In the matter of Modular Building Systems Pty Limited [2014] NSWSC 526

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Modular Building Systems Pty Limited [2014] NSWSC 526 Hearing dates: 29 April 2014 Decision date: 29 April 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Statutory demand set aside. Catchwords: CORPORATIONS - insolvency and winding up - application to set aside a creditor's statutory demand - whether genuine dispute as to debt - held, genuine dispute established - statutory demand set aside Legislation Cited: (Cth) Corporations Act 2001, s 459G, 459J(1) Cases Cited: Solarite Air Conditioning Pty Ltd v York Australia Pty Ltd [2002] NSWSC 411 Category: Principal judgment Parties: Modular Building Systems Pty Limited (plaintiff) Glenn Smith (defendant) Representation: Counsel: S Keizer (plaintiff) I M Neil SC (defendant) Solicitors: Mills Oakley Lawyers (plaintiff) James Tuite & Associates (defendant) File Number(s): 14/6467

Judgment (ex tempore) 1HIS HONOUR: By originating process filed on 8 January 2014 the plaintiff Modular Building Systems Pty Limited seeks an order pursuant to (Cth) Corporations Act 2001, s 459G, setting aside a creditor's statutory demand served on it by the defendant Glenn Smith on 19 December 2013 for the sum of $240,000 described as "amount due pursuant to clause 10.1(c) of agreement between the company and the creditor dated 21 December 2012." 2Somewhat remarkably, eight years after Corporations Form 509H was amended in 2006, the creditor's statutory demand is in the form that was in force before the 2006 amendments to the Corporations Regulations 2001 (Cth). For that reason, it omits the notice in bold typescript contained in a box following paragraph 5 in the prescribed form, specifying that a failure to respond to a statutory demand may have very serious consequences for the company and may result in the company being placed in liquidation with control passing to the liquidator of the company. This omission has been held to be a serious defect in the demand. However, this point was not raised in the s 459G affidavit and, in any event, given that an application was made within time to set aside the demand, it is unlikely to have been productive of the requisite injustice for the demand to be set aside under s 459J(1)(a). Accordingly, I need not be troubled with this aspect any further. 3Mr Smith was employed by Modular as its chief executive officer with effect from 1 July 2012, having earlier been employed as business development manager and being promoted to chief executive officer on that date. 4At the time of his termination in November 2013, his employment was governed by an employment contract dated 21 December 2012. Termination of employment was covered by clause 10 contract which relevantly provides as follows: Clause 10.1 Termination by the Company (a) Subject to clause 10.3, the Company (MBS) may terminate the employee's engagement by giving one month's written notice of its intention to do so. The company may require the employee not to perform the services during that notice period (b) The Company at it's sole discretion may choose to compensate by way of payment to value of the equivalent payment that would otherwise be made if the employee continued to be engaged by the Company for up to 6 months after the termination date. This should be read in conjunction with clause 11 of this Agreement. (c) If the Company (MBS) terminates the contract within 5 years, the Company will compensate you for the unexpired period of the contract as follows: Date of Termination Amount of compensation Between 01 July 2012 to 30 June 2013 $300,000.00 Between 01 July 2013 to 30 June 2014 $240,000.00 Between 01 July 2014 to 30 June 2015 $180,000.00 Between 01 July 2015 to 30 June 2016 $120,000.00 Between 01 July 2016 to 30 June 2017 $60,000.00 After 01 July 2017 Nil