AspectFP Pty Ltd v Messer
[2019] VSC 249
•4 April 2019, revised 12 April 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2018 02866
| ASPECTFP PTY LTD | Plaintiff |
| v | |
| KAYLENE MESSER | Defendant |
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JUDGE: | Gardiner Asj J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 4 April 2019 |
DATE OF JUDGMENT: | 4 April 2019, revised 12 April 2019 |
CASE MAY BE CITED AS: | AspectFP Pty Ltd v Kaylene Messer |
MEDIUM NEUTRAL CITATION: | [2019] VSC 249 |
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CORPORATIONS – Application to set aside statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) – Whether on the construction of a loan agreement plaintiff had genuine dispute – Whether deficiencies in affidavit accompanying the demand should result in the demand being set aside – Whether fact that deponent to affidavit accompanying the demand did not sight the demand at the time of swearing affidavit should result in the demand being set aside – Finding that there was no genuine dispute because on a clear construction of the loan agreement interest was due and payable as demanded – Finding that demand should not be set aside by reason of alleged deficiencies in the affidavit accompanying the demand – Corporations Act 2001 (Cth) did not require deponent to affidavit accompanying the demand to physically sight the demand prior to swearing affidavit – Plaintiff’s application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I Hristovski | Robert James Lawyers |
| For the Defendant | Mr D R Diaz | Madisons Lawyers |
HIS HONOUR:
The plaintiff, AspectFP Holdings Pty Ltd (‘AspectFP’), applies under s 459G of the Corporations Act 2001 (Cth) (‘Act’) to set aside a statutory demand dated 23 November 2018 (‘the demand’) served on it by the defendant, Kaylene Messer (‘Ms Messer’). The demand was accompanied by an affidavit of Ms Messer sworn on 23 November 2018.
The schedule to the demand claims that AspectFP is indebted to Ms Messer for a total of $196,875.00. The debt is described in the schedule to the demand as ‘Principal sum advanced to the Company’, which is specified as $175,000, and ‘Interest at the rate of 12.5% as specified in the Agreement’, which is specified as $21,875.00.
AspectFP relies on an affidavit of its director Peter Morrison-Dowd sworn 18 December 2018. Ms Messer relies on her own affidavit sworn 26 February 2019 and of her solicitor, Stephen Dunn sworn on 26 February 2019. Both parties also filed and served written submissions and Counsel for Ms Messer filed further submissions in reply on the day of the hearing.
The application has been made within the time prescribed by s 459G(2)of the Act. The sums demanded are alleged to be owing under a Loan Agreement dated 25 June 2018 (‘the Loan Agreement’) by which Ms Messer advanced $175,000 to AspectFP. AspectFP concedes that the sum of $175,000 was advanced by Ms Messer and has not been repaid.
AspectFP contends that on a on a proper construction of the terms of the Loan Agreement, interest was not due and payable to Ms Messer as at the date of the demand. This is said to constitute a genuine dispute under s 459H. Associated with this ground was a submission that the amount claimed in the demand was incorrect as interest was not due and payable at the date of the demand. It was contended that the demand for interest which was not due and payable resulted in a gross overstatement of the debt.
AspectFP contends that the affidavit accompanying the demand did not comply with the Supreme Court (Corporations) Rules 2013 (‘Rules’). It contended that it was not enough for the affidavit accompanying the demand to simply refer to the principal debt and interest in an unquantified amount without reference to the amount sought in the demand. AspectFP submits that the Form prescribed by the Rules, Form 7, specifically requires that the deponent refer to the amount claimed in the statutory demand and verify that it is due and payable.
AspectFP also submits that the failure by Ms Messer to have regard to or actually sight the demand when swearing the affidavit accompanying the demand should result in the demand being set aside. It was also submitted that Ms Messer’s affidavit accompanying the demand does not state that there is no genuine dispute as to the amount claimed in the demand but simply refers to there being ‘no genuine dispute about the existence or amount of the debt’ in circumstances where it is unclear what ‘the debt’ is a specific reference to. AspectFP also submitted that the demand should be set aside pursuant to s 459J(1)(a) or 459J(1)(b) on the basis that the affidavit verifying the demand did not comply with s 459E of the Act which requires that the affidavit complies with the Rules.
