Ceduna Marina Development Company Pty Ltd v Bria
[2012] SASC 23
•23 February 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
CEDUNA MARINA DEVELOPMENT COMPANY PTY LTD v BRIA
[2012] SASC 23
Reasons of Judge Lunn a Master of the Supreme Court
23 February 2012
CORPORATIONS
Application to set aside statutory demand on grounds affidavit accompanying the demand was inadequate - failure to follow Form 7 in saying had had regard to the business records instead of had inspected them and in prefacing statement that debt was due and owing by "I believe" - held affidavit was substantially inadequate - whether that finding sufficient to constitute "some other reason" why the demand should be set aside under s 459J(1)(b) of the Corporations Act 2001 without any proof of injustice, prejudice or disadvantage to the plaintiff - cases reviewed - as Court not able to find on the evidence there was no injustice, prejudice or disadvantage to the plaintiff application adjourned for directions on further evidence and argument.
CEDUNA MARINA DEVELOPMENT COMPANY PTY LTD v BRIA
[2012] SASC 23JUDGE LUNN:
Reasons on whether affidavit supporting statutory demand was inadequate
Background
The plaintiff owns land at Ceduna on which it is seeking to carry out a major development known as “The Ceduna Keys Marina”. The commencement of the project has been substantially delayed because of the time taken to obtain the many necessary approvals for the development work. Many of them were only given on 17 November 2011, and the construction phase of the development has not yet commenced.
On 5 March 2009 the plaintiff mortgaged its land to the defendant to secure the repayment of a loan which became due for repayment on 6 September 2011. As at 24 November 2011 $1,338,526 was owing by the plaintiff to the defendant, including default interest to that date.
On 24 November 2011 the plaintiff commenced action SCCIV-11-1767 in this Court against the defendant seeking to restrain him from proceeding to exercise his powers as the mortgagee in conducting an auction of the land. In her affidavit in support of this injunction application Ms Hautop, the plaintiff’s director, said that the plaintiff did not dispute that it was in default under the mortgage and did not challenge the amount owing to the defendant. That was also the position taken by counsel for the plaintiff in his submissions before me on 24 November 2011. After a contested hearing I granted the injunction upon terms that the plaintiff should pay the mortgage debt into Court.[1] The debt was not paid into Court. The auction proceeded on 25 November 2011, but the land was not sold.
[1] See my ex tempore reasons of 24 November 2011.
The statutory demand and this action
On 13 December 2011 the defendant served a statutory demand under s 459E of the Corporations Act 2001 (“the Act”) on the defendant claiming a debt of $1,348,786, which was stated to be the monies due and payable under the mortgage as at 12 December 2011.[2] The statutory demand was accompanied by an affidavit of the defendant, the relevant parts of which are as follows:
[2] It is not alleged that this amount is not the correct amount of the debt including default interest at that date.
I Umilo Bria … say on oath:
1. I am the Creditor herein described.
2.I have had regard to the relevant books and records of the Creditor in respect of the debt and interest owed by the Debtor relating to the total of the amounts detailed in the Schedule to the accompanying Statutory Demand.
3.I make this Affidavit in support of the Form 509H Statutory Notice of Demand for Payment against the Debtor.
4.The monies are for monies due and payable under Memorandum of Mortgage … and have been calculated as follows:
a.$1,070,000.00 being the principal sum,
b. interest at 15% per annum from 13th August 2009 to 5th December, 2010 calculated at $210,628.76.
c. interest at 0% per annum from 6th December 2010 to 6th September, 2011.
d. default interest at 25% which calculates at $732.88 per day from 7th September, 2011 to 9th December, 2012 $68,157.84.
5.I believe the amount of $1,348,786.60 being the total of the amounts specified in the accompanying demand is due and payable by the Debtor to the Creditor – in addition to other costs incurred by me properly claimable under the Mortgage.
…
8.I believe that there is no genuine dispute about the existence or amount of the debts referred to in paragraph 3.
9.I know the facts deposed to herein of my own knowledge except where otherwise appears.
The present argument centres on the contents of this affidavit (“the Affidavit”).
On 22 December 2011 the plaintiff instituted this action under s 459G of the Act seeking to set aside the statutory demand. In support it filed an affidavit of its director, Ms Hautop, which deposed to many of the dealings between the plaintiff and the defendant and the steps being taken by the plaintiff to proceed with the marina project. In paragraphs 22 and 23 of her affidavit she deposed as follows:
22.It is the Company’s intention to investigate further the conduct of Bria for the purposes of prosecuting its claims against Bria in Action no 1767 of 2011. I am advised by my solicitors and understand that the action ought now convert to pleadings and become a formulated claim against Bria for his conduct to date and actions taken by him which are prejudicial to the Company’s interests.
