IC Hire Pty Ltd v Coal Projects Pty Ltd
[2013] VSC 732
•20 December 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2013 02859
IN THE MATTER OF COAL PROJECTS PTY LTD (ACN 153 272 612)
BETWEEN
| IC HIRE PTY LTD (ACN 005 408 793) | Plaintiff |
| v | |
| COAL PROJECTS PTY LTD (ACN 153 272 612) | Defendant |
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JUDGE: | RANDALL AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 September 2013 | |
DATE OF JUDGMENT: | 20 December 2013 | |
CASE MAY BE CITED AS: | IC Hire Pty Ltd v Coal Projects Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 732 | |
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CORPORATIONS – Corporations Act 2001 (Cth) - winding up in insolvency – statutory demand – requirement that affidavit ‘verify’ the debt – significance of defect in affidavit – affidavit not sworn by an appropriate oath-taker – s 459E(3).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Tomlinson | Wisewould Mahony |
| For the Defendant | Mr I G Hone, a solicitor | Ian G Hone |
For Peuker & Alexander Pty Ltd | Mr A Gall, a solicitor | SK Law |
HIS HONOUR:
The plaintiff’s originating process was filed 5 June 2013. The plaintiff sought that the defendant be wound up pursuant to the provisions of s 459P of the Corporations Act 2001. The originating process relies on the defendant’s failure to comply with the statutory demands served upon the defendant on 18 April 2013.
The originating process was first returnable on 17 July 2013 at which time a supporting creditor, Peuker & Alexander Pty Ltd (“the supporting creditor”) appeared to support the application for winding up. The order on that day noted in “other matters” that the adjournment was granted to enable the claims of the plaintiff and the supporting creditor to be satisfied.
On 7 August 2013, the originating process was further adjourned. It was noted in “other matters” that the adjournment was granted for two reasons. First, to enable the defendant to file the material as to solvency if the defendant was unable to negotiate with the plaintiff and the supporting creditor. Second, to enable the parties to exchange and file submissions with respect to the consequences of the affidavit in support of the statutory demand not being sworn before an appropriate oath-taker.
The originating process was further adjourned on 4 September 2013 with directions being made.
The originating process came on for hearing on 13 September 2013. A further adjournment to enable payment out of the plaintiff and the supporting creditor was sought but refused. The natural inference is that the amount sought in the statutory demand was not in dispute. The supporting creditor’s claim was not in dispute. In any event, the defendant’s solicitor conceded that there was no dispute.
The plaintiff appropriately filed and served all the required proofs to enable a winding up order to be made. The sole issue for determination is whether or not the plaintiff is able to rely upon non-compliance with the statutory demand as, contrary to s 459Q, the statutory demand, when served, was not accompanied by an affidavit in accordance with the Supreme Court (Corporations) Rules 2013. A document that purported to be an affidavit was served with the statutory demand, but the oath was not administered by a person authorised to take oaths pursuant to s 123C of the Evidence (Miscellaneous Provisions) Act (Vic) 1958. Accordingly, the plaintiff did not comply with the requirements set out in s 459E(3).
The defendant did not make any application pursuant to s 459S.
In Hamilhall Pty Ltd v A T Phillips Pty Ltd,[1] Branson J observed:
Although it is not necessary for me to decide the point I point out that it is not clear that a statutory demand will fail to be a statutory demand within the meaning of the Corporations Law if it is not accompanied by an affidavit that complies with the requirements of s 459E(3). Section 459E(2) deals explicitly, and one might think comprehensively, with the requirements of a statutory demand. In my view the more likely position is that a statutory demand which is not accompanied by an affidavit which complies with s 459E(3) has not been served as required by s 459E. On this approach a statutory demand which when served is not accompanied by such an affidavit will not support a presumption of insolvency. As its proper service could never be established, failure to comply with it could consequently never be established as required by s 459F of the Corporations Law.
[1][1994] FCA 1446; (1994) 54 FCR 173 at [13].
The defendant’s submission is that the failure to serve an affidavit amounted to a deficiency of a “gross and exceptional character” to undermine the deemed insolvency upon which the application for a winding up order is based. In effect, the defendant adopts the words of Dodds-Streeton J in Crema.[2]
[2]Crema Pty Ltd v Land Mark Property Developments Pty Ltd [2006] VSC 338 at [110].
