Accordent Investment Pty Ltd v RMBL Investments Ltd - [2009] SASC 144

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
ACCORDENT INVESTMENT PTY LTD v RMBL INVESTMENTS LTD
[2009] SASC 144
Judgment of The Honourable Justice Gray
22 May 2009
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENERALLY
Appeal from decision of Master dismissing application to set aside creditor's statutory demand - notice of default issued on basis of non-payment of interest on monies advanced by defendant and respondent to plaintiff and appellant - statutory demand only in respect of principal debt - respondent took possession of property which formed part of security for loan - whether statutory demand defective as it did not identify a single debt within meaning of section 459E of Corporations Act - whether appellant had complied with demand by providing security for debt - whether "other reason" established within meaning of section 459J(1)(b).
Held: appeal dismissed - statutory demand served by respondent related to a single debt - debt claimed substantially more than the value of the security in possession of the respondent - "other reason" sufficient to set aside the demand not made out.
Corporations Act 2001 (Cth) s 459C, s 459E, s 459G, s 459H and s 459J; Acts Interpretation Act 1901 (Cth) s 23, referred to.
Hardel Pty Ltd v Burrel & Family Pty Ltd [2009] SASC 77; Fox v Percy (2003) 214 CLR 118; Wigg v Architects Board of South Australia (1984) 36 SASR 111; Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd (2004) 50 ACSR 544; David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Hooker Cockram Ltd v Minesco Pty Ltd (2001) 3 VR 466; Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314; Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 82 ALJR 1411; Khadine Pty Ltd v Giant Bicycle Co Pty Ltd (1995) 16 ACSR 421; Tatlers.com.au Pty Ltd v Davis [2006] NSWSC 1055; Cooloola Dairies Pty Ltd v National Foods Milk Ltd [2004] QSC 308; Dickenson v Harrison (1817) 146 ER 465; Cusack v Rateki Pty Ltd (Unreported Supreme Court of South Australia, Judge Lunn, 17 January 2008); Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103; Da Starke Pty Ltd t/as Starke Lawyers v Yardoo Pty Ltd [2009] SASC 90, considered.

ACCORDENT INVESTMENT PTY LTD v RMBL INVESTMENTS LTD
[2009] SASC 144
Civil
GRAY J.

This is an appeal from the decision of a Master dismissing an application to set aside a creditor’s statutory demand.
Both parties accepted that the decision of the Master was an interlocutory ruling and that an appeal lay pursuant to Rule 17 of the Supreme Court Civil Rules 2006 (SA).[1]
[1] Hardel Pty Ltd v Burrel & Family Pty Ltd [2009] SASC 77.
This appeal is by way of rehearing.[2] An appeal by rehearing does not involve a completely fresh hearing by the appellate court of all the evidence. Rather, the court proceeds on the basis of the record and any fresh evidence that it chooses to admit.[3] The present appeal proceeded on the evidence before the Master. No fresh evidence was admitted.
[2] Supreme Court Civil Rules 2006 (SA) Rule 292.
[3] Fox v Percy (2003) 214 CLR 118 at [22]; Wigg v Architects Board of South Australia (1984) 36 SASR 111 at 113 per Cox J.
On 19 August 2005 the plaintiff and appellant, Accordent Pty Ltd, entered into a loan agreement with the defendant and respondent, RMBL Investments Ltd. Pursuant to the terms of the agreement, an amount of $7,812,000.00 was advanced by RMBL to Accordent. Subsequently, there were variations of the Loan Agreement pursuant to which further amounts totalling $4,596,000.00 were advanced. This resulted in an advance of principal totalling $12,408,000.00. The loan was secured.
On 26 February 2008, RMBL issued a notice of default pursuant to the terms of the agreement. The default arose from the non-payment of interest on the monies advanced. Pursuant to the terms of the agreement, on default, the total amount of the debt became due and payable. On the same date, RMBL, as mortgagee, took possession of part of the security, a property known as the Windsor Park Shopping Centre.
On 11 September 2008, RMBL auctioned the Windsor Park property. The auction was unsuccessful. The highest bid received was $11,750,000.00. RMBL remains in possession of the property.
On 12 September 2008, RMBL served a statutory demand on Accordent. The demand was made pursuant to section 459E(2)(e) of the Corporations Act 2001 (Cth) and included the following particulars:
The company owes R.M.B.L. Investments Limited ACN 004 493 789 of 40-42 Scott Street, Dandenong, VIC 3175 (“the creditor”) the amount of $12,408,000.00, being the amount of the debt described in the Schedule.
Attached is the affidavit of Colin Henry Madden, dated 10 September 2008 verifying that the amount is due and payable by the company.
The creditor requires the company, within 21 days after service on the company of this demand:
(a) to pay to the creditor the amount of the debt; or
(b)to secure or compound for the amount of the debt, to the creditor’s reasonable satisfaction.
The creditor may rely on a failure to comply with this demand within the period for compliance set out in subsection 459F(2) as grounds for an application to a court having jurisdiction under the Corporations Act 2001 for the winding up of the company.

