Dornay Nominees Pty Ltd v Blackbutt Nominees Pty Ltd

[2001] VSC 20

SUPREME COURT OF VICTORIA

COMMERCIAL AND EQUITY DIVISION

Not Restricted

No. 7255  of 2000

DORNAY NOMINEES PTY LTD	Plaintiff
v
BLACKBUTT NOMINEES PTY LTD	Defendant

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MASTER:	Senior Master Mahony
WHERE HELD:	Melbourne
DATES OF HEARING:	1 November 2000, 7 December 2000
DATE OF JUDGMENT:	14 February 2001
CASE MAY BE CITED AS:	Dornay Nominees v Blackbutt Nominees
MEDIA NEUTRAL CITATION:	[2001] VSC  20

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Corporations – winding up – statutory demand – setting aside – “accompanying” affidavit made  one day before statutory demand signed – whether need for contemporaneity of date – effect of conflicting forms of statutory demand and affidavit 

Corporations Law, section 459E

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Cameron	Barrett, Walker & Co
For the Defendant	Mr W Gillies	Fleming Muntz

JUDGMENT

1. The plaintiff seeks an order setting aside a statutory demand served on it by the defendant, inter alia because the affidavit served with the demand was made one day before the date of the demand. As expressed at the conclusion of the affidavit filed with the originating process, the plaintiff’s contention is that the demand “has not been verified by the necessary Supporting Affidavit in compliance with the Corporations Law”.

1. Section 459E (1) of the Law enables a creditor of a company for a sum or sums equalling or exceeding “the statutory minimum” to serve on the company a demand. Sub-section (2) sets out in peremptory terms the requirements of a valid demand. Sub-section (3) provides that where the debt or each debt is not a judgment debt, “the demand must be accompanied by an affidavit that … verifies that the debt … is due and payable by the company; and … complies with the rules”.

1. Mr Cameron, for the plaintiff, submitted that the affidavit served with the demand in this case, having been made when the demand did not exist, necessarily failed to verify anything with respect to the demand; and that, therefore, this is a case similar in all essential respects to Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (in liquidation) [1994] 14 ACSR 565; 12 ACLC 963, where Cox, J (as he then was) set aside a statutory demand for a debt which was not a judgment debt because, when served, it was not accompanied by any affidavit at all. (See, also, Aluminium Fast Ferries Australia Pty Ltd v Marine Construction & Maintenance Pty Ltd (2000) 2 Qd R 113.) Thus Mr Cameron’s submission, in effect, was that the affidavit which was served was of no effect.

1. It would appear that some implicit support for Mr Cameron’s contention can be found in the judgment of Santow, J. of the Supreme Court of New South Wales in Dolvelle Pty Ltd and Another v Australian Macfarms Pty Ltd [1998] 28 ACSR 175, 16 ACLC 1371. That case involved one application (to which s 459T did not apply) for the winding up of two companies. His Honour held the application good as to one of the defendants, but the matter which is of particular relevance here is that in the case of each of the named defendants the affidavit accompanying the statutory demand served on it had been made two days before the demand was signed. Santow, J stated the argument of counsel for the defendant which was not dismissed from the proceeding, as follows (ACSR, at 184; ACLC, at 1379): “A statutory demand can only be issued in relation to a debt or debts that are due and payable at the date of the demand … The clear intendment of s 459E (3) is that the statutory demand must be accompanied by an affidavit verifying the position as at the date of the demand; that can clearly be tested by assuming that the debt was reduced or repaid between the date of the affidavit and the later date of the statutory demand. In such a case, an earlier dated affidavit would clearly not satisfy this essential requirement that the debt be due and owing at the date of the statutory demand. It follows, according to the defendant, that there is no statutory demand under Pt 5.4 of the Corporations Law and thus no basis for an application under Pt 5.4 to wind up the defendant.” (Thus counsel took a different view from Mr Cameron’s in identifying the effect of the affidavit being made two days before the demand. He submitted not that the affidavit was of no effect but that the statutory demand was not within Part 5.4. I prefer Mr Cameron’s formulation.)

1. Santow, J did not deal with the merits of this argument because he accepted the submission of counsel for the plaintiff in the case that the argument was not open to the defendant unless, not having applied for the setting aside of the demand, it obtained leave under s 459S, and that such leave could not be granted because the argument did not touch the question of the defendant’s solvency.  Further, Santow, J held that, in so far as the argument suggested a defect in the application or in the statutory demand, s 467A applied to relieve the plaintiff of the consequences of the defect provided that an affidavit was filed proving that the debt demanded was still due and payable.

