Condor Asset Management Ltd v Excelsior Eastern Ltd

[2005] NSWSC 1139

Reported Decision: 56 ACSR 223

New South Wales

Supreme Court

CITATION:	Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139
HEARING DATE(S):	04/11/05
JUDGMENT DATE :	10 November 2005
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 - where demand based on several debts states aggregate sum without identification of individual debts - where demand based on assigned debts but alleged debtor not previously aware of assignment or given particulars thereof in demand itself - whether affidavit accompanying demand sufficient - whether genuine dispute as to existence of debts shown
LEGISLATION CITED:	Conveyancing Act 1919. s.12 Corporations Act 2001 (Cth), ss.459E, 459G, 459J Corporations Regulations 2001 (Cth), Form 509H Supreme Court (Corporations) Rules 1999, rule 5.2
CASES CITED:	Bennell v Netlink Australia Pty Ltd (2002) 42 ACSR 680 Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562 Clearance Nominees Pty Ltd v Discount Acceptance Corporation Pty Ltd (1997) 25 ACSR 531 Cooloola Dairys Pty Ltd v National Foods Milk Ltd [2005] 1 QdR 12 Delta Beta Pty Ltd v Vissers (1996) 20 ACSR 583 Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 Jadd Projects Pty Ltd v Muldoon Tiles Supply & Fix Pty Ltd [2004] WASCA 180 Ketrim v AS&L Pty Ltd (2004) 52 ASCR 252 Manzo v 555/255 Pitt Street Pty Ltd (1990) 1 NSWLR 1 Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 6 ACTR 1 Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 QdR 140 Pino v Prosser [1967] VR 835 Reale Bros Pty Ltd v Reale (2003) 179 FLR 427 Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 Re Small & Shattell (Sales) Pty Ltd (1992) 7 ACSR 99 Re Steel Wing Co Ltd [1921] 1 Ch 349 Rohan Trading Co Pty Ltd v Glengor Pastoral Co Pty Ltd [2003] NSWSC 1265 Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd (unreported, VSC, Chernov J, 24 April 1998 Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 489 Topfelt Pty Ltd v State Bank of New South Wales (1993) 47 FCR 226 Tuta Healthcare Pty Ltd v Nipro Asia Pty Ltd [2005] NSWSC 664 Warner Bros Records Inc v Rollergreen Ltd [1976] QB 430 Wildtown Holdings Pty Ltd v Rural Traders Co Ltd (2002) 172 FLR 35
PARTIES:	Condor Asset Management Limited - Plaintiff Excelsior Eastern Limited - Defendant
FILE NUMBER(S):	SC 4773/05
COUNSEL:	Mr E.C. Muston - Plaintiff Mr R.B. O'Hair - Defendant
SOLICITORS:	Verekers - Plaintiff United Legal - Defendant

LOWER COURT JURISDICTION:

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

BARRETT J

THURSDAY, 10 NOVEMBER 2005

4773/05 CONDOR ASSET MANAGEMENT LIMITED v EXCELSIOR EASTERN LIMITED

JUDGMENT

1 The plaintiff applies under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand made by the defendant. The demand is dated 5 August 2005 and says, in its paragraph 1, that the plaintiff “as responsible entity of the Peridon Village Trust” owes the defendant “as assignee of the GDK Financial Solutions Trust” the “amount of $15,768.50 being the amount of the debt described in the schedule”. The schedule, to be examined presently, refers to “debts” in the plural.

2 The affidavit accompanying the statutory demand is the affidavit of Robert Montagnino who deposes:

“1. I am an employee of the solicitor for the Creditor in relation to a debt of $15,768.50 owed by the Debtor company relating to advances made to the Debtor company by the GDK Financial Solutions Trust and assigned to the Creditor and am authorised to make this affidavit on behalf of the Creditor.
2. I have inspected the business records of the Creditor in relation to the Debtor company’s account with the Creditor.
3. The debt, mentioned in paragraph 1 of this affidavit, is due and payable by the Debtor company.
4. I believe that there is no genuine dispute about the existence or amount of the debt.”

