GPC (WA) Pty Ltd v Investec Bank (Australia) Ltd
[2010] WASC 171
•19 JULY 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: GPC (WA) PTY LTD -v- INVESTEC BANK (AUSTRALIA) LTD [2010] WASC 171
CORAM: ACTING MASTER CHAPMAN
HEARD: 6 & 12 APRIL 2010
DELIVERED : 19 JULY 2010
FILE NO/S: COR 221 of 2009
BETWEEN: GPC (WA) PTY LTD
Plaintiff
AND
INVESTEC BANK (AUSTRALIA) LTD
Defendant
FILE NO/S :COR 222 of 2009
BETWEEN :PRIMEPOINT ASSET PTY LTD
Plaintiff
AND
INVESTEC BANK (AUSTRALIA) LTD
Defendant
Catchwords:
Corporations - Statutory demand - Requirements for affidavits - Genuine dispute
Legislation:
Corporations Act 2001 (Cth)
Evidence Act 1995 (Cth)
Oaths Act 1900 (NSW)
Oaths, Affidavits and Statutory Declarations Act 2005 (WA)
Result:
Admitted amount in COR 221 of 2009 $3,530,051.20
Admitted amount in COR 222 of 2009 $7,030,051.20
Category: B
Representation:
COR 221 of 2009
Counsel:
Plaintiff: Mr D K Skender
Defendant: Mr J A Thomson
Solicitors:
Plaintiff: McKenzie Moncrieff Lawyers
Defendant: Jackson McDonald
COR 222 of 2009
Counsel:
Plaintiff: Mr D K Skender
Defendant: Mr J A Thomson
Solicitors:
Plaintiff: McKenzie Moncrieff Lawyers
Defendant: Jackson McDonald
Case(s) referred to in judgment(s):
Carb Royale Pty Ltd v Tonkin [2000] VSC 399; (2000) 35 ACSR 454
Emhill Pty Ltd v Bonsoc Pty Ltd [2001] VSC 179
Fastlink Calling Pty Ltd v Macquarie Telecom Pty Ltd [2008] NSWSC 299; (2008) 217 FLR 366
Frayson Pty Ltd v Stirfry Enterprises Pty Ltd [2008] WASC 301; (2008) 223 FLR 342
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 24 ACSR 353
St George Bank Ltd v Emery [2004] WASC 35
ACTING MASTER CHAPMAN:
Application
The plaintiff by way of originating process filed on 20 November 2009 made an application pursuant to s 459G of the Corporations Act 2001 (Cth) (the Act) to set aside a statutory demand served by the defendant on the plaintiff in COR 221 of 2009 (GPC). A similar application has been made in matter COR 222 of 2009 (Primepoint) and in general terms the applications are the same.
Grounds relied upon to set aside the statutory demands
The grounds upon which the plaintiffs rely to set aside the statutory demands are set out in par 2 of the written submissions as follows:
(a)The affidavits accompanying the statutory demands and the other affidavits relied upon by the defendant are defective which constitute some other reason why the statutory demands ought to be set aside.
(b)There is a genuine dispute concerning the amount claimed in the statutory demands due to the absence of proper demands being issued prior to the issue of the statutory demands.
(c)The absence of proper demands being issued prior to the issue of the statutory demands coupled with an incorrect statement of interest payable in certificates issued by the defendant constitute some other reason why the statutory demands ought to be set aside.
(d)The defects referred to in (c) result in the statutory demands themselves being defective.
The grounds set out in the applications are less detailed and read:
This application is made under section 459G of the Corporations Act 2001 (Cth) (Act) to set aside a statutory demand served by the defendant on the plaintiff on the grounds that:
(a)there is a genuine dispute about the existence of the alleged debt to which the demand relates; further or alternatively
(b)due to defects in the demand, substantial injustice will be caused unless the demand is set aside; further or alternatively
(c)in all the circumstances of the case, the demand should be set aside.
On the facts stated in the supporting affidavit, the plaintiff seeks the following orders:
1.The statutory demand dated 29 October 2009 served by the defendant on the plaintiff for the amount of $4,403,496.11 [in GPC and $8,776,941.01 in Primepoint] be set aside.
2.The defendant pay the plaintiff's costs of the application.
At the outset counsel for the defendants objected to the affidavits of Bryndis Gudridur Moffitt (Mr Moffitt) sworn on 17 March 2010 on the basis that they raise a new issue outside the 21‑day limit provided in s 459G(3) of the Act. The affidavits relate to the defect the plaintiffs' claim exists in the affidavits which accompanied the statutory demands and the affidavits relied upon in these applications.