23.In addition to all the matters raised in my earlier Affidavit and in this Affidavit, the company maintains that by virtue of Bria’s conduct to date and ongoing, he is prevented from asserting that the debt is currently due until such time as the property is marketed on a proper basis to recognise the value of the further approvals and the development nature of the project.
Nothing else was deposed to which apparently gave rise to any genuine dispute or offsetting claim under s 459H of the Act, or any “other reason” under s 459J of the Act[3], which could be raised in law to set aside the demand.
[3] It is quoted below.
Counsel for the plaintiff informed me that the plaintiff would contend that deficiencies in the Affidavit alone justified setting aside the demand. He said that if the alternative grounds in paragraphs 22 and 23 of Ms Hautop’s Affidavit were also to be pursued, the plaintiff would need to file extensive further affidavit material which would involve substantial cost and delay. On 18 January 2012 I directed that the issue of whether the Affidavit is defective be determined before the other issues in the action.[4]
[4] This course was also adopted in B&M Quality Constructions Pty Ltd v Buy Rite Steel Supplies Pty Ltd which is referred to below.
Inadequacy of the accompanying affidavit
Section 459E(3) of the Act provides:
… unless the debt … is a judgment debt, the demand must be accompanied by an affidavit that:
(a)verifies that the debt, or the total amount of the debts, is due and payable by the company; and
(b)complies with the rules.
Rule 5.2 of the Corporations Rules 2003 (South Australia) (“the Rules”) provides:
5.2For the purposes of sub-section 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 …
Form 7 to the Rules, the relevant parts of which are quoted below, sets out a proforma affidavit. Rule 1.7 of the Rules provides:
(1)It is sufficient compliance with these Rules in relation to a document that is required to be in accordance with a form in schedule 1 if the document is substantially in accordance with the form required or has only such variations as the nature of the case requires.
Although many of the cases refer to affidavits which do not comply with Form 7 as being defective affidavits, I accept the point made by the Full Court of Western Australia in Wildtown Holdings Pty Ltd v Rural Traders Co Ltd[5] that a properly sworn affidavit cannot be defective and it is more appropriate to refer to an affidavit which does not contain the evidence required to verify a statutory demand as an inadequate affidavit. My references to an inadequate affidavit are to an affidavit which does not comply with Form 7.
[5] Cited below, at [26].
Whether an affidavit is inadequate for this purpose is a question of fact.[6] Hence, it is to be decided by an objective analysis of the evidence and not by comparison with precedents as if it was a question of law. While I have had general regard to what have been found to be, and not to be, inadequate affidavits in the many cases on the topic, I decide the question here on an objective analysis of the contents of the Affidavit. I reach my conclusion that it is inadequate on the totality of its departures from the requirements of Form 7 without evaluating all of the individual departures separately.
[6] Eastern Metropolitan Regional Council v Four Seasons Constructions Pty Ltd cited below, at [28].
I now consider the three grounds of departure from Form 7 relied upon by the plaintiff. The defendant did not dispute that they were departures, but said that individually and collectively they were not substantial.
The first departure relates to the requirement of paragraph 3 of Form 7 which requires the affidavit to address:
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”].
Paragraph 2 of the Affidavit, as quoted above, is prefaced by the words “I have had regard to”. The plaintiff submits this is something significantly less than deposing to having inspected the records as required by Form 7.
In Trzesinski v Daire[7] Prior J said:
The words “have or (having) regard to” “have generally been constructed … as requiring the authority concerned to take the stated matters into account and consider them and give due weight to them, but without being bound to comply with them. Ultimately the authority’s discretion remains unfettered …”
[Citation of authorities omitted.]
This leaves it open that by using the expression “I have had regard to” the defendant could have inspected his business records but disregarded something which was in them if he otherwise considered it was irrelevant or incorrect. Hence, what the defendant is deposing to in paragraph 2 of his affidavit is a source of knowledge possibly either outside of his business records or inconsistent with them. This is a significant matter.
[7] (1986) 44 SASR 43 at 51.
The second departure relied upon by the plaintiff is one from paragraph 4 of Form 7 which provides:
4*The debt of $[amount]/*the total $[amount] of the debts mentioned in the statutory demand is due and payable by the debtor company.