The Loan Agreement
The parties to the Loan Agreement are Ms Messer as lender and AspectFP as borrower.
The Loan Agreement defines ‘Money Outstanding’ as meaning ‘at any time the aggregate of (a) the loan total, and (b) interest and all other money payable to the Lender under this deed’.
‘Repayment date’ is defined as the date mentioned in Schedule 1. Schedule 1 nominates that date as being 15 September 2018. In the schedule, the ‘Loan Amount’ is stated to be $175,000 and the ‘Loan Period’ is stated to be ‘2.5 months up to and including 15 September 2018’. The interest rate is 12.5%.
Clause 4.1 of the Loan Agreement provides:
4.1The Borrower must pay the Money Outstanding to the Lender on the Repayment Date or on the date or dates otherwise agreed in writing between the Borrower and the Lender.
Clause 5(a) is concerned with repayment of interest and provides:
5(a)The Borrower must pay interest at the Interest Rate on the Money Outstanding as per Schedule-1 on settlement of outstanding borrowing at the interest rate detailed per Schedule 1. (emphasis added)
Mr Hristovski, Counsel for AspectFP, contends that a genuine dispute arises by reason that the Loan Agreement should be construed such that no interest at all is payable by AspectFP on the sum advanced until the principal is repaid and this has not occurred. His basis for such a construction is a contention that the effect of clause 5 of the Loan Agreement is that interest under the Loan Agreement is not due or payable until such time as ‘settlement of the outstanding borrowing occurs’. He asserts that because payment of the principal debt and ‘settlement of the outstanding borrowing’ has not occurred, there is presently no liability to Ms Messer for interest and that such liability remains conditional and prospective. As such he submitted that Ms Messer has made a claim for a debt which is not presently due and payable.
The relevant principles, standard and tests to be applied in applications under s 459G of the Act have been described on many occasions. They have been collected in the decision of the Court of Appeal in this state in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (‘Malec’).[1]
[1][2015] VSCA 330, [47]-[50].
In Malec, the Court of Appeal stated, amongst other things, that the court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that for a dispute to be considered a ‘genuine’ dispute it must be bona fide and truly exist in fact, and that the grounds for alleging the existence of a dispute must be real and not spurious, hypothetical, illusory or misconceived.[2]
[2]Ibid [49].
It has also been observed that the dispute or offsetting claim should have sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is necessary to the effect of operation of the statutory scheme.[3]
[3]Ibid [49].
In Lodge Partners Pty Ltd v Pegum, a case which concerned the construction of a document in the context of a genuine dispute, Lindgren J observed:
…where the dispute relates to a simple question of construction that can be decided following a short hearing and there is no factual issue to be resolved, the Court will decide the question and if construction is against the company the dispute will not be classified as ‘genuine’…[4]
[4]255 ALR 516, [18]. See also Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379, 384-85.
Counsel for Ms Messer, Mr Diaz, in his written submissions in reply asserts that the question of whether interest is due and payable under the Loan Agreement is a question of construction and the terms of the Loan Agreement ought to be given a business-like interpretation.
A construction that is, in his submission, ‘commercial nonsense’ or ‘commercially inconvenient’, (which are expressions discussed in the decision of Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at paragraph 82), should be rejected. Similarly, he submits, a semantic and syntactical analysis leading to a construction flouting business common sense must be rejected and yield to interpretation consistent with business common sense. I agree.
He contends that AspectFP’s construction of the Loan Agreement should be rejected as it wholly ignores the clear commercial intent of the purpose of the Loan Agreement; that is, to facilitate the lending of $175,000 to AspectFP, repayable with interest on either the repayment date or such other date as agreed. He contends that there can be no genuine dispute within the meaning of the Act based on the ground raised.
In my view the terms of the Loan Agreement are clear and required payment of the principal and interest on 15 September 2018. The interest of 12.5% of the principal for the term of the loan was readily calculable. There has been no agreement that the repayment date be extended or varied. One scenario which was suggested at the hearing of this matter today is that the Court may vary the demand to remove the interest component to specify an amount of $175,000, but in my view, the terms of the Loan Agreement are clear and the amount on the demand should not be varied under s 459H.
