Supreme Court New South Wales Medium Neutral Citation: In the matter of Butmall Pty Ltd [2015] NSWSC 1211 Hearing dates: 9 June 2015 Decision date: 09 June 2015 Jurisdiction: Equity - Corporations List Before: Black J Decision: Order that the application to set aside the creditor's statutory demand be dismissed. The Plaintiff pay the Defendant's costs on an ordinary basis, as agreed or as assessed. Catchwords: CORPORATIONS – winding up – application to set aside a creditor's statutory demand under s 459H(1)(b) of the Corporations Act – where offsetting claim was abandoned in earlier Federal Court proceedings – whether serious question to be tried where offsetting claim not available by reason of Anshun estoppel. Legislation Cited: - Corporations Act 2001 (Cth) pt 2D div 2; ss 459G, 459H, 459H(1), 459J Cases Cited: - Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601 - Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 - Queensland Mining Corporation Ltd v Renshaw [2014] FCA 365 - Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 - Truthful Endeavour Pty Ltd v Condon [2015] FCAFC 70 Category: Principal judgment Parties: Butmall Pty Ltd (Plaintiff) Queensland Mining Corporation Ltd (First Defendant) Representation: Counsel: J T Johnson (Plaintiff) N Furlan (Defendant) Solicitors: Beazley Boorman Lawyers (Plaintiff) Kemp Strang (Defendant) File Number(s): 2015/10262 Judgment – ex tempore 1. By Originating Process dated 12 January 2015 the Plaintiff, Butmall Pty Ltd, ("Butmall") applies under ss 459G, 459H and 459J of the Corporations Act 2001 (Cth) to set aside a creditor's statutory demand ("Demand") for payment issued by the Defendant, Queensland Mining Corporation Ltd ("QMC"), dated 19 December 2014. 2. The first basis of that application was that the Demand was not verified by an affidavit. That submission has not been pressed, in circumstances that the Demand related to a judgment debt arising from a judgment delivered in the Federal Court of Australia in Queensland Mining Corporation Ltd v Renshaw [2014] FCA 365, which was subsequently upheld on appeal to the Full Court of the Federal Court. In those circumstances, there was no requirement for verification of the Demand by affidavit. The second basis on which the Demand was sought to be set aside, relating to an overstatement of interest claimed, was not pressed. A third basis on which the Demand was sought to be set aside was the existence of an offsetting claim for the purposes of s 459H of the Corporations Act, arising from the termination of a contract between Butmall and QMC. That application was also not pressed, as a result of a determination of that claim in proceedings in the Federal Circuit Court of Australia. 3. The remaining issue before me was whether an offsetting claim, in the amount of $161,894 plus GST, being $16,189.40, totalling $178,083.40, was available. The issues in respect of that offsetting claim in turn narrowed in submissions when Mr Johnson, who appeared for Butmall, fairly made several concessions. Those concessions included the fact that Butmall had the opportunity to bring, and indeed had brought, that claim in the earlier proceedings in the Federal Court of Australia, in which Mr Johnson had not appeared, and that a decision had been made by Butmall to abandon that claim in the Federal Court and that there was no evidence that that decision had been made on the basis of any concession or agreement that that claim could be brought at any future time. It seems to me that those concessions were fairly and appropriately made in the circumstances, and they have significance to the existence of an estoppel, arising under the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, to which I will refer below. 4. The principles applicable to determining the existence of an offsetting claim are well established, and this case does not require any detailed review of those principles. An offsetting claim for the purposes of s 459H(1)(b) of the Corporations Act is the amount of a claim or claims that a company, relevantly Butmall, has against the person who served the relevant statutory demand by way of counter-claim, set-off or cross-demand, whether or not that amount arises out of the same transaction or circumstances as the debt to which the demand relates. If the Court is satisfied that the Company has an offsetting claim, then the Court is required to calculate the "substantiated amount" of the demand by deducting any offsetting claim from the admitted amount of the debt. A company can establish an offsetting claim if there is a serious question to be tried or an issue deserving of a hearing as to whether the company has such a claim against the creditor and that claim is made in good faith and is arguable and not frivolous or vexatious: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 at 356-357; and see the comprehensive review of the relevant authorities by the Court of Appeal in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601. 