Because of the view I have taken in relation to the affidavits accompanying the statutory demands and those of Chloe Elizabeth Neil (Ms Neil) relied upon in this application it is not necessary for me to address this issue.
Affidavits accompanying the statutory demand
Counsel for the plaintiff submitted that the affidavit of Ms Neil accompanying the statutory demand issued against GPC on its face is said to be affirmed at Sydney on 29 October 2009 before a solicitor David James Walter (Mr Walter) of 50 Bridge Street, Sydney, New South Wales. The first page of the affidavit has two signatures on it. The second page which is also the final page has only one signature which appears to be that of Ms Neil. There is no signature in the jurat but printed under the jurat are the following words:
………………………………………
Justice of the Peace/ SolicitorDAVID JAMES WALTER
50 BRIDGE STREETSYDNEY NSW 2000
The affidavit accompanying the statutory demand issued against Primepoint was signed by Mr Walter in the jurat. Even so counsel for the plaintiffs argues that both affidavits are defective by virtue of the fact that Mr Walter is not qualified as a person before whom an affidavit may be affirmed.
The plaintiffs argue that the affidavits must be made in accordance with the Oaths, Affidavits and Statutory Declarations Act 2005 (WA) (the OASD WA Act). In my view that submission requires further examination.
In Carb Royale Pty Ltd v Tonkin [2000] VSC 399; (2000) 35 ACSR 454, Senior Master Mahoney said:
If it is not made before a person authorised to administer an oath or affirmation for an affidavit, the document, despite its form, will not be an affidavit; and the statutory demand will be liable to be set aside on that ground alone … Once a proceeding under s 459G has been duly commenced, the creditor will have the opportunity to answer the point by filing and serving an affidavit proving the identity, address and qualification of the witness - as happened in this proceeding. Until that proof is adduced, however, the proceeding is properly brought and there must be consequences as to costs even if the plaintiff has no other basis for obtaining an order that the statutory demand be set aside [11].
A similar approach was adopted by Barrett J in Fastlink Calling Pty Ltd v Macquarie Telecom Pty Ltd [2008] NSWSC 299; (2008) 217 FLR 366 where his Honour said:
The document now before me, which is signed by Ms Jebril and states that it was 'sworn', will properly be regarded as an affidavit if, as a matter of fact, it was sworn by her before Mr Chouman, the solicitor whose name appears after 'Name of witness'. Lacking his signature, it is an irregular affidavit but nonetheless an affidavit, provided that the factual matter to which I have just referred is proved.
That brings me to r 35.1 of the Uniform Civil Procedure Rules:
Irregularity does not invalidate affidavit
(cf SCR Part 38, rule 5; DCR Part 30, rule 5; LCR Part 25, rule 5)
An affidavit may, with the leave of the court, be used despite any irregularity in form.
The message here is that an affidavit which is irregular may be used in proceedings if the court so allows. If Ms Jebril's purported affidavit is shown by extrinsic evidence to have been sworn before Mr Chouman, it will, for reasons stated, be properly regarded as an affidavit, albeit one in which there is an 'irregularity of form' as mentioned in r 35.1. Its use in court will then be dependent upon a grant of leave under that rule. But, as I have said, its character as an affidavit - and therefore as a document of the kind contemplated and required by s 459G(3)(a) of the Corporations Act - will be established [39] ‑ [41].
Incidentally objection had been taken to the subsequent affidavit sworn by the solicitor, but his Honour said:
Objection was taken to Mr Chouman's affidavit on the basis that his statement that 'Ana Jebril swore the Affidavit' is not a statement of fact but a statement of legal conclusion. Given that this part of the solicitor's affidavit merely repeats something to which he would have attested had he signed the jurat, I intend to accept and rely on his statement [44].
This is a similar approach which I took in relation to the affidavit of Mr Walter sworn on 9 April 2010. On the basis of that affidavit I am satisfied Mr Walter is an Australian legal practitioner. On 29 October 2009 he administered an affirmation to Ms Neil in accordance with the Oaths Act 1900 (NSW), witnessed her signature on the two affidavits and with both he signed the first page. On the affidavit relating to GPC he endorsed the words underneath the jurat referred to above but he inadvertently omitted his signature in the jurat.