Description of the debt

Amount of the debt

The principal amount outstanding in relation to a certain loan agreement dated 19 August 2005 and subsequent variation loan agreement between the debtor and the creditor (Loan Agreement), as a result of the debtor’s default in payment of quarterly interest instalments due on 15 February 2008, 15 May 2008 and 15 August 2008 under the Loan Agreement.
The Principal amount consists of the amounts advanced under each of the following loan agreements:

Loan Agreement dated 19 August 2005:

Variation of Loan Agreement dated 14 February 2006:

Variation of Loan Agreement dated 12 April 2006:

Variation of Loan Agreement dated 28 April 2006:

Variation of Loan Agreement dated 21 August 2007:

$7,812,000.00

$362,000.00

$1,876,000.00

$1,000,000.00

$1,358,000.00

TOTAL AMOUNT

$12,408,000.00

The Proceedings Before the Master

Accordent applied on 3 October 2008, pursuant to the provisions of sections 459H and 459J(1)(b) of the Corporations Act, to set aside the statutory demand. On 6 March 2009, the Master dismissed the application.
Accordent submitted that the statutory demand did not comply with section 459E and that the verifying affidavit was insufficient and inadequate. It was said that it did not exhibit documents that proved or provided the foundation for the assertions made. The Master rejected this submission:
There is no obligation in a verifying affidavit to provide substantive evidence to support the assertion in the affidavit. The requirement of s 459E is simply that the affidavit “(a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (b) complies with the rules”. The verifying affidavit in this matter complies with the Rules and in particular Form 7. There is no defect which would justify an order under s 459J(1) of the CA. The plaintiff has not demonstrated any substantial injustice caused by the form and content of the verifying affidavit.
It was next submitted to the Master that Accordent had secured the debt and had met RMBL’s demand. The Master’s reasons for rejecting this submission were as follows:
The second argument advanced by the plaintiff was that it had secured the debt and therefore met the requirements of s 459E(2)(c). The plaintiff argued that the debt had been secured because it arose out of finance provided by the defendant to the plaintiff in relation to the plaintiff’s ownership of the Windsor Gardens Shopping Centre and for a refurbishment that was to occur. Because of defaults on the plaintiff’s part the defendant in February 2008 had exercised its rights as mortgagee under a mortgage securing its advances to the plaintiff to obtain possession of that shopping centre. The plaintiff argued that the property owned by the plaintiff but now in the defendant’s possession had been valued at more than the amount of the statutory demand. It provided a copy of a valuation for the property giving a value range of $14.5 million to $16.5 million depending on rental income. Therefore the defendant’s debt was more than adequately secured. Hence the requirements of s 459E were met and the statutory demand should be set aside.
However, the provisions of s 459E(2)(c) refer to securing or compounding the debt to the creditor’s reasonable satisfaction “within 21 days after the demand is served on the company”. In the matter of Cusack v Rateki Pty Ltd, a decision of his Honour Judge Lunn delivered on 17 January 2008 in Action No 861 of 2007 in this Court, his Honour in considering a statutory demand and a similar argument in relation to security said as follows:
[9] the defendant submitted that the new plaintiff was not entitled to obtain the winding up order unless she relinquished other security which she holds for the debt. S 459P makes it clear that a secured creditor can apply for a winding up order. The defendant’s counsel referred to s 554E(1) and (3) of the Act which deals with proofs of debt by secured creditors, but that does not affect the operation of s 459P. Insofar as the statutory demand allows an alternative to payment of the debt of securing it to the satisfaction of the creditor, this only refers to security given after the service of the statutory demand and not to security given beforehand. I reject these submissions.
I respectfully agree with his Honour’s analysis.
The plaintiff referred to the decision of the Commonwealth Bank of Australia v Parform Pty Ltd (1995) 13 ACLC 1309 as supportive authority. In my view that decision was to the effect that the words “to the creditor’s reasonable satisfaction” where used in s 459E(2)(c) imported into the CA an objective test rather than a subjective test specific to that creditor. In my view that case does not assist the plaintiff’s argument.
I accept that the plaintiff has provided an opinion from a valuer that the Windsor Garden’s [sic] property at the time of the valuation was worth somewhere between $14.5 million to $16.5 million – see Document 2k or Exhibit “MRB 11”. I also accept the submission that the words “to the creditor’s reasonable satisfaction” as used in s 459E apply to both securing and compounding the debt the subject of the statutory demand and that an objective test applies. However those words refer to a securing or compounding that occurs within the twenty-one days after the statutory demand is served and that provision does not apply in these particular circumstances. I therefore reject the plaintiff’s argument on this ground.
The third submission advanced by Accordent was that the service of the statutory demand was an abuse of process and should be set aside pursuant to the provisions of section 459J(1)(b). On the hearing of the appeal, Accordent abandoned this submission.
Finally, Accordent submitted that the statutory demand was defective in that it was a demand for part only of an alleged indebtedness. The Master in rejecting this submission reasoned:
I note that the plaintiff referred to two cases of Sentinel Financial Management Pty Ltd v Entercorp Finance Pty Ltd (1997) 15 ACLC 201, and Hooker Cockram Ltd v Minesco Pty Ltd (2001) 3 VR 466 as support for its argument that only one statutory demand can be issued for a single debt. These are decisions of Master Mahony and Warren J (as she then was). I have considered these matters in a decision in the matter of D A Starke Pty Ltd trading as Starke Lawyers v Yardoo Pty Ltd (Action Nos 395 and 863 of 2008, delivered 22 August 2008), and note that in my view the reasoning of Chesterman J of the Supreme Court of Queensland in a conflicting decision of Cooloola Dairys [sic] Pty Ltd v National Foods Milk Ltd (2004) 211 ALR 293 is more persuasive. Whether or not the issue of more than one statutory demand arising out of the same debt or transaction amounts to an abuse of process is a matter to be determined having regard to all of the surrounding circumstances.
