AJ Mayr Engineering (NSW) Pty Ltd v Maxwell Recruitment Pty Limited [2011] NSWSC 509 (1 June 2011)

Last Updated: 1 November 2011

This decision has been amended. Please see the end of the decision for a list of the amendments.

Supreme Court New South Wales

Case Title:	AJ Mayr Engineering (NSW) Pty Ltd v Maxwell Recruitment Pty Limited
Medium Neutral Citation:	[2011] NSWSC 509
Hearing Date(s):	On the papers
Decision Date:	01 June 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Barrett J
Decision:	1.Order that the statutory demand dated 1 March 2011 served on the plaintiff by the defendant be set aside. 2. Order that the plaintiff pay the defendant's costs of the proceedings such costs to be assessed on the indemnity basis.
Catchwords:	CORPORATIONS - winding up - statutory demand - application for order setting aside - no determination on the merits - where company which was served on 4 March 2011 with a demand dated 1 March 2011 accepted that the debt was owing but maintained it was not due and payable until 2 March 2011 - where an application to set aside the demand was nevertheless made - costs - proceedings should not have been brought - demand to be set aside but plaintiff to pay defendant's costs assessed on the indemnity basis
Legislation Cited:	Corporations Act 2001 (Cth), ss 9, 459C(2)(a), 459G, 459F(2)(a)(i), 459F(2)(a)(ii), 459F(2)(b), 459H(1)(a), 459J(1)(a), 459J(1)(b) Uniform Civil Procedure Rules 2005, rules12.1(1), 42.19(1)
Cases Cited:	Jem Number Four Pty Ltd v Southern Cross Construction (NSW) Pty Ltd [2006] NSWSC 602 Oshlack v Richmond River Council [1998] HCA 11; [1998] HCA 11; (1998) 193 CLR 72 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Texts Cited:
Category:	Principal judgment
Parties:	AJ Mayr Engineering (NSW) Pty Ltd - Plaintiff Maxwell Recruitment Pty Limited - Defendant
Representation
- Counsel:	Counsel J T Johnson - Plaintiff B Katekar - Defendant
- Solicitors:	Solicitors Moray & Agnew - Plaintiff Kilmurray Lawyers - Defendant
File number(s):	2011/00096659
Publication Restriction:

JUDGMENT

1. By originating process filed on 25 March 2011, the plaintiff made application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand in the sum of $100,289.34 served on it by the defendant.

2. The statutory demand was dated 1 March 2011 and served on 4 March 2011. The originating process was thus filed within the period of 21 days after service specified in s 459G(3).

3. Because of the due filing and service of the originating process (and in the absence of any order as contemplated by s 459F(2)(a)(i)), s 459F(2)(a)(ii) caused the period for compliance with the statutory demand to be the period starting on the day of service of the demand and ending seven days after the application embodies in the originating process is "finally determined or otherwise disposed of". Since there has, at this point, been no decision on the claim in the originating process and that claim remains extant, the compliance period has not yet come to an end.

4. On 27 April 2011 - that is, within the compliance period just mentioned but beyond the end of the period that would have been the compliance period had the proceedings not been brought - the plaintiff paid to the defendant in full the demanded sum of $100,289.34.

5. The parties accept that the proceedings are now devoid of utility since payment in full by the plaintiff within the compliance period means that the demand and service of it cannot now give rise to any presumption of insolvency against the plaintiff under s 459C(2)(a).

6. Because the proceedings have no continuing utility and in the absence of any positive step by the plaintiff to discontinue, there should be an order that the proceedings be dismissed: Jem Number Four Pty Ltd v Southern Cross Construction (NSW) Pty Ltd [2006] NSWSC 602. Of course, had the plaintiff discontinued with the defendant's consent or with the court's leave ( Uniform Civil Procedure Rules 2005, rule 12.1(1)), the plaintiff would have incurred a liability for the defendant's costs under rule 42.19(1) unless the court otherwise ordered.