Counsel for the plaintiffs referred to the decision of Master Sanderson in Frayson Pty Ltd v Stirfry Enterprises Pty Ltd [2008] WASC 301; (2008) 223 FLR 342, and submitted that the defendants must comply with the law of Western Australia to produce a valid affidavit. Paragraph 17 reads:
That rule, then, does not save the defendant. The defendant must comply with the law in Western Australia to produce a valid affidavit. On behalf of the defendant, it was submitted that if there had been no compliance with s 9(7) of the Oaths Act, then this was no more than an 'irregularity' which could, in effect, be overlooked. In support of this proposition, counsel for the defendant relied on Hawthorn Football Club Ltd v Arfmas Pty Ltd (Unreported, WASCA, Library No 6896, 22 October 1987) 6 (Wallace J). Two things can be said about this case. First, it was decided at a time when the swearing of affidavits was governed by O 37 of the Rules of the Supreme Court 1971 (WA). Under O 37 r 12, an affidavit could not be sworn before a solicitor or his agent. However, irregularity could be excused under O 37 r 5. The Oaths Act came into force on 1 January 2006. Being a statute, it overrules any provision of the Supreme Court Rules with which it is in conflict. In any event, O 37 r 12 has now been repealed. While O 37 r 5(2) remains, it cannot assist the defendant in the light of the clear provisions of the Oaths Act.
There is an important distinction between the case before me and that considered by the learned master in that the affidavit considered by him was sworn in Western Australia. That is not the case here. The affidavits here were attested to in New South Wales.
Section 27(1) of the Oaths Act 1900 (NSW) reads as follows:
An Australian legal practitioner is, except in so far as the Chief Justice of the Supreme Court by order under his or her hand otherwise directs, authorised to take and receive, subject to subsection (4), affidavits concerning any matter within the jurisdiction of any court or required for the purpose of registering an instrument in New South Wales or for any other purpose to be effected in New South Wales.
Counsel for the plaintiffs argues that the provisions of the Oaths Act 1900 (NSW) does not authorise Mr Walter to administer an oath as an affirmation in support of a statutory demand as the statutory demands were served in Western Australia and therefore do not:
1.constitute any matter within the jurisdiction of any court in New South Wales;
2.involve the registration of an instrument in New South Wales; and
3.is for any other purpose to be effected in New South Wales.
Section 459E(3) of the Act reads:
Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:
(a)verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and
(b)complies with the rules.
What does subpar (b) of s 459E(3) of the Act mean? In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 24 ACSR 353, 357 the court stated:
Section 459E(3) requires a demand, unless the debt is a judgment debt, to be accompanied by an affidavit which verifies the debt and 'complies with the rules'. The expression 'the rules' is defined in s 9 of the Corporations Law as meaning:
'(a)rules of the Federal Court; or
(b) rules of the Supreme Court of this or another jurisdiction; as the case requires …'.
And further at (361 ‑ 362):
In our view the expression 'as the case requires' in s 9, when applied to the relevant rules in s 459E(3), enables the creditor to swear its accompanying affidavit in the form provided by the rules of any court which would have jurisdiction to order the winding up of the appellant or in which an application to set aside the demand could be brought. In the present case this includes the Federal Court, the Supreme Court of New South Wales and the Supreme Court of Victoria.
…
In our view as the accompanying affidavit complied with the Rules of the Supreme Court of Victoria there was no defect in relation to the form of that affidavit. Even if we are in error in reaching that conclusion we would not regard the form of affidavit used as warranting an order to set aside the demand under s 459J(1)(b).
Accordingly, the appellant's appeal on the ground of 'a defect' under s 459J fails.
With respect I agree with the court. At the time a statutory demand is served the court in which any application to set it aside is not known. Clearly the Supreme Court of New South Wales had jurisdiction to entertain such an application and thus in my view the accompanying affidavits in these actions comply with the relevant legislation in New South Wales. Should I be wrong I consider the documents are in the character of an affidavit and therefore a document of the kind contemplated and required by s 459(3)(a) of the Act and would not regard the form of affidavit used as warranting an order to set aside the demands under s 459J(1)(b).
Affidavits filed in this application
What of the affidavits of Ms Neil affirmed on 3 March 2010 before Mr Walter and filed in these matters?
Section 9(1), (2), (3) and (8) of the OASD WA Act reads:
(1)Unless another written law provides otherwise, an affidavit for any purpose in this State must be made in accordance with this section.
(2)The affidavit must conclude with a statement that says -
(a)it is sworn or affirmed, as the case requires, by the person making it in the presence of an authorised witness; and
(b)where and when it is sworn or affirmed.
(3)The person who is making the affidavit must
(a)sign or personally mark the statement required by subsection (2) and each other page of the affidavit;
(b)sign or initial any alteration, such as an insertion or erasure, that has been made to the affidavit; and
(c)in the presence of an authorised witness, say orally on oath or orally affirm -
(i)that he or she is the person named as the maker of the affidavit;
(ii)that the contents of the affidavit are true;
(iii)that the signature or mark is his or hers; and
(iv)if necessary, that any attachment to the affidavit is the attachment referred to in it.
