Australian Rural Group Ltd v Main Camp Tea Tree Oil Ltd - [2001] NSWSC 1111

No judgment structure available for this case.

CITATION: Australian Rural Group Ltd v Main Camp Tea Tree Oil Ltd [2001] NSWSC 1111

FILE NUMBER(S): SC 2716 of 2001

HEARING DATE(S): Monday, 12 November 2001
Monday, 3 December 2001

JUDGMENT DATE:
3 December 2001

PARTIES :

Australian Rural Group Limited (Plaintiff)
Main Camp Tea Tree Oil Limited (Defendant)

JUDGMENT OF: Master McLaughlin

COUNSEL : C.C. Hodgekiss, T. Bartush-Peek (Plaintiff)
K. Eassie (Defendant)

SOLICITORS: Tey McMahon Solicitors (Plaintiff)
Cordato Partners Solicitors (Defendant)

LEGISLATION CITED: Corporations Act

CASES CITED: Bluecrest Holdings Pty Limited v Steve Blyth Electrical Engineering & Contracting Pty Limited 241 FCA (23 February 2001)
Daewoo Australia Pty Limited v Suncorp-Metway Limited (2000) 33 ACSR 481
David Grant & Co Limited v Westpac Banking Corporation (1995) 184 CLR 265
Gray Winter Properties Pty Limited v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581
Topfelt Pty Limited v State Bank of New South Wales (1993) 120 ALR 155

DECISION: See paragraph 70.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER McLAUGHLIN

Monday, 3 December 2001

2716/01 AUSTRALIAN RURAL GROUP -V- MAIN CAMP TEA TREE OIL LIMITED

JUDGMENT

1 MASTER: By originating process filed on 18 May 2001 the plaintiff, Australian Rural Group Limited, claims against the defendant, Main Camp Tea Tree Oil Limited, substantively an order in the following terms:

"An order pursuant to section 459H and/or section 459J that the Creditor's Statutory Demand for Payment of Debt pursuant to section 459E dated 2 May 2001 be set aside."

2 There was filed in support of that originating process an affidavit of Michael John Teys. That affidavit bears the date 30 March 2001. It will be appreciated that that date is a date considerably before the date of the originating process and, indeed, considerably before the date of the service of the statutory demand, which is the subject of the proceedings.

3 A subsequent affidavit by Mr Teys, sworn on 16 July 2001, states that the earlier affidavit "inadvertently referred to 30 March 2001 as the date of being sworn". Mr Teys states that the date of swearing was 18 May 2001.

4 A further somewhat curious aspect of that original affidavit of Mr Teys is that paragraph 2 thereof commences with the words, "This is a further affidavit in support of an application by the plaintiff." No other, or earlier, affidavit in support of that application appears to have been filed or, indeed, to be relied upon.

5 The principal affidavit of Mr Teys (which, although dated 30 March 2001, I will treat as having been sworn on 18 May 2001) annexes copies of documents which were served on the plaintiff on 3 May 2001, those documents being described as a creditor's statutory demand and an affidavit.

6 Mr Teys, in paragraph 4 of his affidavit, states as follows:

"I note that the demand does not properly follow prescribed form 509H and that:

(a) the demand is not addressed to the plaintiff directly but to its company secretary;

(b) there is a deletion in paragraph 1 of the address of the defendant;

(c) the demand does not contain as prescribed either a paragraph asserting the amount in paragraph 1 is due and payable by the plaintiff or a paragraph stating attached is an affidavit verifying the amount is due and payable by the plaintiff; and

7 Paragraph 5 of Mr Teys affidavit is in the following terms:

"I note that the affidavit of Frederick Theodore Gulson of 2 May 2001 refers to a demand but does not identify by date or an amount the demand to which he refers."

8 Mr Teys concluded his affidavit by stating in para 6:

"I respectfully request that the court set aside the demand pursuant to section 459J of the Law."

9 The application by the plaintiff is for an order setting aside the statutory demand served upon it, and made pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Act (formerly the Corporations Law).

