Bowes & Brown Pty Ltd, Re [1994] QSC 292

IN THE SUPREME COURT OF QUEENSLAND Apn. 414 of 1994 IN THE MATTER OF THE CORPORATIONS LAW AND IN THE MATTER OF BOWES AND BROWN PTY LTD (ACN 008/048/039) JUDGMENT - MOYNIHAN J Delivered the 10th day of November, 1994 CATCHWORDS: Corporations Law s.459G - Application to extend time to serve a statutory demand - Application to set aside the statutory demand. Counsel: Applicant: Mr Hack Respondent: Mr Samios Solicitors: Applicant: Tobin & Co., Solicitors Respondent: H Drakos & Co., Solicitors Hearing date: 16 August, 1994 -- 1 of 7 -- IN THE SUPREME COURT OF QUEENSLAND No. 414 of 1994 IN THE MATTER OF THE CORPORATIONS LAW AND IN THE MATTER OF BOWES AND BROWN PTY LTD (ACN008-048-039) JUDGMENT - MOYNIHAN J Delivered the day of 199 This is an application for an extension of the time in which to file and serve an application to set aside a statutory demand made under the Corporations Law and to set that statutory demand aside. The application for winding-up is made by C.U.M.A.I. Nominees Pty Ltd (the Applicant) against Bowes and Brown Pty Ltd (the Company). It is founded on a statutory notice dated 23 May, 1994 which is said to have been served on 23 May. The Company's applications were made on 16 August, 1994, that being the day on which the application for winding up was returnable. Section 459G(2) of the Corporations Law provides that an application to set aside a statutory demand served on a company may "only be made" within 21 days after the demand was served. Sub-section 3 provides that an application is made in accordance with the section "only if", within the 21 days, an affidavit supporting the application is filed with the court and copies of the application and supporting material -- 2 of 7 -- 3 are served on the person who served the demand. At the time the applications were made there were conflicting views as to whether a court had jurisdiction to deal with an application to set aside made more than 21 days after the demand was served, so as to be able to extend the time for the makers of the application. The decision of the Court of Appeal in Cavetina Pty Ltd -v- Synthetic Dyeworks Industries Pty Ltd (C.A. No. 250 of 1993, C.A. No. 251 of 1993 judgment delivered 22 August, 1994) resolves the matter so far as I am concerned by determining that there is power. It is therefore necessary to consider whether there should be an extension of time. This involves considering the substance of the application to set aside the statutory notice. The statutory notice was founded on an indebtedness in the amount of $96,428 being the amount of a cheque dated 9 May, 1994 drawn by the Company in favour of the Applicant which was presented on 9 May and dishonoured on presentation with the answer "refer to drawer". Notice of dishonour was given on 18 May and a consequent notice of statutory demand on 23 May. The matter was dealt with on affidavit evidence — there was no cross- examination. There is evidence from a process server that the notice of statutory demand was served on the registered office of the company on 23 May. The registered office is care of a firm of chartered accountants at Menindi in South Australia. There is hearsay material that the document was not received at the registered office. There is direct evidence from a director that had it been received he expected it would have come to his attention. However, on 3 June a solicitor acting for a Dr Kennett, a director and the principal shareholder in the Company, wrote to the Applicant's solicitor in reply to a -- 3 of 7 -- 4 letter of demand dated 18 May in these terms: "......... The cheques forwarded to your clients were marked "Refer to Drawer" not because of insufficient funds but because they were drawn by a former director of B & B, Mr Phillip Cook, who signed the cheques alone, whereas the authority now lodged with the Bank requires the signature of two directors of the company. It appears that these cheques were forwarded to your clients in payment for the purchase of certain shares in a company, Jeffries Industries Limited by B & B from R T Thomas Family Pty Limited. Dr Kennett and the board of B & B was not, I am instructed, aware of this "deal" at the time it was entered into by Mr Cook, however, now that it has happened, B & B intends to honour the deal and since the date of the transaction have attempted to gain possession of the share scrip and the subsequent benefits flowing therefrom. ................." On 16 June the Applicant's solicitors wrote to Dr Kennett advising that the statutory notice had been served on 23 May and that steps were in hand to file an application to wind up the Company. The letter went on that "unless the Applicant was paid by 23 June" the winding-up would proceed. The winding-up application was made on 29 June and served by mail addressed to the registered office of the Company on that day. Dr Kennett received this material then on 5 July he spoke to the Applicant's solicitor whose diary note is relevantly in these terms. "............ Dr Kennett received the Company documents to wind up the Company and he was complaining to me that the cheques that we are relying upon were issued illegally and that the Company has never received the sharescript. We discussed all that and I mentioned to him that I had been informed by Bill Marriott that the shares were actually registered in Bowes and Brown's name so I failed to see how he could complain about that. He mentioned that some of the shares had been transferred illegally by his co-director, Cook, and once again I mentioned to him that even though he may not have seen the sharescript perhaps Cook has the sharescript. I told him that if he wanted us to -- 4 of 7 -- 5 stay the winding-up proceedings he would have to put something in writing to us to convince us that the Company has got the money to pay us for the shares and that it is well secured....................." The next step seems to have been that Dr Kennett's solicitor wrote to the Applicant's solicitor on 22 July. "Dr Kennett has given me a copy of your client's summons for winding-up and instructs that any debt owed by Bowes & Brown Pty Limited would be to an entity known as R T Thomas & Family Limited and not to C.U.M.A.I. Nominees Pty Limited. To my mind, your client would not therefore appear to grounds upon which to base a summons for winding-up of Bowes & Brown Pty Limited. I am advised that Bowes & Brown Pty Limited does not necessarily dispute its debt to R T Thomas, and that Dr Kennett will be meeting with representatives of R T Thomas next week to discuss the matter. You should also be aware that Dr Kennett and Mr Phillip Cook, director and former director of Bowes & Brown Pty Limited are presently engaged in litigation in the Supreme Court of New South Wales (the writer acting for neither party in those proceedings) which has involved the Court ordering an injunction currently freezing the assets of Bowes & Brown Pty Limited. I would request therefore that you seek your client's instructions to either withdraw the Summons or in the alternative adjourn it until the resolution of the current proceedings in the Supreme Court of New South Wales." It is to be remarked that there is no complaint in the exchanges I have been canvassing of non-receipt of the statutory demand. There was apparently no reply to the letter of 22 July but it is safe to conclude the request in the last paragraph was not complied with. There is evidence that Dr Kennett and his co-director Cook are in dispute in respect of a number of aspects of the conduct of the affairs of the Company and there is litigation between them. Cook has sworn an affidavit in these proceedings. He swears that on 19 March 1993 he entered into a put and call option agreement with R T Thomas & Family Pty Limited in respect of 225,000 shares in Jeffries Industries Limited. He further deposes that on or about 17 January he believes that Dr Kennett -- 5 of 7 -- 6 and two directors of R T Thomas & Family Pty Limited signed a share transfer in respect of the shares the subject of the option agreement. Cook further deposes that on 27 April 1994 he met with three representatives of R T Thomas & Family Pty Limited, Mr W Marriott, Mr G Girdani and Mr L Girdani and reached an agreement with them whereby the beneficiaries/shareholders of R T Thomas & Family Pty Limited would receive a payment for interest for a period from 17 January 1994 to 31 May 1994. Cook further deposed that at the direction of R T Thomas & Family Pty Limited he wrote cheques drawn on the account of Bowes & Brown Pty Limited made out to various entities. At the same meeting he wrote a series of cheques at the direction of R T Thomas & Family Pty Limited in respect of the purchase price. These cheques were dated 9 May 1994 and "were issued in anticipation of finalisation of a funding package". The cheques were to be held until there was notification they could be presented. There is no evidence that the Company is insolvent and a sworn assertion to the contrary. The material filed on the Company's behalf is not particularly satisfactory. It may be, as a result of the decision in Cavetina (ante), that the pre-emptory language of S.459G(2) of the Corporations Law is insufficient to exclude the power to extend the time in which an application to set aside a statutory notice should be made. I should have thought, however, that the language carries an implication of the need to explain any delay beyond the 21 days. It should have been apparent from quite early in the piece to those acting in the Company's interest that the Applicant was intent on pursuing the recovery of the money reflected in the dishonoured cheque. The Applicant never deviated from that position. One would have thought that the -- 6 of 7 -- 7 Company should have moved promptly to have the statutory notice set aside once it became aware of it. The material does not directly address the explanation for this failure. Perhaps it is intended that it be inferred from what is said about the litigious dispute between Kennett & Cook. The material does not directly address the issues inherent in the fact that the debt founding the notice was a dishonoured cheque with any particularity. It is, for example, not necessarily in answer to a claim founded on the dishonoured cheque that the Applicant was not a party to any agreement between the Company and R T Thomas & Family Pty Limited. In the same way the material does not address the issue, assuming the cheque to have been one which was to be withheld from presentation until notification that funds are available, of how the Applicant was bound by that arrangement. Nor is it clear whether the cheque was dishonoured on account of non-compliance with the authority to the bank to operate on the account as distinct from as a consequence of a stop payment instruction. This court is, however, not required to conduct a trial to determine whether a disputed debt is genuine or to attempt to weight the merits of that dispute; see for example Mibor Investments Pty Ltd -v- Commonwealth Bank of Australia (1993) 11 A.C.S.R. 362. The deficiencies of the material notwithstanding, the material does raise issues concerning the Company's obligation to pay the Applicant the amount of the cheque and the dishonour of the cheque in circumstances where there is a dispute as to service of the statutory demand. These proceedings are inappropriate to resolve those issues which arise. -- 7 of 7 --