The Master went on to consider whether there was a genuine dispute or set-off. In this respect, he observed:
Accordingly, in my view, and noting the relatively low threshold that the plaintiff is obliged to meet to establish a genuine offsetting claim the plaintiff is entitled to a reduction of the statutory demand for the following amounts:
(1)A genuine dispute or offset in relation to the described out of pocket expenses of $1,253,834.45.
(2)Fit out works $202,211.31 – see paragraph 13.3 of FDN 6.
(3)The shortfall in advance $123,000.00 – see paragraph 20 of FDN 3.
(4)The payment of outgoings $633,967.00 – see paragraph 12 of FDN 6.
(5)The rent foregone [sic] $113,062.29 – see paragraph 42 of FDN 3.
Total: $2,326,075.05.
The Master then concluded:
I therefore dismiss the plaintiff’s claim generally to have the statutory demand set aside either as an abuse of process or for failure to comply with the requirements of the Corporations Act or for a genuine dispute. However, there will be an order reducing the demand by the amount of $2,326,075.05 to an amount of $10,081,924.95 to reflect those offsets advanced by the plaintiff that I found to be genuine and not mere assertions or speculation and to meet the genuine dispute finding in respect of interest and charges.
The Appeal
On the hearing of the appeal, Accordent conceded that there had been defaults in the payment of interest and accepted that it was indebted to RMBL in the amount of $10,081,924.95. Accordent accepted that there was no genuine dispute about that aspect of RMBL’s claim. Accordent accepted the Master’s conclusion that it had only established genuine off-setting claims of $2,326,075.05.
On appeal, three submissions were advanced. It was contended that the statutory demand was defective as it did not identify a single debt within the meaning of section 459E; that Accordent had complied with the statutory demand by providing security for the amount of the debt; and finally it was said that in the alternative “other reason” had been established within the meaning of section 459J(1)(b).
RMBL supported the Master’s reasoning and conclusions. It was contended that the construction of the statutory provisions advanced by Accordent was without substance. It was said that the evidence before the Court demonstrated that the statutory demand had not been met, and that no other reason existed to set aside the demand.
The Legislative Provisions
It is convenient to set out the terms of the legislation to be discussed in these reasons.
Section 459E:
Creditor may serve statutory demand on company
(1)     A person may serve on a company a demand relating to:
(a)a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or
(b)2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.
(2)     The demand:
(a)    if it relates to a single debt--must specify the debt and its amount; and
(b)if it relates to 2 or more debts--must specify the total of the amounts of the debts; and
(c)must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor's reasonable satisfaction, within 21 days after the demand is served on the company; and
(d)must be in writing; and
(e)must be in the prescribed form (if any); and
(f)must be signed by or on behalf of the creditor.
(3) Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:
(a)verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and
(b)    complies with the rules.
…
Section 459H:
Determination of application where there is a dispute or offsetting claim
(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b)that the company has an offsetting claim.
(2)     The Court must calculate the substantiated amount of the demand in accordance with the formula:
where:
“admitted total” means:
(a)    the admitted amount of the debt; or
(b)    the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
“offsetting total” means:
(a)if the Court is satisfied that the company has only one offsetting claim--the amount of that claim; or
(b)if the Court is satisfied that the company has 2 or more offsetting claims--the total of the amounts of those claims; or
(c)    otherwise--a nil amount.
(3)If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4)     If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a)    varying the demand as specified in the order; and
(b)declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
(5)     In this section:
“admitted amount” , in relation to a debt, means:
(a)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt--a nil amount; or
(b)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt--so much of that amount as the Court is satisfied is not the subject of such a dispute; or
(c)    otherwise--the amount of the debt.
“offsetting claim” means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
“respondent” means the person who served the demand on the company.
(6) This section has effect subject to section 459J.
Section 459J:
Setting aside demand on other grounds
(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a)because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b)    there is some other reason why the demand should be set aside.
(2)     Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.
The provisions of the scheme of Part 5.4 of the Corporations Act have been addressed in decisions of the High Court of Australia[4] and in recent decisions of the Full Court of this Court.[5] The statutory scheme may be generally described in the following terms. Section 459C provides for the circumstances in which a presumption of insolvency will arise. Section 459E provides that a creditor may serve a statutory demand and the requirements of such demand are set out. Section 459F determines the time at which a company is taken to have failed to comply with a demand. Section 459G allows for an application to set aside a demand. Section 459H sets out the basis for an application alleging a dispute as to the existence or amount of the debt or alleging an offsetting claim. Section 459J sets out the basis for an application to set aside the demand for injustice caused by a defect in the notice and “on other grounds”. Sections 459K, 459M and 459N are procedural.
[4] David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314 at [14]; Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 82 ALJR 1411 at [15].
[5] Hardel Pty Ltd v Burrell & Family Pty Ltd [2009] SASC 77 at [6] and [7]; Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103; Da Starke Pty Ltd t/as Starke Lawyers v Yardoo Pty Ltd [2009] SASC 90.