…
(8)An authorised witness for an affidavit that is made at a place outside Western Australia is -
(a)a judge of a court of that place, or a magistrate or justice of the peace of or for that place;
(b)a notary public;
(c)a prescribed consular official who is performing official functions at that place; or
(d)a person who has authority under the law of that place to administer an oath to another person.
Ms Neil's affidavits were prepared for the purpose of these applications and thus it is said would fall within s 9(1) of the OASD WA Act. It is further submitted that because the affidavits were made at a place outside Western Australia the authorised witness would need to fall into one of the categories outlined in s 9(8). Mr Walter does not fit within the categories expressed in s 9(8)(a), (b) and (c). If he is to qualify he would need to qualify under s 9(8)(d). That submission overlooks s 186(1) of the Evidence Act 1995 (Cth).
In Frayson v Stirfry Enterprises Master Sanderson held that s 186(1) of the Evidence Act 1995 (Cth) did not apply in that matter because the affidavit being considered was not for use in proceedings. That however is not the case here. Section 186(1) of the Evidence Act 1995 (Cth) reads as follows:
(1)Affidavits for use in:
(a)an Australian court (other than a court of a Territory) in proceedings involving the exercise of federal jurisdiction; or
(b)a court of a Territory in proceedings involving the exercise of jurisdiction conferred by an Act of the Parliament;
may be sworn before any justice of the peace, notary public or Australian lawyer without the issue of any commission for taking affidavits.
In my view this section applies to the affidavits in question and would fit within the category of 'another written law' referred to in s 9(1) of the OASD WA Act. Under this section Mr Walter would qualify as a witness. It is therefore open to the defendants to rely upon the affidavits.
Genuine dispute as to the amount outstanding - s 459H(1)(a)
At par 10 of the written submissions the plaintiffs submit:
As to what constitutes a 'genuine dispute' is well settled. There must be a plausible contention that requires investigation and raises the same sort of considerations as the 'serious questions to be tried' criterion (Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785). What is required is something between mere assertion and the proof that would be required in a court of law (John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 at 253). Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow (Roadships Logistics Ltd v Tree (2007) 64 ACSR 671).
I am in general agreement with that submission.
The plaintiffs rely upon three factors to support the contention that there is a 'genuine dispute':
1.there is no amount outstanding at the time the statutory demands were issued as no valid demand had been made prior to the issue of the statutory demand;
2.no specific sum was claimed in the demands;
3.there is dispute as to the interest outstanding.
The plaintiffs contend that at the time of the issue of the statutory demands there was no amount payable under the guarantee by either plaintiff because no valid demand had been made prior to the issue of the statutory demands. It was submitted that the guarantee expressly requires the issue of a demand before any amount could be said to be due and payable. Thus, it is said, there is a genuine dispute as to the amounts payable.
The amount claimed under the statutory demand in GPC is set out at page 17 of the affidavit of Graham Kenneth Iddles (Mr Iddles) sworn on 20 November 2009 as follows:
Description of the debt
(indicate if it is a judgment debt, giving the name of the court and the date of the order)
Amount of the debt
A debt owed by the company to the creditor under the Guarantee entered into in respect of the Facility Agreement, as set out in the Demand and as subsequently certified in the certificate.
$4,403,496.11
Where:
Certificate means a certificate dated 29 October served by the creditor on the company
Demand means a demand dated 29 January 2009 served by the creditor on the company
Facility Agreement means a Facility Agreement dated 16 August 2007 made between, among others, the creditor as lender and Westmain Corporation Pty Ltd as borrower
Guarantee means a Guarantee dated 17 August 2007 made between, among others, the creditor as lender and the company as guarantor.
Total Amount
$4,403,496.11
In the case of Primepoint the total amount is $8,776,941.01.
The guarantee referred to in the statutory demand is annexed to the affidavit of Mr Iddles as part of attachment GKI2. It is found at pages 49 ‑ 64. Clause 2 which is found at page 53 reads:
GUARANTEE AND INDEMNITY
The Guarantor irrevocably and unconditionally guarantees to Investec the due and punctual payment of the Debt to Investec and the due and punctual performance of all the obligations undertakings and provisions contained in or implied by the Documents other than those imposed on Investec and indemnifies Investec against all loss damage costs and expenses suffered or incurred by Investec as a result of any failure by any person to pay in a due and punctual manner the Debt on due date or as a result of any breach of any of the covenants and conditions contained in or implied by the Documents.
The Guarantor must pay the Debt immediately on demand to Investec.
Counsel for the plaintiffs submits that although there are a number of authorities which support the proposition that generally speaking, a demand may not be necessary before an amount is due under a guarantee, those principles are subject to the express terms of the guarantee. It is submitted that in this case the last sentence of cl 2 required a demand to issue before any liability arises.