3 The plaintiff attacks the statutory demand on four grounds. First, it says that the statutory demand was never served on it and, for that reason, should be set aside. Second, the plaintiff says that, because the demand (by referring to “loans” in the plural) makes it clear that several debts acquired by assignment are relied upon but does not give separate particulars of each such debt or show that the defendant is entitled by assignment to those debts, there is, in terms of s.459J(1)(a), a “defect in the demand” which will be the source of “substantial injustice” unless the demand is set aside. The plaintiff’s third contention is that the content of Mr Montagnino’s accompanying affidavit is defective or insufficient in such a way as to amount to “some other reason” for the purposes of s.459J(1)(b). Fourth, the plaintiff contends that there is a genuine dispute between the plaintiff and the defendant about the existence or amount of the debt or debts to which the demand relates.

The service issue

4 It is common ground that the demand was delivered to an address at North Sydney which was not, at that time, the plaintiff’s registered office. Mr Thomas, a director of the plaintiff, deposes to having attended that address on 12 August 2005 and to having received there an envelope containing the demand and Mr Montagnino’s affidavit. The copy of the envelope annexed to Mr Thomas’s affidavit makes it clear that it was sent through the post, addressed to the plaintiff at the North Sydney address.

5 Having regard to s.109X of the Act and the evidence about the location of the registered office, I am satisfied that the content of that envelope was not “served” on the plaintiff in a manner contemplated by that section. I am also satisfied, however, that the documents came into the possession of and to the attention of the plaintiff by virtue of Mr Thomas’s retrieving the envelope and its content from the North Sydney premises. The situation is accordingly one in which there has been acknowledged receipt of the documents, with that receipt having occurred on 12 August 2005. This makes it necessary to look at cases about informal service.

6 Several cases have considered the question of informal service under s.459G(3)(b), the provision concerned with the conceptually related issue of “service” of a copy of a s.459G application and a copy of the accompanying affidavit. In Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542, Young J dealt with a situation where these documents were forwarded through a document exchange. His Honour held that service in that manner was not good service but that proof of actual receipt, albeit through a document exchange box, was effective as service. That decision was followed, in a similar case, in Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd (unreported, VSC, Chernov J, 24 April 1998) where the s.459G originating process and supporting affidavit had been sent by facsimile to the address for service specified in the statutory demand. Chernov J said:

“In my opinion, for the reasons given below, there has been proper service of the relevant documents on the respondent. Here, the statutory demand which is in the prescribed form was issued in accordance with s459E. It provides, as I have said earlier, that the address of the creditor for service was to be the address of the solicitors. I agree with Lander J in Players Pty Ltd v Interior Projects (1996) 20 ACSR 189, that the combination of s459E, the prescribed form of statutory demand under it, and s459G, shows that the legislation contemplates that the application under s459G(3) may be served on the creditor at the address shown on the statutory demand. A like conclusion was reached by Young J in Howship Holdings Pty Ltd v Leslie (1996) 21 ACSR 440 at 442.

In my view, it is sufficient for the purposes of s459G(3) if copies of the application and affidavit are served at the relevant address, that being the address nominated by the giver of the statutory notice. Thus, service may be effected if copies of the relevant documents are left at the nominated address. In a sense, how they come to be left there is irrelevant (see Young J in Howship Holdings Pty Ltd v Leslie , at p442). For instance, the copy documents may be left by someone attending at the address in question and leaving them there. If that had occurred in this case, then in my view, proper service would have been effected of the relevant documents. The same object is achieved if the copies arrive at that address as a result of being sent by way of a facsimile transmission. What is required by s459G(3) is that the respondent should receive copies of the relevant documents at the address nominated by it. Once that has occurred, the requirement of s459G(3) as to service of the relevant documents is satisfied.”

His Honour added:

“It is not the object of the legislation and the rules governing service to allow a respondent who has the relevant application in his or her hands within the prescribed time, to avoid meeting a case brought against him or her, by recourse to technical arguments as to service. As Lander J in Players Pty Ltd v Interior Projects observed at p193:

The intention is to facilitate the service of an application under s459G, not to impede service or make service of such an application more difficult.”

7 The same approach to the same question was taken in Ketrim Pty Ltd v AS&L Pty Ltd (2004) 52 ASCR 252.

8 There are also cases about informal service of statutory demands. That, of course, is the issue now before me. In Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 QdR 140, Helman J applied the principle in Howship Holdings in addressing the question whether a statutory demand and accompanying affidavit had been served. The documents had been sent by facsimile transmission and receipt had been acknowledged. Helman J said (at p.143):

“To ignore the admissions, and, it should be noted, service … would be artificial in the extreme. I therefore conclude that service of the statutory demand and the accompanying affidavit occurred when, on behalf of the applicant, it was admitted that it had taken place.”

