Fitness First Australia Pty Ltd v Dubow
[2011] NSWSC 531
•03 June 2011
Supreme Court
New South Wales
Medium Neutral Citation: Fitness First Australia Pty Ltd v Dubow [2011] NSWSC 531 Hearing dates: 11 May 2011 Decision date: 03 June 2011 Jurisdiction: Equity Division - Corporations List Before: Ward J Decision: Statutory demand set aside
Catchwords: CORPORATIONS - application under s 459G Corporations Act 2001 (Cth) for order setting aside statutory demand - whether demand validly served in absence of an affidavit verifying debt - whether genuine dispute as to existence of debt or offsetting claim - whether "some other reason" established for the purposes of s 459J(1)(b) - HELD - demand not served in compliance with s 459E as no affidavit verifying that portion of the debt which was not a judgment debt - genuine dispute as to the proper construction of an order staying the execution of the initial costs order underlying the judgment debt and as to whether the debt had been released prior to the registration of the costs assessment certificates - therefore genuine dispute as to existence of the debt - entry into Deed of Release constitutes "some other reason" for the purposes of s 459J(1)(b) - statutory demand set aside Legislation Cited: Corporations Act 2001 (Cth)
Legal Profession Act 2004 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: ACN 001 891 103 Pty Ltd v Reiby St Apartments Pty Ltd [2007] NSWSC 1345
Alternative Engine Technologies Pty Limited v Kruger Ventures Pty Limited (No 2) [2010] SASC 60
Anderson Formrite Pty Ltd v CASC Hire Pty Ltd [2005] FCA 1424
Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd & Anor [2007] NSWCA 57
B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433
Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235
Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd [2005] NSWSC 638
Buddies Liquor Pty Ltd v Wah Lai Investment (Aust) Pty Ltd [2001] NSWSC 337
Callite Pty Ltd v Adams [2001] NSWSC 52
Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporises Pty Ltd (1994) 13 ACSR 37
Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ACSR 682
Compafina Bank v ANZ Banking Group Ltd [1982] 1 NSWLR 409
Civil v ET Constructions [2000] NSWSC 1119
CP York Holdings Pty Ltd v Food Improvers Pty Ltd [2009] NSWSC 409
David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265
Dubow v Fitness First Australia Pty Ltd [2007] NSWSC 1390
Edge Technology Pty Ltd v Lite-on Technology Corporation (2000) 34 ACSR 301
Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560
Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 296
Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; (1994) 12 ACLC 669
First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939
GA Listing & Maintenance Pty Ltd v Francipane (unreported, Giles J, 23 September 1994)
Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456
Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112
Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452
Hansmar Investments Pty Ltd v Perpetual Trustee Ltd [2007] NSWSC 103; (2007) 61 ACSR 321
Hoare Bros Pty Ltd v DCT (1996) 62 FCR 302, 135 ALR 677
Infact Consulting Pty Ltd v Kyle House Pty Ltd [2007] NSWSC 56
Jargon Pty Ltd v Good Earth Garden Products [2006] WASC 282
Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717; (1994) 13 ACSR 787; (1994) 12 ACLC 490
Liverpool Cement Renderers (Aust) Pty Ltd v Landmarks Constructions (NSW) Pty Ltd (1996) 19 ACSR 411
Lewis v Nortex Pty Ltd (in liq) [2002] NSWSC 1083
Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743
Marriage of B (1987) 91 FLR 105
Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229
Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759
Moutere Pty Ltd v Deputy Commissioner of Taxation [2000] NSWSC 379; (2000) 34 ACSR 533
NA Investment Holdings Pty Limited v Perpetual Nominees Limited [2010] NSWCA 210
National Australia Bank v Rusu [1999] NSWSC 539
Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896
Pearl Bay Corp Pty Ltd v Lodur Pty Ltd [2000] WASC 315
Polstar Pty Ltd v Agnew [2007] NSWSC 114; (2007) 25 ACLC 293
POS Media Online Ltd v B Family Pty Ltd (2003) 21 ACLC 533
Prime Property Investment (QLD) Pty Ltd v Nerri Pty Ltd [2011] QSC 119
Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45
Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26
Rainbow and Nature v Bronson and Jacobs [2006] NSWSC 217
Re Marra Developments Ltd and the Companies Act [1979] 2 NSWLR 193
Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601
Re Softex Industries Pty Ltd [2001] QSC 377; (2001) 187 ALR 448
Redglove Holdings Pty Ltd v GNE & Associates Pty Ltd [2001] NSWSC 867
Ritz Hotel Ltd v Charles of the Ritz Ltd (No 18) (1988) 14 NSWLR 116
Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143
Scope Data Systems Pty Ltd v BDO Nelson Parkhill (2003) 199 ALR 56
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 294
Tatlers.com.au Pty Ltd v Davis [2006] NSWSC 1055; (2006) 203 FCR 473;
Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527; (2004) 185 FLR 130
Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 12 ACSR 381
Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (1994) 14 ACSR 565
Vitali v Stachnik [2001] NSWSC 303
Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039
Williams v Calivil Park Holstein Pty Ltd [2009] NSWSC 389
Young v Jackman (1986) 7 NSWLR 97Texts Cited: Austin & Black's Annotations to the Corporations Act
Ford's Principles of Corporations Law
McPherson's Law of Company Liquidation
Ritchie's Uniform Civil Procedure 2005 (NSW)Category: Principal judgment Parties: Fitness First Australia Pty Ltd (Plaintiff)
Yolande Victoria Frances Dubow (Defendant)Representation: Counsel
B M Green (Plaintiff)
Solicitors
Kent Attorneys (Plaintiff)
Defendant self-represented
File Number(s): 10/421992
Judgment
HER HONOUR : This is an application brought by the plaintiff (Fitness First Australia Pty Ltd) under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant (Ms Yolande Dubow) by letter dated 10 December 2010. The demand is in the sum of $31,603.64 and is comprised of moneys said to be due to Ms Dubow arising out of two costs assessment certificates issued in November 2010 in respect of a costs order made in favour of Ms Dubow in other proceedings in this Court in 2007 (together with a smaller amount comprising the filing fee paid by Ms Dubow on registration of the costs assessment certificates in the Local Court).
The application to set aside the statutory demand is brought on various (and to some extent overlapping) grounds: first, that the demand was not verified by affidavit (required pursuant to s 459E of the Act unless all of the debts claimed in the demand are judgment debts) or is defective for failing to state that the debts were judgment debts; second, that there is a genuine dispute as to the existence of the claimed debt for the purposes of s 459H(1)(a) of the Act (and/or an offsetting claim pursuant to s 459H(1)(b) of the Act); and, third, that there is "some other reason" for the purposes of s 459J(1)(b) of the Act that the demand should be set aside.