The statutory demand procedure is one “that defines where the burden of proof lies in winding up proceedings”.[6] It is part of “a legislative scheme for the quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly”.[7]
[6] Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd (2004) 50 ACSR 544 at 547 [16] per Barrett J.
[7] David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 270 per Gummow J.
The legislative scheme provides a mechanism to create a rebuttable presumption of insolvency.[8] In order for RMBL to obtain the benefit of the presumption by the statutory demand procedure, there must be a demand for a single debt pursuant to section 459E,[9] no material defect in the notice or compliance with the provisions of the legislative scheme,[10] no genuine dispute as to the alleged debt or an offending cross-claim,[11] no injustice within section 459J(1)(a) and no other reason why the notice should be set aside pursuant to section 459J(1)(b).
[8] Corporations Act 2001 (Cth) s 459C(3).
[9] Hooker Cockram Ltd v Minesco Pty Ltd (2001) 3 VR 466.
[10] Corporations Act 2001 (SA) sections 459H and 459J.
[11] Corporations Act 2001 (SA) section 459H.
The statutory demand procedure affords the debtor company the opportunity of paying the sum demanded, or otherwise securing it.[12] It has been said[13] in the context of the statutory purpose of the demand procedure, that it is difficult for the debtor company to pay the debt if the demand is wildly inaccurate, and that the debtor should know what is being claimed and the basis of the claim. The statutory purpose has been said to provide a means for the creation of a statutory presumption of insolvency by reason of the non-payment of a single debt.[14] The purpose has further been said to create a presumption of insolvency if circumstances can be seen to be such that non-payment of the particular single debt within the prescribed period was unjustified.[15]
[12] Khadine Pty Ltd v Giant Bicycle Co Pty Ltd (1995) 16 ACSR 421 at 422.
[13] Khadine Pty Ltd v Giant Bicycle Co Pty Ltd (1995) 16 ACSR 421 at 422.
[14] Tatlers.com.au Pty Ltd v Davis [2006] NSWSC 1055 at [12] and [13] per Barrett J.
[15] Tatlers.com.au Pty Ltd v Davis [2006] NSWSC 1055 at [12] and [13] per Barrett J.
A Single Debt
As noted above, section 459E provides that a creditor may make a demand for a single debt. On the hearing of the appeal, it was common ground that the statutory demand sought to recover outstanding principal under the agreement and did not seek to address interest or other subsidiary or consequential claims which the debtor must pay.
Accordent contended that the demand was bad as it claimed only part of an alleged single debt. It was said that RMBL could not leave to one side to pursue separately its other claims for interest and consequential matters. Accordent contended that the verifying affidavit evidenced that the whole debt was not demanded.
Accordent drew attention to the following observations of Warren J in Hooker Cockram v Minesco:[16]
In relation to the preliminary point it was argued on behalf of Hooker that s459E(1) of the Corporations Act permitted a creditor to serve a statutory demand in relation to a single debt but that multiple demands could not be served in relation to the same and related debts. Consideration of subs(1) reveals that a creditor may serve "a demand" in relation to “a single debt” or “a demand” in relation to “2 or more debts that the company owes to the person”. Subs(2) of s459E requires that “the demand” specify “the debt” and “its amount” if it relates to “a single debt” and, if it relates to “two or more debts” to specify “the total of the amounts of the debt”. Subs(3) of s459E provides that unless “the debt” or “each of the debts” is a judgment debt the demand must be accompanied by an affidavit that complies with the rules and verifies that “the debt” or “the total amounts of the debts” is due and payable. The words of the section and their meaning are plain.
Section 459E contemplates that a creditor may serve one statutory demand in relation to a single debt or one statutory demand in relation to multiple debts. Section 459E(1) provides that a person “may” serve a statutory demand and then proceeds to set out that the demand can be by way of a demand relating to a single debt or … two or more debts. In so far as the subsection uses the expression “may” it allows a creditor to exercise the discretion to serve a statutory demand. The expression is confined to whether or not to serve a demand. The discretion … does not extend to a discretion to serve a demand relating to a single debt or separate demands for two or more debts. In my view, it could not be said that there is an election by a creditor to serve a demand relating to a single debt or two or more debts provided for by the expression “or” between paras (a) and (b) of s 459E(1). The conjunctive “or” exists between the two alternative scenarios: one demand where there is a single debt or one demand where there are two or more debts.
