Blayney Wholesale Foods Pty Ltd v BIS Cleanaway Ltd

[2008] NSWSC 1146

CITATION:	Blayney Wholesale Foods Pty Ltd v BIS Cleanaway Ltd [2008] NSWSC 1146
HEARING DATE(S):	28/10/08
JUDGMENT DATE :	29 October 2008
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Statutory demand set aside
CATCHWORDS:	CORPORATIONS - winding up - statutory demand - application for order setting aside - whether genuine dispute as to existence of debt - whether defect in statutory demand because basis of alleged indebtedness not sufficiently explained - where demand refers to earlier invoice and invoice was accompaned by explanatory letter - whether deficiency in affidavit accompanying statutory demand is "some other reason for setting aside" - deficiency is deponent's statement that source of his knowledge of matters deposed to is "my personal knowledge"
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 459E(3), 459G, 459H(1)(a), 459J1(a), (b) Supreme Court (Corporations) Rules 1999, Form 7
CATEGORY:	Principal judgment
CASES CITED:	Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 LSI Australia Pty Limited v LSI Holdings Pty Limited [2007] NSWSC 1406 Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 493; (2005) 54 ACSR 498 Walltech Building Systems Pty Ltd v Gerlich [2008] NSWSC 1048
PARTIES:	Blayney Wholesale Foods Pty Limited - Plaintiff BIS Cleanaway Limited - Defendant
FILE NUMBER(S):	SC 5145/06
COUNSEL:	Mr M T Hutchings - Plaintiff Mr A J McInerney - Defendant
SOLICITORS:	McIntosh McPhillamy & Co - Plaintiff Carneys Lawyers - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY 29 OCTOBER 2008

5145/06 BLAYNEY WHOLESALE FOODS PTY LIMITED v BIS CLEANAWAY LIMITED

JUDGMENT

1 The plaintiff makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside the statutory demand served on it by the defendant more than two years ago, that is to say on 11 September 2006.

2 The reasons why the matter took more than two years to come to trial need not be explored. It was before the court on no less that 14 occasions before coming before me for hearing yesterday.

3 The debt or alleged debt to which the statutory demand relates is stated in its paragraph 1 to be in the sum of $43,945.85. The debt is described in the schedule to the statutory demand as follows:

“ SCHEDULE

DESCRIPTION OF DEBT	AMOUNT OF DEBT
By agreement between Blayney Holdings Pty Limited ACN 003 976 341 trading as Blayney Frozen Foods (as the Company was then known) and the Creditor made on 7 March 2003, the Creditor agreed for reward to provide waste disposal services to the Company for a term of 3 years at an agreed rate (‘the agreement’).	$43,945.85
It was a term of the agreement that the agreement would be automatically renewed at the end of the term for a further term unless either the Company or the Creditor gave written notice of termination to the other at least 60 days before the end of that term (clause 3.1).
It was a term of the agreement that the Creditor may terminate the agreement immediately if the Company fails to pay money to Creditor when it is due (clause 3.3(b)).
It was a term of the agreement that the Creditor may terminate the agreement immediately if the Company breaches any term of the agreement (clause 3.3(c)).
It was a term of the agreement that if: (a) The Creditor terminated the agreement rather than by giving proper notice under clause 3.1; or (b) The agreement was terminated under clause 3.3(b) or 3.3(c), the Company is to pay the Creditor damages calculated by multiplying their total average monthly charge for the period between the commencement date and the termination date by half the number of complete months left in the term (clause 3.4).
In performance of the agreement, the Creditor provided waste disposal services to the Company for a term of 3 years.
In performance of the agreement, the Company paid the Creditor for the services provided at the agreed rate for a term of 3 years.
After the completion of the 3 year term, the term was renewed for a further term under clause 3.1 as the Company did not give the Creditor written notice of termination of the agreement at least 60 days before the end of that term or at all.
On or about 21 April 2006, the Company refused to pay the Creditor.
On or about 21 April 2006, the Company terminated the agreement.
On 1 August 2006, the Creditor caused Tax Invoice No. BA11277 dated 1 August 2006 to be sent to the Company claiming liquidated damages in the sum of $43,945.85 (inc GST) (“the Tax Invoice”) pursuant to clause 3.4.
The Company has failed to pay the Tax Invoice.