The bases on which, in summary, Fitness First disputes the debt are that the costs order on which it was based remains the subject of a stay order and that the parties entered into a Deed of Mutual Release in 2010 (which it is said precludes Ms Dubow from now contending that there is a debt owing in relation to the costs order). The claim that any entitlement arising from the 2007 costs order has been released by Ms Dubow would also appear to be relied upon as a matter constituting "some other reason" why the statutory demand should be set aside. (Insofar as the submissions for Fitness First also indicate that the debt is disputed because it was not asserted to be a judgment debt in the statutory demand and was not verified by an accompanying affidavit, that does not seem to be to go to the existence of a dispute as such, but to the validity of the statutory demand itself and to there being "some other reason" for it to be set aside.) It is said that Ms Dubow's actions, in pursuing the amount claimed in the respective costs certificates obtained by her and in registering those costs certificates as judgments and then pursuing the judgment debt, are in breach of the order made at the time of the initial costs order, staying the execution of that order.
The originating process (accompanied by a supporting affidavit sworn by Fitness First's company secretary and its in-house lawyer, Mr Peter Elliott, on 20 December 2010) was served and filed within the requisite 21-day period.
Ms Dubow contends that the affidavit fails to identify the existence of a genuine dispute and fails to comply with the requirements for a supporting affidavit as set out in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452. Ms Dubow also objected to the affidavit being read unless Mr Elliott was made available for cross-examination. Ms Dubow indicated that what she wished to challenge, through cross-examination, was Mr Elliott's authority to swear the affidavit on behalf of the company.
Cross-examination is rarely permitted on an application such as this, for the reason that the court does not determine the merits of any dispute that may be found to exist, but simply whether these is such a dispute and the threshold for that is not high. In Edge Technology Pty Ltd v Lite-on Technology Corporation (2000) 34 ACSR 301, Barrett J said (at [45]):
The threshold presented by the test to set aside a statutory demand does not however require of the plaintiff a rigorous and in-depth examination of the evidence relating to the plaintiff's claim, dispute or offsetting claim. That is why cross-examination in contested statutory demand proceedings is limited: Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290.
In those circumstances (and given that it might ordinarily be expected that a company secretary is one officer of the corporation who would have knowledge of the matters relating to his books and records of the company, and that he is deposing largely to events recorded in documents in the possession of the company and matters of which, as the company's in-house lawyer, he would be expected to be aware) I did not consider it in the interests of the just, quick and cheap resolution of the real issues in dispute to permit cross-examination by Ms Dubow and I read Mr Elliott's affidavit over her objection.
Ms Dubow relies on the respective costs certificates as evidence both of the existence and the quantum of the debts claimed by her, relying on the fact that under s 372 of the Legal Profession Act 2004 (NSW) the certificates are final and binding. Ms Dubow contends that the Deed of Release does not encompass matters such as the enforcement of the judgment debt comprised by the registration of the costs certificates or the final disposition of the costs certificates. Ms Dubow further contends that any "purported set-off claims" are "explicitly denied" by the Deed of Release. She refers in that regard to clause 3.3 of the Deed and to the terms of the consent orders appearing at schedule B to the Deed (which I will address in due course).
Ms Dubow contends that Fitness First is estopped from seeking to set aside the statutory demand (or, in the alternative, that s 459J(1) of the Act is "against" Fitness First "due to their conduct in extracting the Deed of Release and delaying or failing to comply with the Orders of the Court from December 2007").
The issues presently before me for determination, therefore, are as follows:
(i) whether the requirements of s 459E have been satisfied in the absence of a verifying affidavit (which requires a determination as to whether all of the debts claimed in the schedule are judgment debts and, if so, whether that is a matter that should have been identified in the demand itself);
(ii) whether the affidavit in support of the originating process by Fitness First filed within the 21-day period complies with the Graywinter principles;
(iii) whether there is a genuine dispute as to the existence of the debt(s) claimed and/or a genuine offsetting claim;
(iv) whether there is "some other reason" for the purposes of s 459J(1)(b) why the demand should be set aside; and
(v) whether Fitness First is estopped from bringing the present application.
For the reasons set out below, I consider that: there should have been a verifying affidavit accompanying the statutory demand, as part of the debt claimed was not a judgment debt at the time of service of the statutory demand and this constitutes "some other reason" for the purposes of s 459J(1)(b) to set aside the demand; that there was compliance by Fitness First with the Graywinter principles in relation to the supporting affidavit served within the 21 day period; that there is a genuine dispute as to the existence of the debt; that in any event there is "some other reason" for the demand to be set aside, having regard to the dispute as to the ambit of the Deed of Release; and that Fitness First is not estopped from bringing this application. I set aside the statutory demand with costs.
Background facts
The parties to the present proceedings have been in dispute for no little time. There have been numerous proceedings between them, going back to proceedings in the Consumer, Trader and Tenancy Tribunal in 2005 relating to the circumstances (the detail of which was not before me) in which Ms Dubow's membership of a fitness centre operated by Fitness First was terminated. In Mr Elliott's affidavit filed in support of this application he has summarised the nature and status of the various proceedings and it does not seem that much of the historical background to the present dispute is in contention.
Ms Dubow commenced the Tribunal proceedings in relation to the termination of her Fitness First membership. In Mr Elliott's affidavit he deposes that those proceedings were discontinued by Ms Dubow. A costs order was made on 5 May 2005 in favour of Fitness First in those proceedings (namely, that Ms Dubow pay 75% of the costs of Fitness First in respect of the proceedings in that Tribunal). The jurisdiction of the Tribunal to make that order was subsequently challenged in proceedings commenced by Ms Dubow in this Court, in late September 2005, (30095 of 2005).
The chronology of events leading up to the commencement of those proceedings was noted by Hulme J in his reasons for judgment delivered on 5 December 2007 in relation to the costs of those proceedings (see Dubow v Fitness First Australia Pty Ltd [2007] NSWSC 1390). Briefly, it appears that on 5 September 2005 an application for assessment of party/party costs was filed in this Court in relation to the Tribunal's order; by letters dated 18 September 2005 the costs assessor sought copies of the relevant accounts and submissions from the parties; on 21 September 2005 Ms Dubow wrote indicating her objection to various cost items and to the application for assessment; on 17 October 2005, Fitness First's solicitor wrote to the cost assessor with its submissions; and on 30 October 2005, the costs assessor made a determination of costs at $14,067.70 and issued an assessment of his own costs in an amount of $2,213.75.
Meanwhile, however, on 29 September 2005, after having forwarded her submissions and objection to the cost assessment process to the costs assessor, Ms Dubow had filed the summons in this Court which came to be determined by Hulme J in August 2007. His Honour noted that although the summons did not in terms seek an extension of time to appeal from the Tribunal's May 2005 costs order (which was the relief ultimately granted), the summons was accompanied by an affidavit that his Honour read as having dealt with the question of delay in the making of that application (this being relevant to the assessment of the extent of Ms Dubow's liability for costs occasioned due to the delay in commencement of the proceedings).
In August 2007, Hulme J granted Ms Dubow an extension of time to appeal from the Tribunal's costs order and quashed that costs order, remitting the question of costs of the Tribunal proceedings back to the Tribunal (though it seems there was no re-hearing at that stage). In his Honour's December 2007 reasons for judgment on Ms Dubow's application in relation to the costs of the Supreme Court proceedings, Hulme J noted that, when he had granted the extension in August 2007, he had expressed the view that it should be on terms that Ms Dubow pay certain costs incurred during the period of the delay but went on to say that he "saw virtue in achieving the same result by ordering [Ms Dubow] to pay costs rather than reflecting the object in a condition". At [19] of the December 2007 costs judgment, his Honour said:
The rationale for the order or condition proposed was that [Ms Dubow] should pay costs wasted in consequence of her delay in commencing the proceedings.
However, since Hulme J considered that, from the time of receipt of the summons, Fitness First's solicitors were on notice that the order for costs in its favour was liable to be set aside and could have interrupted the process of assessment at that time, Ms Dubow was not required to pay the whole of the costs incurred during the period of delay in her commencement of the Supreme Court proceedings.
At [25], his Honour said:
There is much to be said for the view that the parties' respective entitlements to costs - at least those arising from events in this Court - should be set off before payment is required. In these circumstances I am disposed to adhere to the approach taken in my reasons of 14 September but staying my orders for a time so as to enable such setoff to be effected prior to payment being made. (my emphasis)
His Honour concluded that the appropriate order for costs of the proceedings before him was to effect a "notional setoff" with the advantage of there being only one assessment of the costs of the appeal rather than two. At [33], his Honour said:
I am conscious that in effecting a notional set off rather than making a more generous order in favour of the Plaintiff and another order in favour of the Defendant, I am placing an impediment in the way of at least some of the orders that, at least theoretically, could be made under s 99 of the Civil Procedure Act. However, I have indicated that there are other reasons for not giving any more time for orders under that section to be made and the course I have adopted means that only one assessment of the costs of the appeal rather than 2 will be necessary.
For present purposes, the relevant orders made, on 5 December 2007, as appear from the reasons for judgment and the electronic record of the orders were:
(iii) Order that the Plaintiff pay the costs of FFA Pty Limited of the application for the assessment of the costs ordered on 5 May 2005 to be paid insofar as ... [COMPLETE] [sic]
(iv) Order that the First Defendant [Fitness First] pay half of the Plaintiff's costs of these proceedings, as assessed or agreed.
(v) Stay any execution of orders (iii) and (iv) until further order, providing however that such stay shall not operate to prevent the assessment of costs pursuant to these orders or the taking of any steps incidental thereto.
Pausing there, it is very clear that his Honour contemplated that there was to be a setoff as between the respective costs orders and that this was to be effected before payment was made (and before any steps were taken to execute or enforce the costs orders).
On 8 February 2008, an order was entered on the court file, apparently for the purpose of completing the incomplete order (iii) in the December 2007 orders, in the following terms:
I order Plaintiff pay the costs of FFA Pty Ltd of the assessment of the costs ordered on 5 May 2005 to be paid insofar as such costs were incurred on 2 June and prior to but not including 18 October 2005 for work actually carried out or events that occurred during that period.
In June 2009, Ms Dubow commenced the necessary steps to seek an assessment of the costs the subject of the 5 December 2007 order in her favour (in the intervening period there having been an assessment of the disputed fees payable by Ms Dubow to her former lawyers who had represented her in the proceedings before Hulme J and entry of a default judgment against her in respect of those costs).
On 29 June 2009, Ms Dubow sought to re-list the matter before Hulme J "to consider the finalisation of order so that the Party Party costs can be assessed". However, the matter was apparently not re-listed and Ms Dubow subsequently filed a Notice of Motion seeking an order for the removal of the stay that had been imposed by his Honour, to which I will refer shortly. (There is no doubt, therefore, that Ms Dubow was aware that the December 2007 costs order made in her favour was the subject of a subsisting stay order as at June 2009.)
Meanwhile, back in 2005, Ms Dubow had commenced other proceedings in the human rights jurisdiction of the Federal Magistrate Court (SYG 1510 of 2005) against Fitness First. Those proceedings were dismissed and Ms Dubow was ordered to pay Fitness First's costs of those proceedings (in the sum of $25,594.32). (I refer to this as the FFA costs order.) Mr Elliott deposes that those costs have not been paid. They were, as I understand it, the subject of successive bankruptcy notices issued by Fitness First against Ms Dubow (and are the subject of the offsetting claim identified in Mr Elliott's affidavit).
There followed 3 further proceedings in the Federal Magistrate Court (SYG 2617 of 2009; SYG 2624 of 2009; and SYG 1965 of 2010), two of which at least related to the issue of bankruptcy notices, and two proceedings in the Federal Court (NSD 523 of 2010 and NSD 526 of 2010), in which Ms Dubow appealed against orders of the Federal Magistrates Court.
Mr Elliott deposes that, as at late 2010, the status of the disputes between the parties was that a bankruptcy notice had been filed by Fitness First and Ms Dubow had applied for a stay of those bankruptcy proceedings (SYG 1965 of 2010). On that occasion, Fitness First notified its grounds of opposition to the stay as being that "the alleged counter claim [namely, the 2007 costs order in Ms Dubow's favour] has not been quantified, cannot be quantified and is, in any event, the subject of a stay order" [i.e., that made by Hulme J in 2007] (see notice dated 21 September 2010). Also on foot were the two Federal Court proceedings (NSD 523 of 2010 and NSD 526 of 2010).
As adverted to earlier, Ms Dubow, by notice of motion filed in this Court on 8 November 2010 then sought the removal of the stay of the orders made by Hulme J on 5 December 2007 (or on 8 February 2008) and a direction that the costs assessor proceed to assess costs and that the costs certificate be treated as if provided under the Legal Profession Act 2004 (NSW). (Two copies of the Notice of Motion, each bearing a court stamp, were in evidence but with different return dates - one with the handwritten date of 19 November 2010 and the other with that date crossed out and another handwritten date of 14 December 2010. It seems from Ms Dubow's later correspondence with Fitness First that the reason for the differing copies of the same Notice of Motion may have been that the first one filed by Ms Dubow was said to have been mislaid by the Court and hence a second one was issued. Nothing, however, seems to turn on this other than that it was a matter of complaint by Ms Dubow.) That Notice of Motion was ultimately dismissed by consent on 22 February 2011.
In an affidavit affirmed 30 September 2010 in support of her application for the removal of the stay, Ms Dubow acknowledged that she was in attendance in court on 5 December 2007 when the orders were made by Hulme J and was aware that they included a stay, but Ms Dubow also deposed that she was not aware of the content of the February 2008 orders until 18 February 2010. (This does not, however, explain the apparent omission of order (iii) from the orders that Ms Dubow sought on 28 June 2010 to have entered as being the orders made on 5 December 2007.)
Prior to the return of the 8 November 2010 Notice of Motion (seeking the removal of the stay, on whichever of the two was the relevant return date), and prior to both the hearing listed on 8 November 2010 of the appeal by Ms Dubow from the orders in the first Federal Court proceedings (NSD 523 of 2010) and the hearing listed for 17 November 2010 of Ms Dubow's application to set aside the bankruptcy notice issued in respect of the costs order made in the first of the Federal Magistrate Court proceedings, discussions took place between the parties and/or their legal representatives in relation to the proposed settlement of all matters in issue between Fitness First and Ms Dubow.
