Summary judgment and complex cases - what's the point?

This article was co-authored by Clancy Petersen, Law Graduate, Sydney.

Background

This matter before the Supreme Court of New South Wales (the Court) concerns an application to set aside two statutory demands by creditors pursuant to their claims for restitution, mistake and failure of consideration. The factual circumstances in which the alleged mistake, restitution and failure of consideration emerged are complex and subject to evidence and proof.

Essentially, the Defendants obtained statutory demands against the Plaintiff for monies which were transferred to a bank account in the name of the Plaintiff. The Plaintiff believed that the monies were transferred to their account pursuant to a facility agreement it had with another entity, Jitou Group Pty Ltd.

The Defendants argued that their transfer of the monies into the Plaintiff’s bank account was based on a misapprehension and that the Defendants were not aware of the facility agreement between the Plaintiff and Jitou Group Pty Ltd. The Defendants issued two statutory demands to the Plaintiff. The Plaintiff, in these proceedings, sought to set aide these demands.

Setting aside statutory demands – requirement if a genuine dispute

In applying to have the statutory demands set aside, the Plaintiff contended that there was a ‘genuine dispute’ between the parties re the existence of the claimed liability in restitution (the subject of the demands).

The Court noted that a genuine dispute must be ‘bona fide and truly exist in fact, and that the grounds for the dispute must be real and not spurious, hypothetical, illusory or misconceived’.[1] It was also noted that this threshold was not high nor demanding.[2] Moreover, it was noted that there must be evidence that satisfies the Court that there is a serious question to be tried or an issue deserving of hearing or a plausible contention requiring investigation.[3] These principles have been summarised by Barrett JA in Ligon 158 Pty Ltd  v Hubert [2016] NSWCA 330 at [8].

Importantly, Barrett JA noted that the function of the Court was merely to determine the existence of a genuine dispute rather than a weighing up of the merits of the cases presented.

Conclusion

In this case, the Court concluded that there was a genuine dispute existent regarding the nature of the facility agreement, its scope and whether payments had been made pursuant to the terms of the facility agreement. Moreover, there was a lack of evidence regarding the Defendants’ supposed intention with the money transfers. Moreover, the Court noted a genuine dispute also arose regarding the Plaintiff’s liability in restitution and whether constructive/ resulting trusts were available to the Defendants. Importantly, the Court identified that there was a serious question to be tried regarding whether the Defendants had in fact laboured under the mistake on which their claim for restitution was based, whether the facility agreement was binding and the issue of the Plaintiff’s liability.

As a result of this conclusion, the Court ordered that the statutory demands be set aside and that the Defendant pay the Plaintiff’s costs as agreed or assessed.

The implications

This matter reinforces the Court’s reluctance to entertain statutory demands or issue default judgments where the matter involves issues which are of a complex nature and involve causes of action clearly subject to evidence and proof.

Importantly, there are cost consequences for those seeking such orders/ determinations even where the other party may be in breach of its obligations in respect of its right to respond to the claim in question. There are also professional practice responsibilities on solicitors to ensure that orders for default judgment are not pursued where the claim is subject to contentious issues.

 

[1] At [53] referring to Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) FCR 452 at 464.

[2] At [54] referring to CGI Information Systems v APRA Consulting Pty Ltd [2003] NSWSC 728 at [16] (Barrett J).

[3] At [56] referring to Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601.