Hooker Cockram[17] concerned the problem of multiple demands. Warren J did not consider the question of whether a creditor must demand the whole debt.
[16] Hooker Cockram Ltd v MinescoPty Ltd (2001) 3 VR 466 at 469 [11]-[12].
[17] Hooker Cockram Ltd v Minesco Pty Ltd (2001) 3 VR 466.
Section 459E provides that a demand must specify the debt and its amount and in relation to two or more debts, must specify the total of the amounts for the debts. A purpose of this section is that a creditor is not to issue more than one statutory demand in order to avoid complicating proceedings for the winding up of the debtor company. Section 459E does not require the creditor to claim the whole of the debt, rather a debt which is at least the statutory minimum of $2,000.
In Cooloola Dairies,[18] Chesterman J disagreed with the approach taken by Warren J. Chesterman J decided that section 23 of the Acts Interpretation Act 1901 (Cth) in providing that “in any Act unless the contrary intention appears words in the singular number include the plural” obliges one to read section 459E(1) as referring to a demand or demands and to a single debt or debts.[19]
[18] Cooloola Dairies Pty Ltd v National Foods Milk Ltd [2005] 1 Qd R 12.
[19] Cooloola DairiesPty Ltd v National Foods Milk Ltd [2005] 1 Qd R 12 at [21].
Chesterman J concluded that section 23 of the Acts Interpretation Act also requires section 459G to be interpreted as allowing a company to apply for an order setting aside either a statutory demand or statutory demands. This, it was said, would overcome any argument that having to apply to set aside multiple demands would result in greatly increased costs. All applications could be included in the same court proceedings.[20] Chesterman J reasoned:[21]
In a case where a creditor demands payment of its debts and the debtor alleges it has an offsetting claim and/or disputes that the debts or some of them are due, it is scarcely conceivable that subr (2) would not be satisfied. Indeed the use of one application to challenge a number of statutory demands would overcome the difficulty which Master Mahoney thought he identified in which a debtor might utilise one offsetting claim against a number of separate debts the total of which exceeded the claim. If one application were brought in respect of all demands the offsetting claim could only be applied to the limit of its amount against the aggregate of the debts demanded.
The reasoning in Sentinel was based upon what I believe to be a false premise, but it was followed by Warren J in Hooker Cockram, the facts of which were that the plaintiff in each proceeding was a building company which had undertaken the construction of a hotel in Melbourne for a very large sum. The defendant in each proceeding had contracted to supply aluminium cladding to the plaintiff. There were disputes concerning the performance of the contract between the parties and the plaintiff withheld two sums as retention moneys. The defendant delivered two separate statutory demands, one in respect of each of the sums retained. The plaintiff issued two separate proceedings, one to set aside each of the demands. Warren J set aside the demands on the basis that the issue of two demands was prohibited by the proper construction of s 459E and s 459G and was, in addition, oppressive.
[20] Cooloola Dairies Pty Ltd v National Foods Milk Ltd [2005] 1 Qd R 12 at [14] and [15].
[21] Cooloola DairiesPty Ltd v National Foods Milk Ltd [2005] 1 Qd R 12 at [14] and [15].
Although I have a preference for the approach and reasoning of Chesterman J, it is unnecessary in the present proceedings to resolve the difference of opinion arising from these authorities. Neither decision directly addressed the question raised in the present appeal - whether the statutory demand claimed a single debt within the meaning of the relevant statutory provision.
RMBL submitted that the principal owing under the agreement was a separate debt from any other monies due and payable. In particular, it was said that the principal and interest owing were separate debts. As a consequence it was submitted that the statutory demand was in respect of a single debt.
RMBL drew attention to the observations of Baron Wood in Dickenson v Harrison:[22]
The question…amounts in truth to this – whether, when two distinct sums are due to the same person, on the same day, under the same instrument, he may not sue for either, at his election; or whether he is therefore necessarily compelled to proceed for both in the same action?
I am of the opinion that he may sue for either; and in the present case, I think that the sums are completely distinct and unconnected, notwithstanding that they become due by the same instrument, and that they may therefore be separated by a plaintiff who sues to recover them, so as to be made the subject of separate actions.
