 2001 (Cth) that a creditor's statutory demand ("Demand") dated 26 November 2012 served by Analysis and Technology Australia Pty Limited ("ATA") be set aside. The application was heard before me in the Corporations Motions List on 8 April 2013 and I delivered an oral judgment on 12 April 2013, dismissing BN's application to set aside the demand. My written judgment will be available shortly. 2Under s 459F(2)(a)(ii) of the Corporations Act, the period for compliance with the Demand was therefore the period ending seven days after the application to set aside the Demand was finally determined by my judgment. By Interlocutory Process dated 17 April 2013, BN seeks an extension of time to comply with the Demand under s 459F(2)(a)(i) of the Corporations Act which permits the Court to extend the time period for compliance with the statutory demand in an appropriate case. Notwithstanding that the matter has been restored at short notice, ATA has been represented in respect of the application. 3BN has indicated that it wishes to consider bringing an application for leave to appeal from my judgment. Although BN has, of course, had access to my reasons given orally, an affidavit of its solicitor, Mr John Glynn, dated 16 April 2013 in support of its application indicates that it will need a period of time after receipt of my written judgment to prepare material to be filed with the Court of Appeal in support of an application for leave to appeal. 4The principles applicable to an application to extend the time for compliance with a statutory demand where an appeal against an order declining to set aside the demand has been filed (or in this case foreshadowed) are well established. The relevant matters are, first, the prospect of success in the appeal and whether an arguable case has been shown; second, whether the appeal will be rendered nugatory unless the extension is granted; and, third, the prejudice the respective parties will suffer in the alternative eventualities: see Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd (2004) NSWSC 877; [2004] 50 ACSR 544; Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd [2006] NSWSC 1378; (2006) 60 ASCR 393; NA Investment Holdings Pty Ltd v Perpetual Nominees Limited [2010] NSWSC 373; Kallawar Holdings Pty Ltd v Commonwealth Bank of Australia (No 2) [2010] VSC 362. 5The first matter which needs to be considered is whether the appeal has prospects of success and whether an arguable case has been shown. Mr Emmett, who appears for BN, identified the possible grounds of appeal in broad terms. So far as the claim for an offsetting claim based on misleading and deceptive conduct is concerned, Mr Emmett contends that, had BN paid the amount of $128,000, which was the subject of the Demand, it would have been entitled to recover that amount as part of its damages for that claim. That argument may face a difficulty as to whether that amount may properly be deployed as an offsetting claim where the amount was not paid, and Mr Emmett also properly conceded that there may be a question as to whether that argument was put fully before me. So far as the contract claim is concerned, Mr Emmett indicated that BN will rely on a submission that evidence as to the purchase price of replacement equipment by BN and as to the gross profit which it claimed to have lost had been admitted without objection, and will also put an argument, as a matter of contract law, that the purchase price of more expensive replacement equipment may be recoverable in some circumstances. Mr Stewart, who appears for ATA, does not seek to be heard in opposition to those grounds where the transcript of the hearing before me is not yet available. I note that my judgment also referred to issues as to the adequacy of evidence supporting the claims for misleading and deceptive conduct and breach of contract as distinct from quantifying the damages, 6I should have regard to the fact that, for reasons that I will note below, any stay granted would be relatively short, since any longer stay will be a matter for the Court of Appeal to be determined at the same time as any application for leave to appeal. I should have regard to the facts that there is evidence that Counsel's advice has been obtained in respect of the prospects of appeal, that ATA has not sought to be heard in opposition to them, and that questions as to whether there is a serious question to be tried in respect of any offsetting claims may well be matters as to which minds may differ. 7The second question raised on the application to extend the time for compliance with the demand is, as Barrett AJ noted in NA Investments above, whether an appeal will be rendered nugatory unless the time is extended. I would reach the same conclusion as his Honour that it is plain that any appeal will be rendered nugatory absent an extension of time having regard to the High Court's decision in Aussie Vic Plant Hire v Esanda [2008] HCA 9; (2008) 232 CLR 314; (2008) 64 ACSR 249. 8The third issue which I must address is the prejudice the respective parties will suffer in the alternative eventualities, namely, of an extension of time being granted on the one hand and being declined on the other. The first prejudice which would be suffered by BN is obviously that it would be deprived of its opportunity to appeal. BN also relies on the further affidavit of its solicitor, Mr Glynn, dated 18 April 2013, to indicate that, he is informed by Mr Baddams, a director of BN, that BN has little cash available; has expectations of further income by way of an amount payable in respect of the sale of two aircraft to a third party; has a contract with the Great Barrier Reef Marine Park Authority to undertake surveillance work commencing on 31 May 2013 for which further moneys will be payable; and also has expectations of further fire surveillance contracts. Mr Glynn's evidence, also on information and belief is that it would be necessary to sell the aircraft owned by BN to meet the debt which would deprive BN of its primary means of earning income. The weight of that evidence is to some extent reduced by evidence, to which ATA draws attention, that that aircraft is already for sale, although the point could, perhaps, be re-formulated on the basis that a sale by a liquidator may well be less satisfactory than a sale in the ordinary course of business. 