10 Section 459J of that statute is in the following terms.

(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.

11 In light of the terms of the relief sought in the originating process and in light of the matters set forth in the aforesaid affidavit of Mr Teys bearing date 30 March 2001, it is appropriate that I should set forth the terms of the statutory demand and the affidavit of Frederick Theodore Gulson of 2 May 2001, which are the subject of the complaints by Mr Teys in the affidavit from which I have just quoted.

12 The statutory demand is headed "Form 509H Paragraph 459E(2)(e) Corporations Law. Creditor's statutory demand for payment of debt." It is addressed to the Company Secretary, Australian Rural Group Limited ACN 002 635 501 ARG House, McLennan Close, Bathurst NSW 2795 (the "company").

13 Paragraph 1 of the statutory demand is in the following terms:

"The company owes Main Camp Tea Tree Oil Limited ACN 054 989 516 (the “creditor”) the amount of $1,150,079.00, being the total amounts of the debts described in the Schedule."

14 Then follow a number of other paragraphs and thereafter appears, under the heading "Schedule", the following:

“Description of the debt”, “Fees paid and recoverable”, “Refer schedule attached".

15 Under the heading "Date" appears the word "various" and under the heading "Amount of debt” appears “$1,150,079”, and under the hearing “Total Amount” appears “$57,470.89."

16 The statutory demand is dated 2 May 2001. It is signed by Anthony Cordato, who describes the capacity in which he signed as “solicitor” and contains various statements under the heading "Notes." There is attached to the statutory demand a further five pages under the heading "Schedule to statutory demand dated 2 May 2001 to Australian Rural Group Limited." There then follows the subheading "Main Camp Tea Tree Oil Project No 1, trustees fees paid project 1" and a number of items under the respective heads: “Payment date” and “amount”.

17 That is followed by a similar list of items under identical headings: The payment date and amount in respect to "Main Camp Tea Tree Oil Protect No 2, Trustees Fees Paid, Project 2; “Main Camp Tea Tree Oil, Project No 3 Trustees Fees Paid, Project 3" and, finally, "Main Camp Tea Tree Oil Project No 4, Trustees Fees Paid, Project 4" and at the conclusion of this document the words and figures "Grand total $1,150,079".

18 There is physically attached as Annexure B to Mr Teys’ affidavit a document headed "Affidavit under section 459E(3) of the Corporations Law" bearing the name of the present defendant, described as creditor, and the name of the present plaintiff, described as debtor. That affidavit was sworn by Frederick Theodore Gulson on 2 May 2001 and consists of three paragraphs as follows:

"1. I am a director of the Creditor and have knowledge of the debtor's ledgers of the Creditor and of the debt owed by the Debtor. I am duly authorised to swear this Affidavit.

2. I have duly verified by perusing the financial records of the Creditor, that the Debtor is indebted in the amount now demanded, and as described in the demand, and believe the details set out in the demand are true and correct.

19 I have had the benefit of receiving from Counsel for the respective parties written outlines of their submissions. Counsel’s written outlines will be retained in the Court file.

20 Essentially, the plaintiff grounds its claim to have the statutory demand set aside upon defects in the statutory demand, defects in the affidavit in support of the statutory demand, and a genuine dispute asserted to exist between the plaintiff and the defendant in respect to the alleged indebtedness which is the subject of the demand.

21 I have already set forth the provisions of section 459J of the Corporations Act, that being the section upon which the plaintiff relies in its application to set aside the demand as a result of the asserted defects in the demand itself and in the affidavit of Mr Gulson which was served with the demand.

22 I have already observed that the present application is brought pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Act.

23 The plaintiff has invoked the provisions of section 459G of that statute. Subsection (1) of that section enables a company which has been served with a statutory demand, to apply to the Court for an order setting aside the statutory demand.

24 Subsection (2) prescribes that such an application may only be made within 21 days after the demand is so served. In the instant case the demand was served on 3 May 2001 and, accordingly, the proceedings instituted by the filing of the originating process on 18 May 2001 were instituted within that period of 21 days.