Counsel for the defendants argues there are two very strong answers to that. The first answer comes from a matter of construction of the terms of the guarantee. Counsel correctly points out that there is no mention of a demand in the first paragraph of cl 2. It is the last sentence of cl 2 which mentions a demand. It is said the guarantee overall demonstrates it is an irrevocable and unconditional guarantee and the obligation is not conditioned expressly upon the making of a demand. The defendants argue the clause does not expressly state that it is a condition precedent. It is said the harmonious construction is a principal obligation which is immediately due and if a demand is made then it is also immediately payable.
Clause 4 reads as:
CONTINUING GUARANTEE
This Guarantee is continuing and irrevocable and the obligations of the Guarantor are absolute and unconditional in all circumstances. The Lender is not obliged to take any action against any person or under any security prior to claiming from the Guarantor.
Clause 6.1 reads:
PRINCIPAL OBLIGATION
This Guarantee is a principal obligation and will not be treated as ancillary or collateral to any other obligation to the intent that this Guarantee is enforceable although the Documents or any other obligation arising between Investec and the Borrower or any other person becomes in whole or part unenforceable for any reason.
It is correctly said there is no reference in cl 4 to a demand having to be made. It is not conditional upon the non-payment of the principal amount. It is accepted by counsel for the defendants that there is tension between the reference to demand referred to in cl 2 and the principal debtor clause obligation and the unconditional statement of the guarantee in cl 4 and cl 6.1. Counsel then referred to the decision of Emhill Pty Ltd v Bonsoc Pty Ltd [2001] VSC 179 [23] ‑ [25], Balmford J said:
In Benson-Brown v Smith [1999] VSC 208 Ashley J was concerned with a document essentially similar to the leases with which I am concerned. He considered the authorities to which I have referred and at [147] found that the clause requiring a demand was inapplicable to a claim under the 'principal debtor' clause. He gave a number of reasons for that finding, of which the following are relevant to the matter before me:
•that it was open to the parties to define the nature of their relationship;
•that the courts have at times been influenced by the language freely chosen by men of business;
•that there is a definite trend against treating a principal debtor arrangement as requiring, save in circumstances which plainly require it, an obligation to make demand before pursuing a claim; and that no such circumstances arose in the case before him;
•that even if an attempt to create a principal debtor failed, it did not mean inevitably that there must be demand before a claim was pursued; the fact that the parties had attempted to create such an arrangement might be thought to tell strongly against the need for a demand, it being a usual concomitant of such an arrangement that prior demand was not required.
In that case, His Honour also noted that the 'principal debtor' clause expressly set up a separate and additional obligation. This is not the case with the clause with which I am concerned. However, in my view, the inclusion of that clause as a separate sentence, in the context of the guarantee read as a whole, is an indication that that was what the parties intended.
Mr Connor submitted that Mr Cook was sued as guarantor and not as principal debtor and accordingly could not be bound as principal debtor. However, the effect of the second last sentence of the guarantee is not to transform the guarantor into the principal debtor, but to render the lessee 'at liberty to act as though the guarantor were the principal debtor', which is not the same thing.
Given the specific wording of the guarantee I consider there is some doubt as to whether or not a demand was required. Demands were in fact issued dated 29 January 2009 and are to be found at pages 67 ‑ 69 and 72 ‑ 73 of the affidavit of Mr Iddles in GPC. Counsel for the plaintiffs submits the demands are defective as no specific sum has been demanded.
Clause 5 of the demand reads:
By reason of the occurrence of the Event of Default, Investec hereby demands and requires payment of the Guaranteed Amount within seven (7) days after the date of service of this demand.
No sum is mentioned in this clause with the demand relating to the 'Guaranteed Amount'. That term is defined in cl 3 which reads:
By the Guarantee the Guarantors unconditionally and irrevocably guaranteed, amongst other things, the due and punctual performance of all the obligations of the Borrower for payment of the Debt, limited to $3,500,000.00 plus interest and costs (Guaranteed Amount).
In the case of Primepoint the limit is $7,000,000.
Whilst that term is referred to in other clauses of the demand no monetary sum is assigned to the total amount ie the limited amount plus interest and costs. Clearly this sum does not include any amounts referred to in cl 3(a)(i)(C). Indeed cl 9 reads:
The amount demanded does not include other unpaid amounts owing to Investec which may include principle, interest, costs, fees and other charges. You will remain liable for those monies, and they must be paid before the Securities will be released (original emphasis).
