BuzD Pty Ltd v Acurix Networks Pty Ltd

[2019] WASC 152

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   BUZD PTY LTD -v- ACURIX NETWORKS PTY LTD [2019] WASC 152

CORAM:   MASTER SANDERSON

HEARD:   17 APRIL 2019

DELIVERED          :   10 MAY 2019

FILE NO/S:   COR 2 of 2019

BETWEEN:   BUZD PTY LTD

Plaintiff

AND

ACURIX NETWORKS PTY LTD

Defendant

Catchwords:

Corporations law - Defective affidavit accompanying statutory demand - Turns on own facts

Legislation:

Nil

Result:

Statutory demand set aside

Category:    B

Representation:

Counsel:

Plaintiff	:	Ms A M Symons
Defendant	:	Ms K M McNally

Solicitors:

Plaintiff	:	Trinix Lawyers
Defendant	:	McNally & Co

Case(s) referred to in decision(s):

Wildtown Holdings Pty Ltd v Rural Traders Company Ltd [2002] WASCA 196

MASTER SANDERSON:

1. This is the plaintiff's application to set aside a statutory demand.  The application raises two issues.  First an alleged defect in the demand and a further defect in the affidavit accompanying the demand.  Second it is said there is a genuine dispute as to the amount claimed in the demand.  For reasons which follow it is clear the affidavit accompanying the demand was defective and accordingly the demand will be set aside.  It is not necessary to consider whether or not the plaintiff has established that there is a genuine dispute as to the amount of the demand.

2. A copy of the demand and the accompanying affidavit appears as attachment GLW1 to the affidavit of Glenn Leslie Weiland sworn 4 January 2019 and filed in support of the application.  The demand itself is in the following terms:

   Creditor's Statutory Demand for Payment of Debt

   To:BuzD Pty Ltd (ACN 167 321 888) of Level 16, 37 St Georges Terrace, Perth, Western Australia ('Company')

   1The Company owes Acurix Networks Pty Ltd (ACN 154 629 320) of Level 2, 140 Colin Street, West Perth, Western Australia ('Creditor') the amount of $336,468 being the total of the amount of the debt described in the Schedule.

   2The amount is due and payable by the Company.

   3The Creditor requires the Company, within 21 days after service on the Company of this demand:

   (a)        to pay the Creditor the total amount of the debt; or

   (b)to secure or compound for the total of the amount of the debt, to the Creditor's reasonable satisfaction.

   4The 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.

   5Section 459G of the Corporations Act 2001 provides that a Company served with a demand may apply to a court having jurisdiction under the Corporations Act 2001 for an order setting the demand aside.  An application must be made within 21 days after the demand is served and, within the same period:

   (a)an affidavit supporting the application must be filed with the court; and

   (b)a copy of the application and a copy of the affidavit must be served on the person who served the demand.

   6The address of the Creditor for service of copies of any application and affidavit is Metaxas Legal, Level 5, 37 St Georges Terrace, Perth WA 6000 (Ref: GM: 2018-157).

   Schedule

   Debt of $336,468 being an amount payable by the Company to the Creditor pursuant to the affidavit of Grant Alan Farrow sworn 17 December 2018.

   Dated:17 December 2018

3. The plaintiff says the demand is defective because in par 2 of the demand the defendant has failed to use the correct paragraph to verify the debt due and payable.  The defendant has used the paragraph relevant for judgment debts.  The debt the subject of this demand was pursuant to alleged outstanding invoices so properly worded par 2 would say:

   Attached is the affidavit of Grant Alan Farrow, dated 17 December 2018 verifying that the amount is due and payable by the company.

4. There is no doubt that the demand is defective as alleged by the plaintiff.  But if this was the end of the matter I would not have set the demand aside.  Anyone reading the demand would have understood the defendant was alleging there was a debt due and payable.  Perhaps then reference would have been had to the affidavit of Mr Farrow.  But even allowing for the bald statement of an alleged amount outstanding the affidavit was attached to the demand, in the circumstances it is difficult to see how confusion could have arisen or that there was room for misunderstanding on the part of the alleged debtor as to what amount was outstanding and why.