5. In this case, Butmall relies on the affidavit of Mr Renshaw dated 30 September 2014, which refers to the existence of a Contracting Agreement, and contends that the services were performed under that agreement between 23 October 2012 and 28 February 2013, and asserts an entitlement to a consultancy fee of $178,083.40 arising from provision of those services. Mr Renshaw does not refer to any invoices having been issued in respect of those services, a matter which may have some relevance to which I will refer below. My attention has been drawn, in the course of submissions, to associated arrangements between QMC, Butmall and Mr Renshaw, including a Deed of Settlement dated 23 October 2012 between the parties, which contemplated that Mr Renshaw personally would provide certain services without charge to QMC, and the Contracting Agreement executed on the same date which, as I have noted, provided for Butmall to provide such services, and provided for remuneration for those services in the amount of $161,894 plus GST, corresponding to the amount which Butmall relies on for its offsetting claim, but on terms that, under clause 5.3, Butmall would be required to provide an invoice at the end of each month in order to obtain payment from QMC. 6. Mr Furlan, who appears for QMC, also draws attention to a letter dated 20 December 2012 from a remuneration consultant, which emphasises the extent of connection between the agreement of 23 October 2012 between Butmall and QMC and the previous provision of services by Mr Renshaw. That connection is relevant in two respects, so far as it may provide an explanation why a claim relating to that agreement may not have been pursued in the Federal Court proceedings, where issues as to whether the arrangement between the parties contravened Part 2D.2 Div 2 of the Corporations Act were in issue, and so far as it is also relevant to the question of Anshun estoppel. 7. QMC in turn relies on the affidavit of its solicitor, Mr Faraday, dated 5 May 2014, which sets out the history of the Federal Court proceedings, including the circumstances in which the aspect of Butmall's Cross-Claim relating to the claim for $178,083.40 was not pursued in those proceedings. In particular, by an Amended Notice of Cross-Claim filed in those proceedings, dated 16 December 2013, Butmall did not press a claim under the Contracting Agreement dated 23 October 2012 against QMC, by which it had pleaded that QMC had refused or failed to pay a fee due to Butmall of $161,894 plus GST. It will immediately be apparent that that is the same claim as Butmall now relies upon to support its offsetting claim. By letter dated 16 December 2013 from Butmall's solicitors to the solicitors for QMC, those solicitors in turn advised that the Amended Cross-Claim proposed the deletion of certain matters from the Cross-Claim, on the basis that the amendments proposed would have the result of substantially decreasing the number of disputed issues. The reference to decreasing the number of disputed issues suggests a narrowing of the range of the dispute, and provides no basis for any suggestion that issues were reserved for the future. That in turn supports the concession that Mr Johnson properly made in that regard in the course of submissions. 8. Mr Furlan submits that the offsetting claim does not, for the purposes of s 459H of the Corporations Act, raise a serious question to be tried or an issue deserving of a hearing, because it has been abandoned in a manner that means it cannot now be pursued, by reason of the principles of Anshun estoppel. It might immediately be observed that, in the ordinary course, disputes as to whether claims have been abandoned, in a manner that gave rise to an Anshun estoppel, would not necessarily be disputes that are capable of determination by the sort of summary procedure that is involved in an application to set aside a creditor's statutory demand. In particular, the question whether a claim is barred under the principle of Anshun estoppel may ordinarily require close analysis of the relevant circumstances, which means that it could not readily be determined in such an application. The relevant principles have recently been reviewed by the Full Court of the Federal Court in Truthful Endeavour Pty Ltd v Condon [2015] FCAFC 70, particularly at [10]–[14], where the Full Court noted that the principle of Anshun estoppel had regard to the reasonableness of conduct in litigation, as well as to principles of abuse of process. It may therefore not generally be the case that, where a claim is sought to be raised as an offsetting claim, a party can be shut out from bringing it, by reason of a suggestion that it had not been raised in earlier proceedings. 