Thus whatever the amount demanded, cl 9 contemplates that is not all which is outstanding. I would agree that the demands do not on their face clearly specify a specific sum which is due and payable at the date the demand was issued. Clause 6 of the demands includes an amount of interest but no amount for costs is specified.
It is further said the demands are defective as they do not indicate how the interest has been calculated. Given the wording of cl 3(a)(i)(B) and the interest rate as defined in the Facility Letter, I consider this significant. I agree that it is not clear from the demands how the interest has been calculated.
Finally, counsel for the plaintiffs contends that the defendant at par 7 of the affidavit of Ms Neil sworn 3 March 2010 concedes the calculation of the interest in the demands is incorrect and therefore it is said the demands are not valid demands.
Annexed to the affidavits of Ms Neil sworn on 3 March 2010 is a document titled Deed of Agreement and is found at pages 6 ‑ 20. GPC and Primepoint are parties to that document. I note that the copy annexed to the affidavits have not been executed by the defendant, it is not dated and does not appear to have been stamped. Apart from annexing it to her affidavits and stating that it is dated 31 March 2009 Ms Neil says nothing of it.
Clause 2 of the deed reads:
ACKNOWLEDGMENTS AND WARRANTIES
2.1The Transaction Parties, by their execution of this deed, jointly and severally acknowledge and agree that:
2.1.1the Securities and Facility are valid and enforceable by Investec in accordance with their terms;
2.1.2they have defaulted under the terms of the Security and Facility;
2.1.3Investec validly served the Demand on the Transaction Parties and the Transaction Parties are presently in default of the Demand;
2.1.4the Secured Money is presently due and payable to Investec;
2.1.5the Transaction Parties are liable to Investec for all amounts outstanding under the Facility together with interest fees, costs and expenses continuing to accrue on the debt; and
2.1.6Investec is presently entitled, and following execution of this deed continues to be entitled, to charge interest on any amounts outstanding under the Facility at the Default Rate.
2.1.7Investec is presently entitled to exercise any or all of its rights on default under the terms of the Facility and the Securities, including without limitation taking possession and selling the Mortgaged Property and enforcing on the Securities.
2.2Each of the Transaction Parties warrants that:
2.2.1they have received independent legal advice as to the nature, effect and extent of this deed and the consequences of failure to comply with their obligations contained in this deed and have executed this deed freely and voluntarily;
2.2.2Investec has not made any promise, representation or inducement or been a party to any conduct material to the entry into this deed other than as set out in this deed; and
2.2.3they are aware that Investec in executing this deed is relying upon the acknowledgments and warranties contained in this clause.
If it is that the deed was entered into on 31 March 2009 it post dates the demands of 29 January 2009. I note that two further documents were annexed to the affidavit being annexures C and D, each of which purport to amend the Deed of Agreement said to have been dated on or around 31 March 2009. The two latter documents were executed by each of the parties the first being dated 3 June 2009, and the second 22 July 2009.
Certainly cl 2.1.3 acknowledges that demands had been served and the parties were in default of the demands. Demand is defined in par 1.1 to mean:
Demand means the formal demand issued by Investec on the Borrower dated 29 January 2009 and the Guarantors dated 29 January 2009.
Counsel for the defendants submitted that the plaintiffs received the commercial benefit of the deeds and the extra time which it brought. I am not aware of any evidence which supports this although by implication annexures C and D would appear to do so.
Given the lack of clarity of the amount actually claimed in the demands, the plaintiffs may have an argument as to their validity had it not been for the acknowledgments and warranties made in cl 2 of the Deed of Agreement.
I would not set aside the statutory demands on this basis.
Interest
It is submitted there has been some confusion on the part of the defendants as to how the amount of interest is to be determined. The difficulties it is said seem to stem from the correct meaning of the word 'payable' found in cl 3(a)(i)(B) of the guarantee.
Clause 3 of the guarantee reads:
LIMITATION OF LIABILITY
(a)This document is a guarantee and indemnity for the whole of the Debt. However:
(i)the total amount for which each Guarantor is liable under clause 2 is limited to a sum equal to the aggregate of:
(A)the amount specified in respect to each Guarantor listed in the Guarantee Schedule (Specific Limitation Amount);
(B)an amount equal to all interest payable by the Borrower on an amount equal to the Specific Limitation Amount at the interest rate payable in respect of the Facilities; and
(C)an amount equal to all amounts payable by a Guarantor under clause 10.1,
and where a Specific Limitation Amount is specified in respect to more than one Guarantor, those Guarantors shall be jointly and severally liable for the amounts referred to in clauses 3(a)(i)(A), (B) and (C); and
(ii)the total amount for which the Guarantors are together liable under clause 2 is limited to a sum equal to the aggregate of:
(A)$7,000,000;
(B)an amount equal to all interest payable by the Borrower at the interest rate payable in respect of the Facilities; and
(C)an amount equal to all amounts payable by a Guarantor under clause 10.1,
(General Limitation Amount) subject always to the limitation in clause 3(a)(i) and provided that Investec may determine at its absolute discretion from which Guarantors it will recover the General Limitation Amount.