Mr Hristovski placed emphasis on the words ‘on settlement of outstanding borrowing’ where they appear in clause 5 of the agreement. In my view, it is clear, having regard to the context, that ‘settlement of outstanding borrowing’ means repayment of the principal on the repayment date, and interest was repayable on the same day that the capital was repayable, 15 September 2018. I do not regard the issue as to the construction as being arguable or tenable and I consider that the matter does not warrant further investigation in that context.
I do not accept Mr Hristovski’s submission that Ms Messer has made a claim for a debt which is not presently due and payable on the basis that the interest is not due and payable. I regard such a proposed construction as being completely untenable. In effect, if one applied AspectFP’s construction, interest would only be payable at its whim if and when it decided to repay the principal debt. Further, Mr Hristovski asserted that the figure for interest was fixed at 12.5% for the term of the loan identified in the schedule and no further interest would accrue after that date if it was not repaid. I find that a most unattractive submission.
In these circumstances, there is no factual investigation required and no issue of credit. The matter, in my view, involves a quite straight forward question of construction of the terms of the Loan Agreement which is susceptible of resolution in this application. As such I do not regard there as being a genuine dispute arising from the construction of the terms of the Loan Agreement.
AspectFP’s submission that the amount of the demand is wrong or grossly overstated falls away on my finding that interest was due and payable on the date that the principal was due to be repaid. As such, ground 1 is not made out.
I turn to the contention by AspectFP that the affidavit accompanying the demand does not comply with the Act. It is said that there are a number of deficiencies in the verifying affidavit which are identified in Mr Hristovski’s submissions. They are as follows:
The Demand Affidavit does not comply with section 459E of the Act or the Court Rules as:
(a)the Demand Affidavit does not verify the Debt, but simply refers to the Loan Agreement. This is not sufficient. Verification of the total debt demanded (as to quantum) is required;
(b)it is not enough for the Demand Affidavit to simply refer to the principal debt and interest in an unquantified amount and without reference to the amounts sought in the Demand;
(c)the prescribed Form 7 specifically requires the deponent to refer to the debt figure specified in the statutory demand and verify that it is due and payable. The figures in the Demand and the Demand Affidavit should be the same. The Demand Affidavit does not do this;
(d)the amount claimed in the Demand was wrong as interest was not due and payable; and
(e)the Defendant does not state that there is no genuine dispute as to the amount claimed in the Demand. The Demand Affidavit simply refers to there being no dispute as to the “debt” in circumstances where it is unclear what debt is referred to and in circumstances where the amount stated in the Demand Affidavit is different to the total amount stated in the Demand.
The text of Ms Messer’s affidavit which accompanied the demand, omitting the formal parts, deposed:
(1)I am the creditor and I make this affidavit from my own knowledge, information and belief except where stated otherwise.
(2)I advanced the sum of $175,000 (‘The loan’) to the debtor company following the execution of a loan agreement dated 25 June 2018. A copy of the loan agreement is marked with the letter A and attached to this affidavit.
(3)The loan advanced to the debtor company has not been repaid along with the agreed interest and is due and payable by the debtor company.
(4)I believe there is no genuine dispute about the existence or amount of the debt.
The affidavit sworn by Ms Messer was served with the demand. The demand claimed an amount of $196,875. The schedule to the demand identified the principal sum advanced to the company as being $175,000 together with interest at the rate of 12.5% as specified in the Agreement of $21,875.
The Loan Agreement was exhibited to the affidavit accompanying the demand. In my opinion there could be no confusion as to the debt and how it is comprised if the documents consisting of the demand, the affidavit and the exhibit are read together, as the Act implicitly contemplates they be read. Paragraph 3 of the affidavit accompanying the demand refers to the ‘agreed interest’ and that amount is identified in the schedule to the demand. That figure is readily calculable and is simply 12.5% of the principal, $175,000. In my view, no substantial injustice arises by reason of what Mr Hristovski identifies are deficiencies in the affidavit accompanying the demand and I reject AspectFP’s submissions in that regard.