25 Subsection (3) of section 459G is in the following terms:

"An application is made in accordance with this section only if, within those 21 days:

(a) an affidavit supporting the application is filed with the Court; and

26 The effect of section 459G was considered by the High Court of Australia in David Grant & Co Pty Limited v Westpac Banking Corporation Limited (1995) 184 CLR 265.

27 It has been submitted on behalf of the defendant in the present proceedings that the plaintiff, having raised in the affidavit in support of the originating process certain grounds upon which it seeks to have the statutory demand set aside, is then limited to those grounds and, having brought the application, in the words of Counsel for the defendant, having availed itself of the gateway provided by section 459G, cannot, therefore, rely upon an asserted genuine dispute as to the existence or amount of the debt to which the demand relates.

28 That submission on behalf of the defendant appears to me to be consistent with the decision of the High Court of Australia in David Grant v Westpac Banking Corporation and also with the decision of Sundberg J in the Federal Court of Australia in Gray Winter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 21 ACSR 581. It has, however, been recognised by Beaumont J in the Federal Court of Australia in Bluecrest Holdings Pty Limited v Steve Blyth Electrical Engineering and Contracting Pty Limited (23 February 1998, unreported) that the question remains open as to whether a party, in the situation of the plaintiff in the present proceedings, having invoked the provisions of section 459G, in reliance only upon certain specified grounds, can then, after the lapse of the 21 day period referred to in subsection (2) of section 459G, raise another ground (being here a genuine dispute as to the existence or amount of a debt).

29 I am inclined to agree with the submissions made on behalf of the defendant in this regard and to accept, as appears to be recognised on behalf of the plaintiff, that section 459H, which deals with the determination of an application where there is a dispute as to the existence of amount of the debt claimed, should be treated as a code relating to the question of existence of such a genuine dispute.

30 Were I to be wrong in that regard, and were it to be open to the plaintiff to rely upon this ground (the existence of a genuine dispute), then affidavit material which has been read in the hearing of the present proceedings (but the admission of which, in relation to the proceedings, as the defendant perceives them to be constituted, was objected to) certainly would satisfy me of the existence of such a genuine dispute. However, I do not consider it is necessary for me to express a concluded view in this regard. Nevertheless, were it necessary for me to do so, I would, as I have already recorded, adopt the submissions of the defendant and decline to allow the raising of this further ground of a genuine dispute as a ground upon which the statutory demand should be set aside.

31 I turn now to the grounds which are expressly referred to in the affidavit filed in support of the originating process; that is, defects in the form of the statutory demand and in the affidavit which was served at the same time and with the statutory demand and which appears to be relied upon by the defendant as the affidavit which is required to be served with such a statutory demand.

32 Section 459E makes provision for the service on a company of a statutory demand. Subsection (2) prescribes the contents of such demand. Paragraph (e) of that subsection provides that the demand must be in the prescribed form, if any. Such a form has been prescribed, being Form 509H in Schedule 2 to the Corporations Regulations.

33 There are a number of asserted defects in the form of the demand. Those defects are identified in paragraph 4 of affidavit of Mr Teys bearing date 30 March 2001. The first is that the demand is not addressed to the plaintiff directly, but to the company secretary. I have already read out the form of that demand and it is directed "to the Company Secretary, Australian Rural Group Limited", followed by the Australian Corporation Number and the address of the company.

34 The second complaint is described as, "There is a deletion in paragraph 1 of the address of the defendant." However, what the plaintiff appears to be complaining about is that the address of the defendant does not appear in paragraph 1, that being an omission rather than a deletion of that address. Paragraph 1 commences with the words, "The Company owes Main Camp Tea Tree Oil Limited", followed by the Australian Corporation Number of that Company, but omits to provide any address for the company.

35 The form of the demand, as shown as Form 509H, indicates that it should be addressed to the name and the Australian Corporation Number of the debtor company with the address of the company's registered office, and that the first paragraph should include the name and address of the creditor.

