Driford Pty Ltd v Advance Business Finance Pty Ltd

[2010] VSC 666

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT
CORPORATIONS LIST
LIST E

S CI 2009 10505

IN THE MATTER OF DRIFORD PTY LTD (ACN 105 239 432) AND TARRICA PTY LTD (ACN 104 354 985)

BETWEEN

DRIFORD PTY LTD (ACN 105 239 432)	Plaintiffs
and
TARRICA PTY LTD (ACN 104 354 985)
v
ADVANCE BUSINESS FINANCE PTY LTD (FORMERLY KNOWN AS BFL CAPITAL PTY LTD) (ACN 114 212 672)	Defendant

ASSOCIATE JUSTICE:	Gardiner AsJ
WHERE HELD:	Melbourne
DATES OF HEARING:	27 January 2010
DATE OF JUDGMENT:	27 January 2010
CASE MAY BE CITED AS:	Driford Pty Ltd and anor v Advance Business Finance Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VSC 666

---

CORPORATIONS – Application to set aside statutory demand pursuant to section 459G of the Corporations Act 2001 (Cth) – Singular application made in respect of two demands – Affidavit of plaintiff filed within 21 days period did not “support” the application as it consisted of mere assertions not supported by evidentiary foundation – Application dismissed.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M. W. Sanger	Eggleston Whelan
For the Defendant	Mr P. Siva	Clayton Utz

HIS HONOUR:

1. By an originating process dated 4 December 2009, the plaintiffs, Driford Pty Ltd and Tarrica Pty Ltd, make application to set aside statutory demands served on them by the defendant.  The application is supported by an affidavit of Stephen Vincent McGovern, sworn 4 December 2009.

1. The application seeks to set aside two statutory demands pursuant to s 459G of the Corporations Act 2001 (Cth) (“the Act”) by way of a singular application. The defendant says that this offends the principles set out in Help Desk Institute Pty Ltd v Adams (1999) 17 ACLC 18. In my view, a more appropriate authority for application in these particular circumstances is that of Santow J in Femley Pty Ltd v Salken Engineering Pty Ltd,[1] where joint debts were the subject of the application.  The debt the subject of the demands in this instance is not a joint debt as such but is in the nature of primary and accessory liability.  As occurred in the Femley case, the same facts and grounds which are the basis of the application to set aside the demand would apply uniformly to each debtor.  While accepting Young J’s approach on the issue of statutory interpretation, the approach taken by Santow J in Femley is consistent with the decision of Barrett J in a similar decision of Asaco Pty Ltd v Davey.[2]

   [1](1999) 17 ACLC 828.

   [2](2003) 47 ACSR 483.

1. I consider that it is permissible in these circumstances, although not the ideal or preferable course, for an application to be made in respect of the two demands.  It is said by the defendant that the affidavit in support makes no mention of Tarrica Pty Ltd but the deponent, Mr McGovern, states that he is “a director of the above-named plaintiffs” and is duly “authorised to make this affidavit on their behalf”.  In the circumstances of primary and accessory liability, I accept for current purposes that it is a valid application by both debtors.

1. Further, it was said by Mr Siva, the solicitor for the defendant, that the affidavit of Mr McGovern in support of the application nonetheless does not pass the so called Graywinter test.[3] The relevant passages of that affidavit state as follows, after the formal segments:

“3. There is an agreement on foot between Driford Pty Ltd and Advance Business Finance.

4. Driford Pty Ltd is currently meeting all its obligations under that agreement including being current with payment terms.”

[3]Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 21 ACSR 581.

1. Counsel for the plaintiffs, Mr Sanger, submits that that affidavit is sufficient, at least from a jurisdictional point of view to support an application to set aside the demands.  In my view, the affidavit falls short of “supporting” in the relevant sense the application to set aside the demand.

1. In Modena Imports Pty Ltd v Leveraged Capital Pty Ltd (in liq) [2009] NSWSC 20 Barrett J considered an affidavit of a similar ilk in support of an application to set aside a demand. The affidavit in that case stated:

“5. The Plaintiff and the Defendant are currently involved in a series of commercial disputes.

6. The Defendant owes money to the Plaintiff in the amount of $275,000 which has not been paid.

7. The Plaintiff claims by way of set-off in this matter, the monies owed to it by the Defendant.”

1. His Honour did not consider that this was sufficient to “support” the s 459G application in that instance. His Honour collected and referred to the numerous authorities which have been handed down on this particular point, including Graywinter and Macleay Nominees Pty Ltd v Belle Property East Pty Ltd.[4]At paragraphs 12 and 13 of Modena Imports, Barrett J said:

[12] Palmer J said in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 that a genuine claim for these purposes is one on a cause of action advanced in good faith for an amount claimed in good faith so that the claim can be seen to be arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful.

[13] In order to be “an affidavit supporting” an application based on offsetting claim, the affidavit must go beyond mere assertion or bare claim and show some basis for the allegation that there is a counterclaim set-off or cross-demand, that it has some explained substance and that it is in a particular amount. This last aspect is important because of the role that the amount of the offsetting claim plays under s 459H.”

[4][2001] NSWSC 743.

1. At paragraph 14, Barrett J cited from the decision of Austin J in Pacific Islands Express Pty Ltd v Empire Building Development Pty Ltd,[5] where Austin J states:

“In my view Mr Dagher's affidavit is not an affidavit "supporting the application", for the purposes of s 459G(3)(a), because it amounts to nothing more than a mere assertion that the debt claimed by the defendant is disputed and that the plaintiff has an unspecified claim for damages against the defendant. The affidavit fails to alert the defendant to the nature of the case the company seeks to make in resisting the statutory demand.”

[5][2008] NSWSC 576 at [7].

1. In my view, that authority is apposite for application in this case. What might be described minimalist assertions, of the character made in paragraphs 3 and 4 of Mr McGovern’s affidavit, do not meet the jurisdictional threshold so as to “support” the application under s 459G of the Act. For that reason, the application should be dismissed. As such, there was no application properly so called made in the 21 day period prescribed by the legislation and the plaintiffs committed an act of insolvency 21 days after being served with the demand.

1. If I am not correct in my above analysis I would also make the following observations.  I have been taken to correspondence which has emanated from Clayton Utz since the service of this application on 4 December 2009, nearly two months ago.  That documentation is exhibited to an affidavit of Polat Siva, sworn 27 January 2010.  It details in comprehensive terms the defendant’s position in regard to what the plaintiffs assert in Mr McGovern’s affidavit.  On three occasions the solicitors for the defendant articulate in considerable detail the defendant’s position in regard to what the plaintiffs asserts.  There has been no response at all to the matters raised in those letters which fairly warned the plaintiffs of the defendant’s position.  As I have said, the application was not, in any event, “supported” by an affidavit but it gives some comfort that if the plaintiffs had matters that they wished to raise at all, they have not done so despite ample opportunity to do so.

1. In the circumstances, the application is dismissed with costs. The plaintiffs had been warned on several occasions that the application was not properly constituted and had no merit and was warned that indemnity costs would be sought but it chose to proceed. The Court considered that was not reasonable to do so and an award of indemnity costs was appropriate.

---