[22] Dickenson v Harrison (1817) 146 ER 465 at 467 per Baron Wood, with whom Baron Garrow concurred.
This observation has been referred to as representing a correct legal analysis in learned texts since its pronouncement. In Fisher and Lightwoods Law of Mortgage,[23] the learned editors note:
Covenant for payment. Purpose. It is usual in a mortgage to insert a covenant to repay the principal sum with interest, on a fixed day, and also to pay interest after default so long as the security shall subsist, but that is not, nor was it ever, a necessary part of a mortgage which, in itself, implies a loan, and therefore a debt recoverable by action, and bearing interest even though none is expressly reserved. In the absence, however, of a covenant or bond, the debt is only a simple contract debt. The principal secured by the mortgage and the interest thereon are distinct debts, and may be separately recovered.
…
Action on the covenant to pay. Every mortgage implies a loan, and every loan implies a debt, for which the borrower is personally liable, though he has entered into neither bond nor covenant for payment of it, but the debt is of the nature of simple contract only, unless there is a bond or an express or implied covenant to give it the character of specialty. The principal secured by the mortgage, and the interest thereon, are distinct debts, and may be separately recovered. Upon the breach of an absolute covenant for payment of the debt on a certain day, the mortgagee may maintain an action on the covenant, whether the covenantor is principal or surety, unless the qualified form of the covenant implies that there is no personal contract for repayment, upon which an action can be brought, eg, where the covenantor, borrowing in the character of a trustee, covenants for repayment only out of money coming to his hands as trustees or where a person merely agrees to charge his property as collateral security for the debt of another. The action on the covenant is only for principal and interest and any other sums which the mortgagor has for principal and interest and any other sums which the mortgagor has covenanted to pay, not for expenses incurred by the mortgagee outside the covenant, though he may be entitled to these in redemption or foreclosure action.
[emphasis added]
[23] Fisher and Lightwood’s, Law of Mortgage (10th ed, 1988) at 45 and 306 [footnotes omitted].
These passages have been adopted in Fisher and Lightwoods (2^nd Aust ed).[24] Halsbury’s Laws of England also treats Dickenson v Harrison as correctly setting out the relevant legal principles as having application at the present the time.[25]
[24] Fisher and Lightwood’s, Law of Mortgage (2^nd Australian ed, 2005) at [3.13] and [17.2].
[25] Halsbury’s Laws of England (4^th ed 2005 Reissue) vol 32 [420].
Good reason may exist for a creditor choosing not to include a debt in a statutory demand directed to the debtor. One debt may be disputed while others are not. If a disputed debt is excluded the debtor would have no basis for making an application under section 459G. If the undisputed debts were not paid, the debtor would be wound up and to include a disputed debt would be to invite an application with attendant expense and delay.[26]
[26] Cooloola DairiesPty Ltd v National Foods Milk Ltd [2005] 1 Qd R 12 at [22].
In the present proceeding, RMBL was aware that Accordent disputed interest and other charges. It was said that knowledge of this dispute led RMBL to issue a statutory demand for what it claimed was the indisputable principal sum of the loans. Had interest and costs been claimed in the demand, the verifying affidavit would have had to attest to there being no genuine dispute as to that element of the debt. The deponent could not have so sworn because of his awareness of Accordent’s dispute in relation to those matters.
In these proceedings, the loan agreement appears to treat the principal and interest as separate debts, as they are dealt with in separate clauses of the Agreement. The fact that both clauses come within the definition of “the Moneys Hereby Secured” is not a relevant consideration. That definition is with respect to the issue of security, not the issue of contract or debt.
In accordance with the above considerations, and a consideration of section 459E of the Corporations Act, a creditor can demand the principal, owing under a loan, as it is the whole of a single debt. The statutory demand served by the defendant therefore only related to a single debt.
For these reasons, the submission of Accordent is rejected.
Secure – Section 459E
