Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (No 2)

HER HONOUR: On 19 December 2018, I ordered that the time for compliance with a statutory demand served on the applicant, Grandview Ausbuilder Pty Ltd (Grandview), by the respondent, Budget Demolitions Pty Ltd (Budget), on 31 January 2018 be extended until seven days after judgment is delivered on Grandview’s summons seeking leave to appeal from the judgment of Parker J, in which his Honour dismissed Grandview’s application to set aside the statutory demand: Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd [2018] NSWCA 336.

Following delivery of judgment, counsel for Budget, in an email to the Court, drew the Court’s attention to what appeared to be a misapprehension in my reasons, at [39], as to the existence of certain court proceedings. Budget sought, therefore, that the Court’s judgment be reviewed pursuant to the Uniform Civil Procedure Rules 2005 (NSW), r 36.16(3A).

In that judgment, I stated:

The reference to the commencement of proceedings by Grandview was, as counsel for Budget pointed out, an error. By way of explanation, it was due to an error in reading the parties’ submissions. As will be apparent, from what I said at [39], it was a material factor in my decision to grant an extension of time. The matter having been drawn to my attention, the parties were invited to file further short submissions addressing the error.

Grandview submitted that Budget had not argued at the hearing of Grandview’s application for an extension of time on 3 December 2018 that the fact that it had not commenced proceedings to ‘vindicate’ its claim was a basis for rejecting Grandview’s application. Grandview submitted that had that been argued, it would have emphasised the submission it had made at para (12) of its written submissions that Budget had not taken any recovery action, having chosen instead to issue a statutory demand. It would also have emphasised that Budget is not now precluded from seeking recovery through other means.

Grandview reiterated the point it had made at the hearing on 3 December 2018 that Budget had been responsible for a delay of approximately three months in responding to Grandview’s expert evidence on the application before Parker J.

Budget, for its part, submitted that if the error in my earlier judgment is corrected, the effect of my reasoning would be that I would have refused Grandview’s application for an extension of time. It submitted that, for that reason, I should refuse Grandview’s application.

Budget submitted that there was an alternative course which, although it would improve its present position, would not wholly reverse Grandview’s position, namely, ordering Grandview to pay a sum of money into Court, which it suggested be one third of the admitted debt the subject of the statutory demand, as a condition of extending the time for compliance. Budget recognised that there are authorities, to which I referred in my earlier judgment, that suggest that to do so could unfairly give a creditor who had issued a statutory demand a security for what it was owed: see Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd (2004) 50 ACSR 544; [2004] NSWSC 877; Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd (2006) 60 ACSR 393; [2006] NSWSC 1378. It submitted, however, that this case could be distinguished.

Budget submitted that, unlike the present case, in Australian Beverage Distributors v Cranswick Premium Wines, there was no potential for significant delay. In this case, by the time that the concurrent hearing of the summons for leave to appeal and the appeal is heard and determined, some 15 to 18 months will have elapsed since the service of the statutory demand. Budget also submitted that in Australian Beverage Distributors v Cranswick Premium Wines, there was no suggestion that a creditor had been stultified. In this case, however, Budget had an admitted debt that was not paid, thus justifying the use of the statutory demand. Further, months later, Grandview had contended that it had an offsetting claim. Budget also submitted that Jem Developments v Hansen Yuncken was distinguishable, as in that case, the creditor sought to be paid directly, rather than have the funds paid into Court.

Budget also referred to the power contained in the Corporations Act 2001 (Cth), s 459M, which provides that a court may make an order under s 459H or s 459J subject to conditions. Those sections relate to setting aside a statutory demand.

The application before me is an application to extend the time for compliance with a statutory demand. However, that application has been made in the context where Grandview has contended that it has an offsetting claim greater than Budget’s admitted debt. That claim is contestable, both in amount and as a matter of legal principle. Nonetheless, in my earlier judgment, I concluded that “there is a least a sufficient argument for Grandview to advance in support of its application for leave to appeal”. If the Court were to grant Grandview leave to appeal and allow the appeal, it could, pursuant to s 459M, impose conditions on any orders made setting aside the statutory demand. However, it is not clear to me that it would require Grandview to pay any monies into Court.

It is thus necessary to return to the reasoning in Australian Beverage Distributors v Cranswick Premium Wines and Jem Developments v Hansen Yuncken to determine whether this case may be distinguished in such a way as to permit the Court to make an order that monies be paid into Court pending the determination of the appeal.

In Australian Beverage Distributors v Cranswick Premium Wines, Barrett J stated:

It is convenient that I set out again Barrett J’s observations at [16], to which I referred in my earlier judgment:

In Jem Developments v Hansen Yuncken, Austin J made a number of observations as to the cogency of the plaintiff’s offsetting claim. So that his Honour’s observations can be understood as a whole, I will again set out [28], referred to in my earlier judgment, as well as his Honour’s observations:

None of the discretionary factors to which Austin J referred are present in this case. Importantly, contrary to my misapprehension that Grandview had commenced proceedings in respect of its claim, Grandview has taken no steps to do so. Rather, it has kept Budget out of its monies for nearly 12 months. Further, as I stated and as the primary judge indicated in his judgment, the quantum of Grandview’s offsetting claim is “seriously contestable”.

For those reasons, I am of the opinion that this matter is sufficiently distinguishable from Australian Beverage Distributors v Cranswick Premium Wines and Jem Developments v Hansen Yuncken such that, in the exercise of my discretion, I would order that Grandview pay an amount into Court. In doing so, I do not seek to detract from the statements of Barrett J in Australian Beverage Distributors v Cranswick Premium Wines and of Austin J in Jem Developments v Hansen Yuncken, other than to say that a payment into Court will not necessarily give Budget any priority interest, nor would it constitute Budget a secured creditor. If, during the course of the court proceedings, Grandview is wound up, the liquidator would undoubtedly have access to the monies paid into Court for the purposes of the winding up, including for distribution amongst the creditors generally. If Grandview is wound up after the monies are paid out to Budget, the monies would fall to be dealt with in accordance with the Corporations Act, Pt 5.6.

Accordingly, I propose to accede to Budget’s alternate course and order that a portion of approximately one third of its admitted debt be paid into Court. Accordingly, I make the following orders: