First Sydney Properties Pty Limited v Double Bay Project Pty Limited, Consolidated Credit Network (NSW) Pty Limited v Double Bay Project Pty Limited, CCN Properties (Sydney) Pty Limited v Double Bay Project Pty...

[2004] NSWSC 1137

CITATION:	First Sydney Properties Pty Limited v Double Bay Project Pty Limited, Consolidated Credit Network (NSW) Pty Limited v Double Bay Project Pty Limited, CCN Properties (Sydney) Pty Limited v Double Bay Project Pty Limited, CCN Real Estate (Sydney) Pty Limited v Double Bay Project Pty Limited [2004] NSWSC 1137 revised - 2/12/2004
HEARING DATE(S):	20 September 2004
JUDGMENT DATE:	26 November 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Master McLaughlin at 1
DECISION:	In each proceeding: (1). I make an order as sought in prayer 1 in the Originating Process. (2). I order that the Defendant pay the costs of the Plaintiff. (3). The exhibits may be returned.
CATCHWORDS:	Corporations. Statutory demand. Must be signed by or on behalf of creditor. Affidavit accompanying demand. Must be made by the creditor or a person with the authority of the creditor. Non-compliance constitutes "some other reason why the demand should be set aside". Genuine dispute as to existence or amount of the debt. Whether entirety of the debt was payable at time when demand was served.
LEGISLATION CITED:	Corporations Act 2001 (Commonwealth) Supreme Court Rules 1970 (New South Wales) Supreme Court (Corporations) Rules 1999 (New South Wales)
CASES CITED:	B. & M Quality Constructions Pty. Limited. v Buyrite Steel Supplies Pty. Limited (1995) 15 ACSR 433 Eng Mee Yong v Letchumanan [1980] AC 331 Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACSR 785 L. M. & W. J. Taylor v Armour Timber & Trading Pty Limited (1996) 19 ACSR 231 South Australia v Wall (1980) 24 SASR 189
PARTIES :	First Sydney Properties Pty Limited (Plaintiff in 3316 of 2004) Consolidated Credit Network (NSW) Pty Limited (Plaintiff in 3317 of 2004) CCN Properties (Sydney) Pty Limited (Plaintiff in 3318 of 2004) CCN Real Estate (Sydney) Pty Limited (Plaintiff in 3319 of 2004) Double Bay Project Pty Limited (Defendant in all matters)
FILE NUMBER(S):	SC 3316 of 2004; 3317 of 2004; 3318 of 2004; 3319 of 2004
COUNSEL:	Mr. N. Kidd (Plaintiffs) Mr. M. Heath (Defendant)
SOLICITORS:	Levitt Robinson (Plaintiffs) Konstan Lawyers (Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER McLAUGHLIN

Friday, 26 November 2004

3316/04 FIRST SYDNEY PROPERTIES PTY LIMITED – v- DOUBLE BAY PROJECT PTY LIMITED

3317/04 CONSOLIDATED CREDIT NETWORK (NSW) PTY LIMITED – v - DOUBLE BAY PROJECT PTY LIMITED

3318/04 CCN PROPERTIES (SYDNEY) PTY LIMITED – v - DOUBLE BAY PROJECT PTY LIMITED and

3319/04 CCN REAL ESTATE (SYDNEY) PTY LIMITED – v – DOUBLE BAY PROJECT PTY LIMITED

JUDGMENT

1 MASTER: In each of these matters the Plaintiff (being respectively First Sydney Properties Pty Limited, Consolidated Credit Network (NSW) Pty Limited, CCN Properties (Sydney) Pty Limited and CCN Real Estate (Sydney) Pty Limited) has filed an originating process on 8 June 2004. The Defendant in each matter is Double Bay Projects Pty Limited. Each such originating process seeks an order setting aside the statutory demand dated 18 May 2004 served upon the Plaintiff by the Defendant.

2 Each of those statutory demands claims payment by the Plaintiff to the Defendant of the sum of $827,129.38, being the amount of the debt described in the schedule.

3 In proceedings 3316 of 2004 (First Sydney Properties Pty Limited v Double Bay Project Pty Limited) and in proceedings 3319 of 2004 (CCN Real Estate (Sydney) Pty Limited v Double Bay Project Pty Limited), the debt is described in the schedule to the respective statutory demands as follows,

Monies lent to the company, including
interest, repayable on 18 May 2004 - $827,129.38

4 In each of proceedings 3317 of 2004 (Consolidated Credit Network (NSW) Pty Limited) and proceedings 3318 of 2004 (CCN Properties (Sydney) Pty Limited) the debt is described in the schedule as

Monies guaranteed to be paid by the company to the creditor, including interest, repayable on 18 May 2004 - $827,128.38

5 The four matters were by consent heard together. It is appropriate that I should present one set of reasons in respect to each of the four matters, since the factual context in which the each statutory demand has been served is identical. (Nothing would appear to turn upon the difference in the amounts claimed in the demands which are respectively the subject of proceedings 3316 of 2004 and 3319 of 2004 and of proceedings 3317 of 2004 and 3318 of 2004. The difference in the amounts is minimal, and I shall disregard it. No reference to that difference in the amounts was made during the hearing.)

6 Each of the demands and the proceedings in relation thereto have arisen out of the sale or proposed sale of various lots in a strata development situate at 113 New South Head Road, Edgecliff. The Defendant was the registered proprietor of each lot and was the vendor in those sales. CCN Real Estate (Sydney) Pty Limited was the purchaser under contracts for sale in respect to those lots. Under certain of those contracts the subject lot was required by that purchaser to be transferred to First Sydney Properties Pty Limited.

7 The purchaser under a number of those contracts for sale, having failed to complete those contracts, the parties entered into a deed, described as Deed of Settlement, dated 24 March 2004. The terms of that deed were subsequently varied by a Deed of Variation, dated 14 April 2004. I shall, in due course, refer in greater detail to the terms of the Deed of Settlement and the Deed of Variation. For the present, it is sufficient to record that the dispute between the parties which is the subject of the present proceedings relates to only two lots in the development, being Lot 3 and Lot 8, the sale of the various other lots of which the Defendant was the vendor having now been completed.

8 Proceeding 3319 of 2004 (CCN Real Estate (Sydney) Pty Limited) concerns the asserted indebtedness of the Plaintiff as purchaser of the subject lots. Proceeding 3316 of 2004 (First Sydney Properties Pty Limited) concerns the asserted indebtedness of the Plaintiff as the party to which it was intended that the properties purchased by CCN Real Estate (Sydney) Pty Limited should be transferred by the Defendant. Proceeding 3317 of 2004 (Consolidated Credit Network (NSW) Pty Limited) and proceeding 3318 of 2004 (CCN Properties Pty Limited) each concerns a guarantee of the obligations of either or both of CCN Real Estate (Sydney) Pty Limited and First Sydney Properties Pty Limited in respect to the foregoing purchases.

9 In each matter I have had the benefit of receiving a written outline of submissions from Counsel for the respective parties, together with a chronology prepared on behalf of the Plaintiff. Those documents will be retained in the Court file.

10 Each proceeding is brought pursuant to the provisions of Division 6 of Part 5.4 of the Corporations Act 2001.

11 At the outset each Plaintiff submits that the statutory demand should be set aside pursuant to the provisions of section 459J(1)(a) of the Act, in that, “there is some other reason why the demand should be set aside”. The “some other reason” relied upon is that, so it is submitted, the demand does not comply with the requirements of section 459E(2)(f) of the Corporations Act; and, further, that the affidavit which has been served in support of the statutory demand does not comply with the requirements of the Supreme Court (Corporations) Rules 1999. Compliance with those rules is required by section 459E(3) of the Corporations Act.

12 I shall deal first with the submissions concerning the affidavits served in support of each statutory demand.

13 The Plaintiffs submit that each such affidavit fails to comply with the provisions of rule 5.2 and rule 2.5.

14 Rule 5.2 provides,

For the purposes of subsection 459E(3) of the Corporations Act, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must:
(a) be in accordance with Form 7 and state the matters mentioned in that Form; and
(b) be made by the creditor or a person with the authority of the creditor or creditors; and
(c) not state a proceeding number, or refer to a Court proceeding, in any heading or title to the affidavit.

15 Rule 2.5 makes provision concerning the identity of the person by whom the affidavit of a creditor may be made, as follows,

Subject to rule 5.4, an affidavit that is to be made by a creditor may be made:
(a) if the creditor is a corporation – by a director, secretary, or other principal officer of the corporation, or by a person employed by the corporation who is authorised to make the affidavit on its behalf; or
(b) if the creditor is a company to which a liquidator, provisional liquidator, receiver, administrator or controller has been appointed - by that person; or
(c) in any other case – by the creditor or a person authorised by the creditor to make the affidavit on behalf of the creditor.

16 Rule 5.4 (to which rule 2.5 is subject) relates to an affidavit in support of an originating process seeking an order that a company be wound up, and is not relevant to the circumstances of the instant cases.

17 In each proceeding the affidavit served in support of the statutory demand has been sworn by Joseph Kotowicz, who in each affidavit describes himself as follows,

I am a solicitor in the employ of Konstan Lawyers, the solicitors for Double Bay Project Pty Limited (“ creditor ”) and at all material times have had the conduct and carriage of the matters involving the sale of various properties from the creditor to CCN Real Estate (Sydney) Pty Limited (ACN 106 824 720) (“ First Purchaser ”) and First Sydney Properties Pty Limited (ACN 098 958 402) (“ Second Purchaser ”) (together referred to as “ Purchasers ”).

18 On behalf of the Plaintiffs it is submitted that the affidavit has not been made by the creditor, being a corporation (in that Mr. Kotowicz is not a director, secretary or other principal officer of the Defendant, and is not a “person employed by the corporation who is authorised to make the affidavit on its behalf”, as provided by rule 2.5 (a)) and has not been made by “a person with the authority of the creditor”, as required by rule 5.2 (b).

19 Further, it is submitted on behalf of the Plaintiffs that the affidavit sworn by Mr. Kotowicz does not comply with the requirement of rule 5.2 (a) that it “be in accordance with Form 7”, in that (as contemplated by paragraph 2 of that Form, where the deponent is not the creditor), it does not “state the facts entitling the deponent to make the affidavit, eg “I am authorised by the creditor(s) to make this affidavit on its/their behalf”. In respect to the question of whether or not an affidavit sworn by Mr. Kotowicz is an affidavit of the nature required by the Rules, having regard to the fact that Mr. Kotowicz is a solicitor in the employ of the solicitors acting for the Defendant, and is not, and does not assert himself to be, a director, secretary, principal officer or person employed by the Defendant and authorised to swear the affidavit, the Plaintiffs rely upon the decision of McLelland CJ in Eq in L. M. & W. J. Taylor v Armour Timber & Trading Pty Limited (1996) 19 ACSR 231, where His Honour said at 233,

The affidavit, as I have already mentioned, was made by the solicitor for the defendant. The rule prescribes that where the creditor is a corporation, the affidavit must be made by a member or officer of the corporation having knowledge of the facts, so far as they are known to the corporation. That description does not include the solicitor for the creditor, and the … requirements of that rule are designed to serve not only the private interests of the parties, but also the public interest, in that if the affidavit is made by a person who is likely to have personal knowledge of the relevant matters, the potential sanction of prosecution for perjury will filter out some cases of disputed debts which would otherwise come before the court for resolution.

20 The Plaintiffs also rely upon the following passage in the decision of McLelland CJ in Eq in B. & M Quality Constructions Pty. Limited. v Buyrite Steel Supplies Pty. Limited (1995) 15 ACSR 433 at 435 – 436,

In my opinion the departure from the relevant rule in respect of the affidavit accompanying the statutory demand is a matter of substance. The requirement of that rule, as to the identity of the person making the affidavit accompanying the statutory declaration [ sic ], is designed to serve the public interest as well as to protect the company against unwarranted demands, by endeavouring to ensure, within practical limits, that the person who must put his or her oath or solemn affirmation to the relevant matters (and thereby risk a conviction for perjury if a knowingly false statement is made) is the person associated with the creditor who is most likely to have direct knowledge of those matters. It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out cases where there is in fact such a dispute, so as prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute, if there is one, makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability. I therefore do not regard what has occurred in the present case as a merely technical breach of the rules. It goes to the heart of what Part 80A rule 15 was intended to achieve.

21 The Defendant, however, submits that in the specific circumstances of this case the fact that the affidavit was sworn by Mr. Kotowicz does not constitute sufficient “other reason” to justify the demand being set aside. Firstly, the Defendant submits that the foregoing Rules, the provisions whereof are relied upon by the Plaintiffs, are not relevant to the circumstances of the instant case.

22 Somewhat curiously the Defendant submits that rule 2.5 is referable to the requirements of an affidavit in support of an application for winding up under rule 5.4, and has no relevance to the requirements for an affidavit accompanying a statutory demand. The Defendant submits that the relevant rule is Part 80A rule 15 of the Supreme Court Rules 1970, and, in particular, subrule (2) of that rule.

23 The provisions of rule 2.5 of the Supreme Court (Corporations) Rules have general application, subject, however, to the specific provisions of rule 5.4 in the case of an affidavit in support of an application for the winding up of a company (where the requirements of such an application are expressly set forth in rule 5.4(1)).

24 Rule 5.2 of the Supreme Court (Corporations) Rules makes express provision for the requirements of “the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company”. Subrule (b) of that rule requires that the affidavit be made either by the creditor or by “a person with the authority of the creditor or creditors”. The manner in which an affidavit may be made by a creditor is set forth in rule 2.5. In the case where, as here, the creditor is a corporation, the affidavit made by a creditor may be made by a person falling within one of the categories set forth in paragraph (a) of rule 2.5.

25 In the instant case, where the creditor is a corporation, it is apparent that an affidavit made by someone in the position of Mr. Kotowicz, who does not fall within any of the categories specified in paragraph (a) of rule 2.5, is not an affidavit made by the creditor. Compliance with paragraph (b) of rule 5.2 then requires that if the affidavit is not made by the creditor it must be made by “a person with the authority of the creditor”. In the instant case Mr. Kotowicz does not assert that he has the authority of the creditor to make the affidavit. If it be suggested that the Court should infer the existence of such authority from the facts that the affidavit is made by a solicitor in the employ of the solicitors for the creditor and that that solicitor “at all material times [has] had the conduct and carriage of the matters involving the sale of various properties from the creditor to [two of the alleged debtors]”, I am not prepared to infer such authority, especially since I do not consider that those circumstances entitle the deponent to assert the indebtedness of the Plaintiffs to the Defendant.

26 Further, it emerged from the ASIC Historical Extract in respect to the Defendant that at the time when Mr. Kotowicz had made his affidavit the Defendant had been deregistered at the instance of its sole director, one Serghei Mesalchin, on 5 May 2004.

27 The absence of any assertion of authority on the part of Mr. Kotowicz to make the affidavit in support of the statutory demand could have been remedied by an affidavit in that regard sworn by the sole director of the Defendant. That was not done. However, there was filed an affidavit of one Tony Rallis, dated 26 July 2004. That deponent stated in paragraph 1 that he had “the sole authority to act on behalf of Double Bay Project Pty Ltd in all matters to do with the sale and development of the project at 113 New South Head Road, Edgecliff (hereinafter referred to as the “project”)”.

28 It was submitted on behalf of the Plaintiffs that the affidavit of Mr. Rallis did not in any way clarify the entitlement or authority of Mr. Kotowicz to make the affidavit in support of the statutory demand, and that, indeed, the affidavit of Mr. Rallis merely added to uncertainty in that regard. It was submitted that the affidavit of Mr. Rallis was an argument against my drawing an inference that Mr. Kotowicz had any authority to make an affidavit on behalf of the Defendant, since Mr. Rallis stated that he had “the sole authority” to act on behalf of the Defendant in all matters to do with the sale and development of the project, thus implicitly precluding any such authority on the part of any other person (be such other person Mr. Kotowicz or any one else).

29 I have already recorded that I am not prepared to draw the inference concerning the asserted authority of Mr. Kotowicz which the Defendant submitted that I should draw. The existence of the affidavit by Mr. Rallis is a further reason why that inference should not be drawn.

30 I turn to the submission of the Defendant that the relevant provisions of the Rules in respect to the affidavit accompanying a statutory demand are contained in Part 80A rule 15 of the Supreme Court Rules.

31 Firstly, it will be appreciated that Part 80A has been superseded by the Supreme Court (Corporations) Rules 1999. Rule 1.3(1) expressly provides that these Rules “apply to a proceeding in the Court under the Corporations Act … that is commenced on or after the commencement of these rules”. The Supreme Court (Corporations) Rules commenced on 1 March 2000.

32 But, in any event, even if Part 80A of the Supreme Court Rules (which Part still has application to proceedings commenced before 1 March 2000) were to apply to the statutory demands in the instant cases, the Defendant would not be in any better position. Part 80A rule 15(2) provides,

In the case of a creditor which is:
(a) a corporation – an affidavit by a member or officer of the corporation having knowledge of the facts so far as they are known to the corporation is taken to be an affidavit by the creditor.

33 In the instant case Mr. Kotowicz is neither a member nor an officer of the Defendant corporation. Further, “the facts” referred to in paragraph (a) must be the facts relating to the alleged indebtedness of each Plaintiff to the Defendant. Merely because he has had the conduct and carriage of “the matters involving the sale of various properties from the creditor to [two of the alleged debtors]” does not mean that he has knowledge of the facts relating to the alleged indebtedness so far as they are known to the Defendant.

34 If follows, therefore, that the affidavit of Mr. Kotowicz does not comply with the requirements of Part 80A rule 15(2)(a), even if (contrary to the view which I have already expressed) that provision of the Supreme Court Rules has application to the instant cases.

35 I am satisfied that the affidavit of Mr. Kotowicz is not an affidavit of the nature required by section 459E(3) of the Corporations Act, in that, firstly, it is not made by the creditor or by a person with the authority of the creditor; and, secondly, it is not in accordance with Form 7 contained in Schedule 1 to the Supreme Court (Corporations) Rules, in that it does not “state the facts entitling the deponent to make the affidavit”, since I am satisfied that such entitlement, which must be in respect to the indebtedness of the Plaintiffs to the Defendant, does not necessarily follow from a statement by the deponent that he, a solicitor in the employ of the solicitors for the Defendant, “at all material times [has] had the conduct and carriage of the matters involving the sale of various properties from the creditor to [two of the alleged debtors]”. As McLelland CJ in Eq observed, the purpose of the requirement concerning the deponent of the affidavit accompanying the statutory demand is that a person with direct knowledge of the indebtedness of the recipient of the demand must make the affidavit.

36 I am satisfied that the absence of an affidavit complying with the requirements of section 459E(3) of the Corporations Act constitutes “some other reason” of the nature contemplated by section 459J(1)(b) of the Act. It follows, therefore, that in each of the four proceedings the statutory demand must be set aside.

37 I turn now to the submissions of the Plaintiffs concerning the demand itself.

38 Section 459E(2) sets forth certain requirements in respect to the demand. Paragraph (f) of that subsection requires that the demand “must be signed by or on behalf of the creditor”. Each demand is signed by Joseph Kotowicz, describing himself as Solicitor. It does not purport to be signed by the creditor itself, which is a company. Accordingly, it must purport to be signed “on behalf of the creditor”. There would appear to be little reason in principle why any distinction should be drawn between the phrase “on behalf of the creditor”, in respect to the signing of the demand, as required by section 459E(2)(f), and the requirement that the affidavit accompanying the demand be made by a person “with the authority of the creditor”, as required by rule 5.2 of the Supreme Court (Corporations) Rules.

39 As I have already concluded, Mr. Kotowicz is not a person with the authority of the creditor to make the affidavit. Similarly, in my conclusion, the evidence does not disclose that he was entitled to sign the demand “on behalf of the creditor”, in circumstances where he was a solicitor in the employ of the solicitors for the creditor. Just as in the case of the affidavit, so also in the case of the demand it would have been very simple for the sole director of the Defendant to have either provided an authorisation to Mr. Kotowicz not only to make the affidavit, but also to sign the demand; or to have himself made an affidavit setting forth the entitlement and capacity of Mr. Kotowicz to sign the demand. In my conclusion, therefore, the signing of the demand by someone who merely identifies himself as “Solicitor” without more, is not a demand which is signed “on behalf of the creditor”. It follows, therefore, that the demand is not a demand of the nature required by section 459E(2), and must therefore be set aside.

40 The Plaintiffs also rely upon a misdescription of the debt as constituting a defect in the demand, because of which substantial injustice will be caused unless the demand is set aside (section 459J(1)(a)). In two of the statutory demands (being the subject of proceeding 3316 of 2004, First Sydney Properties Pty Limited, and of proceeding 3319 of 2004, CCN Real Estate (Sydney) Pty Limited) the debt is described as being “monies lent”. The Plaintiffs submit that that misdescription of the debt constitutes a defect in the demand. I am in agreement that the characterisation of the debt as being moneys lent constitutes a defect in the demand.

41 Nevertheless, the Court is precluded by section 459J(2) from setting aside the statutory demand merely because of a defect in the demand, except in the case (provided for by subsection (1)(a) of that section) where, because of a defect in the demand, substantial injustice will be caused unless the demand is set aside. In the light of the surrounding circumstances in which the parties found themselves and in the light of the complaint by the Defendant resulting from the failure by the Plaintiffs to complete the purchase of the subject properties and in the light of the correspondence and the Notice of Termination, I am not satisfied that the foregoing misdescription would cause substantial injustice unless the demand be set aside.

42 It follows, as required by the subsection, that, merely on account of the foregoing misdescription, categorising the amount claimed as being “monies lent”, the statutory demands must not be set aside.

43 I have already, however, expressed my conclusions that both the absence of an affidavit complying with the requirements of section 459E(3) of the Corporations Act and the fact that the demand itself is not of the nature required by section 459E(2) each constitutes “some other reason why the demand should be set aside”. Each of those conclusions is of itself sufficient to dispose of each of these four proceedings.

44 Nevertheless, it is appropriate that I should also proceed to a consideration of the other grounds upon which the Plaintiffs seek to have the statutory demands set aside.

45 The Plaintiffs submit that there is a genuine dispute as to the existence or amount of the alleged indebtedness of each Plaintiff to the Defendant, and that, in consequence, the provisions of section 459G of the statute are activated.

46 The principles in regard to what constitutes a genuine dispute are well recognised. I need refer only to what was said by McLelland CJ in Eq in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACSR 785 at 787,

In my opinion that expression [“genuine dispute”] connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. That does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be” not having “sufficient prima facie plausibility to merit further consideration as to [its] truth” (cf. Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf. South Australia v Wall (1980) 24 SASR 189 at 194).

47 It will be appreciated that where a company upon which is served a statutory demand asserts that there is a genuine dispute as to its indebtedness in respect to the debt claimed in that demand, it is no part of the function of the Court to express any view concerning the strength or weakness of the claim in respect to the alleged debt, let alone to attempt to resolve the dispute between the parties. Once the Court is satisfied that there is a genuine dispute as to the existence of the debt, the Court is required by section 459H(3) to set aside the statutory demand. Once the Court is satisfied that there is a genuine dispute as to the amount of the alleged debt, the Court is required to vary the demand to the extent of that part of the debt in respect whereof there is a genuine dispute (section 459H(4)).

48 I have already recorded that proceedings 3319 of 2004 and 3316 of 2004 concern the purchase of two lots, Lot 3 and Lot 8, in the strata development, which purchases were never completed, and that in consequence the parties entered into the Deed of Settlement and subsequently the Deed of Variation. The parties to the Deed of Settlement were the present Defendant, Double Bay Project Pty Limited, described as Vendor; CCN Real Estate (Sydney) Pty Limited, the Plaintiff in proceeding 3319 of 2004, described as First Purchaser; First Sydney Properties Pty Limited, the Plaintiff in proceeding 3316 of 2004, described as Second Purchaser; and Consolidated Credit Network (NSW) Pty Limited, the Plaintiff in proceeding 3317 of 2004, CCN Properties (Sydney), the Plaintiff in proceeding 3318 of 2004, and Franklin Alexander Winkler, all described as Guarantor. That deed makes provision, inter alia, for the completion of various contracts for sale between the Vendor and the First Purchaser, and for payment of the purchase price, and for the guarantee by the Guarantors of the performance of the deed by the Purchasers. Clause 7 of the Deed of Settlement make provision for payment by the First Purchaser to the Vendor on or before the Final Completion Date of compensation and the Vendor’s Loan. The compensation is described in Clause 7.1 as being,

compensation limited to the sum of $50,000 for any loss suffered by the Vendor as a result of the First Purchaser’s failure to complete in accordance with the terms of the Contract and/or the Notices to Complete.

49 It will be appreciated that the Plaintiffs in proceeding 3317 of 2004, Consolidated Credit Network (NSW) Pty Limited, and in proceeding 3318 of 2004, CCN Properties (Sydney) Pty Limited, are asserted to be indebted to the Defendant in their capacity as guarantors of the performance by the purchasers under the Deed. It follows, therefore, that if the Plaintiffs in proceeding 3316 of 2004, First Sydney Properties Pty Limited, or 3319 of 2004, CCN Real Estate (Sydney) Pty Limited, can establish that there is a genuine dispute as to the existence or the amount of their alleged indebtedness to the Defendant, then there must, in consequence, be a genuine dispute in respect to the indebtedness of the Plaintiffs who are liable only in their capacity as guarantors.

50 The first ground upon which the Plaintiffs submit that there is a genuine dispute as to the existence of the alleged debts is that the purchases which are asserted to have given rise to those debts have not been completed. It is submitted on behalf of the Plaintiffs that, in respect to such an incomplete purchase, there can be no indebtedness as to the unpaid part of the purchase price. To make such a claim discloses (so it is submitted by the Plaintiffs) a total misconception concerning the nature of a contract for the sale of real property. The Defendant, if dissatisfied with the failure of the purchaser to complete, may, subject to any specific provisions of the contract for sale in that regard, terminate the contract, and forfeit to the Vendor any deposit paid and sue the purchaser for damages. That is what the Defendant has, in fact, done. (See Notice of Termination by Vendor dated 12 March 2004, and associated correspondence, being annexures C and D to the affidavit of Franklin Alexander Winkler sworn 7 June 2004.) However, the effect of Clause 4 of the Deed of Settlement, which was made some twelve days after the giving of the Notice of Termination, was to revive the Contracts for Sale. Clause 4.3 provided that the Lot 3 Contract and Lot 8 Contract must be completed on or before 21 May 2004.

51 However, as submitted on behalf of the Plaintiffs, so long as the Vendor chooses to treat the uncompleted contract as still being on foot, then, until the completion of the purchase, there is no indebtedness on the part of the purchaser in respect to a liquidated sum.

52 Further, the Plaintiffs observe that the amount claimed by the Defendant includes an amount of $50,000 claimed by way of compensation, asserted to be owing to the Defendant by the purchasing Plaintiffs pursuant to clause 7 of the Deed of Settlement. It is submitted, however, on behalf of the Plaintiffs that that clause does not create an indebtedness to the Defendant in a liquidated amount of $50,000, but merely entitles the Defendant to compensation “for any loss suffered by the Vendor as a result of the First Purchaser’s failure to complete in accordance with the terms of the Contract and/or the Notices to Complete”, and that the amount of such compensation is limited to the sum of $50,000. That construction is clearly available upon the terms of Clause 7. It follows, therefore, that there is a genuine dispute as to the component of $50,000 in the amount claimed by the Defendant.

53 The Deed refers to what is called the Final Completion Date, that phrase being defined (in Clause 1.1) as,

The date being the earlier of 21 May 2004 and the date on which the last of the Contracts for Sale is actually completed.

54 But even if they do not establish a genuine dispute as to the existence of the debt, the Plaintiffs submit that, in the circumstances, they were not indebted to the Defendant at the date upon which the demands were served, that being 18 May 2004, since their liability only arose, even upon the argument of the Defendant, upon completion of the Contracts for Sale, and that under the terms of the Deed of Settlement that completion could not have been required earlier than 21 May 2004. The demands were served on 18 May 2004.

55 The Defendant, however, in this regard relies upon the provisions of the Deed of Variation made between the parties on 14 April 2004. The parties to that Deed were the same as the parties to the Deed of Settlement. The Deed of Variation varied the earlier Deed in respect to the completion of, inter alia, the Lot 3 Contract and the Lot 8 Contract, providing in clause 1.2 as follows,

The completing party (as Purchasers in the Settlement Deed) must complete the Lot 3 Contract and the Lot 8 Contract on or before 7 May 2004.

56 The Defendant, therefore, submits that, whatever be the amount of the indebtedness of the Plaintiffs to the Defendant, that amount had become due on 7 May 2004, that date being well before the issue of the statutory demands on 18 May 2004.

57 The Plaintiffs respond to that submission by pointing to the fact that the Deed of Settlement makes provision for the payment of the purchase price upon completion of each contract (Clause 5.1), that the date which was varied by the Deed of Variation (Clause 1.2) was the completion of the Lot 3 Contract and of the Lot 8 Contract, whereas the Final Completion Date (which was not expressly varied by the Deed of Variation) is a date specifically contemplated by the Deed of Settlement as being the date upon which the Vendor’s Loan to Purchaser (referred to in Clause 6), any interest to which the Vendor might become entitled at the rate of 12 percent per annum and any compensation (pursuant to Clause 7) became payable. The Final Completion Date, it was submitted on behalf of the Plaintiffs, was quite distinct from the date of the settlement of the sales of Lot 3 and Lot 8, and only that latter date was varied by the Deed of Variation. The Plaintiffs point to the fact that it would have been very simple for the Deed of Variation to have varied the Final Completion Date to 7 May 2004, but that was not done.

58 This submission on the part of the Plaintiffs certainly seems to me to be arguable and to raise a genuine dispute as to whether the components in respect to the Vendor’s Loan, interest and compensation for which the Plaintiffs might otherwise have been indebted to the Defendant were payable at the date upon which the statutory demands were served, 18 May 2004, or whether such components only became payable three days later, on 21 May 2004.

59 Two other aspects of the matter were relied upon by the Plaintiffs as constituting a genuine dispute as to the existence or amount of the alleged debts.

60 Firstly, the Plaintiffs pointed to the claim for interest. Clause 5.1 of the Deed of Settlement provides for the Completing Party to pay the purchase price,

adjusted in accordance with the terms of each of the Contracts for Sale including the payment of interest at the rate of 12% per annum as specified in special condition 5 of each of the Contracts for Sale.

61 Clause 7 also provides for the payment of an interest component, being interest on the Vendor’s Loan,

calculated on such principal sum at the Interest Rate such interest accruing from but not including the date from which each of the Contracts for Sale referred to in clause 4 is completed to and including the Final Completion Date.

62 The Phrase “Interest Rate” is defined in the Deed of Settlement as being 12 percent per annum.

63 It will be appreciated that there are two completely separate claims for interest being made by the Defendant, one being for interest upon the purchase price, of the nature described in Clause 5.1, and the other being for interest upon the Vendor’s Loan, calculated in the manner set forth in Clause 7.2.

64 Whether either or both of those components of interest was properly payable by the Plaintiffs to the Defendant, the Defendant, in any event, was not entitled to claim (as it has done) interest upon interest.

65 It was submitted on behalf of the Defendant, however, that since the provisions of Clause 4 were not complied with the effect of the provisions of Clause 5.2, deferring until the Final Completion Date the payment of interest upon the purchase price (under clause 5.1), was irrelevant. The Defendant submits that the liability for interest arose at the time stipulated in Clause 1 of the Deed of Variation. However, the Defendant acknowledges that the demands should be varied in order to reflect a genuine dispute in respect to the components in the amount claimed which represent the Vendor’s Loan to the purchaser and the claim for interest upon that loan.

66 Secondly, it was submitted on behalf of the Plaintiffs that the entitlement of the Vendor to claim interest upon the Vendor’s Loan as provided by Clause 6, arose only in respect to the completion of each of the Lot 4 Contract, Lot 6 Contract, Lot 10 Contract and Lot 15 Contract. It did not arise (and indeed, there was no provision for a Vendor’s Loan to the purchaser) in respect to the Lot 3 Contract or the Lot 8 Contract, which are the contracts the subject of the present claims of indebtedness made in the statutory demands. Such a construction of Clause 6 is certainly available to the Plaintiffs, and provides yet another ground for the Court being satisfied that there is a genuine dispute as to at least that component of the amount claimed which reflects interest upon the Vendor’s Loan.

67 Further, in respect to the claim for interest upon the Vendor’s Loan pursuant to Clause 6 of the Deed of Settlement, the First Purchaser, CCN Real Estate (Sydney) Pty Limited, and the Second Purchaser, First Sydney Properties Pty Limited, are treated as being jointly liable, whereas Clause 6 clearly imposes the liability in respect to interest only upon whichever of those purchasers has completed each of the Lot 4 Contract, Lot 5 Contract, Lot 6 Contract, Lot 10 Contract and Lot 15 Contract, and which purchaser has, in accordance with that clause, been lent with respect to each property referred to in each such contract of sale the Principal Sum (as defined in Clause 1, being $25,000 in respect to each contract, comprising a total loan of $125,000), together with interest. The liability in respect to the repayment of such Vendor’s Loan together with interest thereon rests upon whichever of the purchasers completed each of the foregoing contracts. To the extent that it cannot be said that each of the First Purchaser and Second Purchaser completed each of the foregoing five contracts, those two Purchasers cannot be treated as being equally or jointly liable in respect to the loan amounts or the interest upon those loan amounts.