1. These matters on which the plaintiff successfully relied in Dolvelle were not available to Mr Gillies as submissions for the defendant in this proceeding.  The merits of the argument advanced by Mr Cameron and by counsel in Dolvelle have to be considered.  The implicit support for Mr Cameron’s position which I suggested might be found in the judgment of Santow, J in Dolvelle is contained in the following passage (ACSR, at 185; ACLC, at 1379-1380): “It is with some hesitation that I have concluded that the word ‘must’ in s 459E (3) is not comparable in effect to the words ‘may only’ in s 459G (2) such as to render an application based on such a statutory demand outside Pt 5.4 merely because the accompanying affidavit is two days premature. The requirement (of exact coincidence of date for verification of the statutory demand), though important, is not to be treated as an essential integer of the relief sought; there is of course no dispute that the amount remains unpaid” [my emphasis].  The relief sought to which Santow, J was referring was winding up, the statutory demand in Dolvelle neither having been complied with nor made the subject of an application for an order setting it aside; and, therefore, at least apparently, having led to the presumption of insolvency provided for by s 459C (2)(a).  The impact of a requirement such as that identified by Santow, J – “of exact coincidence of date for verification of the statutory demand” – necessarily will be different where the relief sought is that the statutory demand be set aside on the express ground that such a requirement has not been satisfied.  Since, however, Santow, J., in the view he took, was not obliged to consider further the nature of that ‘requirement’, it is not to be overlooked that the question was not fully argued before him and that, in referring to it, what he said was obiter.

1. The ‘requirement’ does not appear in s 459E. That section empowers a creditor to serve a demand (sub-s (1)) and requires that the demand be accompanied by an affidavit if the debt demanded is not a judgment debt (sub-s (3)).  This means that in such a case an affidavit must be served with the demand.   It says nothing about the contemporaneity of creation of the documents served.  The Explanatory Memorandum which accompanied the Corporate Law Reform Bill 1992, in consequence of which Part 5.4 (which contains s 459E) was inserted in the Corporations Law, is similarly silent: see paragraphs 679-682.

1. The argument of the defendant’s counsel in Dolvelle as expressed by Santow, J, it may be recalled, was that “it was the clear intendment” of the section that the demand was to be accompanied by an affidavit “verifying the position as at the date of the demand”.  In so far as the demand must be for a sum which is due and payable this may be conceded, provided that “the position” is understood simply to relate to that quality of the debt.  But the affidavit contemplated by the section effectively may verify that fact if made after the demand is signed, even days after, provided that it is made in time to be served with the demand. 

1. The proposition advanced by counsel in Dolvelle to prove his point in the case of an affidavit made before the demand, the situation which is particularly relevant to this case, is not compelling.  It involved examples of a payment in satisfaction or reduction of the debt after the affidavit was made but before the demand was signed.  Surely it is trite that, if a debt were extinguished by payment, the former creditor would not be minded to sign a demand at all!  Secondly, if there were a partial payment after the making of the affidavit but before a demand was signed, it would mean that the affidavit would no longer be usable because the debt it identified as due and payable would not be that which thenceforth could properly be specified in the demand.

1. Counsel in Dolvelle was right, however,  to the extent that it is “the clear intendment” of the section that the demand and the affidavit relate to the same debt or debts.  The affidavit cannot fulfil its statutory function if it does not prove that the debt or debts demanded are due and payable.  The performance of this function, however, does not mean that the affidavit must “accompany” the demand at the time at which the demand is signed.  As I have mentioned, all the section requires is that the affidavit “accompany” the demand at the time of service; and  this may be achieved whether the affidavit is made before or after the demand is signed.  Considered simply in the light of the requirements of the section, it will matter not to the company, when served with the demand and the affidavit, which preceded the other into existence.  For example, if there is a part payment before service but after the documents have been forwarded for service, it will not have the effect contended for in Dolvelle; it will merely afford the company a case for applying to the Court in accordance with s 459G for an order under s 459H (4)(a) varying the demand to reflect the part payment. 

1. The notion that there ought be contemporaneity of the demand and the affidavit was created, I believe, by two forms: the form of statutory demand prescribed pursuant to s 459E (2)(e); and the form of affidavit prescribed in court rules in apparent response to the provision in s 459E (3)(ii) that the affidavit must be such as to comply with “the rules”. The forms are such that each of the documents prescribed refers to the other as if it already exists at the time of the document’s creation.