(b)The Guarantor acknowledges and agrees that this clause 3 does not:
(i)restrict Investec in its dealings with the Borrower and that the amount and extent of any financial accommodation which Investec may from time to time provide to the Borrower need not bear any relationship to any Specific Limitation Amount or General Limitation Amount; or
(ii)restrict the amount Investec can claim from a Guarantor and that it only limits the amount that Investec can ultimately recover from a Guarantor.
The borrower is Westmain Corporation Pty Ltd (Westmain) and in pars 6 ‑ 7 of the affidavits of Mr Brian Lawrence Swain, a director of Westmain, he deposes to the fact that Westmain paid $4,801,655.63 in interest between 17 September 2007 and 17 December 2008. It is submitted the interest was up to date as at 17 December 2008. Counsel for the plaintiffs submits that because of the way cl 3(a)(i)(B) has been drafted there are a number of possibilities as to how interest might be calculated. The possibilities suggested are:
1.Interest continued to be charged after 17 December 2008 but was capitalised and therefore loses its character as interest and becomes effectively principal. If it is always capitalised there is no interest payable.
2.On or about April 2009 the facility limit was increased from $34.5 million to $35.82 million. An alternative argument is that only so much of the interest was capitalised as would equate to the increase in principal on the facility; that is, $1.32 million. That would far exceed the amount of interest that might be payable at the time of the demands.
3.Neither GPC nor Primepoint could calculate the rate of interest for themselves as they could not find the BBSY Bid Rate of interest. This is because of the definition of the interest rate contained in the Facility Letter which is contained at pages 22 ‑ 32 of the affidavit of Mr Iddles. The interest rate is defined at page 2 of the Facility Letter and reads:
Interest Rate:
BBSY Bid Rate for 90 days determined on the date of the first drawdown and then re‑determined approximately every 90 days thereafter (each a 'Reset Date') plus:
1. 2.5% per annum from the date of the first drawdown to 31 December 2007; and
2. 3.55% per annum from 1 January 2008 until the end of the Facility Term.
BBSY Bid Rate means the rate per cent per annum expressed as a yield being the bid rate for bank bills on the relevant day for a period equal to or approximately equal to the ensuing rate setting period as appearing on the Reuter's screen on page 'BBSY' at approximately 10:30 am Sydney time rounded upwards to two decimal places. If Investec decides that the basis on which the rate is determined differs at any time from that employed at the date of this Facility Agreement, or if no relevant rate appears on the Reuter's screen, BBSY Bid Rate means the rate determined by Investec from time to time. In making any determination under this clause Investec must not act arbitrarily, capriciously, or unreasonably.
Neither the demand nor the statutory demand state the BBSY Bid Rate of interest.
4.At the time the demands were issued against GPC and Primepoint a demand was also issued against Westmain claiming interest in the sum of $128,244.02.
Counsel for the plaintiffs submitted that on any of the above analysis interest has been overstated in the demands.
As to the interest counsel for the defendants contends that the interest accrues on the whole amount of the facility which initially was $34.5 million. The full amount of the debt is not guaranteed and the fact that Westmain has paid interest over a period of time does not mean the guarantors are able to gain the proportionate benefit of those payments. Counsel submitted that the term 'an amount equal to all interest payable' in cl 3(a)(i)(B) means the full amount of the interest payable on the Specific Limitation Amount. He further contends Ms Neil, in her affidavits affirmed on 3 March 2009, sets out the method by which she calculated the interest.
In the same affidavits at par 7 she states that the interest set out in the demand was underestimated but the amount set out in the certificate issued on 29 October 2009 was correct. The certificate referred to was issued pursuant to cl 10.3 of the guarantee which reads:
Lender's Certificate
A certificate signed by or on behalf of Investec or its solicitors as to a matter or as to an amount payable to Investec in connection with this Guarantee in the absence of manifest error is conclusive and binding on the Guarantor as to the amount stated in it or any other matter of a factual nature unless the matter or amount is capable of being determined by Investec in its discretion in which case Investec must not act arbitrarily, capriciously, or unreasonably in exercising that discretion.
The certificate issued on 29 October 2009 in GPC states an amount outstanding as follows:
3(c)the amount payable to Investec by each Guarantor in connection with this Guarantee is $4,403,496.11, being:
(i)Principal of $3,500,000.00;
(ii)Interest of $873,444.91; and
(iii)Enforcement costs of $30,051.20.