Mr Elliott deposes (in his supporting affidavit) to a conversation he had on 5 November 2010 with Counsel acting for Ms Dubow in the Federal Court proceedings then listed for hearing on 8 November 2010 (Mr Robinson). Mr Elliott says that Mr Robinson telephoned him and proposed a "complete walk away" with "all proceedings dismissed, releases in respect of all outstanding judgments and costs orders".
In evidence before me on the present application were copies of the email communications between the respective legal representatives during the afternoon of Friday 5 November 2010. At 1.20pm, Mr Elliott forwarded to Mr Robinson, expressly on a without prejudice basis, a deed of settlement which he said set out the terms on which Fitness First was prepared to settle the matters against Ms Dubow. That email noted that "The deed must be executed by your client today if the matters are not to proceed on Monday and subsequently (including the bankruptcy proceedings)" and stated that Fitness First was not in a position to execute the deed that day as the directors were out of the country. The email contemplated that, on confirmation by Mr Robinson that the deed was agreed and on receipt of the deed executed by Ms Dubow, the court would be advised that the matter had settled.
An email response by Ms Dubow's Senior Counsel (Mr Brabazon SC) at 2.24pm noted that Ms Dubow was presently flying down from Queensland and that he would seek instructions. The next communication was an email at 2.48pm from the solicitor for Fitness First (Mr Orlizki) advising that if any amendments were proposed he would seek his client's instructions but that any amendment would be treated as a rejection of the offer and as a counter offer. (Although Ms Dubow in later correspondence characterised the offer by Fitness First as a non-negotiable offer, the email correspondence does not support that characterisation and, indeed, there were amendments to the Fitness First document apparently proposed by Ms Dubow's Counsel and agreed to by Fitness First.) That said, the 2.48pm email from Mr Orlizki made it clear that Fitness First's position was that under no circumstances would it consent to an adjournment of the proceedings listed the following Monday and that there would either be a deed signed by Ms Dubow and consent orders filed in accordance with that deed or the appeal would proceed.
As I have said, some amendments to the deed were clearly proposed by Ms Dubow's legal representatives, since, at 3.37pm, Mr Orlizki confirmed his instructions to agree to 'the amendments'. He also attached a form of order to be filed in the various Courts and the Tribunal to dispose of the various proceedings, including the bankruptcy proceedings and the Federal Court appeal proceedings (though not the proceedings that had been the subject of the judgment and orders by Hulme J.
At 6.20pm, Mr Brabazon forwarded a scan of an executed deed of settlement which he noted incorporated the amendments as discussed and stated "In accordance with the previous emails, this settles the matter between our respective clients". At 6.26pm Mr Brabazon forwarded by way of email attachments a further copy of the signed Deed of Settlement (version 4). Relevantly, the deed contained the following recitals:
C. Dubow has commenced various proceedings against FFA.
D. FFA has denied any liability in respect of the various Proceedings.
E. The Parties have agreed to resolve all issues between them upon the terms of this Deed.
Clause 2 set out the release by Ms Dubow:
2.1 Dubow hereby releases FFA and its servants or agents in respect of any Claim made or that could be made at any time whether before or after the date of this Deed.
2.2 The release in clause 2.1 may be pleaded in bar in complete answer to any Claim made.
The release by Fitness First, in contrast, was in clause 3 and provided:
3.1 Subject to clause 3.1, FFA hereby releases Dubow in respect of any Claim made or that could be made down to the date of this Deed.
3.2 Subject to clause 3.1, FFA shall not enforce the court order and/or judgment in Federal Magistrate Court Proceedings (1) [the FFA costs order the subject of the appeal then listed for hearing on 8 November 2010 and the subject of the bankruptcy notice to be before the court on 17 November 2010].
3.3 It is a condition subsequent to the operation of the release in clause 3.1 and the operation of clause 3.2 that Dubow comply with and not breach clauses 4.1, 4.2, 6.1, 6.3, 6.4, 7.1 and 7.2.
3.4 [this clause in effect provided, for the avoidance of doubt, that in the event of a breach of any of the abovementioned clauses, clause 3.1 did not operate to release Dubow and FFA was to be at liberty to enforce the costs order and/or judgment in the Federal Magistrates Court proceedings (1)].
3.5 The release in clause 3.1, to the extent that it is operative, may be pleaded in bar in complete answer to any Claim made.
(I note that, following the hearing of the application before me, Ms Dubow copied my associate with an email communication of 14 May 2011 to Mr Orlizki in which she asserted that "..the submissions you filed on my behalf left off the Bar to further proceedings under provision 3.5 of the Deed of Release which would bind you from claiming genuine dispute! ...", thus seemingly wishing to draw particular attention to that clause.)
In the definitions (clause 1.1), the word "Claim" was defined as including (in (a) (v)) the Proceedings (or any of them or their subject matter) including any order or application for costs (but not including any obligations created pursuant to the terms of the Deed); the various sets of proceedings were defined in (b)-(j) (including the Costs Assessment Proceedings in respect of the Hulme J 2007 costs orders); and "Proceedings" was defined in (k) as meaning collectively, among others, (i) the Costs Assessment Proceedings and (ix) the Supreme Court Proceedings 30095/2005.
Thus, it is clear that what the Deed contemplated was a regime whereby Ms Dubow was to release her claims in relation to the costs orders and/or the costs assessment proceedings (as identified in the Deed), whether or not those claims arose before or after the making of the Deed, and that Fitness First was to release any claim it had (but only up to the date of the deed) and, in the case of any claim in relation to the Federal Magistrate Court costs order, Ms Dubow would lose the benefit of that release if she breached certain other clauses of the deed. (Those clauses related to a prohibition on Ms Dubow applying in the future for Fitness First membership or entering any of its facilities (clauses 4.1 and 4.2) and imposing confidentiality (clause 6) and non-disparagement (clause 7) obligations on Ms Dubow.) I note, in passing, that there was no suggestion that Ms Dubow has breached any of these clauses so as to deprive her of the benefit of the release in clause 3.1.
Relevantly, for present purposes, clauses 5.1 and 5.2 provided that:
5.1 The Parties, upon exchange of signed counterpart copies of this Deed , shall cause to be signed and sent to the Manager, Costs Assessment and the Costs Assessor appointed in the Costs Assessment Proceedings a letter signed by each of them or their solicitors in terms of Schedule A hereto. (my emphasis)
5.2 Dubow shall pay any costs and fees payable to the Manager, Costs Assessment and or the appointed Costs Assessor relating to the Costs Assessment Proceedings.
Schedule A contained a letter in which it was noted that the parties had agreed that the costs the subject of the costs assessment should be assessed at nil and requesting that a costs certificate should issue in that amount.
There is no dispute that Ms Dubow signed the Deed (and her signature appears to have been witnessed by someone from the chambers of her Senior Counsel). At 6.32pm, Mr Orlizki sent an email to Mr Brabazon providing his undertaking that the executed Deed would be provided as soon as possible and expressly confirming that "we have a binding agreement in terms of the Deed". There was no suggestion to the contrary by or on behalf of Ms Dubow nor is there any suggestion that the various proceedings were not disposed of by the filing of consent orders in accordance with the Deed (copies of the orders as filed being exhibited to Mr Elliott's affidavit). (This is relevant in circumstances where Ms Dubow maintained in the proceedings before me that there had been, in effect, no consideration for the release she provided since Fitness First had not released the only costs order that it held against her (the FFA costs order). In fact, however, it seems to me that there was clear consideration on the face of the Deed in the promise by Fitness First to consent to the dismissal of the various proceedings, including the very proceeding listed for hearing on the following Monday, and the release of the existing FFA costs order against Ms Dubow, provided only that she continue to comply with the particular obligations identified under the Deed as being conditions subsequent to the operation of the release.)
The Deed did not make express provision for the dismissal of the 2005 proceedings that had been the subject of determination by Hulme J and no consent orders in relation thereto were included in schedule B to the Deed.
The counterpart deed, as executed by Fitness First, was not emailed to Ms Dubow by Mr Orlizki until 16 November 2010. In the intervening period, not only was the Schedule A letter not sent to the costs assessor (and, as noted by Ms Dubow, the obligation to send it did not strictly speaking arise under the terms of the Deed until the exchange of signed counterparts of the Deed) but, and relevantly for the purposes of the present application, on 9 November 2010 the costs assessor made his costs determination. That determination (not in fact issued to the parties until 30 November 2010) determined the party/party costs payable to Ms Dubow in accordance with the 2007 order in Ms Dubow's favour at $28,127.48 (it is unclear whether this took into account the offsetting amount for which Hulme J had made provision in order (iii) of the orders). A separate certificate determined the costs of the costs assessment at $3,398.16, which included the fee payable at $510.66 and the amount paid by Ms Dubow to obtain release of the Certificate of Determination of Costs ($2,887.50). (The second costs certificate, therefore, related to the very amount that under clause 5.2 of the Deed of Release Ms Dubow had agreed to pay herself.)
Ms Dubow contends that because, by the time the exchange of counterparts was completed on 16 November 2010, there was a decision by the costs assessor that (subject to appeal) was binding under the relevant legislation, then clause 5.1 (which in its terms had not been enlivened before exchange of counterparts) was "defunct and unenforceable" (T 29.24). Ms Dubow accepted that she had not informed Fitness First that this was her view as at 16 November, not did she inform Fitness First prior to receipt of the counterpart (and a fortiori before the dismissal of proceedings in accordance with the terms agreed in the Deed) that she contended or would contend that she retained a right to enforce the costs assessment if it were to be issued before the counterpart deed was exchanged (and before the so-called condition precedent in clause 5.1 was satisfied). Apparently Ms Dubow took the view then (or takes the view now) that the Deed was Fitness First's document and that it should suffer from any defect in its drafting ("their terms, their terminology, their words" - T 29.29).
Ms Dubow also places weight on the lack of any indemnity in favour of Fitness First for any liability arising from the findings of the costs assessor (Ms Dubow asserting that the effect of the costs assessment gave rise to a statutory liability to pay for the costs assessment [T 29.46] that she appears to consider overrides the Deed even if it would otherwise have applied.)
The present dispute between the parties, in essence, arises from the fact that, on receipt of the respective Costs Certificates, (and notwithstanding the provisions of the Deed of Release and that, by then, she was in receipt of the counterpart signed deed) Ms Dubow proceeded to file the certificates in the Local Court and thus obtained judgment in those amounts against Fitness First. (There is a dispute as to precisely when that occurred, to which I refer below). The statutory demand the subject of the present proceedings includes the amounts certified under each of the costs certificates as well as a $78 filing fee included in the amount for which the judgment was ultimately entered on 16 December 2010.
The statutory demand is dated 10 December 2010. It was served under cover of a letter dated 10 December 2010 which (apparently anticipating a dispute and that Fitness First would seek to rely on the Deed of Release) noted that:
The Deed of Release entered into by me does not cover the liability which as a judgment amount is not covered by the deed. No provision relating to me not enforcing the Costs Order or judgment was included in the document drafted on a non-negotiable basis by your lawyers. (my emphasis)
Further the provision of the deed relating to clause 5.1 was not effected as the countersigned document from your organisation was not forwarded to me before the assessor completed his statutory obligations or was emailed without original signatures on 15 November 2010 after the date of the assessor's decision. Similarly, there is no indemnification offered in relation to the Costs of the Costs Certificate for which the Costs Assessor found you liable. I completed my obligation to pay the Manager, Costs assessment under clause 5.2 [though I interpose to note that Ms Dubow is now seeking under the statutory demand to recover precisely that amount ]. There is no provision preventing registration of that amount against FFA.
Ms Dubow forwarded with the letter the statutory demand, as well as a copy of the two costs certificates, a "re-listed notice of motion" (presumably that being the Notice of Motion seeking removal of the Hulme J stay order) said to be now 'unnecessary' and the 'original' notice of motion (again apparently relating to the stay order) said to have been mislaid by the Court and not returned until 3 December 2010.
The statutory demand dated 10 December 2010 described the debt in the Schedule as:
$28,127.48 being an Assessment of Party and Party Costs as certified by the Costs Assessor Certificate of Determination of Costs issued on 9 November 2010
$3,398.16 being costs of the Costs Assessment as certified by the Costs Assessor Certification of Determination of Costs of Costs Assessment issued on 9 November 2010
$78.00 being the Costs of Registration of Certificates in the Local Court situated at Downing Centre Sydney on 7 December 2010.
There was no reference to the orders made by Hulme J on 5 December 2007 nor of any judgment arising on filing or registration of the costs certificates. The amounts claimed under the costs certificates are not in terms described as judgment debts (nor is the last amount, being the Costs of Registration of the certificates). However, the last item does at least by inference indicate the existence of a judgment debt, in the sense that the Legal Profession Act provides that on the filing of a costs certificate it takes effect as a judgment without any further step and therefore it might be reasoned that a claim for filing fees indicated that such a step had occurred or was contended to have occurred. (Ms Dubow relies on the reference in the schedule to "Party Party" costs as alerting Fitness First to something that could only be a judgment debt.)
The statutory demand noted, in accordance with the prescribed form, that unless the debt "or each of the debts" is a judgment debt the demand must be accompanied by an affidavit verifying the debt. There was no verifying affidavit accompanying service of the statutory demand.
Mr Elliott's 20 December 2010 affidavit accompanying the application to set aside the statutory demand raised the following matters:
(i) under the heading " Genuine Dispute ", it was asserted that Fitness First disputed the debt, referring to the various proceedings and setting out the circumstances in which the Deed of Release was executed; noting that the 2007 costs order remained stayed; and asserting that clause 2.1 operated to release the claims relating to the first two amounts in the schedule to the statutory demand and relying on clause 2.2 as a complete bar to those claims. Reference was made to clause 5.1 of the Deed (asserting that had Ms Dubow signed and sent the Schedule A letter, the costs certificates would not have been issued) and relying on clause 5.2 of the Deed in relation to the claim for the costs of the assessment. In relation to the sum of $78, it was asserted that the filing of the costs certificates in the Local Court and seeking registration of those certificates was fraudulent or against good faith and that Ms Dubow was not entitled to claim that amount from Fitness First.
(ii) under the heading " Offsetting Claim ", Mr Elliott deposed that if the Deed was found to be void, voidable or unenforceable then Fitness First relied upon the costs order in the first Federal Magistrates Court proceedings (i.e. the FFA costs order in the sum of $25,594.32 plus interest of $1,509.19 pursuant to the Federal Magistrates Court Rules). Mr Elliott also noted that in that event, Fitness First would also proceed to the taxation of the Federal Court Proceedings costs estimated at $2,773.20, the calculation of which was attached; and
(iii) under the heading "Defect in Demand and some other reason to set aside the Statutory Demand", Mr Elliot noted the contention of Fitness First that the debts the subject of the statutory demand were not judgment debts and the statutory demand was not accompanied by a verifying affidavit.
On 20 January 2011, Fitness First obtained an order (on an application brought by notice of motion in the Local Court) setting aside the Local Court costs judgment as being "against good faith" and dismissing the proceedings pursuant to rule 13.4 of the Uniform Civil Procedure Rules 2005 (NSW), with an order for costs against Ms Dubow in the sum of $1,000. Ms Dubow has complained that this was obtained in her absence but I note that the transcript tendered by her of the proceedings before Magistrate Townsden on that day (and admitted as Exhibit 1 over the objection of the plaintiff) indicates that a Mr Tam appeared on that occasion on Ms Dubow's behalf.
(Ms Dubow tendered a copy of that transcript, which she said was relevant to three matters: first, that no evidence was "received" by her when the Local Court acted to set aside the costs judgment; second, that she said it indicated that orders were made contrary to those in Mr Orlizki's affidavit; and, third, that when the matter first came before the Registrar in this Court, on the current application, Fitness First's solicitor had resisted the referral of the matter to the duty judge on that day on the basis that he wished to file this transcript - a matter at best going to any issue arising from the delay in hearing this application as a result of that.)
Annexed to Ms Dubow's January affidavit is a copy of a letter dated 28 January 2011 indicating that she was prepared to withdraw the statutory demand and refrain from the filing of the Supreme Court appeal in respect of the judgment of the Local Court on 20 January 2011 on the payment of the amount of $31,603.64 less the Costs Award of $1,000 "apparently made by the Local Court in my absence" and also indicating that she was prepared to provide an undertaking not to commence winding up proceedings. The letter contained a handwritten annotation that the offer would close on 4 February 2011 at noon.
By letter dated 31 January 2011, Fitness First's solicitors wrote to Ms Dubow stating that the 2010 Deed of Release "did not contemplate Consent Orders being filed in the 2005 Supreme Court proceedings [the Hulme J proceedings], as both your counsel, Mr Brabazon SC, and the writer considered that those proceedings had already been finally determined"; acknowledging that it appeared that this was not the case and asserting that the proceedings were the subject of releases under clauses 2.1 and 3.1 of the Deed. The letter called on Ms Dubow to sign Consent Orders to dispose of those proceedings. (Ms Dubow maintains that this is an acknowledgment that there is no genuine dispute either as to the existence of the judgment debt or that it remains payable as outside the terms of the Deed of Release.)
Ms Dubow has now lodged an appeal against the setting aside of the Local Court costs judgment (as deposed to in para 10 of her 7 March 2011 affidavit). Annexed to her March affidavit is a copy of a notice of motion (apparently prepared on around 17 February 2011) seeking a garnishee order against National Australia Bank in the amount of $32,447.70 in respect of the claimed judgment (the judgment date being shown as 7 February 2011) which, by affidavit affirmed on 17 February 2011, Ms Dubow deposed was not stayed by an order of the court or by an instalment order or by a suspension under s 377(1) or 386(1) of the Legal Profession Act that has not been ended. Ms Dubow deposes that she had applied for the garnishee order prior to the hearing on 20 January 2011 (although the supporting affidavit seems to have been after that date) and that she had received no notice "by this plaintiff" of the result of the Local Court hearing in relation to the 20 January application as at the time of the affirmation of the 7 March 2011 affidavit (the affidavit being silent as to what communication there was or was not as between Ms Dubow and the solicitor who purported to appear on her behalf before Magistrate Townsden on the hearing of that application). In her 7 March affidavit, Ms Dubow also said that she seeks a freezing order "on the Assets known to exist of the Plaintiff to the amount of $33,000 at the National Australia Bank at Bondi Junction".
On 8 March 2011, Adams J heard an ex parte application by Fitness First and made orders including a stay of enforcement across all courts but with liberty to Ms Dubow to continue with her opposition to the present application.
To his affidavit sworn 9 March 2011, Mr Orlizki annexed a copy of a letter dated 22 February 2011 from the Registrar of the Local Court headed "Notice of Orders Made", in which the Registrar stated that on 16 December 2010 the following orders and or directions were made:
Judgment:
Fitness First (Australia) Pty Ltd, First Defendant
Is to pay
Yolande Frances Dubow, First Plaintiff
The sum of $31603.64
Costs assessment registered at the Local Court
By affidavit sworn 10 March 2011, Mr Orlizki annexed an audited Special Purpose Financial Report for the financial year ended 31 October 2009 relating to Fitness First (indicating a surplus of assets over liabilities) and deposed on information and belief, among other things, that Fitness First employed approximately 5,500 people in its fitness clubs and that its financial position had not materially changed since the audited report. (Although solvency is not a ground on which reliance is placed to set aside the statutory demand, I note that in Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ACSR 682 it was said to be a factor that could be taken into account. Lindgren J there said that "solvency alone" is not to be considered "some other reason" for an order setting aside a statutory demand; however, that the solvency of a company is clearly relevant to the "substantial injustice" issue posed by s 459J(1)(a) and may be relevant to an "other reason" for setting aside under s 459J(1)(b).)
On 10 May 2011, Fitness First filed a Summons in this Court seeking leave to appeal from the 2010 costs assessment determinations (and leave to extend the time for the making of the appeal) and for orders substituting the amount of "Nil" for the costs assessment and substituting Ms Dubow as the party against whom the costs of the costs assessment should be payable (Exhibit B). A copy of that Summons had not been served on Ms Dubow as at the time of the hearing before me.