9. This is, however, it seems to me not a case where issues of complexity arise. This is not a case where, for example, a matter could have been, but was not, raised in earlier proceedings, and there are questions of complexity as to whether it ought to have been raised in those earlier proceedings. Instead, it is clear from the material before me, to which I have referred above, that the relevant matter was here raised in the earlier proceedings and was then abandoned in those earlier proceedings, without any reservation of the possibility of bringing it in future proceedings. That much has, as I have noted, fairly been accepted by Mr Johnson in submissions. In these circumstances, it seems to me that it is not possible to say, for the purposes of s 459H of the Corporations Act, that there is a serious question to be tried or an issue deserving of a hearing, as to whether Butmall can now maintain the very claim which it abandoned in the Federal Court proceedings, in separate proceedings, as Mr Renshaw's affidavit foreshadows. The immediate difficulty with establishing an issue deserving of a hearing in that regard is that principles of Anshun estoppel would prevent such a claim going forward, where it has not been possible for Butmall to identify any matter which might exclude the application of those principles. 10. Mr Furlan pointed, in the course of the submissions, to a further difficulty with such an offsetting claim, namely, that an essential element of such a claim, the issue of the invoices by Butmall, is not established by evidence in these proceedings. It is possible that this matter, at least in the absence of any suggestion that such invoices were in fact issued, notwithstanding that they had not been tendered, would itself have been sufficient to deprive the offsetting claim of the character of a genuinely arguable claim. It is not necessary to determine that matter, given the findings which I have reached above on other grounds. 11. In these circumstances, it seems to me that the application to set aside the demand must be dismissed, and Butmall must pay the costs of the application as agreed or as assessed. I should thank both counsel for the responsible way in which these proceedings have been conducted, which focussed on the real issues in dispute. 12. Accordingly, I make the following orders. 1. The Originating Process dated 12 January 2015 filed by Butmall Pty Limited be dismissed. 2. Butmall Pty Limited pay the costs of Queensland Mining Corporation Ltd as agreed or as assessed. Application for indemnity costs 1. Application was made in these proceedings for an order for indemnity costs against Butmall in respect of the period from 5 June 2015 to 9 June 2015. It will immediately be noted that the period that is subject of that application is, at best, the day of 5 June 2015, depending upon when a letter was sent on that day, and an hour in the morning of 9 June 2015, in which the application determined above was heard before me. 2. The application for indemnity costs is based on the fact that, some time on 5 June 2015, a letter was sent by the solicitors for QMC to the solicitors for Butmall inviting Butmall to consent to the dismissal of these proceedings on the basis that it would pay QMC's costs on an ordinary basis, as a result of the determination of certain other proceedings in the Federal Circuit Court of Australia. 3. It seems to me that there are two reasons why an order for indemnity costs, which would normally reflect an element of unreasonable conduct of the proceedings, should not be made. The first is, that between the letter on 5 June 2015 and the hearing today, a long weekend intervened. On any view, there would have been a limited time for Butmall's solicitors to obtain instructions in respect of that letter, so as to reach a conclusion that the proceedings today should not be pressed. The second is that the proceedings today were, as I noted in my substantive judgment, conducted by Counsel for Butmall in a responsible manner, by making concessions that substantially narrowed the issues in dispute and avoided significant waste of time. It has taken in the order of an hour to determine the proceedings, including the delivery of an ex tempore judgment. The time involved is not large, and the difference involved in an assessment of the associated costs, as between indemnity costs and party-party costs, is likely to be insubstantial. 4. It seems to me this is not a case in which indemnity costs should be ordered, not least because that would not reflect the fact that Counsel for Butmall has conducted the proceedings in an appropriate way. An order for indemnity costs may well have been made had the hearing today been conducted by Butmall in a manner that did not give proper recognition of the areas of difficulty which had developed in its case. That has not occurred and the proceedings have been conducted in a manner which avoided any substantial waste of time, arising from those difficulties, while nonetheless not involving a complete capitulation. 5. In those circumstances, an order for costs on the ordinary basis seems to me to reflect that QMC was successful in the proceedings and the basis for an order for indemnity costs having not been established. ********** 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: 03 September 2015