4 The plaintiff attacks the statutory demand on several grounds. It contends, first, that there is a genuine dispute about the existence of the debt; second, that there is a genuine dispute about the amount of the debt; third, that there is a defect in the demand; and, fourth, that there are deficiencies in the affidavit that accompanied the statutory demand in conformity with s 459E(3) such as to warrant setting aside of the demand.

5 The first two matters are advanced by reference to s 459H(1)(a), the third by reference to s 459J(1)(a) and the fourth by reference to the s 459J(1)(b).

6 I consider first the contention that there is a genuine dispute about the existence of the debt.

7 Mr McInerney of counsel who appeared for the defendant emphasised that the plaintiff, in advancing its case that there is a genuine dispute as to the existence of the debt, is confined to the grounds for alleging such dispute that are raised by the affidavit in support of the s 459G application. He referred to Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 and to several subsequent cases in which the reasoning expounded there has been applied, including decisions of intermediate appellate courts.

8 Mr McInerney submitted that the supporting affidavit in this case – Mr Tanos’ affidavit of 30 October 2006 – did not go beyond mere assertion of the existence of a genuine dispute. I do not accept that that is so. I do, however, accept Mr McInerney's alternative submission that, as regards the question of genuine dispute as to the existence of the debt, the affidavit delineates the grounds in fairly narrow terms in its paragraph 17:

“The alleged agreement was not signed by an authorised officer of the Company. I am informed by Mr Gaeta, and verily believe, that Mr Gaeta was induced into signing the agreement by an employee or representative of Cleanaway following representations that the agreement was limited in effect and as to time.”

9 There is then a question about just what that delineation is. That, however, is more conveniently addressed after the facts have been considered.

10 There is in evidence a printed form agreement (with detailed terms on the back) ostensibly between "Brambles Australia Pty Limited (ACN 000 164 938) trading as Cleanaway" and "Blayney Frozen Foods". Given the correspondence of the ACN 000 164 938, I infer that “Brambles Australia Limited” is a former name of the defendant. “Blayney Frozen Foods”, it is accepted, is a name registered under the Business Names Act 1962 in respect of the plaintiff which, at the time of the registration, had the name “Blayney Holdings Pty Limited”.

11 The printed form carries on its face in the space for execution by "Customer" the signature of Phillip Gaeta against which are written apparently by him "7/3/03" in the space for "Date", "Phillip Gaeta" in the space for "Print Name" and "Opp Manager" in the space for "Position". In the space for execution by Cleanaway, appears a signature that cannot be deciphered which purports to be the signature of "Administrator". Against this signature in the space for "Date" is written in apparently the same hand "18/02/03".

12 Where it is said in the first sentence of paragraph 17 of Mr Tanos' affidavit that the alleged agreement was not signed by "an authorised officer" of the plaintiff, it must I think be accepted that a ground of want of authority or want of officer status or both on the part of Mr Gaeta is sufficiently raised so that the plaintiff challenges the existence of the agreement on the ground that it was not signed by an officer of the plaintiff so as to bind the plaintiff and was not otherwise signed by a person having the authority of the plaintiff so as to become a binding engagement of the plaintiff.

13 Mr Gaeta gave evidence on affidavit of 23 April 2008 that at that date he was "employed as the Operations Manager Blayney Investments Pty Limited". He also gave evidence that in February 2003 he was "employed by Blayney Investments Pty Limited, the corner of Lawson and Toolbar Streets, Blayney in the State of New South Wales".

14 There is also evidence from Mr Tanos that a number of the companies in the “Blayney Group”, as he calls it, obtained services from the defendant; also that the waste output from the plaintiff itself was small between February 2003 and May 2006.

15 Turning to the second sentence of Mr Tanos' paragraph 17, the matter raised is an allegation that Mr Gaeta was "induced into signing the agreement by an employee or representative of Cleanaway following representations that the agreement was limited in effect and as to time".