I consider that the situation is quite different from that the subject of consideration in the case of Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (‘Portrait Express’).[5]In Portrait Express, there were deficiencies relating to the debts claimed in the demand and the verifying affidavit averred to matters which were clearly incorrect. Further, in Portrait Express, the affidavit did not specify the source of the deponent’s knowledge, did not state that the deponent believed the matters set out in the affidavit were true and did not state that the deponent believed that no genuine dispute existed as to the debt.
[5](1996) 20 ACSR 746 (‘Portrait Express’).
I was referred to the decision of Print Mail Logistics Ltd v Waratah Investments Pty Ltd.[6] In that case, the affidavit contained a false statement in that the deponent had sworn that he had inspected accounts related to the creditor when in fact there were no such accounts. This is not this case. The affidavit of Ms Messer accompanying the demand contained no factual inaccuracies. The Loan Agreement and its terms are not contentious and when read together, the demand and the affidavit accompanying it admit of no confusion and give rise to no injustice. I do not consider that the alleged deficiencies referred to by Mr Hristovski give rise to any basis to set the demand aside.
[6](2018) 131 ACSR 559.
The remaining issue upon which AspectFP relies is based on the fact that when Ms Messer swore her affidavit accompanying the demand she did not sight the demand. In his written submissions, Mr Hristovski observed that Ms Messer’s affidavit in opposition states that on 23 November 2018 she received an email from her solicitor, Mr Dunn, attaching a form of affidavit. The email stated:
Kaylene,
See attached Affidavit and Exhibit ‘A’. Please attend at your local Police station and have it sworn and return the original to me by express post. I have retained the original signed CSD for service with the original sworn Affidavit and Exhibit.
Regards,
Steven Dunn.
The draft affidavit was attached to this email. Exhibit ‘A’ is a copy of the Loan Agreement.
Mr Hristovski observes that the email from Mr Dunn to Ms Messer did not attach a copy of the demand in either a signed or unsigned form and there is no evidence that Mr Dunn ever sent Ms Messer a copy of the demand. As such, he contends Ms Messer did not have and could not have had regard to the demand and the matters set out in it before swearing her affidavit accompanying the demand. He referred to a passage from Portrait Express[7] where Bryson J observed that the verification process, i.e. the requirement for verification of a demand not based on a judgment by an accompanying affidavit:
... must be carried out in a responsible way, and regard must be paid, with a strictness appropriate for verification, to the need to review the available information and observe whether what is being verified conforms to the information in the creditor’s own hands.
[7]Portrait Express (n 5) 758.
Mr Hristovski contended that in these circumstances there has not been an appropriate verification of the debt if Ms Messer had not sighted the demand by reason that one can only verify a matter that one knows exists.
In his submissions, Mr Diaz, Counsel for Ms Messer contended that the purpose of providing a verifying affidavit is to advise a debtor that a debt is owing and that the creditor has no doubt that it is owed and to satisfy the Court that the creditor has taken steps to assure itself that the debt is outstanding. In that regard, he submitted the following principles are relevant:
(i) the purpose of the verifying affidavit is to verify ‘the debt’, not to verify that the particulars of the demand are correct or that the deponent has sighted the demand and agrees with its contents;
(ii) the verifying affidavit need only ‘verify’, in the sense of formally affirming that the debt is due and payable, and does not need to substantiate the debt’s existence;
(iii) although there is a prescribed form for verifying affidavits under the Rules, a verifying affidavit does not need to strictly comply with that form;
(iv)to the extent that the requirements of the prescribed form are extraneous to the statutory purposes of the verifying affidavit, a failure to include such information is not relevant; and
(v) a verifying affidavit cannot verify a debt if it is sworn on a day prior to the date the demand is signed.
Mr Diaz contended that Ms Messer’s affidavit verifies that the debt described in the demand is due and payable in that:
(a) the demand specifies the debt as being $175,000 that was advanced to AspectFP and the interest payable as that specified in the ‘Agreement’ being the Loan Agreement; and
(b) the verifying affidavit provides verification that:
(vi)the defendant advanced $175,000 to the plaintiff pursuant to the terms of the Loan Agreement exhibited; and
(vii) as at the date of the affidavit, AspectFP had not repaid the debt owing under the Loan Agreement that was due and payable under that agreement.
