Entech-Renewable Energy Solutions Pty Ltd v POLYTEK-WEARNES Engineering Sdn BHD - [2010] WASC 354

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ENTECH-RENEWABLE ENERGY SOLUTIONS PTY LTD -v- POLYTEK-WEARNES ENGINEERING SDN BHD [2010] WASC 354

CORAM: MASTER SANDERSON

HEARD: 1 NOVEMBER 2010

DELIVERED : 30 NOVEMBER 2010

FILE NO/S: COR 122 of 2010

BETWEEN: ENTECH-RENEWABLE ENERGY SOLUTIONS PTY LTD
Plaintiff
AND
POLYTEK-WEARNES ENGINEERING SDN BHD
Defendant

Catchwords:

Corporation law - Application to set aside statutory demand - Sufficiency of affidavit in support of application - Relevancy of later affidavit - Principles to be applied

Legislation:

Nil

Result:

Remand set aside

Category: A

Representation:

Counsel:

Plaintiff: Mr P T Arns
Defendant: Mr J C Vaughan

Solicitors:

Plaintiff: Arns & Associates
Defendant: Jackson McDonald

Case(s) referred to in judgment(s):

71 Paisley Street Footscray Pty Ltd v Vineyards Estate Pty Ltd (Unreported, FCA, 18 August 1995)
Ainslie v Ainslie (1927) 39 CLR 381
Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd (2005) 23 ACLC 1266
Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419
Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306
Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452
Jadd Projects Pty Ltd v Muldoon Tiles Supply & Fix Pty Ltd [2004] WASCA 180
Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360

MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The application is brought pursuant to s 459G of the Corporations Act 2001 (Cth) (the Act). The plaintiff alleges there is a genuine dispute as to the debt the subject of the demand. It says the demand ought be set aside under s 459H(1). In support of its application the plaintiff relies on an affidavit of Neil Robbie Martin sworn 3 July 2010. Mr Martin is the sole director of the plaintiff. Appearing as annexure NRM-01 to the affidavit is a copy of the statutory demand. Appearing in the schedule to the demand under the heading 'description of debt' there appears the following:
Judgment debt in favour of the creditor on judgment granted against the debtor on 4 March 2010 by the High Court of Malaysia at Kuala Lumpur (Commercial Division) under Civil Suit Number D-22NCC-568-2009.
The amount of the debt is said to be 'RM 6,251,323.21'. No where is that Malaysian currency amount converted into Australian dollars.
Appearing as annexure NRM-02 to Mr Martin's affidavit is a copy of the affidavit accompanying the statutory demand. It was sworn by one Mun How Keat who says he is the general manager of the defendant. Mr Keat says on an unspecified date the defendant commenced proceedings against the plaintiff in the High Court of Malaya at Kuala Lumpur. He also says the plaintiff did not defend the proceedings. Accordingly default judgment was granted against the plaintiff in favour of the defendant. There is no further explanation provided by Mr Keat as to how the debt arose, when the proceedings were served or what the case was about. Appearing as annexure 'A' to Mr Keat's affidavit there is a copy of the judgment and a translation of the judgment into English.
Returning to Mr Martin's affidavit he says the first time he became aware of any proceedings in Malaysia was when he was served with the statutory demand. He says he has never been served with any writ or other court document which would have alerted him to the Malaysian proceedings. He then goes on to explain why it is in his view, if any documents were served on the plaintiff they would have come to his attention.
Between pars 11 ‑ 18 of his affidavit Mr Martin sets out what he says is the basis of the genuine dispute in relation to the debt. He acknowledges at the outset there is a degree of speculation in his evidence given as he has said the plaintiff was not served with any documentation and the judgment itself does not disclose the basis of the claim. However, Mr Martin is of the view the claim relates to the supply of equipment by the plaintiff to the defendant for the construction of an incinerator plant in Malaysia for a company called Faber Medi‑Serve SDN BHD.
Mr Martin says he did receive a notice of arbitration dated 10 August 2009 from Bodipalar Ponnudurai Natham, the defendant's Malaysian solicitors. A copy of that notice appears as annexure NRM-05 to Mr Martin's affidavit. A reading of the notice confirms Mr Martin's understanding of its effect.
Mr Martin says he responded to the notice of arbitration by an email dated 11 September 2009. A copy of that email appears as annexure NRM-06 to his affidavit. Essentially Mr Martin pointed out the agency agreement referred to in the notice of arbitration expired some five years prior to the receipt of the notice. On this basis he advised the defendant's Malaysian solicitors the plaintiff did not acknowledge any claims with respect to the agreement. Although it is not explicit in the email it is clear the plaintiff indicated to the defendant's Malaysian solicitors the plaintiff did not intend to participate in any arbitration because on the plaintiff's view it was not bound to do so.
Mr Martin then goes on to detail why he says the plaintiff has no liability to the defendant and is not required to participate in any arbitration. It is unnecessary to detail this evidence. It was not challenged by the defendant either by way of alternate affidavit evidence or in submissions. What can be said then is if an arbitration took place in the absence of the plaintiff it is arguable the arbitration was improper. Of course no finding can be made on that question in these proceedings. But on the evidence the position is arguable.
What Mr Martin's affidavit does not do is say what the plaintiff intends to do about the judgment. There is nothing in the evidence to suggest the plaintiff has consulted Malaysian solicitors with a view to having the default judgment set aside. Consequently there is nothing in the evidence to explain what the procedure might be for having a default judgment set aside in Malaysia nor is there any assessment of the plaintiff's chances of success if an application is made.
In opposition to the application the defendant filed an affidavit of Mr Keat sworn 23 August 2010. In that affidavit Mr Keat pointed out the plaintiff had not made an application to have the judgment set aside. Mr Keat then goes on to take issue with Mr Martin's evidence as to the nature of the agency agreement between the plaintiff and the defendant and the potential liability pursuant to that agreement. This evidence only serves to reinforce the fact that insofar as the contractual relationship between the parties is concerned it is clear there is a genuine dispute as to whether or not and in what circumstances the plaintiff could be liable to the defendant.
Subsequent to the receipt of Mr Keat's affidavit the plaintiff filed an affidavit of Paul Theodore Arns sworn 28 October 2010. Mr Arns is the plaintiff's solicitor. The purpose of the affidavit was to introduce into evidence copies of documents lodged with the High Court of Malaya in Kula Lumpur seeking to set aside the default judgment. Counsel for the defendant did not object to this late affidavit. However, he submitted it was irrelevant and of no benefit to the plaintiff.
The defendant's submissions on this application can be summarised in this way. The defendant has a judgment in the High Court of Malaya. This judgment cannot be registered under the Foreign Judgments Act 1991 (Cth) because Malaysia is not one of those countries prescribed by the Foreign Judgments Regulations 1992 (Cth). It is open then to the defendant to enforce the judgment at common law. Because the judgment is for a liquidated sum the defendant can bring an action in Western Australia and recover the sum as an obligation of the defendant. Once proceedings were issued the defendant could apply for summary judgment.