7. It is to the question of costs that I now turn. In the absence of a hearing on the merits, the strong expectation must be that there will be no order as to costs, so that each party is left to bear its own costs Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 . Each party contends, however, that that is not the appropriate outcome in this case. In fact, each argues that the other should be ordered to pay its costs.

8. The plaintiff says (and the defendant, I think, agrees) that both parties accepted, at all material times, that the sum of $100,289.34 was owed. The disagreement was as to the time at which the sum became due and payable. The defendant contended that it was due and payable on 28 February 2011. The plaintiff maintained that it was due and payable on 2 March 2011.

9. The plaintiff puts store by the fact that the date of the demand's "issue" - that is, the date it bore (being 1 March 2011) - fell before the day on which, in the plaintiff's view, the sum was due and payable. That, it seems, is put forward as a good and proper reason for having commenced the proceedings and continued them in the way they were continued.

10. The plaintiff's contention is, in substance, that the demand misrepresented the true position because it spoke in the present tense, as a the date it bore (1 March 2011), of the sum in question being due and payable, whereas the true position was that the sum was not due and payable until the following day.

11. The plaintiff might therefore have argued that, having regard to the s 9 definition of "defect", there was, for s 459J(1)(a) purposes, "a defect in the demand". But it is inconceivable that the plaintiff would have succeeded in the contention that that defect was such as to produce "substantial injustice" unless the demand was set aside (nor would reliance on s 459J(1)(b) have been warranted). I say this because, on the view the plaintiff takes, it was in no sense unjust for it to be required, on or after 2 March 2011 (including on 4 March 2011, when the demand was served), to pay as it eventually paid on 27 April 2011.

12. Any attempt by the plaintiff to rely on the "genuine dispute" ground in s 459H(1)(a) would also have been unsuccessful. This is because, under that section, the court is permitted to set aside a statutory demand only if "the Court is satisfied . . . that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates". An order can be made only if the court finds that a genuine dispute exists when the application comes before it. It follows that, if the court finds that there was such a dispute at a past date - for example, the date the demand bears or the date on which it was served - but the dispute no longer exists when the matter comes before the court for decision, there is no power to set the demand aside. On the view the plaintiff takes, there was, after 2 March 2011, no dispute that a debt of $100,289.34 existed and that that sum was not only owing but also due and payable.

13. The plaintiff's contention that it was, as it were, forced to commence the proceedings to avoid a presumption of insolvency arising against it does not withstand scrutiny. The statutory demand, although dated 1 March 2011 and, in a literal sense, "speaking" at that date, was not served until 4 March 2011. On the plaintiff's view of matters, the debt had, at that point, been due and payable for two days. There is no apparent reason why the plaintiff did not, at the point of service of the demand, accept that the debt was owing, due and payable; or why it did not, thereafter and within the period of 21 days after service of the demand, simply pay the debt as it eventually did on 27 April 2011.

14. The circumstances are such that, as at the time the proceedings were commenced on 25 March 2011, they enjoyed no prospects of success under either s 459H(1)(a) or as 459J(1)(a).

15. The inference is inescapable that the plaintiff commenced the proceedings knowing that it had no case and for the purpose of avoiding a compliance period ending 21 days after service of the demand (s 459F(2)(b)) and causing to be substituted the longer compliance period arising under s 459F(2)(a)(ii).

16. The proceedings should not have been commenced. The defendant should not have been subjected to them. The course the plaintiff took involved "relevant delinquency" as referred to by Gaudron J and Gummow J in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. The defendant should be awarded costs and those costs should be assessed on the indemnity basis.

17. The orders are:

1. Order that the statutory demand dated 1 March 2011 served on the plaintiff by the defendant be set aside.

2. Order that the plaintiff pay the defendant's costs of the proceedings such costs to be assessed on the indemnity basis.

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Amendments

08 Jun 2011 Name of Counsel for Defendant amended. Paragraphs: Cover sheet