Paragraph 5 of the Affidavit, which appears to be in purported compliance with paragraph 4 of Form 7, is prefaced by the words “I believe”. This needs to be assessed in conjunction with paragraph 9 of the Affidavit which has no equivalent in Form 7.[8] The literal interpretation of the combination of paragraphs 5 and 9 of the Affidavit is that the defendant is not deposing to paragraph 5 of his own knowledge because he has stated that paragraph 5 is a matter of belief, and therefore not of knowledge.
[8] If this was an affidavit to be filed in the Court, this phrase is banned by Practice Direction 3.1.2 because of its inherent ambiguities.
Belief is the mental acceptance that a fact is true, based on the ground of authority or evidence, and falls between suspicion, which is a slight opinion without proof, and knowledge which excludes doubt.[9] Hence, belief is something less than knowledge.
[9] Homes v Thorpe [1925] SASR 286; Rosey v Reynolds [1929] SASR 408 at 417-9.
If the Affidavit was one to be filed in Court, 6R 162(2), Exception 2 would only permit belief evidence where it was in combination with a statement of the grounds of the deponent’s belief in the truth of the information deposed to. A mere statement of belief goes only the bona fides of the deponent, but gives no grounds for objectively determining the reliability of what has been deposed to.
The defendant’s counsel cited the decision of Barrett J in Saferack Pty Ltd v Marketing Heads Australia Pty Ltd[10] where the deponent there departed from Form 7 by not stating the source of his knowledge. Barrett J was prepared to assume in the context of that case that the deponent as a director of the creditor company had full access to the company’s records and his evidence was based on that. However, here the defendant did not opt for the first alternative in paragraph 3 of Form 7 to depose that he was the person who had had the relevant dealings and he relied upon a reference to his relevant books and records. For the reasons given above he did not explicitly depose that the source of his information was confined to, and in conformity with, the contents of those books and records.
[10] (2007) 214 FLR 393 at [44].
The defendant has not in the Affidavit gone as far as to depose of his own knowledge that the debt is due and payable by the plaintiff. He has not pledged his oath to it. This in itself is a substantial departure from the requirements of Form 7.
The third departure relied upon by the plaintiff relates to the last words in paragraph 8 of the Affidavit “of the debts referred to in paragraph 3”. There are no debts referred to in paragraph 3. It is probably a mistaken reference to paragraph 4. There is no significance in this departure.
Overall, I find that the defendant in the Affidavit has substantially failed to comply with the requirements of Form 7, and thus that the Affidavit is substantially inadequate.
Whether the demand should be set aside for an inadequate accompanying affidavit?
The plaintiff seeks its order under s 459J(1) of the Act which provides:
(1)On an application under s 459G the court may by order set aside the demand if it is satisfied that:
(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b) there is some other reason why the demand should be set aside.
The plaintiff submits that the inadequate Affidavit is “some other reason” under sub-s (1)(b). The defendant argues no order should be made under sub‑s (1)(b) unless the plaintiff shows a substantial injustice or the like would be caused if the demand was not set aside.
It is clear on the authorities that the substantial injustice requirement of sub‑s (1)(a) does not apply to setting aside a demand under sub‑s (1)(b),[11] but the defendant contends that the Court’s discretion under s 459J(1) should not be exercised unless there would be some injustice or the like to the plaintiff if the demand was not set aside. There was no evidence that the plaintiff was in any way disadvantaged or prejudiced in its response to the statutory demand by any of the inadequacies in the Affidavit. The plaintiff relies upon a line of cases where substantial inadequacies in the supporting affidavit led to the demand being set aside without the Court relying on any evidence of injustice, disadvantage or prejudice to the plaintiff. The defendant relies on other cases under s 459J(1)(b), but generally not concerned with inadequate affidavits.
[11] Wildtown Holdings Pty Ltd v Rural Traders Co Ltd below at [29].
It is convenient to start the survey of the cases relied upon by the plaintiff with the decision of McLelland CJ in Eq in B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd[12] where at 435-6 he said:
In my opinion the departure from the relevant rule in respect of the affidavit accompanying the statutory demand is a matter of substance. The requirement of that rule, as to the identify of the person making the affidavit accompanying the statutory declaration, is designed to serve the public interest as well as to protect the company against unwarranted demands, by endeavouring to ensure, within practical limits, that the person who must put his or her oath or solemn affirmation to the relevant matters (and thereby a risk of conviction for perjury if a knowingly false statement is made) is the person associated with the creditor who is most likely to have direct knowledge of those matters. It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute if there is one makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability. I therefore do not regard what has occurred in the present case as a merely technical breach of the rules. It goes to the heart of what Pt 80A r 15 was intended to achieve.