In opposing such an application a party in the plaintiff's position could only raise three matters which might lead a court to give leave to defend the action. First, if the party establishes the judgment was obtained by fraud; second, the judgment is contrary to public policy; and third, the party against whom the judgment was entered was denied natural justice before the court entering the judgment. Further, with the exception of a defence based on fraud it was not open to a party to challenge the intrinsic merits of the judgment by alleging the foreign court made a mistake as to the facts or the law. Nor could the party raise any matter or defence which could have been raised in the foreign proceedings even though this would afford a complete defence to the claim: see Ainslie v Ainslie (1927) 39 CLR 381, 402.
The defendant submitted as no evidence had been led in relation to any of these three matters, if proceedings were issued in Western Australia to enforce the judgment then the defendant would have been entitled to summary judgment. That being so it followed there was no genuine dispute as to the debt and the application to set aside the statutory demand ought be dismissed.
It was submitted on behalf of the defendant there was no evidence in the affidavit supporting the application to set aside the statutory demand of any intention on the part of the plaintiff to attempt to set aside the Malaysian judgment. Insofar as the affidavit of Mr Arns indicated the plaintiff had taken steps to have the Malaysian judgment set aside it was said the issue was raised for the first time in an affidavit well outside the 21 day period. It was not a matter which supplemented any evidence in Mr Martin's affidavit. It was therefore irrelevant and should not be considered in the context of the application to set aside the demand.
Counsel for the plaintiff accepted it would be open to the defendant to issue proceedings in Western Australia to enforce the Malaysian judgment at common law. He also accepted first, the limited basis upon which any summary judgment could be resisted and second, the fact there was nothing in Mr Martin's affidavit which went to any of the three relevant matters. It was counsel's submission there was sufficient in Mr Martin's affidavit to show the plaintiff intended to apply to have the Malaysian judgment set aside. Counsel was forced to concede there was no direct evidence on the point. It was his submission it was implicit in Mr Martin's affidavit. On that basis he submitted his affidavit (Mr Arns was counsel at the hearing) was relevant and showed there was a genuine dispute as to the debt.
The submissions of the defendant raise again the question of what is a sufficient affidavit for the purposes of s 459G(3)(a) of the Act. The starting pointing considering this question is the decision of Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452. The facts in the case were as follows. The statutory demand asserted the respondent owed the applicant an amount of $127,500 being the amount of an alleged judgment debt. The respondent filed a brief affidavit in support of its application to have the demand set aside. The affidavit in support provided in part:
The Respondent agreed to a compromise, a terms payment and to forbear to sue in relation to the alleged debt, which is disputed. I verily believe judgment was entered erroneously and have given instructions for an application to be made to set aside the judgment.
His Honour referred to a number of decisions particularly the judgment of Olney J in 71 Paisley Street Footscray Pty Ltd v Vineyards Estate Pty Ltd (Unreported, FCA, 18 August 1995). His Honour then said:
In order to be a 'supporting affidavit', an affidavit must say something that promotes the company's case. An affidavit which merely says 'I am a director of the company but am too busy at present to make a full affidavit, and I will do so later' would not support the application. It would in no way advance, further or assist the company's cause, which is to have the notice set aside. At the other extreme, the affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute ... .
In a s 459H(1)(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient.
The statement of principle by Sundberg J has been almost universally accepted and applied both in first instance and by appellate courts. So far as appellate courts are concerned most of the decisions have originated in this jurisdiction: see Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360; Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306; Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; and Jadd Projects Pty Ltd v Muldoon Tiles Supply & Fix Pty Ltd [2004] WASCA 180. Of these decisions the judgment of Parker J in Financial Solutions Australasia v Predella perhaps offers the most detailed analysis of the applicable principles. In that decision, in a concurring judgment, Anderson J made some brief comments which are relevant to this application. His Honour said:
As to the sufficiency of the affidavit in support of the application to set aside the statutory demand, I must say I do not see why a debtor faced with a statutory demand from a stranger who claims to be an assignee does not sufficiently dispute liability to the stranger by stating a 'genuine bona fide belief' that the deed of assignment 'may be void and of no legal force or effect', which is the statement made by Mr Farbenbloom in his supporting affidavit of 14 December 2000. That is more than a mere assertion that there is a genuine dispute. It states the basis of the dispute. A little more might have been required had the debtor been in possession of the deed of assignment. So far as appears, neither Mr Farbenbloom nor the debtor Predella Pty Ltd was in possession of the deed of assignment. The affidavit is to be understood as saying 'the assignment is unenforceable. Particulars will be given after discovery'. That would be a good pleading, disclosing a good defence in the sense that it is more than a bare denial.