9 This decision was followed in Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305 where there had been personal service of the statutory demand and affidavit on the sole director and shareholder of the company. Mandie J accepted (at p.312) that s.109X is facultative rather than exclusive and mandatory and “should not be construed so as to exclude any means of service which is proved to have brought a document to the actual attention of the company”.

10 In the present case, posting of the statutory demand and affidavit to the North Sydney address is proved to have brought them to the plaintiff’s attention. The proof is provided by the plaintiff’s own actions. It has brought these proceedings seeking an order setting aside the statutory demand. In doing so, it has sought to counter submissions on behalf of the defendant (to be mentioned presently) based on the principle in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 under which a company challenging a statutory demand is limited to the grounds of challenge discoverable from the affidavit supporting the application made within 21 days after service of the demand. The plaintiff has thus showed itself to be working on the basis that the statutory demand had been served on 12 August 2005, the day on which possession of it was taken by Mr Thomas at North Sydney. I am satisfied, therefore, that the statutory demand should be taken to have been served on the plaintiff on that day. Echoing what was said by McInerney J in Pino v Prosser [1967] VR 835 at p.837, I observe that it would be “remarkable to the point of seeming absurdity” that someone who admits having received a document “should be held not to have been served”.

11 This makes it unnecessary to deal with the question whether non-service of a statutory demand is capable of grounding an application for an order that it be set aside. I would, however, make two observations on that question. First, such a notion, if correct, would mean that every statutory demand was liable to be set aside from the very moment that it came into existence in a form satisfying s.459E(2) and that this susceptibility continued thereafter up to the time, if any, at which it was served, whereupon that particular ground for an order setting it aside would cease to be available. It is very difficult to think that this represents the legislative intention.

12 The second observation is that the question whether non-service of a statutory demand represents a ground for setting it aside was considered by Mandie J in Emhill Pty Ltd v Bonsoc Pty Ltd (above) at p.308:

“Although not adverted to in the course of argument, it appears to me that the plaintiff’s application faces an initial difficulty. Section 459E(1) of the Act provides that a person may ‘serve’ on a company a demand relating to a debt or debts. Section 459G(1) of the Act provides that a company may apply to the court for an order setting aside such a statutory demand ‘served’ on the company. I consider that the plaintiff cannot seek an order pursuant to s 459G(1) of the Act setting aside a statutory demand where it wishes to say that it has not been served with the demand. The appropriate mode of dealing with that situation would have been either to apply for a declaration that the purported service was ineffective or to rely upon the point in opposition to any winding-up application based upon the statutory demand.”

13 The point his Honour makes is a compelling one. In the present proceedings, the plaintiff seeks, in terms of s.459G(1), “an order setting aside a statutory demand served on” it. Proceedings in which a plaintiff seeks relief in those terms simply cannot be the occasion for a contention by that plaintiff that there is no “statutory demand served on” it.

The several debts issue

14 Section 459E makes it clear that a statutory demand may be based on one debt or several debts. Section 459E(1)(b) says that a statutory demand may relate to “2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum”. A person to whom several debts are owed may thus use a single statutory demand covering all the debts or, if preferred, a separate statutory demand for each separate debt: Cooloola Dairys Pty Ltd v National Foods Milk Ltd [2005] 1 QdR 12.

15 Section 459E(2)(b) deals with the content of the demand “if it relates to 2 or more debts”, that is, if the first approach is taken. In such a case, the demand “must specify the total of the amounts of the debts”. Under s.459E(2)(c), the demand must then require the company to pay “the total of the amounts of the debts” (or to secure or compound for “that total”). In relation to the accompanying affidavit, the requirement imposed by s.459E(3)(a) where there are several debts is that the affidavit verify that “the total amount of the debts” is due and payable by the company.