…
The defendant’s failure to comply with the rules in the manner discussed, for the reasons I have indicated, provides a sufficient “other reason” for the purposes of s 459J(1)(b) why the demand should be set aside.
[12] (1994) 15 ACSR 433.
The statutory demand there was set aside under sub-s 459J(1)(b) without any reference to prejudice or disadvantage to the plaintiff arising from the inadequate affidavit. This decision has been followed and applied, or at least cited with apparent approval, in numerous subsequent single judge decisions on setting aside statutory demands under s 459J(1)(b) of the Act for inadequate affidavits and the like.[13]
[13] Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd (2005) 190 FLR 466; Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11; Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746; Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 489; Ambassador at Redcliffe Pty Ltd & Anor v Barreau Peninsula Property Pty Ltd & Ors (2006) 202 FLR 459; Rapcivic Contractors Pty Ltd v Mapol Nominees Pty Ltd t/as Amalgamated Painting Services [2009] 1 Qd R 21; Ri-Co Holdings (Australia) Pty Ltd v Allied Sandblasters Pty Ltd (2009) 72 ACSR 103.
The plaintiff’s counsel principally relied upon the decision of the Full Court of Western Australian in Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd.[14] Miller J, on behalf of the Court, said there as follows:
[14] (2002) 20 ACLC 352.
[26]The affidavit which accompanied the statutory demand clearly failed to comply with O 81G r 31 of the Supreme Court Rules which requires such an affidavit to be in accordance with Form 7. …
[27]As the Master pointed out, O 81G r 31 is couched in mandatory language. It provides that the affidavit "must" comply with subr (a), (b) and (c). There is, however, a provision in O 81G r 5(1) that it is sufficient compliance with the order in relation to a document that is required to be in accordance with a form in Pt 1 of the Seventh Schedule if the document is "substantially in accordance with a form required or has only such variations as the nature of the case requires".
[28]In this case the Master looked closely at the question whether the affidavit in question substantially complied with Form 7. As he pointed out, it is a question of fact whether or not there has been substantial compliance with the rules. … The Master was particularly influenced by the fact that the deponent to the affidavit had failed to swear that there was no genuine dispute between the parties. This he considered to be a significant omission. Combined with the other defects in the affidavit the Master considered it to be sufficient to conclude that there had not been substantial compliance with the rules.
[29]The appellant argues that the Master ought to have determined that the affidavit was substantially in accordance with the form required. Counsel for the appellant relied on Carlino Enterprises v Donnybrook Holdings Pty Ltd (2001) 19 ACLC 414 where the Master (at [4]) said:
…Order 81G r 5(1) allows a document which is 'substantially in accordance with the form required' to stand even when a rule is in mandatory terms. The question is whether in a particular case the form of the affidavit is such as to allow a debtor to understand the nature of the case to be met…
…
[31]The appellant argues that the Master was wrong to conclude that the affidavit provided no indication as to how the deponent was aware that the debt was due and payable. Counsel for the appellant points out that the deponent is the Chief Executive Officer of the appellant who has deposed to the fact that he is authorised to make the affidavit and to his knowledge, the debt is due and payable by the respondent to the appellant and payable pursuant to an agreement made on 2 December 1997 relating to the Red Hill Land Fill Facility. This, counsel submits, is substantial compliance with the requirements of O 81G r 31. However, I do not agree. I consider the Master to have correctly concluded that the deponent to the affidavit failed to indicate how he was aware that the debt 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.
[32]… The Master was, in my view, entitled to conclude that the failure of the deponent to swear that there was no genuine dispute between the parties was a significant omission. It is essentially because there is no genuine dispute that the legislation has provided for the procedure.
[33]… the Master determined that the affidavit did not satisfy the requirements of s 459E(3)(b). He then turned to the question whether the demand should be set aside under s 459J(1)(b) or whether the non-compliance could be categorised as a "mere defect" to be excused under s 459(2). The Master considered the omissions in the affidavit to be much more than "sloppy drafting" and concluded that the form of the affidavit gave no indication whether or not the deponent had turned his mind to the question whether there was a genuine dispute in relation to the debt the subject of the demand. This the Master considered a fundamental issue and one which gave rise to a substantial injustice. He was therefore unable to be satisfied that there was a mere defect in the affidavit, concluding (in the words of the statute) that there was "some other reason why the statutory demand ought be set aside".
