Ceduna Marina Development Company Pty Ltd v Bria - [2012] SASC 23

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 23
JUDGE 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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] SASC 23
Decision Date: 23 February 2012

CaseChat Overview and Summary

The case of Ceduna Marina Development Company Pty Ltd v Bria involved a dispute over the validity of a statutory demand. The plaintiff, Ceduna Marina Development Company, sought to enforce a statutory demand against the defendant, Bria, which had not been complied with within the prescribed period. The legal issue before the court was whether the affidavit accompanying the statutory demand complied with the necessary legal requirements, specifically whether it substantially complied with Form 7 as mandated by the Supreme Court Rules. The court had to determine whether the omissions in the affidavit were substantial enough to justify setting aside the statutory demand or if they constituted a mere defect that could be excused.

The court examined the affidavit and found that it did not meet the requirements of Form 7, specifically in not stating that there was no genuine dispute between the parties. This was considered a crucial omission, especially given that the parties were already involved in arbitration. The court held that the failure to include this sworn allegation in the affidavit was a fundamental failure, leading to a substantial injustice. The court also noted that while the affidavit might have been amended due to a change in the form, this did not excuse the fundamental omission. The court concluded that the substantial injustice caused by the failure to include the sworn allegation warranted setting aside the statutory demand.

The outcome of the case was that the appeal against the decision to set aside the statutory demand was dismissed. The court found that the omissions in the affidavit were significant and led to a substantial injustice, justifying the setting aside of the statutory demand. The court emphasized the importance of the requirement that the affidavit accompanying a statutory demand must state that there is no genuine dispute between the parties, and the failure to include this statement was a fundamental failure that could not be excused. The court's decision highlighted the necessity of strict compliance with the legal requirements for statutory demands to ensure fairness and justice between the parties.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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