16 A further requirement as to content is imposed by s.459E(2)(e). That section says that a statutory demand “must be in the prescribed form (if any)”. A form is prescribed by the Corporations Regulations 2001 (Cth). It is Form 509H set out in Schedule 2 to the regulations. It is pertinent to set out paragraphs 1 and 3 of the form:

“1. The company owes ( name ) of ( address ) (‘the creditor’)
* the amount of $( insert amount ), being the amount of the debt described in the Schedule.
* the amount of $( insert total amount ), being the total of the amounts of the debts described in the Schedule.”
“3. The creditor requires the company, within 21 days after service on the company of this demand:
(a) to pay to the creditor *the amount of the debt/*total of the amounts of the debts; or
(b) to secure or compound for the *amount of the debt/*total of the amounts of the debts, to the creditor’s reasonable satisfaction”.

17 I also set out the schedule as it appears in the prescribed form:

“SCHEDULE

Description of the debt (indicate if it is a judgment debt,giving the name of the court and the date of the order)	Amount of the debt
__________________________________________________________________
__________________________________________________________________
_____________________________________________*Total Amount”

18 There are, as may be seen, asterisks against “Total Amount” at the end of the schedule and against several parts of paragraphs 1 and 3. The footnote identified by asterisk is, “Delete if not applicable”.

19 I now set out the content of the demand at issue in this case, as it relates to the several part of the prescribed form set out above:

“1. The company, Condor Asset Management Limited as Responsible Entity of the Peridon Village Trust, owes Excelsior Eastern Limited as assignee of the GDK Financial Solutions Trust of 311 Two Sticks Road, Uriarra, New South Wales (the Creditor) the amount of $15,768.50 being the amount of the debt described in the Schedule.”
“3. The creditor requires the company, within 21 days after service on the company of this demand:
(a) to pay to the creditor the amount of the debt; or
(b) to secure or compound for the amount of the debt to the creditors reasonable satisfaction.”

“ SCHEDULE

Description of the debt (indicate if it is a judgment debt, giving the name of the court and the date of the order)	Amount of the debt
Short terms loans advanced by the trustee of the GDK Financial Solutions Trust who have assigned the debts owing to Excelsior Eastern Limited.
_________________________________________________
_________________________________________________
____________________________________$15,768"

20 The form of the schedule to Form 509H was the subject of comment by Lindgren J in Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562. His Honour said (at p.579), after setting out that schedule:

“Clearly, a statutory demand relating to two or more debts must give a ‘description’ of the individual debts and state their amounts as well as state the total of those amounts.”

21 I respectfully agree. The matter to be specified in the first column of the schedule is “Description of the debt”. Against that must be shown in the second column “Amount of the debt”. Where, consistently with s.459E(1)(b), a single demand is based on several debts, the reference in the heading of each of the schedule’s columns to “the debt” is a reference to each of the several debts individually. That reference to “the debt” is not concerned with the totality of the several debts. The direction in the heading of the first column does not call for an amalgamated single description of all the debts together; and the direction in the heading of the second column does not call for a statement of the aggregate amount of the several debts. The requirement that such an aggregate amount be stated where the demand is based on several debts comes from the words “Total amount” which is positioned on the lowest of the three ruled lines at the foot of the second column so as to indicate that that the separate amounts specified on the lines above in respect of individual debts are to be added together and the aggregate inserted on the lowest line. The clear intention is that a separate description and a separate amount be stated for each debt, together with an aggregate amount for all together. The case in which, as envisaged by the asterisked footnote, “Total amount” will not be applicable is the case where there is only one sum under “Amount of the debt” because there is only one debt. It is this analysis that underlies Lindgren J’s observation.

22 The approach taken by Lindgren J was expressly approved and adopted by Nicholson J in Delta Beta Pty Ltd v Vissers (1996) 20 ACSR 583. His Honour held (at p.586) that, in a case where a statutory demand relates to several debts, compliance with s.459E(2)(e) (requiring adherence to the prescribed form) entails specification of individual debts and the total amount of all debts.

23 In the present case, each of paragraph 1 and paragraph 3 of the demand purports to refer to a single debt. It is identified in paragraph 1 as “the debt described in the Schedule” and its amount is stated to be $15,768.50. The demand made in paragraph 3 is that “the amount of the debt” be paid or that the company secure or compound for “the amount of the debt”. But the defendant clearly accepted during the hearing that several debts are, in reality the subject of the document, that being the alternative message conveyed by its schedule where there is reference to “loans” and “the debts owing”, both in the plural. The demand may thus be seen to be non-compliant, so far as Form 509H is concerned, in several ways. First, the version of paragraph 1 appropriate to a single debt rather than multiple debts has been employed; second, the version of paragraph 3 appropriate to a single debt rather than multiple debts has been employed; and, third, the schedule (which, correctly on the facts, refers to several debts) fails to provide a description and amount separately in respect of each debt and gives only an un-dissected total of $15,768.50 for all debts included in a global description of debts.