Mr Diaz submitted that the only deficiency in the accompanying affidavit is perhaps that Ms Messer did not quantify the total owed under the Loan Agreement in paragraph 2 but this cannot be a substantive deficiency given that Ms Messer otherwise verifies the debt by reference to its source being the advance of funds under the Loan Agreement. In that regard, it is not a case where there is an inconsistency in the descriptions of the debt in the demand and in the accompanying affidavit such that the true nature of the debt cannot be ascertained. Again, he submitted that the demand and the accompanying affidavit read together are clear as to how the debt is constituted and I agree.
Mr Diaz submitted that the verifying affidavit in Form 7 of the Rules does not require verification of the debt specified in the demand because:
(a) there is no principle that a verifying affidavit sworn on the same date as a demand, but before the demand is signed, is incapable of verifying the debt described in the demand. He contended that to the contrary such a principle should be expressly rejected by the Court because that principle:
(viii) would encourage only ‘arid enquires’ as to which of the signatures on a demand and its accompanying verifying affidavit was first affixed, even if there was a short interval of time between the two;
(ix) would discourage the resolution of disputes concerning demands on the basis of substantive injustice; and
(x) is inconsistent with the general principle that the law does not concern itself with fractions of a day.
Mr Diaz contended that the Act only requires an accompanying affidavit to verify that the ‘debt’ is due and payable. The Act neither expressly nor implicitly requires that the deponent also depose that the demand has been sighted by them. If it did, then that requirement would open up those types of ‘arid enquires’ with which the Act is not concerned where a demand is signed by a person other than the deponent of the accompanying affidavit. He states that on that basis, the Court should reject that such a requirement exists under the Act.
Section 459E(3) provides:
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.
Rule 5.2 of the Rules provides:
Affidavit accompanying statutory demand ((s 459E)(3) of the Corporations Act) – Form 7
5.2For the purpose of s 459E(3) of the Corporations Act, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must –
(a)be in accordance with Form 7 and state the matters mentioned in that Form;
(b)be made by the creditor or by a person with the authority of the creditor or creditors; and
(c)not state a proceeding number, or refer to a court proceeding, in any heading or title to the affidavit.
In my view, the affidavit sworn by Ms Messer appears to be in compliance with Form 7 of the Rules. There is no reference to the demand in Form 7 other than the reference in paragraph 1 where the deponent is directed to ‘State nature of debt, or debts, ensuring that what is stated corresponds with the description of the debt, or debts, to be given in the proposed statutory demand, with which this affidavit is to be served on the debtor company.’ This is a direction requiring the deponent to describe the nature of the debt and ensuring that the statement of its nature matches what is stated in the proposed demand, which I consider has occurred in this case.
There is no other mention of ‘the demand’ as such in Form 7 and there is no reference required to be made to it in the prescribed text which the deponent is obliged to swear or affirm to. Rather, there is reference throughout to ‘the debt’ or ‘the debts’. There is no requirement in the text of the affidavit that there be reference to the demand at the time of swearing the affidavit or that it be exhibited to this affidavit.
As such, the terms of the Act in my view do not stipulate that there must be reference to the demand or that it must be sighted when the deponent to the affidavit accompanying the demand swears the affidavit. The Rules and the relevant form are concerned with verification of the debt, not the demand. For that reason I do not consider that the fact that Ms Messer did not have the demand in signed or unsigned form before her when she swore the affidavit constitutes ‘substantial injustice’ under s 459J(1)(a) or ‘some other reason’ under s 459J(1)(b) of the Act to set aside the demand and I reject AspectFP’s submissions in that regard.
In the circumstances, I will order that the plaintiff’s application to set aside the demand be dismissed.
I will also order that:
1. The plaintiff’s application dated 18 December 2018 be dismissed.
2.The plaintiff is to pay the defendant’s costs of the proceeding including costs reserved on 13 February 2019.
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