36 Item (c) in paragraph 4 of Mr Teys' affidavit raises the fact that the demand does not contain either a paragraph asserting that the amount referred to in paragraph 1 of the demand is due and payable or a paragraph stating that there attached to the demand an affidavit verifying that the amount is due and payable. The prescribed form contains, as set forth in the second paragraph thereof, the following:

37 The statutory demand in the instant case does not contain either of those statements which appear in the prescribed form of the demand.

38 The final ground of the complaint concerning the form of the demand is that there are two completely different amounts shown in the demand. There is in paragraph 1 of the document an assertion that the plaintiff owes to the defendant the amount of $1,190,079. described as "being the total amounts of the debts described in the schedule". However, the schedule contains two figures, one under the heading "Amount of the debt", being $1,150,079; and the other appearing subsequently described as "Total amount", being $57,470.89.

39 Subsection (1) of section 459J vests the Court with a discretion to set aside the demand if it is satisfied of one or both of the following matters. The first is:

"(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside."

40 Subsection (2) of that section provides:

"Expect as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect."

41 That is, unless the Court is satisfied that because of the defect in the demand substantial injustice will be caused, then the Court is prohibited to setting aside the demand merely because of a defect. The word "defect" is defined in section 9 of the Corporations Act in relation to a statutory demand as including:

"(a) an irregularity; and

(b) a misstatement of an amount or total; and

(c) a misdescription of a debt or other matter; and

42 I have no hesitation in expressing my view that the first two items in respect of which the plaintiff complains, each constitute a defect, but that neither of those items is a cause of substantial injustice. Those two items are, firstly, that the demand is addressed to the company secretary of the plaintiff rather than merely to the plaintiff; and, secondly, that the address of the defendant is omitted from paragraph (a) of the demand.

43 The situation is somewhat different in respect to subparagraphs (c) and (d) of paragraph 4 of the affidavit of Mr Teys. Subparagraph (c) essentially asserts that the demand is defective in that it does not contain a statement that the amount is due and payable by the company or that it does not state there is attached an affidavit verifying that the amount is due and payable by the company.

44 This question of the form of the demand has been considered in Daewoo Australia Pty Limited v Suncorp-Metway Pty Limited, a decision of Austin J in this Court, (2000) 33 ACSR 481.

45 The demand also contains the two apparently inconsistent amounts of $57,470.89 and $1,150,079, there being a great divergence between those two amounts.

46 It is submitted, on behalf of the plaintiff, that the inclusion in the demand of those two amounts will cause confusion in the mind of the person receiving the demand and that, in consequence, substantial injustice will result. The defendant, however, submits that there can be no confusion in the mind of the plaintiff upon receipt of the demand as to what it was that the demand was requiring the plaintiff to pay. So, it is submitted by the defendant, the demand cannot be looked at in isolation, but must be looked at in the context of the relationship between the parties.

47 The affidavit of Mr Gulson sworn on 30 October 2001 was read in the present proceedings. Mr Gulson, being the director of the defendant who swore the affidavit which was served with the statutory demand, admits that the demand contains what he describes as "an obvious error in respect to the amount" Also Mr Gulson, in describing the circumstances in which apparently two statutory demands were prepared (although it would appear only one was served upon the plaintiff), speaks in paragraph 12 of his affidavit that he was concerned, if a second statutory demand was dated 2 May 2001, "that it may cause confusion for ARG".

48 In Topfelt Pty Limited v the State Bank of New South Wales Limited (1994) 120 ALR 155 Lockhart J, in the Federal Court of Australia, said:

"It is not asking too much that creditors who issue statutory demands under the Corporations Law should ensure that the demands are expressed in clear, correct and unambiguous terms. If the creditors wish to have the benefit of the presumption of insolvency, the least they can do is to tell the debtor companies in clear terms what amounts are due, whether they include interest or not, and, if so, the amount."