[34]The appellant submits that, upon the proper construction of s 459J(2), a statutory demand should not be set aside because of a defect in the accompanying affidavit, unless there be some substantial injustice … The appellant asserts that the respondent has not pointed to any injustice or substantial injustice caused by the form of the affidavit in question, nor has it submitted that it has any doubt about how the amount of the debt is alleged to have arisen. … In essence, the appellant's submission is that, on any view of the affidavit, it could not be said that substantial injustice had been done to the respondent.
[35]I accept, however, the submission made on behalf of the respondent that the failure by the deponent to the affidavit to state that there is no genuine dispute between the parties was a crucial and substantive omission. The fact was that the parties were already locked in arbitration. Moreover, there were a number of interlocutory proceedings in that arbitration which had already been before this Court. Whilst it can be accepted that the affidavit failed to comply with Form 7 because of an amendment to that form at or about the time the affidavit was sworn, this is no sufficient excuse for the failure to incorporate within the affidavit the statement that there was no genuine dispute between the parties. All the evidence points to a substantial dispute between them. It was, in my view, essential that the affidavit accompanying the statutory demand comply with Form 7 and include this particular sworn allegation. The failure to do so was rightly categorised by the Master as a fundamental failure and one giving rise to a substantial injustice. For these reasons I would dismiss the second and third grounds of appeal.[15]
(Underlining added and to be referred to later).
[15] B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd above was cited to the Court, but was not referred to in the judgments.
The plaintiff’s counsel also relied upon the subsequent decision of the Full Court of Western Australia in Wildtown Holdings Pty Ltd v Rural Traders Co Ltd[16] where it was said by Templeman J with whom the other members of the Court agreed:
[27]In Four Seasons Construction Pty Ltd v Eastern Metropolitan Regional Council (2001) 35 ACSR 716 at [19], Master Sanderson held that the purpose of the affidavit which accompanies a statutory demand is twofold:
“… Secondly, and perhaps more importantly, when the matter comes before the Court, either on an application to set aside a statutory demand …, the Court, by reference to the accompanying affidavit can be sure the party issuing the demand has taken steps to satisfy themselves that the debt is outstanding. … But even on a contested application to set aside a statutory demand, if there is compliance with the rules in relation to the accompanying affidavit, the Court can be satisfied that there is a sound basis on which to begin. The respondent should say there is a debt, that it is still owed and about which there is no genuine dispute. It is then up to the applicant to show that the demand ought be set aside either because there is a genuine dispute or for some other reason. An accompanying affidavit which refers to the deponent's belief that there is no genuine dispute about the debt is important if the issues between the parties are to be clearly delineated.”
[28]Master Sanderson's decision was upheld by this Court. Although the above extract from Master Sanderson's judgment was not cited, it is clear from the decision of Miller J, with whom the other members of the Court agreed, that the Court accepted Master Sanderson's approach as correct.
[29]In 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.[17]
[16] (2002) 172 FLR 35.
[17] This case concerned a slightly different point under s 459J(1)(b) of where the accompanying affidavit had been sworn too early. The statutory demand there was set aside by reason of the inadequate affidavit.
Counsel for the defendant relied upon the following cases under s 459J(1)(b) which often involved grounds other than an inadequate accompanying affidavit.
In Meehan v Glazier Holdings Pty Ltd[18], the Court of Appeal of New South Wales, in considering s 459J(1)(b) of the Act on a ground unrelated to an inadequate accompanying affidavit, took into account whether there would be substantial injustice if the demand was not set aside. Neither Four Seasons Constructions Pty Ltd v Eastern Metropolitan Regional Council nor Wildtown Holdings Pty Ltd v Rural Traders Co Ltd were cited in the judgments. Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd, which is referred to in footnote [13] above, was referred to without apparent disapproval.
[18] (2005) 53 ACSR 229.
In W & F Lechner Pty Ltd v Drummond & Rosen Pty Ltd (2001) 38 ACSR 42 Santow J treated an inadequate affidavit as being similar to a defect in the demand itself, but this is clearly contrary to subsequent authority.[19]
[19] See footnote [12] above.
In Daewoo Australia Pty Ltd v Suncorp-Metway Ltd (2000) 33 ACSR 481 at [51] Austin J declined to set aside a demand under s 459J(1)(b) on the ground of a departure from an equivalent of Form 7, but the decision is explicable on the basis that he did not regard the departure as substantial.
In Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 ACTR 22 at [30] the Court of Appeal of the Australian Capital Territory set aside a statutory demand under s 459J(1)(b) of the Act on the grounds that not to do so would cause an injustice on grounds that were unrelated to any inadequate accompanying affidavit.
In Besser Industries (NT) Pty Ltd v Steelcon Constructions Pty Ltd (1995) 129 ALR 308 Branson J declined to set aside a statutory demand under s 495J(1)(b) of the Act for an omission from the required form, but the decision is explicable on the basis that she only categorised the omission as a “technical point”.
As the Act is a Commonwealth statute this Court is to treat decisions of the Federal and other State Courts on the Act as highly persuasive unless they are clearly wrong.[20] Here the two decisions of the Full Court of Western Australia, and the single judge decision interstate of B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd, and the many cases which have followed it, are clear authority that no injustice, prejudice or disadvantage to the plaintiff is a necessary element of a cause of action to set aside a statutory demand under s 459J(1)(b) of the Act, at least where the ground is a substantially inadequate accompanying affidavit.
[20] Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492; Ambassador at Redcliffe Pty Ltd & Anor v Barreau Peninsula Property Pty Ltd & Ors above at [17].
An order under s 459J(1)(b) of the Act requires the exercise of a judicial discretion to be exercised in the whole of the circumstances of the case. While the cases relied upon by the plaintiff show that a substantial inadequate affidavit can be sufficient to justify the exercise of a discretion in favour of the plaintiff, and indeed usually would be the appropriate order, they do not go as far as showing that it is automatically to be the result in every case.
In Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd, Miller J, in his reasons at [35], as quoted and underlined above, confined his decision to a context of where the evidence pointed to a substantial dispute between the parties about the debt. The inference is that if there had not been such a substantial dispute between the parties the exercise of the discretion based on the substantially inadequate affidavit might have been different. In most of the cases referred to above where a statutory demand was set aside for a substantially inadequate affidavit or the like there was also an alternative ground of challenge based on either a genuine dispute or an offsetting claim under s 459H of the Act. In the other cases it is impossible to tell from the reports whether there was evidence of a dispute between the parties. I am not aware of any case where a substantially inadequate affidavit has resulted in a statutory demand being set aside under s 459J(1)(b) of the Act where it was clear there was no dispute between the parties that the whole of the debt was then due and payable.
The defendant’s submission was that on the evidence the plaintiff had already admitted that the whole debt was due and payable. Therefore, he contended it would be a wrong exercise of the Court’s discretion under s 459J(1)(b) of the Act to set aside the demand for any substantially defective affidavit when the plaintiff was not disputing its liability for that debt. It was said it would be unjust to exercise the power under sub-s (1)(b) on a basis which was inconsistent with the purpose of Part 5.4 of the Act.[21] However, I need not now pursue the point to a conclusion.
[21] Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd above; Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd above.
The defendant’s submission was predicated upon it being established that the plaintiff had admitted that the whole debt was due and payable. While this was the case as at 25 November 2011 it was not necessarily the case at 12 December 2011, being the date of the swearing of the affidavit, or at the present time. In paragraphs 22 and 23 of the affidavit of Ms Hautop, as quoted above, it is at least open for the plaintiff to argue that events since 25 November 2011 gave rise to a genuine dispute that the debt was no longer due and payable and/or that some offsetting claim has arisen since that date. The grounds set out in those paragraphs 22 and 23 are vague and weak. Counsel for the plaintiff acknowledged that it would need to build an additional case based on them by further affidavits if the plaintiff was to establish an alternative that the demand should be set aside for a genuine dispute or an offsetting claim under s 459H of the Act. Whether the plaintiff can do so remains to be seen.
In my view the plaintiff needs to show that there is some dispute about the debt claimed if it is to succeed in having the demand set aside under s 459J(1)(b) of the Act for the substantially inadequate affidavit. Whether it need be as much as is required for a genuine dispute and/or offsetting claim under s 459H of the Act I will leave for further argument. As the hearing on 7 February 2012 excluded the grounds raised by paragraphs 22 and 23 of the affidavit of Ms Hautop it would not be fair to the plaintiff for me now to find that those paragraphs did not show a sufficient dispute about the debt to refuse on that basis to set aside the demand under s 459J(1)(b) of the Act.
I will hold a further directions hearing on Thursday 8 March 2012 at 9.30am concerning what further affidavits are to be filed and the future progress of the proceedings.
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