16 Given the earlier denial of the making of any agreement, this second sentence in referring to signing of "the agreement" must be taken to refer to the signing of the document or form on which the defendant relies in alleging the indebtedness. The reference to inducing representations must I think open up in a fairly wide way the context in which the signing took place.

17 Mr Gaeta gives evidence that, on or about 7 March 2003, a woman he knew only as Leanne from Cleanaway attended the premises at the corner of Lawson and Tollbar Streets, Blayney and that there was a conversation between them as set out in paragraph 8 of his affidavit:

“On or about 7 March 2003, Leanne attended the premises at the corner of Lawson and Tollbar Streets Blayney and insisted on speaking with me in words to the effect:
‘I need to talk to you about pricing.’
I replied: ‘I am really busy just now’.
Leanne said: ‘There is going to be a big rise in the dumping fees that Cleanaway pays at the tip. That means we will be charging you more for each lift of the waste bins.’
I observed Leanne then produced a form of some kind with the logo of Cleanaway printed on it.
Leanne then said:
‘If you sign this today, I will lock in the price Cleanaway currently charges you for each lift for twelve more months.’
I looked at the document which had no handwriting on it of any kind and said:
‘This is blank.’
Leanne said: ‘I know. Don’t worry about it, just sign it to lock in your price. I will fill in all the details and then come back to you and talk to you about it.’
I said: ‘Look I am just too busy now.’
Leanne said: ‘I know. Look, all you have to do is sign it to lock in your price. I will fill all the rest in and come back and see you.’”

18 Paragraph 9 of his affidavit reads:

“I did not read the document carefully, I did not look to see if there was any writing on the reverse side of the document as I was assured by Leanne’s words that the only effect of signing the document was to lock in an existing lift price for twelve (12) months.”

19 I am satisfied that the delineation of grounds in the two sentences of paragraph 17 of Mr Tanos' first affidavit is sufficient to raise matters which are acceptably amplified in the part of the later affidavits of Mr Tanos and Mr Gaeta to which I have referred.

20 Taken as a whole, the plaintiff’s evidence lends credence to the propositions, first, that when Mr Gaeta signed the printed form document in March 2003, he was not an officer or employee of the plaintiff and did not act with the authority of the plaintiff; second, that one or more other companies in the “Blayney Group” obtained from the defendant services of the kind covered by the agreement’ and, third, that the document Mr Gaeta signed was a blank form in which the name of the customer, the commencement date, the expiry of the initial period, the pricing structure and the character of the agreement as "permanent agreement" or "temporary agreement" did not appear, these all being particulars written in by hand.

21 Unexplained by Mr Gaeta's account is how the apparent date of signature by "Administrator" for the defendant is a date before the apparent signing by Mr Gaeta. That does tend to place a question mark over his account but it is not my task to come to firm conclusions on that in the present proceedings.

22 Leanne, the person apparently representing the defendant who, according to Mr Gaeta, was present when he signed, did not give evidence. It is said on affidavit by a manager of the defendant that Leanne is no longer an employee and that he does not know her whereabouts. He does, however, give evidence of the system of contract administration administered by Leanne. The description is at odds with the version of events regarding signing by Mr Gaeta. But the evidence of system is of limited value in deciding what actually happened on the particular occasion – not, as I say, that I am required here to come to a concluded view about what happened.

23 I have only to decide whether a “plausible contention” is raised consistent with the existence of a dispute as alleged by the plaintiff. This is the test stated in the well-known case of Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785. Having regard to the evidence to which I have referred I am of the opinion that a “plausible contention” has been shown as to existence of a genuine dispute on the basis referred to by Mr Tanos in his paragraph 17 and amplified in his later affidavit and that of Mr Gaeta. Furthermore, that evidence is relevant to each of the grounds of challenge appearing from paragraph 17, understood in the way I have already described.