Accordent submitted that the evidence before the Court established that adequate security was held by RMBL for the amount of the debt. It was pointed out that the undisputed debt as found by the Master was $10,081,924.95. It was contended that the security offered had, on any view, a value in excess of that amount. Accordent drew attention to the fact that at auction in September 2008, a potential buyer was prepared to pay $11,750,000.00 for the property. A valuation prepared on behalf of Accordent following the auction in September 2008 valued the property at either $14,500,000.00 or $16,500,000.00. The valuations were a consequence of different assumptions as to rental income. It was argued that this was the only valuation evidence before the Court and should be accepted for the purpose of determining the interlocutory issue. Accordent accepted that a secured creditor was entitled to issue a statutory demand. However, it was contended that as a matter of statutory construction Accordent was entitled to rely on existing security as satisfying section 459E(2)(c).
Section 459E(2)(c) provides that a statutory demand “must require the company to pay the amount of the debt, or the total amount of the debt, or to secure or compound to that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company”.
RMBL submitted that it is clear from the wording of section 459E(2)(c) that the security to be given by a debtor in response to a statutory demand must be given after the demand has been served. According to RMBL, the security cannot be security given prior to the demand as it would not be given “within 21 days after the demand”.[27]
[27] Cusack v Rateki Pty Ltd (Unreported Supreme Court of South Australia, Judge Lunn, 17 January 2008) at [9].
In my view, the reference in section 459E to securing the amount of the debt is intended to permit the debtor to provide further security to the reasonable satisfaction of the creditor.[28] In the circumstances of the present proceeding, RMBL was claiming an indebtedness of substantially more than the auction bid of $11,750,00 and in the circumstances Accordent had not established that the value of the security was substantially greater than the indebtedness claimed.
[28] Cusack v Rateki Pty Ltd (Unreported Supreme Court of South Australia, Judge Lunn, 17 January 2008).
Section 459J(1)(b) – Other Reasons
Accordent submitted in the alternative that there was good reason to set aside the statutory demand. It was put that the Master erred in the exercise of the discretion under section 459J in failing to be satisfied that there were “other reasons” why the demand should be set aside, so as to satisfy section 459J(1)(b). This submission relied primarily on the valuation evidence. In Accordent’s submission, the evidence demonstrated that the value of the property held in security and in possession of RMBL exceeded the amount of the demand.
As earlier discussed, Accordent submitted that the value of the property was between $14,500,000.00 and $16,500,000.00. Accordent contended that RMBL did not dispute the evidence of value and did not provide to the Court any alternative valuation evidence. Accordent submitted that the Court should draw inferences against RMBL as a consequence of its failure to provide any valuation evidence. It was said that the Court should infer that RMBL was not able to provide valuation evidence, or that any valuation evidence would not assist its case. It was further suggested that RMBL could not contest Accordent’s contention that RMBL held sufficient security to satisfy the demand.
Accordent further submitted that the sale process engaged in by RMBL in relation to the sale of the secured property was inept and inadequate. It was said that the evidence demonstrated that RMBL failed to properly market the property consistently with the duties owed by a mortgagee in possession, or as required by section 420A of the Corporations Act.
The suggested defects or errors in the sale process outlined by Accordent included the fact that the first information memorandum in relation to the sale excluded reference to lease and rental income of four tenancies, and a further information memorandum excluded reference to further tenancies. Although a revised information memorandum was prepared by RMBL, this contained significant errors in relation to the value of the property. It was further claimed that RMBL changed locks and prevented tenants from gaining access to leased premises. It was claimed that RMBL conducted an advertising campaign for the property which substantially understated the rental and lettable area. In addition, RMBL withdrew the property from auction 26 August 2008 after complaints by Accordent as to the content of the advertising campaign. Accordent claimed that the For Sale sign placed in front of the property contained incorrect information. On 9 September, two days before the auction, RMBL’s website indicated that the property had been sold when that was not the case. Accordent contended that this incorrect information caused a prospective refinancier to be lost to Accordent. Accordent contended that RMBL’s conduct prevented Accordent from having any real opportunity to satisfy the demand.