68 I do not agree with the further submission on the part of the Defendant that the definition of the phrase Purchaser’s Debt in the Deed of Settlement (“The aggregate of the moneys payable by the Purchaser to the Vendor in accordance with clauses 5, 6, 7, 8 and, if applicable, 9 of this Deed”) entitles the Vendor to be paid the entirety of the purchase price in respect to Lots 3 and 8 and yet still to retain title to those Lots. Such a submission is not in accordance with the fundamental concept of a conveyancing transaction. Either the title passes to the purchaser, in which case there is an indebtedness in the purchaser to pay the outstanding part of the purchase price; or the title is retained by the Vendor, who can then forfeit any deposit and sue the Purchaser for damages. The Vendor cannot both claim as a debt the unpaid part of the purchase price and yet still retain the title to the land.

69 It is not necessary for me to express any further views concerning the foregoing submissions of the Defendant, except to say that I consider that there is a genuine dispute not only as to the existence of an indebtedness in the Plaintiffs to the Defendant in the totality of the amounts claimed; but also as to whether, in any event, the full amounts claimed were payable at the date upon which the demands were served, 18 May 2004, or, even if there is no genuine dispute as to the existence of the debt, the amount of the indebtedness became payable only on 21 May 2004. Any part of the indebtedness becoming payable only on that later date, would, in any event, entitle the Plaintiffs to have the amount of the demands varied.

70 I summarise, as follows, my foregoing conclusions.

71 In respect to each of the four statutory demands, I am satisfied that there is “some other reason”, of the nature contemplated by section 459J(1)(b) of the Corporations Act, why the demand should be set aside. That “some other reason” is both the fact that the demand was not signed by or on behalf of the creditor as required by section 459E(2)(f) and, further, the fact that no affidavit of the nature required by section 459E(3)(e) accompanied the demand.

72 I am not, however, satisfied that the misdescription of the debt in two of the demands (where the debt is described as “monies lent”) constitutes a defect because of which substantial injustice would be caused unless those two demands be set aside.

73 In any event, I am satisfied that there is a genuine dispute as to the existence of the debt claimed by the Defendant in proceedings 3317 of 2004 and 3318 of 2004. My conclusion in that regard is essentially grounded upon the fact that so long as the Defendant retained title to Lots 3 and 8 it could legitimately be argued by those Plaintiffs that there was no liquidated sum (asserted to be the outstanding balance of each of the two purchase prices) owing by those Plaintiffs to the Defendant. It is certainly arguable that whilst the Defendant retained title to the subject lots, the remedy of the Defendant lay in a claim for damages, not in a claim in respect to an asserted liquidated amount for the unpaid purchase price, together with other components.

74 Further, in any event, I am satisfied that there is a genuine dispute as to whether the totality of any amount which might otherwise have been owed by those two Plaintiffs to the Defendant was payable at the date upon which the statutory demands were served, 18 May 2004, or whether the totality of any such indebtedness became payable only on 21 May 2004.

75 Further, in any event, I consider that there is a genuine dispute as to at least a number of components of the amounts claimed, including the component of $50,000 by way of compensation, and the components reflecting claims for interest and for interest upon interest. That conclusion would, at the least, entitle the Plaintiffs to have the amounts in the statutory demands varied by deducting therefrom the amounts of those foregoing components. The Defendant during the course of the hearing conceded that the Plaintiffs were entitled to such a variation.

76 It will be appreciated, however, that, being satisfied that there is a genuine dispute as to the entirety of the alleged indebtedness of those two Plaintiffs to the Defendant, the Court is required to set aside the statutory demands.

77 Since the alleged indebtedness of the Plaintiffs in proceedings 3317 of 2004 and 3318 of 2004 is based only upon the character of those Plaintiffs as guarantors of the indebtedness of the Plaintiffs in the other two proceedings, the consequence of the setting aside of the statutory demands upon the ground of a genuine dispute as to the indebtedness of the Plaintiffs in proceedings 3316 of 2004 and 3319 of 2004 is that the statutory demands issued against the Plaintiffs in proceedings 3317 of 2004 and 3318 of 2004 must also be set aside.

78 In each of proceedings

3316 of 2004, First Sydney Properties Pty Limited v Double Bay Project Pty Limited,
3317 of 2004, Consolidated Credit Network (NSW) Pty Limited v Double Bay Project Pty Limited,
3318 of 2004, CCN Properties (Sydney) Pty Limited v Double Bay Project Pty Limited,
3319 of 2004, CCN (Sydney) Pty Limited v Double Bay Project Pty Limited

I make the following orders:

(1). I make an order as sought in prayer 1 in the Originating Process.

(2). I order that the Defendant pay the costs of the Plaintiff.

(3). The exhibits may be returned.

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Last Modified: 12/14/2004