24 These matters of non-compliance amount to a “defect” in the statutory demand, within the s.9 definition of “defect”. It therefore becomes necessary to address the question posed by s.459J(1)(a), that is, whether the defect is of such a quality that substantial injustice will be caused unless the demand is set aside.

25 That question must, of course, be addressed in context; and it is clear that a defect will not be productive of “substantial injustice” if the demand, viewed in the light of what the company already knows or ought reasonably be expected to know, contains sufficient information to assess its liability for the amounts demanded: Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226. In the present case, the plaintiff, upon reading the demand, would have become aware that the defendant alleged, first, that the plaintiff had become indebted to the (unnamed and unidentified) person who was the trustee of the GDK Financial Solutions Trust in respect of “short term loans advanced by” that person; second, that that person had assigned to the defendant “the debts owing” and; third, that the amount considered by the defendant to be due accordingly to it was $15,768.50.

26 Leave to one side for the moment the reference to assignment. Assume that the demand speaks simply of several debts aggregating $15,768.50 said to be owed by the plaintiff to the defendant in respect of short term loans. If, as a matter of fact, the plaintiff received several short term loans from the defendant and their aggregate principal amount, now due, was exactly $15,768.50, the plaintiff would presumably be in no doubt as to the meaning and intent of the demand. But assume the plaintiff’s position was that it had received several short term loans from the defendant but the aggregate amount was only $10,000; or that it had received several short term loans of an aggregate amount of $20,000 and considered itself to have been released from $5,000 of them; or that there had been several loans, some short term now due and the others long term not yet due, the aggregate of which was $15,768.50.

27 In the last three situations, the plaintiff would be unable to come to grips with the intended meaning of the statutory demand in the way the legislation intends. The ability of a company served with a statutory demand to understand with clarity the requirement the demanding party seeks to impose is crucial to the working of the statutory provisions. One need not go beyond s.459H(1)(a), the provision which is the most fertile source of challenges to statutory demands. That section enables the company concerned to mount a challenge on the basis of a genuine dispute about “the existence or amount of a debt to which the demand relates”. The reference here is to “a debt” in the singular. It follows that, where the demand is of the kind allowed by s.459E(1)(b) and relates to “2 or more debts”, a s.459H(1)(a) challenge may be pursued on the basis of a dispute with respect of any one of the several debts dealt with in the demand. Indeed, it may be pursued on the basis of a dispute as to all or any of the several debts.

28 Fundamental, in these circumstances, is the proposition that the company on which the demand is served must be able to identify with precision the debt – or each and every one of the several debts – upon which a statutory demand is based. Failure to provide the means of such identification means that the company is denied the ability even to begin to consider whether s.459H(1)(a) provides a ground for challenge. A company in that position suffers severe prejudice; and that prejudice must, of its nature, mean that there will be, in terms of s.459J(1)(a), “substantial injustice” unless the demand is set aside.

29 In the present case, therefore, I am satisfied that the defendant’s failure to include in the statutory demand both a separate description and a separate amount in respect of each of the assigned debts on which it based the demand constitutes a defect productive of substantial injustice requiring that the court make an order under s.459J(1)(a) setting the demand aside.

The assignment issue

30 The debts upon which the defendant relied in formulating the statutory demand were represented in the demand to be debts assigned to the defendant by another person. It was submitted on behalf of the defendant that a statutory demand may itself constitute notice of assignment for the purposes of s.12 of the Conveyancing Act 1919 so as to perfect an assignment at law of a legal chose in action. Reference was made to Clearance Nominees Pty Ltd v Discount Acceptance Corporation Pty Ltd (1997) 25 ACSR 531 and Bennell v Netlink Australia Pty Ltd (2002) 42 ACSR 680 (see also Re Small & Shattell (Sales) Pty Ltd (1992) 7 ACSR 99).

