Brannelly Financial Pty Ltd v Delmenico [2007] QSC 308

[2007] QSC 308 SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MARTIN J No 8054 of 2007 BRANNELLY FINANCIAL PTY LTD (ACN 011 021 640) Applicant and JAMES DELMENICO Respondent BRISBANE ..DATE 27/09/2007 JUDGMENT 1 -- 1 of 5 -- 2 JUDGMENT 1 10 20 30 40 50 60 HIS HONOUR: The applicant seeks an order setting aside a statutory demand served on it by the respondent. It relies on section 459J(1)(b) of the Corporations Act 2001 in advancing the argument that there is "some other reason" why the demand should be set aside. On 9 August 2000 Judge Forde gave judgment in favour of the respondent against the applicant in the sum of $114,736.62. The judgment was pursuant to an action brought by the respondent in which he sued the applicant in negligence for providing negligent advice, or alternatively breaches of the Corporations Act 2001, the Australian Securities and Investments Commission Act 2001, the Trade Practices Act 1974, and the Fair Trading Act. At the trial the causes of action were confined to negligence and breach of the Australian Securities and Investments Commission Act. On 21 August 2007 the statutory demand the subject of this application was served on the applicant. On 6 September 2007 the applicant filed a notice of appeal to the Court of Appeal appealing against the whole of the judgment. The notice of appeal contains a number of grounds which relate, among other things, to questions of reliance, to reasonableness of reliance and the falsity of representations. It was pointed out by Mr Forde for the respondent that, as the -- 2 of 5 -- 3 JUDGMENT 1 10 20 30 40 50 60 applicant had not called any evidence at the trial, the prospects of success on issues of reliance were not bright. It is not appropriate nor is it possible for me to attempt a detailed examination of his Honour's reasons and to arrive at a conclusion as to the likelihood of success of the appeal. In circumstances such as these all that I can do is to attempt an assessment of whether or not an appeal is arguable and in this case I consider that it is. In support of his argument I was referred by Mr Martin for the applicant to a decision of Justice Holmes as she then was in Willemse Family Company Pty Ltd v Deputy Commissioner of Taxation (2003) 2 Queensland Reports 334, and to the Court of Appeal decision in K W and K M Quinn Investments Pty Ltd v Deputy Commissioner of Taxation [2004] Queensland Court of Appeal 91. Before I turn to those decisions I should set out some of the statements of principle which guide consideration of applications of this type. First, it appears to be well- accepted that the limits of the Court's discretion are not marked out by the section or the Act. See Hoare Brothers v Commissioner of Taxation (1996) 62 Federal Court Reports 302 at 317. Section 459J(1)(b) confers a remedial jurisdiction. This was the position stated in Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 Australian Capital -- 3 of 5 -- 4 JUDGMENT 1 10 20 30 40 50 60 Territory Reports 22, where the Court of Appeal of the Australian Capital Territory also said that that section gives a discretion of broad compass which extends to conduct that gives rise to "substantial injustice". The reference to substantial injustice was echoed by the New South Wales Court of Appeal in Meehan v Glazier Holdings Pty Ltd (2005) 53 Australian Company and Securities Reports 229, but, it should be noted, it was emphasised that "injustice" must be assessed by reference to the purposes that Part 5.4 of the Corporations Act is intended to serve. See in particular Santow JA at 235 and Young, Chief Judge in Equity, at 240. In my opinion, the reference to "substantial" is a gloss which is neither implicit in the section nor needed for its proper functioning. The circumstances of this case demonstrate that an injustice will occur if the applicant has to deal with the statutory demand while the appeal is pending. As was said in Hoare Brothers at 317, whatever view is taken of the relationship between section 459J(1)(a) and (b), the Court has a discretion in a case which does not involve a defect in the demand to set aside the demand if some appropriate reason is shown. The discretion may be exercised in favour of a company even without a showing that substantial injustice would otherwise be caused. This is consistent with the remarks of Justice Holmes in Willemse at paragraph 42 where her Honour said: "But in the present case where the applicant has on foot an appeal which is at least arguable and which would, if successful, have the consequence that the bulk of the amount in respect of which the statutory demand is made would not be payable, it does seem to me that there is an injustice in permitting the statutory demand procedure to go forward." -- 4 of 5 -- 5 JUDGMENT 1 10 20 30 40 50 60 These remarks were apparently approved by the Court of Appeal in K W and K M Quinn. The appeal in this case, which has been lodged by the applicant, would, if successful, reverse the decision of Judge Forde so that no money was owing. On the basis of the reasoning in Hoare Brothers and Willemse Family Company, I find that the applicant has established grounds sufficient to satisfy section 459J(1)(b) and I will set the statutory demand aside. ... HIS HONOUR: In circumstances where the notice of appeal was not filed until after the statutory demand was served and where part of the grounds involved a limited ability to assess the merits of an appeal I think that in these circumstances, whether the appeal is arguable or not and whether it will succeed is a matter that is clearly in the hands of the Court of Appeal, I will make an order that will not require the Court to further consider this question. The costs of this application will be costs in the appeal. ----- -- 5 of 5 --