24 As I have said on a number of earlier occasions, including in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411, the tests of "plausible contention requiring investigation”, “real but not serious, hypothetical, delusionary or misconceived" and "perception of the genuineness (or lack of it)" – all expressions from earlier cases – applied in the context of a summary procedure where "it is not expected that the court will embark on any extended enquiry" (again a quote from an earlier case) mean that the task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be agreeable the finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of the competing contentions. If it is sees any factor that on rational grounds indicates an arguable case on the part of the company, it must find that a genuine dispute exists even where any case apparently available to be advanced against the company seems stronger.

25 The plaintiff succeeds on the first of the bases of attack it advances. The existence of the alleged debt should be proved (or not) in an action at law.

26 Since it has been shown that there is a genuine dispute as to the existence of the debt, I pass over the allegation that there is a genuine dispute as to amount of the debt. But I should say something about the alleged deficiencies in the statutory demand and the accompanying affidavit.

27 The contention that there is a defect in the statutory demand is based on an allegation that the description of the debt in the schedule did not fairly alert the plaintiff to either the basis on which liability was asserted or the basis on which the liquidated claim was calculated. For example, it is said that while there is an allegation of breach, there is no explanation of what the breach consisted of; and as to quantification there was merely reference to an invoice for $43,945.85 dated 1 August 2006.

28 It is said that this is within the concept of defect as explained by Austin J in LSI Australia Pty Limited v LSI Holdings Pty Limited [2007] NSWSC 1406 at [54]:

“A statutory demand is required by Form 509H to "describe" the debt that is claimed. If the demand is so vague or ambiguous that it fails to identify, to a reasonable person in the shoes of a director of the debtor company, the general nature of the debt to a sufficient degree that the director can assess whether there is a genuine dispute as to the existence or amount of the debt or an offsetting claim, then there is a lack of something necessary for completeness, and therefore a defect in the demand. In my opinion, for the reasons I have given, that is the case in respect of both of the statutory demands presently before the court.”

29 Inspection of the invoice referred to in the statutory demand shows that it is in substance of two lines only: "Liquidated damaged [sic] to Cleanaway for the period of 34 months remaining", followed by an amount of $39,950.77 plus GST $3,995.07 making a total of $43,945.85. The invoice itself is thus quite uninformative and does nothing to elucidate the description of the debt in the schedule to the statutory demand.

30 I should interpolate two points. First, the invoice preceded the statutory demand by only a month or thereabouts, so that there is no possibility that the plaintiff would not have made a connection between the two and read the later document in the light of the earlier. Second, no point is taken by plaintiff that the so-called "liquidated damages” provided for in the alleged contract is not a "debt" for the purposes of s 459E.

31 As I have said, the invoice was dated 1 August 2006. As I have implied, it was itself far from informative. But the invoice was accompanied by a letter also dated 1 August 2006 which not only enclosed the invoice, but also enclosed a copy of the alleged agreement. The letter then went on for something more than one and a half pages to refer to and provide an interpretation of the alleged agreement, and to explain the way in which the sum claimed had been calculated by reference to the alleged agreement.

32 When the statutory demand, the invoice referred to in it and the letter with which the invoice itself was enclosed are taken together, there is a quite comprehensive explanation of the basis of alleged debt liability and the manner of calculation. Given the proximity in time between the statutory demand and the preceding invoice and explanatory letter and the clear cross reference from the statutory demand to the invoice, the plaintiff cannot but have been aware of the basis of claim. It may not have agreed with it, but that is not a valid criticism of the statutory demand.

33 I accept that a statutory demand will be defective if it does not fairly alert the recipient to the quantum of the alleged debt and the basis on which it is said to exist. It is not necessary that the statutory demand be entirely self-contained. Cross-referencing to material already in the possession of the company served must be permissible at least where, as here, the cross-referencing is to a recently sent and received document which the company could not help but connect with the statutory demand.

34 The challenge based on the existence of defect in the statutory demand fails.

35 Finally, I come to the challenge based on aspects of the s 459E(3) affidavit. There are three alleged deficiencies. To describe them, I need to refer to paragraphs 2, 3 and 4 of Form 7 as prescribed by the Supreme Court (Corporations) Rules 1999:

“2 [If the deponent is not the creditor, state the facts entitling the deponent to make the affidavit, eg ‘I am authorised by the creditor(s) to make this affidavit on its/their behalf].