On the hearing before me, Ms Dubow tendered an incomplete document (said to have been an annexure to another affidavit of which Ms Dubow said she did not have a copy) which on its face was an email communication from a "Michael McTegg" on an agd.nsw email address confirming that the "electronic database" showed registration of Cost Assessment Certificate involving the parties noted (Dubow and Fitness First) (with an allocated file number as identified on the email) on 9 December 2010 and that a motion for the stay of enforcement of that certificate had been filed by the defendant and was listed on 20 January 2011. That email does not make clear the sender's responsibility or function. (Earlier in that email chain was a communication by Ms Dubow to the effect that she had been advised by the Bundaberg Post office that the money order that accompanied her registration of order forms was cashed on 17 December 2010, as well as other email communications apparently between Ms Dubow and a Ms Lambino (identified as Deputy Registrar Courts and Tribunal Services at the Downing Centre Local Court) in which Ms Dubow referred to advice she had received on 6 January 2011 to the effect that her registration had not been received and was "not in the system").
Objection was taken by Mr Green to the tender of that document on the basis that it was, on its face, part of a document the whole of which was not being tendered (and, indeed, Ms Dubow confirmed that she did not know where the complete document was). Ms Dubow pressed the admission into evidence of that document first on the basis that it was a "factual document" and that she was available to be cross-examined as to it; and secondly, on the basis that it was a business record from the Attorney-General's department to her workplace. After some debate, and after submissions in relation to the substantive application, I provisionally allowed the document and indicated that I would rule on its admissibility in these reasons. I do so in the context of the consideration of issue (i) below.
Finally, I note that to the extent that objection was raised by Mr Green to Ms Dubow's affidavits as containing a large amount of material by way of submission, I indicated that I would read those parts of the affidavits as submissions (this would include, for example, the accusations made in Ms Dubow's 7 March 2011 affidavit of obfuscation by Fitness First of the costs assessor's attempts to assess costs, and of frustration and abuse by Fitness First of court processes to avoid payment of the debt and of misleading the Local Court as to the contents of the Deed of Release "and the authority to set aside the entered judgment").
With the above background in mind, I turn to the issues for determination.
(i) Validity of statutory demand
Section 459E, relevantly, requires that a statutory demand served on a company, if it relates to two or more debts, must specify the total of the amounts of the debts (subs (2)(b)) and, pursuant to sub-section (3), that the demand (unless the debt, or each of the debts, is a judgment debt) must be accompanied by an affidavit that complies with that sub-section.
Mr Green submits, and I agree, that it is implicit in s 459E(3) that in order to be exempt from the requirement to provide an accompanying affidavit there must be an underlying judgment debt in existence at the time the statutory demand is signed or at least at the time it is served.
The first issue for determination is whether there is in fact a valid statutory demand under the Act, given the lack of an affidavit verifying the statutory demand at the time it was signed and served. Whether such an affidavit was required pursuant to s 459E(3) depends on whether all of the debts claimed therein were judgment debts. (The next question is whether, if the demand claimed only a judgment debt or debts (so that no verifying affidavit was necessary), whether the demand was still defective because it failed to disclose the fact that the amount claimed was a judgment debt.
- Was there a judgment debt at the time of issue of the statutory demand?
Ms Dubow contends that the judgment was entered on the date the electronic database recorded the cost certificates as having been filed (referring to Uniform Civil Procedure Rule 36.11(2)) and maintains that it was entered in the Local Court electronic database as at 9 December 2010. For that, she relies on the email correspondence forming the email chain in Exhibit 2 that I only provisionally admitted. Ms Dubow submitted that this email chain was admissible as a business record.
Section 69 of the Evidence Act 1995 (NSW) provides an exception to the hearsay rule for business records, those being documents forming (or that at any time formed) "part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business" and containing a previous representation made or recorded in the document in the course of, or for the purposes of, the business. Sub-section 69(2) provides that the hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. There is an exclusion in sub-section 69(3) if the representation was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, a relevant proceeding.
The activities of government departments generally may constitute a business for the purposes of this section ( Marriage of B (1987) 91 FLR 105; Ritz Hotel Ltd v Charles of the Ritz Ltd (No 18) (1988) 14 NSWLR 116 at [120] - [121]) and the records which may be covered can include company reports, records of conversations between company officers and inter-office correspondence ( Re Marra Developments Ltd and the Companies Act [1979] 2 NSWLR 193 at [197]). So, for example, business letters may form part of the relevant business records ( Compafina Bank v ANZ Banking Group Ltd [1982] 1 NSWLR 409).
Ritchie's commentary notes that the section amounts to legislative recognition of the probable accuracy of business records and of the fact that they are likely to be more reliable than mere memory (referring to Albrighton v Royal Prince Alfred Hospital [1980] 2 NSWLR 542 at [548]).
Statements made by Ms Dubow in the email chain would not, however, form part of the business records of the entity to whom an email was sent by her, for the purposes of this exception to the hearsay rule. Ritchie's further observes that statements made in documents sent by an entity (here, for example, the Local Court registry staff, assuming that is the source of the relevant email) will not form part of the business records of the sender if it has parted with possession of the documents in question (citing Karnot Auto Spares Pty Ltd v Dominelli Ford (Hurstville) Pty Ltd (1992) 35 FCR 560; (1992) ATPR 41-175; Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647 at [659]). In this regard, it is not known whether the communications in question are presently retained in the email database or business records at the Local Court registry given the circumstances in which the email chain was tendered.
As to whether the statements contained in the email chain were made "in contemplation of" or "in connection with" proceedings, the purpose of the exclusion created by s 69(3) is said to be to prevent the admission of hearsay material which is self serving (because it has possibly been prepared to assist the proof of something known, or at least apprehended to be, relevant to the outcome of identifiable legal proceedings) ( Vitali v Stachnik [2001] NSWSC 303). It seems (by reference solely to the email chain) that there is a reasonable inference that the last document in the chain was brought into existence in response to a request by Ms Dubow for the purposes of and in connection with the present proceedings, given its timing (although earlier parts of the email chain seem to be connected with the desire to enforce the costs judgment rather than by reference to the current application). In Lewis v Nortex Pty Ltd (in liq) [2002] NSWSC 1083 it was said that the expression "in contemplation of" should be given a wide meaning (as ordinarily would be the expression "in connection with"). However, it is noted in Ritchie's that it would be contrary to the general policy of the Uniform Evidence Act ( to facilitate the admissibility of apparently reliable probative information) to adopt a broad interpretation of the "in connection with" expression and allow it unnecessarily to narrow the scope of the "business records" exceptions to the hearsay rule (referring to Nye v New South Wales (2002) 134 A Crim R 245.)
Even assuming that the email chain did otherwise fall within the definition of a business record (and was not created in contemplation of or in connection with the proceedings), it has not been authenticated as required in National Australia Bank v Rusu [1999] NSWSC 539. There, Bryson J held at [17] and [34] that:
Before a business record or any other document is admitted in evidence it is obviously necessary that there should be an evidentiary basis for finding that it is what it purports to be. Documents are not ordinarily taken to prove themselves or accepted as what they purport to be; there are exceptions under the common law and under statutes for public registers and for many kinds of documents when certified in various ways: and see the method of proof provided in some cases by s 170 and s 171 of the Evidence Act 1995. At the simplest, the authenticity of a document may be proved by the evidence of the person who made it or one of the persons who made it, or a person who was present when it was made, or in the case of a business record, a person who participates in the conduct of the business and compiled the document, or found it among the business' records, or can recognise it as one of the records of the business.