49 It is all very well for the defendant here to submit that the plaintiff could have been under no misconception as to the amount which the defendant was, by the statutory demand, requiring it to pay. The defendant in this regard relied upon immediately preceding communications between the parties and the relationship between the parties, a reference to the auditor of the defendant company and to a determination by that auditor. However, the audit related solely to the construction of certain trust deeds and not to the quantification of any amount that might, in the light of that construction, ultimately have been considered to have been owing by one party to the other.

50 Further, a letter which was sent by the defendant to the plaintiff on 22 April 2001, preceding the service of the statutory demand, refers to two amounts, one being the amount of $57,470.89 (which was the amount appearing in the demand under the description "total amount") and the other being the amount of $1,457,045. That latter figure is vastly different from the figure of $1,150,079, which is one of the amounts appearing in the statutory demand.

51 I am in agreement with the submissions of the plaintiff that any objective reader of the demand would be confused as to what it was that the defendant was requiring the plaintiff to pay.

52 I am satisfied that the use in the demand of those two separate and extremely divergent figures could have the effect of causing substantial injustice. That conclusion enlivens the discretion vested in the Court by subsection (1) of section 459J.

53 The omission from the demand of either of the statements appearing in the form of the demand, described as Form 509H, that the amount is due and payable by the company is also the subject of complaint by the plaintiff.

54 Section 459E prescribes in subsection (3) thereof as follows:

"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 amounts of the debts, is due and payable by the company; and

55 In the instant case the affidavit of Frederick Theodore Gulson sworn 2 May 2001 is the only affidavit by which the demand was accompanied. Somewhat curiously that affidavit does not in any way link itself up to the statutory demand. The deponent states that he is a director of the creditor, and that he has knowledge of the debtor's ledger held by the creditor and of the debt owed by the debtor. The creditor and the debtor identified in the heading to that affidavit. He states that he was duly authorised to swear the affidavit.

56 He then says, in paragraph 2, that he has verified, by perusing the financial records of the creditor, that the debtor, "is indebted in the amount now demanded, and as described in the demand." Then he proceeds to state this belief: "The details set out in the demand are true and correct." But he does not otherwise identify what is the amount now demanded or, indeed, identify the statutory demand itself. He does not, for example, annex the demand to his affidavit. Neither does he refer to the date of the demand, nor does he refer to the amount claimed in the demand.

57 The Corporations Law Rules prescribe in Rule 5.2 that the affidavit accompanying a statutory demand must be in accordance with Form 7 and state the matters mentioned in that Form. Form 7 is contained in Schedule 1 to the Corporation Law Rules, and set forth various matters which should appear in the affidavit. One of those matters is set forth in paragraph 4 of Form 7 as follows:

"The debt of $[amount]/The total $[amount] of the debts mentioned in the statutory demand is due and payable by the debtor company.”

58 The effect of not following the strict wording of Form 7 was considered by Austin J in Daewoo Australia Pty Limited v Suncorp-Metway Limited at 495. His Honour was there dealing with earlier Rules of the Court and an earlier form. However, the replacement of those Rules by the Corporations Law Rules and the replacement of the earlier form with Form 7 does not affect the substance of His Honour’s reasons. His Honour said:

GoldSpar Australia Pty Limited v KWA Design Group Pty Limited

59 Somewhat strangely, however, his Honour in Daewoo appears to limit himself to the requirements of the Rules and the prescribed form of the content of the affidavit which is referred to in section 459E(3) of the Corporations Law. His Honour in Daewoo does not address directly the requirement of that subsection of the statute, which is a mandatory requirement.

60 Where, as here, there is no judgment debt the statute requires that the demand must be accompanied by an affidavit that does two things. They are, firstly, that it verifies that the debt is due and payable by the company; and, secondly, that it complies with the Rules. With respect, I am in total agreement with his Honour that in respect to the requirements of the Rules and the form of affidavit required by the Rules substance must take precedence over form. Thus, if it is apparent that the affidavit substantially complies with the requirements of the Rules and follows, although not in exact language, the prescribed form, then I would not treat any departure from the precise working of the Rules and the form as constituting "some other reason" of the nature identified in subsection (1) of section 459J why the demand should be set aside.