The certificate issued in Primepoint states an amount outstanding as follows:
3(c)the amount payable to Investec by each Guarantor in connection with this Guarantee is $4,403,496.11, being:
(i)Principal of $7,000,000.00;
(ii)Interest of $1,746,889.81; and
(iii)Enforcement costs of $30,051.20.
Counsel for the defendants submits that there is no evidence of any manifest error or that the exercise of the discretion has been untoward. In St George Bank Ltd v Emery [2004] WASC 35 Master Newnes (as he then was) said [36] ‑ [37]:
Fourthly, it was submitted that by reason of the matters set out in the defendant's affidavit, there appeared to be manifest errors in the certificates such that they should not be relied upon.
What amounts to manifest error was considered in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203, where Sheller JA described a 'manifest error' as an error such that there were powerful reasons for considering, on a preliminary basis, without prolonged adversarial argument, that it was, indeed, an error. That dicta was referred to with approval by Einstein J in State Bank of New South Wales Ltd v Chia (2000) 50 NSWLR 587, at 607 - 608.
The certificates include an amount for enforcement costs. There is nothing to suggest that any manifest error has resulted in the calculation of these sums. However, I do consider the plaintiffs raise a number of legitimate concerns as to the basis upon which interest is to be calculated and the interest rate applicable. In relation to the BBSY Bid Rate there are several matters which are not clear such as:
1.the dates used to arrive at the rate which is to be re‑determined approximately every 90 days;
2.how the period equal to or approximately equal to the ensuing rate setting period was determined;
3.what decision did Investec make if any or what if any rate did Investec determine?
Whilst a methodology of calculating interest is set out in the affidavit of Ms Neil affirmed on 3 March 2010 it is arguable that it is not detailed enough to allow an independent person to make the calculations and even that detail was not contained in the demand, the statutory demand nor the certificate.
In my view the issues surrounding the question of interest are such that a manifest error may well have occurred. I do not consider that issue could be determined until it is fully argued.
Defects and demands - s 459J(1)(a)
Counsel for the plaintiffs contends that the statutory demands should be set aside on the basis that the documents upon which the statutory demands are based are defective. The amounts claimed in the statutory demands refers to the demands. Counsel for the plaintiffs contends that because the demands were defective, for the reasons he previously contended, the statutory demands should be set aside on that basis. For the reasons outlined above, I do not consider the statutory demands should be set aside on that basis.
Further, it is submitted that the amount of interest claimed in the statutory demands is considerably higher than that claimed in the demand and there is no statement in the certificates as to how the interest is calculated and what rates have been applied. It is said that the errors in the certificates is manifest and they ought be discarded as any evidence of the debt for that reason. It is also contended that the certificates are defective in that they fail to provide sufficient information to enable GPC and Primepoint to ascertain details of the amounts which, according to the defendants, are owing under the guarantee and how those amounts are arrived at.
In addition it is said the statutory demands are defective in that various amendments to the facility agreements are not recited.
It is said the failure of the defendants to provide this information, coupled with the concession by the defendants that the demands are incorrect, results in the demands made on GPC and Primepoint being invalid. Absent a valid demand the plaintiffs contend there can be no amount due and payable by them as at the date of the statutory demands.
For the reasons stated previously I do not consider the demands were invalid, but I am of the view there is a genuine dispute regarding the interest.
Some other reason - s 459J(1)(b)
The statutory demands rely upon the letters of demand and the applicable certificates. It is therefore submitted that the defects in those documents constitute another reason why the statutory demands should be set aside.
It is further contended that the defendants are in possession of property over which they have security for the repayment of the sums claimed in the guarantee. The defendants have refused an offer for the purchase of those properties which would have resulted in the entire amounts claimed against Westmain being paid and would avoid the claims being made under the guarantee. It is said for this reason the statutory demands should be set aside. I do not agree.
Conclusion
For the reasons stated I do not consider the statutory demands should be set aside. The amount sought in the statutory demands was based on the demands made and the amounts certified in the certificates. The demands referred to three components of the debt - $3,500,000 in the case of GPC and $7,000,000 in the case of Primepoint plus interest and costs.
Although the demands included an amount of interest, no amount was included for costs. Notwithstanding the acknowledgement made in the Deed of Agreement, I consider there is a genuine dispute about the interest which is not cured by the certificates. I do not consider the same applies to the principal amount nor the question of costs. On that basis the admitted amount in relation to COR 221 of 2009 is $3,530,051.20 and in COR 222 of 2009 is $7,030,051.20, these being the principal amounts and the enforcement costs as certified in the Lender's Certificates.
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