...
If the court is to find a significant fact on which a large liability may depend, there is a need for the court to have some measure of confidence in the source of the court's belief that the fact exists. The court acts almost always on narrations which must have a human origin; not usually on the court's own knowledge or on states of fact which are taken to be incontestable. The balance of probabilities is not a demanding standard, as the possibility that the less probable state of fact may be the true one is very obvious, and makes civil justice very vulnerable to error. For the court to feel confident that it should act on any narration it is very important to have a human witness who has pledged, by oath or affirmation, that the narration is true: someone who is responsible for it. Business records may be incomplete; they often are. They record what there is perceived to be a business need to record, and that may be a small part or an oblique aspect of the objective event.
However, the estoppel claim as asserted in paragraph 15 of Ms Dubow's 31 January 2011 affidavit (which I read as a submission) seems to go beyond this:
Given the failure to notify of the Federal Magistrates Court Judgment in 2006, the issuing of the Bankruptcy notices the delay in responding to the costs assessor, the issuing of a further Bankruptcy Notice and denial of the debt in that jurisdiction and the terms of the Deed of Release, I would submit that this estopped or Anshun estopped the Plaintiff from relying on "Bad Faith"
The reference to reliance by Fitness First on "bad faith" seems to be a reference to the fact that on its application the Local Court costs judgment was set aside on the ground of lack of good faith in January 2011 (see para 13 of the affidavit). Whether or not that was justified would be a matter to be dealt with on the appeal lodged by Ms Dubow but is not a matter that for present purposes affects the fact that there is clearly a dispute between the parties as to Ms Dubow's entitlement to proceed to enter that costs judgment having regard to the stay order and to the Deed of Release.
Ms Dubow has also submitted that Fitness First was in contempt of the 2007 court orders (citing Young v Jackman (1986) 7 NSWLR 97 for the proposition that a party prima facie in contempt should not be heard on an application on its own behalf). If this is based on the proposition that Fitness First has to date failed to pay the costs as quantified in the costs assessments, Fitness First's contention is that liability for those costs was the subject of releases under the Deed of Release. It does not seem to me that there is any basis on which a finding of contempt could be made at this stage.
Further it is asserted by Ms Dubow that the denial of the judgment debt "fully litigated assessed and registered pursuant to the Legal Profession Act 2004" amounts to the interpretation of an instrument (presumably the Deed of Release) exceeding the legislative powers of parliament, contrary to s 31 of the Interpretation Act 1987 (NSW) s. 31. This seems to be based on the finality of the costs assessment pursuant to the provisions of the Act. Ms Dubow relies upon s 372 of the Legal Profession Act which provides that:
A costs assessor's determination of an application is binding on all parties to the application and no appeal or other assessment lies in respect of the determination, except as provided by this Division.
and on s 367A of the Act which provides that:
A costs assessor is to determine an application for an assessment of costs payable as a result of an order made by a court or tribunal by making a determination of the fair and reasonable amount of those costs.
However, this submission again does not take into account the live dispute as to whether the entitlement of Ms Dubow to those costs was released by her in 2010 prior to the issue of the costs determination certificates and whether that affected her ability later to seek to rely on those certificates.
Ms Dubow contends that Fitness First, in the bankruptcy proceedings commenced prior to the Deed of Release, had (by denying the debt the subject of the 2007 orders) necessitated the incurring of excessive costs in the Federal jurisdiction. I am not in a position to make any assessment of this and do not consider it relevant to a determination as to whether there is a dispute that, by reason of entry into the Deed of Release, it is no longer open to Ms Dubow to raise claims in relation to the debt the subject of the statutory demand or in relation to those proceedings.
Finally, Ms Dubow submits that on a public purpose basis, to allow Fitness First to "avoid the debt responsibilities after Court Orders and assessments by means of continual litigation is the heart of abuse of process". Ms Dubow cites Meehan (in the passage referred to above) for the proposition that in exercising the discretion whether to set aside a demand pursuant to s 459J(l)(b) the court is required to look at the relative positions of both parties against the objectives of Part 5.4 "not merely the allegations by the plaintiff". She submits that there is no sound or positive ground or good reason for setting aside the statutory demand or not allowing the enforcement of the judgment debt as envisioned by the original proceedings.
In that regard, the complaint as to continual litigation is one that might equally be levelled against Ms Dubow. The unfortunate state of affairs seems to be that the substantive complaints raised by Ms Dubow as to the termination of her membership with Fitness First were dealt with (or disposed of) years ago and since then the ongoing dispute has been as to the enforcement of costs orders both in Ms Dubow's favour and against her (costs orders which, I might add, seem on the amounts had have been quantified to date roughly to balance each other out). The proposal by Ms Dubow's barrister in early 2010 for a walk-away resolution of all disputes seems to me to have been one of eminent good sense. Regrettably, the Deed of Release has not brought all disputes to an end in a practical sense (even if, on its proper construction, that is its true effect), principally by reason of Ms Dubow's decision to pursue registration of the costs certificates. Ms Dubow maintains that she was entitled to do so and ultimately that decision might be vindicated. However, it seems to me difficult for Ms Dubow to suggest that there is an abuse of process in Fitness First seeking to uphold what it contends (and what on a reasonable construction of the Deed of Release may well be the case) was a final resolution of the costs and other disputes between the parties.
I am not satisfied that Ms Dubow has established the basis for any estoppel to preclude Fitness First relying upon the Deed of Release (as it may ultimately be properly construed) or seeking to set aside the statutory demand on that basis. Nor am I persuaded that the discretionary considerations sought to be invoked by Ms Dubow are merited or should lead to the exercise of discretion not to set aside the statutory demand.
Conclusion
For the reasons set out above, and having regard to the policy underlying the requirement for a verifying affidavit to accompany a demand which includes a non-judgment debt, I consider that the statutory demand should be set aside by reason of the lack of an accompanying verifying affidavit in circumstances where one of the three components of the debt the subject of the demand was not a judgment debt at the time the demand was served.
Had that not been the case, I would have been satisfied, having regard to the low threshold for the test as to whether there is a genuine dispute as to the existence of the debt claimed, that Fitness First has established a genuine dispute as to the existence of the debt by reference to the dispute as to the operation of the stay order and as to the question whether the debt has been released by reason of entry into the Deed of Release. I consider that those matters would have constituted "some other reason" for the demand to be set aside under s 459J(1)(b), even had the ground under s 459H(1)(a) not been established (say, because the existence up until 20 January 2010 of the Local Court judgment had precluded the raising of a dispute as to the existence of the debt).
The appropriate order is to set aside the statutory demand and I so order. I further order that the defendant pay the plaintiff's costs of the proceedings.
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Decision last updated: 21 September 2011
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