Banda Group P/L v Rosswell Holdings P/L & Ors [2003] QSC 306

SUPREME COURT OF QUEENSLAND CITATION: Banda Group P/L v Rosswell Holdings P/L & Ors [2003] QSC 306 PARTIES: BANDA GROUP PTY LIMITED ACN 097 563 543 AS TRUSTEE FOR THE BANDA FAMILY TRUST (applicant) v ROSSWELL HOLDINGS PTY LIMITED ACN 077 428 801 (first respondent) DANIEL GEOFFREY ROSS (second respondent) MICHAEL ERIC ATTEWELL (third respondent) FILE NO/S: S5976 of 2003 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 16 September 2003 DELIVERED AT: Brisbane HEARING DATE: 10 September 2003 JUDGE: Mackenzie J ORDER: The application is dismissed with costs to be assessed CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – STAYING PROCEEDINGS – where applicant sought an order that a statutory demand under the Corporations Act 2001 and/or the orders for costs upon which the demand was based be stayed until conclusion of the related claim – where application adjourned to allow collation of evidence as to impecuniosity of the applicant – where evidence established impecuniosity and insolvency – whether failure to delay payment of costs by the applicant would result in genuine hardship Corporations Act 2001 (Cth), s 459F, s 459J Supreme Court Act 1995 (Qld), s 244 COUNSEL: R J Clutterback for the applicant N H Ferrett for the respondents -- 1 of 3 -- 2 SOLICITORS: Wellner & Associates for the applicant Jones & Co for the respondents [1] MACKENZIE J: This began as an application to set aside a statutory demand but, following an amendment, has transformed into an application that a statutory demand under the Corporations Act 2001 (Cth) and/or the orders for costs upon which the statutory demand is based be stayed until the conclusion of the claim in which the costs orders were made. The matter came before Atkinson J on 26 August 2003 and was adjourned on the undertaking of the respondent not to act on the statutory demand until the matter was decided. Directions were given concerning the filing of additional material. [2] The applicant’s solicitor deposed that at the hearing Her Honour indicated that she was not going to grant the applicant’s request to set aside the statutory demand but that she was “prepared to stay the statutory demand until the hearing” underlying action if the applicant could show that it was impecunious. Upon the undertaking referred to above, the matter was adjourned for the purpose of evidence of the applicant’s impecuniosity being put before the court. [3] A director of the company gave evidence that the company has ceased trading and is insolvent, allegedly as a consequence of representations made by the respondents. It is denied that the representations alleged were made; no conclusion can be reached on the evidence before me as to how that issue will eventually be resolved. There is no satisfactory evidence to rebut the proposition that the company is insolvent although the deponent was cross-examined. [4] The statutory demand is for $10,500, comprised of moneys due under a costs order made on 2 July 2002 and a costs order made on 17 December 2002. The order of 2 July 2002 was not by consent, but that of 17 December 2002 was by consent. The schedule to the statutory demand describes the debt as a debt due pursuant to the terms of a costs agreement dated 3 June 2003. While the obligations to pay costs are of some age, the quantum was apparently not fixed precisely until 3 June 2003. Since the demand was made very soon afterwards there has not been inordinate delay in progressing the matter. It is deposed on behalf of the company that it was served on 13 June 2003. No application was made in either instance to have payment of those costs deferred until the conclusion of the action in which they were awarded either at the time or later. There is no dispute that the sum demanded is due and owing in the absence of an order deferring payment. At the time the statutory demand was made the sum was due and owing. [5] Both the original and the amended applications sought orders to set aside the statutory demand on the basis that the applicant had an offsetting claim and that the demand should be set aside for “some other reason” under s 459J(1)(b). The reason advanced was that it would be unjust for the company to be wound up because of a debt arising from costs orders in the action it was pursuing against the respondents which remained unpaid. Counsel for the applicants expressly indicated that he was not pressing either of those grounds. The respondents’ “outline of argument for the respondents” sets out arguments that would have been addressed to those issues had they been pressed; (there is a separate outline relating to the application for an order that the costs orders be stayed). -- 2 of 3 -- 3 [6] Reliance was placed by the applicant on s 244(7) and (8) of the Supreme Court Act 1995 (Qld) as a source of power to stay further proceedings in respect of the statutory demand. It was accepted that there was no specific power to stay the proceedings under the Corporations Act. [7] It may be observed that in a case where appropriate grounds were made out, a like effect might be reached by exercising the power in s 459F(2)(a)(i). However no submissions were addressed to me on that provision and it may be doubted, for reasons which appear shortly, that it would be appropriate to do so in circumstances like the present. [8] It is not uncommon for orders to be made delaying payment of costs until the determination of the action if a sufficient case of genuine hardship to a party liable to pay the costs is made out, especially if the party entitled to the costs has the financial capacity to bear delay in their payment without hardship. The present matter goes beyond that kind of case because it is admitted by the director who gave evidence that the company is not only impecunious but in fact insolvent. To seek an indulgence now which was not sought at the time that the orders were made or subsequently, especially where one of the orders was made by consent, in my view, is not properly open. It would be contrary to the policy of the Corporations Act to facilitate an insolvent company incurring further financial obligations. There is no evidence that there is a capacity to take further steps in the action using resources derived from some external source without obligation to the company. [9] If the company is wound up on the basis of the debts for costs, the action will not necessary die. Only the capacity of the present plaintiff and in particular its directors, to control the destiny of the action will be limited. [10] For those reasons it is my view that the application insofar as it relies on a general power to stay further proceedings in respect of the statutory demand must fail. I do not consider that “any other reason” why the demand should be set aside within the meaning of s 459J has been established. Nor is it appropriate to stay the operation of the costs orders in the circumstances of the case. Each basis upon which the applicant relied in the amended application fails. The application is therefore dismissed with costs to be assessed. -- 3 of 3 --