9Mr Stewart put measured and appropriate submissions for ATA in respect of this aspect of the matter. He accepted that the case law indicates that an extension does not, in any substantive sense, keep a defendant out of money, where the only consequence of not granting that extension would be that the statutory presumption of insolvency would arise. He also accepted that Courts have generally not granted orders requiring the full amount of the statutory demand to be paid into court, where that would allow a defendant a form of priority or security. He points out that there is some analogy between an application for an extension and a stay pending appeal, and the Court may well require moneys to be paid into Court as a condition of a stay pending appeal. However, that course is usually taken where there is a judgment debt, and ATA presently does not have the benefit of a judgment debt. Further, ATA's right to payment depends upon the matters which are, to some extent, sought to be raised in the appeal which BN seeks to bring. I do not understand Mr Stewart to have ultimately contended that an order for payment of the amount due into Court should be made as a condition of the grant of an extension of time, and it seems to me that he was right in taking that approach. 10BN has offered to grant a third ranking charge over its aircraft and certain associated equipment to ATA. On the face of it, it appears that there may well be value in that charge, although that question depends in part upon the value of the aircraft and other associated equipment, as to which there was some evidence in Mr Glynn's further affidavit. At least on the figures contained in that affidavit, there would be value in a third ranking charge, after the amounts due to the first and second ranking charge holders. The utility of that security may perhaps be qualified by the fact it would not be registered without the consent of the first and second ranking chargees. However, that matter is likely to be apparent by the time any leave application and application for extension of a stay is heard in the Court of Appeal, and the inability of BN to give a registered charge, if that occurs, is a matter that could be taken into account at that time. 11Several questions also arose as to the scope and language of the orders which should be made in respect of the charge, and I will make certain amendments to the orders which BN proposed having regard to submissions as to those matters. Mr Stewart contended that any order for extension of time should be conditional upon the registration of the charge. I do not consider that I should grant that order because it seems to me that, on balance, it is preferable that the discretion which I have exercised be re-exercised, when the Court of Appeal determines any leave application, and when it is then aware of whether a charge has been registered . If the charge is not registered, then there will need to be a fresh weighing of the detriment to the respective parties arising from the grant of any further extension of time under s 459F of the Corporations Act. 12The final question which I need to address is whether I should make, as BN originally sought, an order extending time until seven days after any appeal that is brought, if leave to appeal is granted. I do not consider that I should take that course, for two reasons. First, there seems to me to be substantial force in the observation of Barrett J in NA Investment Holdings, that, in the ordinary course, it is preferable for a judge at first instance to extend the time for compliance with a statutory demand only for a relatively short period, on the basis that the matter will then be under the control of the Court of Appeal which can then address the need for any further extension of time for compliance of the demand. Second, in the present circumstance, that approach will allow any developments as to whether the charge has ultimately been registered to be taken into account when the discretion is re-exercised. I therefore propose to extend the time for compliance with the Demand, until 4.00pm on 10 May 2013, or, if an application for leave to appeal is filed on or before that date, then until seven days after the final determination of that application. 13The parties have otherwise proffered a form of order, as to which there has been argument before me as I have noted. I will make orders in the form of the short minutes of order initialled by me and contained in the file, amended as follows from the form of orders originally offered: * Paragraph 1(b) will be amended to read, in the last line: "then until seven days after the final determination of that application, on condition that the plaintiff expeditiously conduct that application. " * Paragraph 2 will be amended by inserting, after the words in line three "such charge to", the additional words "specify part numbers or other distinguishing identification information and to". * Paragraph 3 will be amended by inserting the words "(at its own cost)" after the words "registration of the charge" in the first line. 14Subject to hearing from the parties, I propose to order that the costs of the application today be reserved pending the outcome of any application of leave to appeal and, if brought, any appeal. No Counsel sought to be heard in opposition to that order, and I also make an additional order 7 to the short minutes of order indicating that the costs of the application today be reserved pending the outcome of any application for leave to appeal and if brought any appeal. ********** Amendments 14 January 2014 - corrected decision date Amended paragraphs: coversheet 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: 14 January 2014