Peter A Clarke

Yesterday’s Federal Court decision in Grant Thornton Services (NSW) Pty Limited v St. George Wholesale Distributors Pty Ltd (No 2) throws up both a curious factual situation but the relatively little considered section 459(S) of the Corporations Act 2001. It is also a salient and sombre lesson in how to run an application.

Facts

Grant Thornton Services (NSW) Pty Ltd (“Grant Thornton”) provides accounting services.  It provided those services to the “Paul’s Warehouse” group of companies.  St George Wholesale Distributors Pty Ltd (St George) is part of that group but unlike other companies in that group it had net asssets.  Grant Thornton issued invoices on St George totalling $91,305.50. When the invoices were not paid Grant Thornton issued a statutory demand.  St George neither paid the sum nor applied to set aside the demand.  When St George found itself the subject of winding up application it roused itself to apply for leave to oppose the application on the basis that there was a genuine dispute. Leave is required because, per section 459 (S), St George could have earlier applied to set aside the statutory demand because there was a genuine dispute.

The issues

Section 459(s) (pars [7]  – [10])

To get leave section 459(s) requires that a court is satisfied that the ground is material to proving that a company is solvent.

The Federal Court decision in  Lodge Partners Pty Ltd v Pegum is a salutory lesson that while the threshold for determining whether there is a genuine dispute is low where the facts are essentially agreed and the main dispute  is the construction of a contract a court can and does make that call. In this proceeding that construction was against the applicant and the statutory demand was not set aside. On his way to that conclusion Lingren J provided a very useful analysis.

Issues  

The focus here was on what constitutes a genuine dispute.  Lingren dealt with that in a two stage process. At [17] he quickly reviewed the authorities and distilled the principle that no “genuine dispute” exists where  the contentions by the applicant is devoid of substance such that “no further investigation is warranted.”  He said: Read the rest of this entry »