61 However, the situation is quite different where the statute itself imposes a mandatory requirement that the demand must be accompanied by an affidavit that does two specific things.

62 One of those things that the affidavit must do is to verify that the debt is due and payable by the company. In the instant case the affidavit of Mr Gulson can properly be construed as verifying that the debt is due by the company, but it is does not go so far as to verify that the debt is payable by the company.

63 It seems to me that the failure of the defendant to comply with a mandatory requirement of the statute concerning a matter which must, on any account, be regarded as significant where a claim is being made against a company for an alleged debt, constitutes some other reason of the nature contemplated by paragraph (b) of section 459(1). It does not seem to me that the failure of the defendant to comply with a mandatory requirement of the statute can be cured by reference to other areas of evidentiary material: for example, evidence concerning the relationship between the parties; evidence concerning recent communications between the parties; or the determination of the auditor considering construction, but not quantification, of the trust deeds.

64 In my conclusion, therefore, the failure of the defendant to comply with the requirement of verifying, in the accompanying affidavit, that the debt is payable, as well as being due, by the company, constitutes “some other reason” why the demand should be set aside.

65 Moreover, I have considerable concern about the fact that the affidavit does not by any internal content link itself with, or associate itself with, the demand which it physically accompanied.

66 Further, I consider that the use of the two completely disparate figures in the demand itself constitutes a defect because of which substantial injustice will be caused unless the demand is set aside.

67 I have already recorded that it is not necessary for the purposes of the present proceedings for me to express a concluded view as to whether the plaintiff is entitled to raise the existence of genuine dispute. I would strongly incline, however, to the view that the plaintiff is not entitled, in the present proceedings, to raise such a ground.

68 It follows from my forgoing conclusions that the statutory demand will be set aside, and I propose to make an order in that regard.

69 (Counsel addressed on a stay and cost orders.)

70 I make the following orders:

(1). I make an order as in prayer 1 in the originating process.

(2). I order that the defendant pay the costs of the plaintiff, such costs to be on the party and party basis.

(3). On the application of the defendant, which is opposed by the plaintiff, I order that execution on the forgoing orders be stayed up to and including Thursday 6 December 2001.

71 The written submissions will be retained in the Court file.

72 The copies of various authorities are handed back. The folder of the exhibits will be returned.

73 (For application to correct a matter in the written submissions see separate transcript.)

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Last Modified: 05/19/2003

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Australian Rural Group Ltd v Main Camp Tea Tree Oil Ltd [2001] NSWSC 1111

Cases Citing This Decision

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Cases Cited

6

Statutory Material Cited

1

David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43

CITATION:	Australian Rural Group Ltd v Main Camp Tea Tree Oil Ltd [2001] NSWSC 1111
FILE NUMBER(S):	SC 2716 of 2001
HEARING DATE(S):	Monday, 12 November 2001 Monday, 3 December 2001
JUDGMENT DATE:	3 December 2001
PARTIES :	Australian Rural Group Limited (Plaintiff) Main Camp Tea Tree Oil Limited (Defendant)
JUDGMENT OF:	Master McLaughlin

COUNSEL :	C.C. Hodgekiss, T. Bartush-Peek (Plaintiff) K. Eassie (Defendant)
SOLICITORS:	Tey McMahon Solicitors (Plaintiff) Cordato Partners Solicitors (Defendant)
LEGISLATION CITED:	Corporations Act
CASES CITED:	Bluecrest Holdings Pty Limited v Steve Blyth Electrical Engineering & Contracting Pty Limited 241 FCA (23 February 2001) Daewoo Australia Pty Limited v Suncorp-Metway Limited (2000) 33 ACSR 481 David Grant & Co Limited v Westpac Banking Corporation (1995) 184 CLR 265 Gray Winter Properties Pty Limited v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581 Topfelt Pty Limited v State Bank of New South Wales (1993) 120 ALR 155
DECISION:	See paragraph 70.