Case: Williams v Spautz [1992] HCA 34 ; (1992) 174 CLR 509
Outcome: cited
Ordinarily, if a company the subject of a statutory demand wishes to oppose a winding up order notwithstanding its failure to comply with it, it may apply to do so under s 459S of the Corporations Act . The statutory demand procedure created by Pt 5.4 of the Corporations Act does not, though, totally preclude an application for an injunction to restrain an abuse of process in the initiation or prosecution of winding up proceedings founded on non-compliance with statutory demand. As was said by Gummow J in David Grant at 279: "No doubt, in some circumstances, the new Pt 5.4 may appear to operate harshly. But that is a consequence of the legislative scheme which has been adopted to deal with perceived defects in the pre-existing procedure in relation to notices of demand. It also may transpire that a winding up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz [(1992) [1992] HCA 34 ; 174 CLR 509 at 518-522, 532-537]. However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction." 3 An abuse of process in the technical sense to which his Honour referred occurs when a party institutes proceedings "for a purpose or to effect an object beyond that which the legal process offers": see Williams v Spautz at 523. Hardel Holdings is alleging in this proceedings that such is the case. It contends that the evidence establishes a prima facie case of Allmark knowingly instituting proceedings against it which it knows to be without foundation but has done so as a tactical manoeuvre in respect of a dispute between two other companies in the Hardel and Allmark families which is presently the subject of legal proceedings in the Supreme Court of South Australia. Those proceedings seek the winding up of an Allmark company on the basis of non-compliance to the statutory demand. 4 The matter presently before me is for interlocutory relief. It is brought as a matter of urgency because, Hardel Holdings not having satisfied the statutory demand, Allmark is entitled under the Corporations Act to institute proceedings to wind up the company and has indicated it wishes to do so. For its part Hardel Holdings says it will suffer significant prejudice if such a course was to be taken by Allmark, the more so given that the taking of that course would, Hardel contends, constitute a technical abuse of process in the circumstances. The apprehended prejudice making the application an urgent one is that the institution of winding up proceedings against it would trigger default events under, or otherwise would imperil, financing arrangements it has in place for property developments that it is undertaking in several parts of Australia. 5 It is fair to say that the material that has been filed by both parties but in particular by Allmark suffers from opacity and generates some real level of doubt as to what is the true position between the parties in respect of the alleged debt and in respect of such object as Allmark may have had in bringing the proceedings. Nonetheless, serious allegations are made against Allmark. 19 It is well established that the onus of satisfying the court that there is an abuse of process lies upon the party alleging it. That onus is a heavy one and the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances: Williams v Spautz at 529. The present hearing being only of an interlocutory character, a permanent stay is not being sought. Nonetheless, I am mindful of the gravity of the allegation being made and, in consequence of, the need for a prima facie case to be properly established in light of that.