5. The real difficulty in this case lies with the accompanying affidavit.  It is in the following terms:

   I, Grant Alan Farrow of 29 Versailles Turn, Landsdale, Western Australia, company director, being duly sworn say on oath as follows:

   1I am a director of Acurix Networks Pty Ltd (ACN 154 629 320) (Creditor).

   2I am duly authorised to swear this affidavit on behalf of the Creditor.

   3The Creditor carries on business in Western Australia providing cloud based managed analytical services (Services).

   4Attached and marked GAF-1 is a true copy of a research and development agreement made between the Creditor and BuzD Pty Ltd (ACN 167 321 888) (Company) dated 16 September 2015 (Agreement).

   5Between 16 September 2015 and 14 December 2018 the Company provided the Services to the Company.

   6Pursuant to the Agreement the Creditor rendered the below invoices to the Company totalling $870,822.93:

Date	Invoice No	Amount
01.09.2015	638	$18,150.00
01.10.2015	672	$17,963.11
01.10.2015	699	$213.89
22.10.2015	707	$17,936.11
22.10.2015	709	$213.90
16.11.2015	739	$3,106.92
25.11.2015	745	$213.90
25.11.2015	746	$17,926.11
24.12.2015	807	$101,930.00
04.01.2016	779	$213.90
04.01.2016	780	$17,936.11
01.02.2016	815	$213.90
01.02.2016	816	$17,936.11
01.03.2016	846	$17,936.11
01.03.2016	847	$213.90
17.03.2016	878	$3,286.47
01.04.2016	882	$17,926.11
01.04.2016	883	$213.89
02.05.2016	910	$18,150.00
12.05.2016	938	$32,188.42
23.05.2016	965	$1,093.08
01.06.2016	940	$18,150.00
01.07.2016	973	$18,150.00
01.08.2016	1008	$18,150.00
01.09.2016	1034	$18,150.00
27.09.2016	1059	$1,521.58
01.10.2016	1065	$18,150.00
01.11.2016	1090	$18,150.00
01.12.2016	1119	$18,150.00
02.01.2017	1151	$18,150.00
01.02.2017	1187	$18,150.00
01.03.2017	1217	$18,150.00
01.04.2017	1246	$18,150.00
01.05.2017	1273	$18,150.00
01.06.2017	1302	$18,150.00
01.07.2017	1356	$18,150.00
24.07.2017	1374	$18,150.00
28.08.2017	1409	$18,150.00
26.09.2017	1452	$18,150.00
30.10.2017	1493	$18,150.00
30.11.2017	1533	$18,150.00
15.12.2017	1564	$18,150.00
29.01.2017	1607	$18,150.00
26.02.2018	1641	$18,150.00
26.03.2018	1672	$18,150.00
26.04.2018	1707	$18,150.00
16.05.2018	1741	$18,150.00
30.06.2018	1780	$11,622.61
01.07.2018	1825	$18,150.00
01.08.2018	1851	$18,150.00
01.09.2018	1863	$18,150.00
01.10.2018	1902	$18,150.00
01.11.2018	1949	$18,150.00
14.12.2018	1984	$8,196.80
Total	$870,822.93

7Attached and marked GAF-2 are true copies of the tax invoices referred to in the preceding paragraph.