1. Paragraph 2 of Form 509H, the form of statutory demand, in the case of a non-judgment debt is prescribed to be as follows: “Attached is the affidavit of (insert name of deponent of the affidavit), dated (insert date of affidavit), verifying that the amount is due and payable by the company.” Since a document drawn up to be an affidavit only becomes an affidavit of which there a ‘deponent’ when that person subscribes his or her signature and takes the oath or makes the affirmation before a person qualified to administer it and when that latter person duly completes the jurat, and since an affidavit meaningfully acquires a date only when the jurat specifying the date of the oath or affirmation is completed, and since it is to be ‘attached’, paragraph 2 of the form appears necessarily to require that, at the time that the statutory demand is signed (as required by s 459E (2)(f)), the steps necessary to constitute it an affidavit have been taken with respect to the document referred to as attached to the demand, and that the particulars of the affidavit have been inserted in paragraph 2 as required by the form. In other words, the prescribed form of statutory demand for a non-judgment debt can only be complied with strictly if the affidavit required by s 459E (3) has been made and attached before the statutory demand is signed.  The plaintiff’s contention, of course, is that such compliance ought, of itself, result in the setting aside of the demand!

1. Form 7 of the Corporations Rules is the form prescribed for an affidavit under s 459E (3). The first paragraph of the ‘affidavit’ specifies the relationship of the deponent to the creditor “named in the statutory demand, which this affidavit accompanies, relating to the *debt/debts owed by [name of debtor company]”.  Since this is a document the contents of which are to be sworn or affirmed to be true, it would seem that the statutory demand must be duly completed by signature at the time at which the document is produced to the person authorised to administer the oath or affirmation.  In other words, an affidavit following the form can only be made if the statutory demand is already in existence. (The definitions of ‘statutory demand’ in s 9 of the Corporations Law do not assist. The first is “a document that is, or purports to be, a demand served under section 459E” (my emphasis); and the other is “such a document as varied by an order under subsection 459H(4)”. The definitions, then, apply to a document which has been served and not to that expression as used in Form 7.)

1. Because, depending on which of the documents is completed first, the respective forms make it inevitable – in every case to which s 459E (3) applies – that one must contain some factual ‘inexactitude’, it has been, perhaps, convenient to attempt to disguise this by having both dated the same day. A less cynical view is that there is compliance with a ‘requirement’ of ‘date contemporaneity’, or as Santow, J expressed it in Dolvelle, of “exact coincidence of date for verification of the statutory demand”. 

1. This may have been thought efficacious because of the maxim fractionem diei non recipit lex or, as Chitty, J effectively translated in In re Railway Sleepers Supply Company (1885) 29 Ch D 204, at 205: “The general rule of law in the computation of time is that fractions of a day are not reckoned.” The general rule, as that description suggests, has exceptions. In Combe v Pitt (1763) 3 Burr. 1423, at 1434, Lord Mansfield said, “(T)hough the law does not in general, allow of the fraction of a day, yet it admits it in cases where it is necessary to distinguish”: see, for example, Campbell v Stringways (1877) LR 3 CPD 105; Chappel v Moffatt (1878) 4 VLR (L) 189; R v O’Brien, ex p The Dalmatia Gold Mining Company Limited (1880) 6 VLR (L) 429 (where the Full Court of this Court succinctly stated: “The Court takes notice of parts of a day, only where it is necessary to determine which of two acts done on the same day is to have priority”); Eaglehill Ltd v J Needham Builders Ltd [1973] AC 992, at 1006-7; Cooper v Chief Commissioner of Land Tax (1988) 12 NSWLR 660, at 668-9; and Marshall v D G Sundin & Co Pty Ltd (1989) 16 NSWLR 463, at 467.

1. If, then, the validity of a statutory demand were to depend on whether it was signed before or after an affidavit in accordance with s 459E (3) was made – and, as I have mentioned, paragraph 2 of the prescribed form of statutory demand suggests that the affidavit necessarily must precede the demand – that the documents were signed and made on the same day would not relieve the court in every application under s 459G from making a determination of validity based on evidence as to the times of signing the demand and making the affidavit. It is not without significance that this has not been the practice and is plainly not intended by Part 5.4 to be the practice. First, s 459E does not contemplate that the requirement that an affidavit accompany a demand in the case of a non-judgment debt should obtain until service is effected. Secondly, the summary nature of an application under s 459G means that the court would be obliged to resist the creation of any such cumbersome practice. Thirdly, that any such inquiry could only show that one form had been complied with, and the other not, would also militate against such a course. Accordingly, one concludes that no exception to the general rule applies. But this does not mean that the general rule applies so as to reflect a requirement that the statutory demand and the affidavit must be signed and made on the same day. Since such a course merely disguises which event occurred first so as to prevent an allegation as to which form has not been followed strictly, and since the respective provisions in the forms are not required for the proper operation of s 459E (3), the imposition of a gratuitous requirement of “exact co-incidence of date for verification of the demand” would be an unwarranted fetter on the performance by the creditor of the creditor’s obligations under the section.