31 While this may well be so (and it is clear, having regard to s.459E(4), that what s.80(1) of the Companies Act 1862 (Eng) and later legislation called a “creditor by assignment” may take advantage of the statutory demand procedure), there is a question whether an unsupported assertion in the demand of the status of creditor by assignment is sufficient to make the demand a complying statutory demand. Take the case where X is an acknowledged and undisputed creditor of a company in the sum of $10,000 for goods sold and delivered by X to the company on 31 January. If that company receives a statutory demand in which Y is named as creditor and the description of the debt refers to $10,000 for goods sold and delivered by X to the company on 31 January and to subsequent assignment of the debt by X to Y, does a presumption of insolvency arise if the company, never having heard of Y, having had no relevant communication from X and being mistrustful of the bald assertion of assignee status by the stranger Y, fails to pay $10,000 to Y within 21 days after service of the demand?

32 It is said that, in a situation of equitable assignment only, each of the assignor and the assignee of the debt is a “creditor” within s.459E: Rohan Trading Co Pty Ltd v Glengor Pastoral Co Pty Ltd [2003] NSWSC 1265 referring to Re Steel Wing Co Ltd [1921] 1 Ch 349. Alternatively, it may be that there can only ever be one creditor in respect of a particular debt, as suggested by Young CJ in Eq in Reale Bros Pty Ltd v Reale (2003) 179 FLR 427 at p.435 on the basis of the decision of Hodgson J in Manzo v 555/255 Pitt Street Pty Ltd (1990) 21 NSWLR 1 at p.8. Perhaps each proposition is correct, in that the right of action on the part of the assignor will alone be recognised in the eyes of the common law while that of the assignee will be recognised by equity as paramount, but neither common law nor equity will countenance double recovery, with the result that only one claimant will ultimately be permitted to recover as against the debtor.

33 Speaking of the position of someone who had granted an option to one person and later received a purported notice of exercise from another person who claimed to be the assignee of the first, Lord Denning MR said, in Warner Bros Records Inc v Rollgreen Ltd [1976] QB 430 (at p.442):

“The grantor cannot be expected to act on a letter (purporting to exercise the option) which comes out of the blue from someone or other of which he knows nothing. He must be told that it comes from an assignee who has taken an assignment.”

34 This does not mean that an equitable assignment is incomplete or imperfect in the absence of notice to the obligor. What it does mean is that, in the absence of full legal assignment under s.12 of the Conveyancing Act, the assignee cannot maintain a debt action in a court of common law in his own name. To sue at law, he must enlist (or, with the aid of equity, compel) the assistance of the assignor: see the discussion at (2000) 74 ALJ 287. Where that assistance is not willingly given by the assignor, the first task of the equitable assignee is to make a case in a court of equity justifying an order that the assignor lend his name to an action at law against the debtor. It has been said that this is really no more than “a formality”: National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 6 ACTR 1 at p.8 per Blackburn J. This is no doubt so once the all-important matter of the assignment itself has been proved.

35 In the context of a statutory demand issued by an assignee of a debt, it is reasonable to think that the requirements under s.459E(2), including the requirement arising from the “Description of debt” instruction in Form 509H, will not be satisfied unless it can be seen, when the demand is served, that circumstances warranting such an order of a court of equity exist in relation to a debt upon which the person serving the demand relies as a creditor by assignment. In other words, a self-professing assignee cannot be regarded as having satisfied the content requirements of s.459E(2) unless the statutory demand is framed in terms enabling the company to see the matters that would cause a court to order that the assignor’s name be used in a debt recovery action brought by the equitable assignee. If, as has been suggested, the statutory demand can operate as notice which causes a merely equitable assignment to become a legal assignment under s.12 of the Conveyancing Act, it does not follow as some form of corollary that the demand need not contain, in the way I have stated, information sufficient to show the status of the issuer as an assignee. Where the statutory demand represents the first intimation to the debtor regarding the assignment, the content I have described must, I think, be included.