8Between 16 September 2015 and 23 February 2018 the Company paid the Creditor $534,354.94 as follows:

Date	Receipt No	Amount
16.09.2015	574	$18,150.00
23.10.2015	613	$18,500.00
26.11.2015	638	$17,936.11
26.11.2015	639	$3,320.82
21.12.2015	660	$17,936.11
05.01.2016	683	$50,000.00
05.01.2016	684	$50,000.00
06.01.2016	685	$1,930.00
27.01.2016	706	$17,936.11
27.01.2016	707	$213.90
10.02.2016	924	$213.90
10.02.2016	728	$17,936.11
29.03.2016	766	$213.90
30.03.2016	761	$17,936.11
02.05.2016	802	$3,286.47
02.05.2016	803	$18,363.90
20.05.2016	822	$18,150.00
25.05.2016	823	$32,188.42
31.05.2016	829	#1,093.08
16.06.2016	846	$18,150.00
28.07.2016	877	$18,150.00
08.08.2016	899	$18,150.00
08.09.2016	923	$18,150.00
04.10.2016	945	$18,150.00
28.02.2017	1072	$36,300.00
21.04.2017	1116	$22,000.00
02.05.2017	1121	$25,000.00
23.06.2017	1166	$10,000.00
25.08.2017	1230	$10,000.00
29.08.2017	1234	$20,000.00
21.12.2017	1364	$5,000.00
23.02.2018	1421	$10.000.00
Total	$534,354.94

9Despite demand the company has failed to the Creditors $336,468 or any other amount.

10The debt of $336,468 referred to in the accompanying statutory demand and this affidavit is due and payable by the Company to the Creditor.

11I believe that there is no genuine dispute about the existence or amount of the Debt.

1. The plaintiff's complaint is that nowhere in the affidavit does Mr Farrow depose to the source of his knowledge of matters stated in the affidavit in relation to the debt as required by par 3 of form 7.  Nor does the deponent link the debt to the demand in the manner provided in par 1 of Form 7.  Accordingly, the plaintiff says the defects and inadequacies in the affidavit are fatal and the demand must be set aside.

2. In making this submission counsel relies on the decision of the Full Court of this court in Wildtown Holdings Pty Ltd v Rural Traders Company Ltd [2002] WASCA 196. In the course of his judgment Templeman J (with whom other members of the court agreed) set out the terms and the effect of the relevant statutory provisions. His Honour said:

   16By s 459E(1) a person may serve on a company a demand relating to one or more debts owed by the company.  The debts must be at least equal to the statutory minimum amount and must be "due and payable".

   17Section 459E(2) prescribes the contents of a demand.  It is in the following terms:

   "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."

   18Section 459E(3) provides that:  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 amount of the debts, is due and payable by the company; and

   (b) complies with the rules."

   19The relevant rule in the present case is O 81G r 31 of the Rules of the Supreme Court.  The rule provides:

   "For the purposes of section 459E(3) of the Law, 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."

   20Form 7 (Seaman par [6730]) requires the affidavit to state the name of the creditor(s) and the name of the debtor company.  The form then requires the deponent to state his or her relationship to the creditor.  The deponent may be the creditor or one of a number of creditors.  If the creditor is a company, the deponent may be a director.  A deponent who is not the creditor, must state the facts entitling him or her to make the affidavit.

   21The deponent is then required to identify the debt and to state

   •the source of his or her knowledge of the matters stated in the affidavit in relation to the debt;

   •that the debt (or total amount of the debts) … is due and payable by the debtor company; and

   •that he or she believes that there is no genuine dispute about the existence or amount of the debt(s).

   22Although r 31 is couched in mandatory terms, it takes effect subject to O 81G r 5 which provides that it is "sufficient compliance" with O 81G in relation to a prescribed form, if the document:

   "is substantially in accordance with the form required or has only such variations as the nature of the case requires."

   23When an application is made under s 459G of the Law to set aside a statutory demand, s 459J applies. Section 459J(1) provides that the court may 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." [my emphasis]

   Section 459J(2) provides that except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

   24I have emphasised that under par (a) of s 459J(1), the Court is concerned only with the demand.  The Court is not concerned, under that paragraph, with the supporting affidavit.

   25This is confirmed by the relevant definitions in s 9 of the Law.  There, "a statutory demand" means:

   "(a)a document that is, or purports to be, a demand served under s 459E; or

   (b)such a document as varied by an order under subsection 459H(4)."