The defendant's position in this application really rests on the plaintiff's failure in Mr Martin's affidavit to say the plaintiff intends to apply in Malaysia to have the judgment set aside. If that paragraph had been included in Mr Martin's affidavit it is difficult to see how this application could have been resisted. After all Mr Martin says that neither he nor the plaintiff received any documents alerting them to the proceedings in Malaysia. Without knowing anything about the law in Malaysia it is clearly arguable a judgment entered against a party who has never been served with an originating process and has no knowledge at all of the proceedings would be liable to be set aside. On the other hand, as counsel for the defendant pointed out, if it was the intention of the plaintiff to apply to have the Malaysian judgment set aside why was nothing to that effect included in the affidavit. Counsel submitted an intention to apply to have the judgment set aside could not be inferred from the affidavit because the evidence contained no hint of an intention to make such an application.
So far as the affidavit of Mr Arns is concerned two points can be made. First, an affidavit purportedly in support of an application to set aside a statutory demand which is fundamentally insufficient cannot be supplemented by evidence outside the 21 day time limit to rectify the deficiency. There are numerous cases which support this principle including Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd (2005) 23 ACLC 1266 (Gzell J). The facts of that case taken from the head note were as follows:
The originating application had attached to it a page headed 'Affidavit in support'. There followed a document in the form of an affidavit by Thomas Beale, the solicitor for Broke Hills. Mr Beale asserted that in 2004, Oakvale had made a large quantity of wine pursuant to the agreement, a significant quantity of which was defective in quality and that wine could not be sold or had to be sold at significantly reduced prices. As a result, Broke Hills suffered loss and had an offsetting claim against Oakvale. Annexed to the document was a facsimile from the solicitors for Broke Hills to the solicitors for Oakvale which asserted that Broke Hills disputed the amount of the debt of Oakvale and it had an offsetting claim as a result of the poor quality of the wine made by Oakvale. …
There were a number of objections made regarding the admittance of the supporting affidavit on the grounds of form. These objections were dismissed. The main area of dispute centred on whether the supporting affidavit raised sufficient matters to enable the court to act under s 459H(2) of the Corporations Act 2001 (Cth). With respect to a claim under s 459H(2), the court was required to calculate the substantiated amount of the demand in accordance with the formula in ...
The admitted total was the amount contained in the statutory demand as there was no dispute about the existence of the debt nor its amount. The difficulty was ascribing a value to the offsetting claim, based on the material contained in the supporting affidavit.
Broke Hills sought to read further affidavits to remedy this defect.
Gzell J dismissed the plaintiff's application. His Honour said:
In my view, the task required of a court by the Corporations Act 2001 (Cth), s 459H(2) requires evidence to be put on within the statutory 21‑day period enabling the Court to make a determination of the offsetting total. That means that some evidence of quantum must be contained in the affidavit to enable the Court to take that course.
...
It was submitted that an affidavit in support that is more than a mere assertion but less than final proof is insufficient. In my view it is insufficient if it does not contain material from which a Court ... can make an estimate of the amount of an offsetting claim (1269 ‑ 1270).
Of course that case was dealing with an offsetting claim. Here we are dealing with a claim there is genuine dispute. The question is whether the affidavit does enough to show there is a genuine dispute.
Second, a supplementary affidavit cannot be used to raise new grounds of objection to the statutory demand. This principle was set out by the Full Court of this court in Energy Equity Corporation v Sinedie. That case is relied upon by the defendant. It says Mr Arns' affidavit showing the plaintiff intends to apply to set aside the judgment raises a new point which is not dealt with in the affidavit in support.
In the end I am satisfied there is a genuine dispute in this matter and the demand ought be set aside. In Assaf: Statutory Demands: Law & Practice the learned author makes the following comment:
The Financial Solutions case illustrates the flexible and commercially sensible approach the courts generally adopt to determining the sufficiency or otherwise of an affidavit in support. As already mentioned, however, what more than mere assertion is required in an affidavit will vary from case to case [5.48].
While the affidavit in support sworn by Mr Martin did not mention the possibility of having the Malaysian judgment set aside the affidavit does set out two important matters. First, there was no service of the Malaysian proceedings on the plaintiff. Second, the plaintiff disputed that it was indebted to the defendant to the extent that at a contested hearing it would raise matters which it said would lead to the defendant's claim being dismissed. In other words in contested proceedings there was a genuine dispute. In my view these two matters taken together are sufficient to establish the plaintiff would do whatever was necessary to protect its position. Properly advised, that involved taking advice from Malaysian lawyers and attempting to have the judgment set aside. While it would have been much more satisfactory if a statement to that effect had been included in the supporting affidavit sworn by Mr Martin its absence is not fatal. To hold otherwise would in my view be taking too rigid an approach and eschewing what is in the circumstances commercially sensible.

For these reasons then I am satisfied that the statutory demand ought be set aside. I will hear the parties as to costs.