36 The position will, of course, be different where the company upon which the statutory demand is served already knows of the assignment. The cases make it clear that the content of a statutory demand will be measured against the “substantial injustice” criterion in s.459J(1)(a) by reference to the company’s pre-existing knowledge of relevant matters. I have already referred, in that connection, to the Topfelt case. A company is, for example, presumed to have knowledge of dealings in which it has engaged, with the result that there is no need for the creditor formulating a statutory demand to provide notice of such dealings. But where the existence of the debt on which the creditor bases the statutory demand depends, so far as the status of the debt as a debt owing to that creditor is concerned, on matters of which the company has no knowledge and cannot reasonably be expected to receive knowledge in the ordinary course of events, it becomes incumbent upon the creditor to show the missing particulars on which its claim depends.

37 The statutory demand in the present case contained no more than a bald assertion that the unnamed “trustee of the GDK Financial Solutions Trust” had assigned the debts to the defendant. The plaintiff was provided with no means whatsoever of satisfying itself of the validity of that assertion. It was left in a position where, if it complied with the demand, it might, for all it knew, have remained liable to the supposed assignor (assuming that it was indebted to that supposed assignor).

38 The failure to include in the description of the debt in the statutory demand material from which the plaintiff could satisfy itself that there had been an assignment as alleged was, in my opinion, another “defect” in the demand in terms of the s.9 definition of “defect”. And because that defect left the plaintiff in a position where it could not see whether it could, with safety, comply with the demand, it was a defect productive of “substantial injustice” as referred to in s.459J(1)(a).

Sufficiency of the supporting affidavit

39 The plaintiff says that there are deficiencies in the accompanying s.459E(3) affidavit which constitute “some other reason” (within s.459J(1)(b)) why the statutory demand should be set aside.

40 The affidavit is sworn by Mr Montagnino who states that he is an employee of the solicitor for the defendant and is authorised to make the affidavit on behalf of the defendant: see [2] above. In the absence of any challenge to Mr Montagnino’s authority, his statement is sufficient to bring him within the class of relevant deponents described in rule 5.2 of the Supreme Court (Corporations) Rules 1999, which rule should be regarded as applying to an affidavit of this kind to the exclusion of rule 5.2; see the discussion in Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 489 at pp.491-2.

41 It was submitted on behalf of the plaintiff that, even if Mr Montagnino is an appropriate deponent, the statements he makes about the debt being due and payable and the absence of genuine dispute about the existence or amount of it can only be hearsay, with the result that the affidavit is open to the objection discussed in the Standard Commodities case at pp.493-4.

42 I do not accept this submission. In Standard Commodities, the deponent said in the affidavit that he had been informed of relevant matters by the French lawyers for the creditor. The hearsay and third-hand nature of the statements making them unreliable was thus clear on the face of the affidavit. Here, by contrast, the deponent makes direct statements on the relevant matters and clearly identifies the source of his knowledge. He states explicitly that he has inspected the business records of the defendant in relation to the plaintiff’s account with the defendant. One might wonder how an assignee of a debt or debts would be in a position where the alleged debtor had an “account with” the assignee, but I am content to regard the statement in the affidavit as referring to the business records of the defendant relating to the plaintiff’s indebtedness to the defendant.

43 The need for the deponent to state the source of his knowledge is emphasised in the judgment of Templeman J (with whom Steytler and Miller JJ agreed) in Wildtown Holdings Pty Ltd v Rural Traders Co Ltd (2002) 172 FLR 35 at 43-44. That requirement is met in this case by the deponent’s statement of having accessed relevant business records.

44 In light of the reference to the deponent’s source of knowledge and the absence of any challenge to his statement regarding inspection of records by him, I do not regard the s.459E(3) affidavit in this case to be open to the objection that was upheld in Standard Commodities.

The genuine dispute issue

45 It remains to consider the plaintiff’s case based on s.459H and the claim that there is a “genuine dispute” as to the existence of the debt.

46 In order to be within s.459H(1)(a), a dispute must satisfy tests laid down in a number of well known cases, including Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601, Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 and Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452. I would repeat here what I said about those tests in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23]:

“It is appropriate to dwell for a moment on the guidance provided by these cases. The tests of ‘plausible contention requiring investigation’, ‘real and not spurious, hypothetical, illusory or misconceived’ and ‘perception of genuineness (or lack of it)’, applied in the context of a summary procedure where ‘it is not expected that the court will embark on any extended inquiry’, 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 arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it 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.”