   The term "defect", in relation to a statutory demand, is defined to include:

   "(a)     an irregularity; and

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

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

   (d)      a misdescription of a person or entity."

   26It may be convenient to describe an affidavit which does not comply with O 81G as being "defective".  In my view, however, that is an inappropriate expression.  An affidavit contains evidence.  If it is sworn properly, an affidavit cannot be defective.  An affidavit which does not contain the evidence required to verify a statutory demand, may be inadequate for that purpose, and thereby deficient, but it cannot be said, strictly, that it is a defective affidavit.

   …

   29In my view, the question which arises when an affidavit accompanying a statutory demand does not comply substantially with O 81G, is not whether that is a defect which will cause a substantial injustice.  That is because, as I have noted above, that part of s 459J applies only to defective demands.  Rather, the question is whether there is some other reason why the demand should be set aside.

3. Having set out the statutory provisions Templeman J then noted that ground 3(b) of the grounds of appeal alleged that the affidavit was defective because of:

   The failure of the affidavit in support of the statutory demand to state the deponent's belief that the money claimed in the statutory demand was due and owing [51].

4. Dealing with that ground of appeal Templeman J said:

   59I turn to ground 3(b).  The Master accepted that the fact that the supporting affidavit did not state the source of the deponent's belief that the money was owing was "a defect".

   60The Master set out the examples contained in Form 7 of the form of words which might be used by a deponent in these circumstances.  They were as follows:

   "I am the person who on behalf of the creditor company had the dealings with the debtor company that gave rise to the debt;"

   61Or,

   "I have inspected the business records of the company in relation to the debtor's account with the company;"

   62The Master went on to add his own version, which was in the following terms:

   "I have inspected the business records of the company in relation to the debtor's account with the company and I have spoken to Mrs Tracy Sulejmani, our Credit Services Manager, who has the day-to-day control of this account."

   63The Master went on to express the view that if Mr Newman, who swore the affidavit, had addressed his mind to those matters, he could have said the words set out above.

   64Accepting, for present purposes, that Mr Newman could have sworn an affidavit in those terms, the fact is that he did not do so.  He merely said:

   "To my knowledge, the amount of the debt referred to in the … statutory demand … as $131,139.01 … is due and payable by (the appellant) … to (the respondent)."

   65In my view, the failure of Mr Newman to give even the slightest indication of his means of knowledge, must result in the conclusion that there was neither compliance nor substantial compliance with O 81G r 31.

   66As Miller J said in Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd (supra) at [31], of a failure by the deponent to indicate how he was aware that the debt the subject of a statutory demand was due and payable:

   "That is a very important matter in the scheme of statutory demands and it would be quite unfair to their recipients not to insist upon observance of it.  What is contained within the affidavit is a mere statement that, to the knowledge of the deponent, the amount is due and payable.  No reference is made to any source from which that knowledge is derived."

   67For this reason also, I consider that the demand should be set aside.

5. The Wildtown Holdings decision is indistinguishable from this case.  The fact is the affidavit gives no indication of how Mr Farrow satisfied himself the debt was due and payable.  The fact he is a director is not sufficient.  Nor is the fact that attached to his affidavit are copies of the accounts rendered to the plaintiff and the alleged receipts.  If he had said he had considered these documents and reconciled the amount outstanding that might have been sufficient.  But he does not say that he consulted the books and records of the defendant to satisfy himself the invoices attached to his affidavit were those that had been rendered and satisfied himself payments made by the plaintiff to the defendant were consistent with the receipts issued.  Not much more needed to be done by Mr Farrow to satisfy the requirements for a complying affidavit.  But the fact is he did not take the necessary steps and consistent with the Wildtown Holdings decision that justifies the statutory demand being set aside.

6. The demand will be set aside.  Subject to hearing from counsel the defendants ought pay the costs of the application including reserved costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

DG
Associate to Master Sanderson

10 MAY 2019