1. In this I am not overlooking that both forms may be said to have statutory force. Section 459E (2)(e) provides that a statutory demand “must be in the prescribed form (if any)” (my emphasis).  Rule 5.2 (a) provides that the affidavit “must … be in accordance with Form 7 and state the matters mentioned in that Form” (my emphasis); and this peremptory provision is supported by that in s 459E (3)(b) – that the affidavit comply “with the rules”. (In a case where the rule is complied with and the affidavit made follows Form 7, the ameliorating provision of Rule 1.7, that substantial accord with the form or the presence of variations required by the nature of the case will suffice to comply with the Rules, has no operation.) It is seen that the creditor is obliged by the word “must” to comply with incompatible ‘statutory’ forms. This being impossible, the creditor is not to be penalised unless there is more than mere non-compliance with one.

1. If, as in this case, an affidavit is made a day before there is signed a statutory demand in Form 509H concerning the same debt, or two days before (as in Dolvelle), the difference from the case where such an affidavit is made five minutes, or half an hour, before such a demand is signed, is only a matter of degree.  In each case the reference in the affidavit to the statutory demand would not be correct, but those in the statutory demand to the affidavit would be just as apparently contemplated by Form 509H.  The opposite would be so if the affidavit were made five minutes or half an hour after the statutory demand was signed.  Then it would be the references in the statutory demand to the affidavit which would be incorrect while the affidavit would be as apparently contemplated by Form 7.  The position if the affidavit were made a day, or two days, after the statutory demand was signed, however, would be different.  In such a case, paragraph 2 of the statutory demand could not be completed until after the affidavit was made and completion of that paragraph after that event would be a material alteration to the document.  Considerations of practicality indicate that since the statutory demand must contain the particulars required by paragraph 2 of Form 509H, in every case where the affidavit is not made on the same day as that on which the statutory demand is signed, it will be made on a day before, rather than a day after, that event.  It may be that ‘backdating’ of the jurat is used in some cases to make it appear that a later affidavit has been made on the same day as the demand was signed; and it may be that paragraph 2 of the statutory demand is completed after it has been signed.  That would be deceitful but pragmatic.  This is not such a case and no more need be said of it than that it is conceivable that it may be a deceit and a pragmatism which, in certain circumstances, a creditor’s practitioner not without reason may consider has been forced upon the creditor by the forms.

1. If it were necessary to choose between the forms, these considerations suggest that Form 509H should operate in preference to Form 7. Further, s 459E (2)(e) expressly contemplated the prescription of a form of statutory demand and the reference in s 459E (3)(b) did not suggest that “the rules” would contain a form of affidavit, a fortiori a form of affidavit inconsistent with the form of statutory demand prescribed under subs (2)(e).  In the circumstances, I do not consider the fact that it is apparent, rather than hidden, in the documents served which was created before the other, should, of itself, constitute a reason within s 459J (1)(b) why a statutory demand should be set aside.  For the reasons set out in paragraph 18 this is especially so where, as in this case, it is apparent that the affidavit was made first.

1. In my view, however, it is neither necessary nor desirable to “choose” between the forms.  The section’s emphasis being on an affidavit accompanying a demand at the time of service, as a general rule one should attend to the substance of each to determine whether they comply with the requirements of the section and, to the extent necessary in a particular case, ignore any lack of apparent contemporaneity in their creation.  In my view, creditors cannot be penalised for following prescribed forms; and, if the complaint is, as, on analysis, it is in this case, simply that the content of the affidavit or of the statutory demand is inaccurate because there is reference to a document which apparently was not in existence at the time, then, in all but some exceptional case or cases, that complaint should not lead to the application of s 459J (1)(b) to set aside the demand.  That this will usually be consonant with justice is illustrated by the facts of this case, about which evidence was adduced during an adjournment I ordered for that purpose, at that time not having reached a concluded view about the objection raised by Mr Cameron.