Accordent submitted that the Master erred in failing to regard these facts as material considerations for the Court to be satisfied of the existence of “other grounds” to set aside the demand by exercise of the power in section 459J.
Accordent further argued that the function and purpose of the statutory demand procedure were not satisfied, affording another ground to set aside the demand. Allowing the demand to stand in the circumstances was said to have one of two potential outcomes. First, it would merely defer the obvious dispute as to the valuation and conduct, to the hearing of the winding-up application, which would be contrary to the policy of the Act. Alternatively, the presumption of insolvency would have the effect of quelling the dispute without its having been properly ventilated in any appropriate forum. Accordent argued that section 549J is intended to avoid both of these potential consequences, particularly where there is no other express ground among the provisions of the Part that gives a reason to set aside.
The valuation provided asserts a value of between $14,500,000.00 and $16,500,000.00. However, the valuation is qualified and pays no regard to the circumstances of the auction. The letter of instruction to the valuer has not been produced and it is apparent that the valuer had been given separate advice about the auction process and suggested inadequacies within that process. In my view, these matters affect the weight to be given to the valuation.
I have reached the conclusion that other reasons within the meaning of section 459J(1)(b) sufficient to set aside the statutory demand have not been made out. The evidence and inferences to be drawn from that evidence militate against Accordent’s submission that RMBL holds more than adequate security for the alleged indebtedness (being the $10,081,924.95 and the further claims for interest and consequential expenses). More than six months have passed since the auction and there is no evidence before the Court of attempts to refinance since that time. No attempts to make payment of the admitted indebtedness have been made. As pointed out earlier, the hearing of this interlocutory appeal is a rehearing and it was open to Accordent to place information before the Court in accordance with the Rules that govern such a rehearing. When this matter was raised, counsel for Accordent advised the Court that he had no instructions to place evidence on this topic or any further evidence before this Court. Counsel asserted from the bar table that ongoing attempts were being made to refinance. Without an evidentiary base, no weight can be given to this assertion.
If the security had a value of $14,500,000.00 to $16,500,000.00 it might be expected that refinancing would be a likely scenario. The absence of any evidence of any attempt to refinance for more than six months allows the inference to be drawn that there may be some real differences of opinion about value.
Conclusion
For these reasons, this appeal is dismissed.

A person may serve on a company [demands] relating to:
(a) … single debt[s] that the company owes to the person …