47 Mr Thomas, a director of the plaintiff, acknowledges that the plaintiff did have business dealings with GDK Financial Solutions Pty Ltd, which he describes as a former trustee of the GDK Financial Solutions Trust. Those dealings began with discussions that commenced in September or October 2003. They involved the provision of services by the plaintiff to GDK Financial Solutions Pty Ltd in connection with the establishment of managed investment schemes related to retirement villages. Mr Thomas says, however, that none of the transactions and dealings involved the making of loans (whether “short term” or otherwise) to the plaintiff (as trustee of the Peridon Retirement Villages Trust or otherwise) by any of the defendant, Equitable Overseer Pty Ltd, Vertean Pty Ltd, GDK Financial Solutions Pty Ltd or the GDK Financial Solutions Trust. He has no doubt mentioned all these names because they appear in orders of the Federal Court of 20 May 2005 as to change of trustees of the GDK Financial Solutions Trust. Those orders were introduced into evidence by the defendant. The names seem to cover all possibilities so far as the identity of the trustee of that trust may be gathered from those orders.

48 The defendant says that it is not good enough for the plaintiff merely to say, as it does, that it never received any loan from any of the persons mentioned. That, it is said, amounts to mere assertion; and mere assertion is not sufficient to justify a finding of genuine dispute.

49 It is true that a “mere assertion” of genuine dispute as such is not enough to activate s.459H(1)(a). That was pointed out by Sundberg J in Graywinter Properties (above) at p.459; and see the recent decision of the Western Australia Court of Appeal in Jadd Projects Pty Ltd v Muldoon Tiles Supply & Fix Pty Ltd [2004] WASCA 180. But to say that one has never received any loan from a person is not to make a “mere assertion” of genuine dispute about the state of one’s indebtedness to that person. Mr Thomas’s evidence about absence of dealings involving loans is really the only evidence that can be given in an attempt to prove the negative proposition that no loan was ever made. I accept it, therefore, as evidence relevant to the genuine dispute issue under s.459H(1)(a). And because that evidence is not effectively countered, I must find that the contention of the defendant in the statutory demand regarding indebtedness of the plaintiff arising from short term loans made to it by the (unnamed) trustee of the GDK Financial Solutions Trust is sufficiently called into question to warrant the conclusion that there is a genuine dispute as to the existence of the debt.

Graywinter

50 Before disposing of the application, I must deal with a submission of the defendant that the plaintiff is precluded by the “Graywinter Principle” (derived from the Graywinter Properties case, above) from relying on some of the grounds of challenge to the statutory demand discussed above. The gist of the Graywinter principle is that the application for an order setting aside the statutory demand and the affidavit in support of that application, both filed and served within the twenty-one day period stipulated in s.459G(3), must fairly alert the claimant to the nature of the case the company will seek to make in seeking to have the statutory demand set aside. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by ss.459H and 459J for setting aside statutory demands. That process of delineation may not be extended after the end of the twenty-one day period, although it is open to the plaintiff to supplement the initial affidavit by way of additional evidence relevant to the area of controversy identified within the period. The provenance of the principle is discussed in the recent judgment of Campbell J in Tuta Healthcare Pty Ltd v Nipro Asia Pty Ltd [2005] NSWSC 664.

51 The relevant affidavit in this case is that of Mr Thomas sworn on 30 August 2005. That affidavit is admittedly brief. Its content is supplemented by Mr Thomas’s subsequent affidavit. It is nevertheless clear that the first affidavit sufficiently identified (with one exception) the grounds on which the plaintiff has relied. The alleged lack of service is dealt with at paragraphs 2 and 3. The matter of lack of identification of separate debts is dealt with at paragraphs 5 and 6. The lack of information about any assignment of debt is raised at paragraph 7. The matters going to the genuine dispute ground are referred to at paragraphs 4, 5 and 6.

52 The affidavit does not, however, refer to the ground of objection based on inadequacy of Mr Montagnino’s affidavit, with the result that the Graywinter objection is validly taken in relation to that ground. But since I have found that that ground is not made out, the unavailability of the ground makes no difference to the result.

Disposition

53 The plaintiff has been successful in its contentions based on s.459J(1)(a) and s.459H(1)(a). As a result, it is entitled to an order setting aside the statutory demand.

54 I therefore order that the statutory demand dated 5 August 2005 addressed by the defendant to the plaintiff be set aside.

55 I shall hear the parties on costs at a time to be fixed.

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