1. In this case the affidavit followed Form 7 save that the deponent, Bruce Cameron McIntyre, a director of the defendant, left to inference his authority to make the affidavit: cf. paragraph 2 of the form.  Despite the fact that the affidavit was made on the day before that on which the demand was signed, therefore, Mr McIntyre deposed inter alia that he was “a Director of the Creditor named in the Statutory Demand which this Affidavit accompanies relating to the debt owed by the [plaintiff]”; and that “(t)he debt of $76,056.67 mentioned in the Statutory Demand is due and payable by the [plaintiff]”.  It seeming apparent that, in so far as they referred to a statutory demand, these statements could not be referable to that which was signed on the next day, at the time when I ordered the adjournment the plaintiff was, in my view, entitled to query the propriety of the documents served upon it.  It has been explained by the affidavits by Mr McIntyre and the defendant’s solicitor which were filed during the adjournment.

1. The relevant facts proved by their affidavits may be summarised as follows. As originally drawn, paragraph 2 of the statutory demand, in its reference to the ‘accompanying’ affidavit, named its deponent as “Bruce McIntyre”.  The solicitor forwarded both that statutory demand and the affidavit by express post to Mr McIntyre with a letter advising him concerning the making of the affidavit and noting the importance of swearing it on 26 September 2000 because interest had been calculated to that date.  The letter then requested the return of the affidavit by express post.  No explicit reference to the return of the statutory demand was made, but service of both the demand and the affidavit on the plaintiff was mentioned.  Having received the documents, Mr McIntyre took them to the local police station and swore the affidavit before the sergeant.  Before he made the affidavit he had read the statutory demand, he deposed, “to satisfy myself that all details contained therein were true and correct to be (sic) best of my knowledge and information available to me and [the defendant]”.  The only defect he detected was that in paragraph 2 he was not mentioned by his full name, “Bruce Cameron McIntyre”.  After he made the affidavit he “made notation on the Statutory Demand that my middle name of ‘Cameron’ had been omitted, and then returned the sworn Affidavit and Statutory Demand by express post to [the defendant’s solicitors] on the same date”.  When the solicitor received the documents on the following day he noticed the insertion of Mr McIntyre’s middle name and caused the statutory demand to be re-engrossed.  He deposed that “(a)t the time of re-engrossment of the Statutory demand the date of the document was inadvertently (sic) shown as 27 September 2000 and not 26 September 2000”.

1. It is apparent that even though the use of the post, albeit express post, would necessarily prevent the affidavit’s being made and the demand’s being signed on the same day – for some reason the statutory demand provided for signature by the solicitor’s firm and not by Mr McIntyre as director of the defendant – the solicitor’s intention was that the statutory demand should bear the same date as that on which the affidavit was sworn; that the true date of creation and signature of the demand appeared in it was “inadvertent”.  Because of an appreciation of the desirability or apparent necessity of the appearance of contemporaneity, it seems likely that what the solicitor intended is a device which is frequently adopted to disguise a difference in the true dates of creation of demand and affidavit.

1. In this case the evidence shows that the statutory demand which was served, albeit re-engrossed and (“inadvertently”) correctly dated, accorded completely with Mr McIntyre’s instructions even to an immaterial matter which he considered significant; that he was aware of the essential content of the demand when he made the affidavit; that he had in his possession at that time a document in the exact form of the statutory demand subsequently served (save for the immaterial matter which he subsequently inserted); and that, therefore, the debt which he deposed was due and payable was that which was demanded when the statutory demand was served with the affidavit on the plaintiff.  In these circumstances, if I were to order the setting aside of the demand, that result would be based on a failure adequately to negotiate the difficulty posed by the forms through following them literally. This is not the sort of reason, other than a defect in the demand, which s 459J (1)(b) contemplates the court’s accepting in that behalf.

1. In my view, but for Form 7, an affidavit would suffice for the purposes of s 459E (3)(a) if it did not identify the debt by reference to the statutory demand at all, but by amount (as the form provides) and a description which is the same as, or sufficiently similar to, the description of the debt in the schedule to the demand (provided, of course, that that description is adequate). If that were the case at the point of service of the demand and affidavit, an alleged debtor company would have no such difficulty as confronted the plaintiff in this case, irrespective of when the demand was signed and the affidavit made. Obviously, it would be similarly beneficial if paragraph 2 of Form 509H were also reconsidered.

1. Therefore, I shall not order the setting aside of the demand on the preliminary point raised by the plaintiff; and I shall, after hearing counsel, give directions for the completion of affidavit evidence, having previously indicated that no further costs were to be incurred until the preliminary point was determined.