3 [State the source of the deponent’s knowledge of the matters stated in the affidavit in relation to the debt or each of the debts, eg ‘I am the person who, on behalf of the creditor(s), had the dealings with the debtor company that gave rise to the debt’, ‘I have inspected the business records of the creditor in relation to the debtor company’s account with the creditor’].

4 *The debt/*The total of the amounts of the debts mentioned in paragraph 1 of this affidavit is due and payable by the debtor company.”

36 Paragraph 2 of Form 7 deals with a case where the deponent is not the creditor. It requires the deponent to state "the facts entitling the deponent to make the affidavit". I am satisfied that the deponent, being Mr Kettle, is not the creditor. The creditor is the defendant company. But I am also satisfied that Mr Kettle states the facts entitling him to make the affidavit by saying that he is the National Credit Manager of the defendant. A national credit manager would generally be accepted as entitled to speak about a company's debtors. The facts are sufficiently stated by the title description.

37 Paragraph 3 of Form 7 requires a statement of the source of the deponent's knowledge of the matters stated in the affidavit. Mr Kettle's affidavit says in this connection:

"The source of my knowledge of the matters stated in this affidavit is my personal knowledge."

38 This statement is meaningless. To say that "my knowledge” of a particular matter comes from “my personal knowledge" is really to say that I know what I know. That does nothing to identify the source of what I know – in other words, how I came to know what I know, or what it is that tells me what I know or put it into my head. There is in my judgment a non- compliance with the requirement imposed through paragraph 3 of Form 7.

39 The third alleged deficiency was, I think, only faintly pressed. There is no stand alone statement in the terms envisaged by paragraph 4 of the form. But paragraph 2 of the Mr Kettle's affidavit contains a clear statement that the debt is due and payable:

“The demand relates to a debit [sic] of $43,945.85 which is due and payable to the Creditor by the Company.”

40 The information envisaged by paragraph 4 of the orm is thus provided. The departure from the form in this area is only as to the ordering of content. It is not as to substance.

41 In the result, therefore, only one of the alleged deficiencies in the s 459E(3) affidavit is made out, being the second of those to which I have referred.

42 For that deficiency to warrant an order setting aside the demand, it would be necessary to find that the deficiency brought the case within s 459J(1)(b) so as to constitute "some other reason why the demand should be set aside" with "other" referring to a reason distinct from the s 459J(1)(a) reason which is a defect in the statutory demand itself that would be productive of substantial injustice unless the demand were set aside.

43 Decided cases show that a deficiency in the accompanying s 459E(3) affidavit is capable of constituting "some other reason" within s 459J(1)(b). And as to type of deficiency in this case – failure to specify the source of the deponent's knowledge – there is discussion in a recent judgment of Hammerschlag J about the circumstances in which it might constitute "some other reason": see Walltech Building Systems Pty Ltd v Gerlich [2008] NSWSC 1048. The essential requirement is that it be seen through the affidavit either that the deponent's knowledge is the knowledge of the creditor or is credibly sourced from the creditor.

44 In this case, however, the lack of any explicit statement of source is off-set by the fact that the deponent is the national credit manager of the defendant. I am prepared to accept that someone occupying that position has access to information throughout the company concerning defaulting customers and debtors.

45 While it would have been far preferable for Mr Kettle to spell out the source of his knowledge rather than making the circular statement he made, I think that, given the office he holds, his failure to do so does not deny the party served with the statutory demand the entitlement referred to in the Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 493; (2005) 54 ACSR 498 at [15], that is, the entitlement to know that the information given in this s 459E(3) affidavit both comes from and is attested by the person claiming to be a creditor.

46 The plaintiff's attack on the statutory demand based on deficiencies in the s 459E(3) affidavit therefore fails.

47 However, as I have said, the plaintiff's attack based on genuine dispute as to the existence of the debt succeeds. For that reason, I make the following orders:

1. Order that the statutory demand served on the plaintiff by the defendant on 11 September 2006 be set aside.

2. Order that the defendant pay the plaintiff's costs of the proceedings.

48 Exhibit 1 may be returned.

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