The plaintiff submits that the absence of the affidavit in support of the statutory demand does not undermine the validity of the application under s 459Q. It relies on Radiancy (Sales),[3] where White J noted that:
It might be arguable that a statutory demand not accompanied by an affidavit required by s 459E(3) has not been served as required by s 459E so that non-compliance with the demand does not support a presumption of insolvency…The better view is that this would not prevent the demand from having come into effect; so that s 459F applies, the company is taken to have failed to comply with the demand, and s 459S also applies…
[3]Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962 at [46].
Habersberger J said in Microjet Imaging Pty Ltd v Charard[4] that:
Although it is also been held that “there is no iron clad rule that a defective affidavit will mandate the setting aside of a statutory demand’,[5] here the affidavit was not defective, it was non-existent. In my opinion, the omission of the affidavit required by s 459E(3) constitutes “some other reason why the demand should be set aside”.[6] As Cox J said in Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (in liq):[7]
It is not asking too much of a creditor whose debt is not subject of a judgment to verify on oath that the debt is due and payable as specifically required by the Act.
[4][2010] VSC 446 at [13].
[5]Equuscorp Pty Ltd v Perpetual Trustees (WA) Ltd (1997) 80 FCR 296, 301 (French, Kiefel and Sundberg JJ).
[6]Corporations Act 2001, s 459J(1)(b).
[7](1994) 14 ACSR 565, 568.
Notwithstanding the elevated status of the affidavit in support of the statutory demand in Equuscorp Pty Ltd v Perpetual Trustees (WA) Ltd,[8] French, Kiefel and Sundberg JJ held that a defective affidavit would be a factor in favour of the discretion to set aside the statutory demand, but that it was not an “iron clad” rule:
Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd…was referred to by his Honour as a case in which the discretion to vary was declined. As appears from the judgment of Bryson J that case concerned a defect in the affidavit purportedly verifying the demand as distinct from a defect in the demand itself. Bryson J said (at 1105):
I see a clear distinction between a defect in a demand as a ground for setting aside the demand, and a defect in an affidavit purportedly verifying the demand as a ground for setting aside the demand. An affidavit which is incorrect has a different and higher order of importance to a demand which is incorrect. There are some deficiencies in procedure which the Court should not allow to be successful, whether or not they have any high practical significance in terms of justice between the parties in the instant case.
The requirement of verification and its attendant responsibilities are not to be regarded as “no more than another form to fill in, errors in which the debtor can have put right on application to the Court”(at 1105). If these observations means no more than that a defect in the verifying affidavit is to be regarded as a factor weighing strongly against the exercise of the discretion to vary and in favour of the discretion to set aside, then they are consistent with the requirement that the discretion to set aside or to vary be exercised having regard to all the circumstances of the case. There is therefore no ironclad rule that a defective affidavit will mandate the setting aside of the demand.
[8](1998) 80 FCR 296, 300-301.
Notwithstanding that the authorities I have referred to appear to elevate the status of the affidavit verifying the statutory demand, the failure to provide such an affidavit or the failure to provide an affidavit in the appropriate form is not considered a fatal defect in the demand itself.
Santo J in Dolvelle Pty Ltd v Austin MacFarms Pty Ltd[9] said:
It is with some hesitation that I have concluded that the word “must” in s 459E(3) is not comparable in effect to the words “may only” in s 459G(2) such as to render an application based on such a statutory demand outside Pt 5.4 merely because the accompanying affidavit is two days premature. The requirement (of exact coincidence of date for verification of the statutory demand), though important, is not to be treated as an essential integer of the relief sought; there is of course no dispute that the amount remains unpaid. It thus follows that s 459S is applicable, subject to the fact that no application was made for the demand to be set aside. However, s 459S(1)(b) provides for the situation where such application to set aside the demand is not made and contemplates that where the ground is one which could have been relied upon but was not so relied upon, the leave of the Court is nonetheless required. The drafting slides over the apparent difficulty that it is difficult to envisage a circumstance in which such a ground could ever have been raised, there being as hypothesised no application in the first place to set aside the demand at which the ground could have been raised in the first place. However, the legislative intent is clear enough.
Thus treating s 459S as applicable, clearly enough the ground here relied upon is not material to proving that the company is solvent in circumstances where it is not in dispute that the debt in question remains unpaid, more particularly where no contention has been paid pursuant to s 459G that the debt is genuinely in dispute.
[9](1998) 43 NSWLR 717, 727-8.
In Portrait Express (Sales) Pty Ltd,[10] Bryson J set aside a statutory demand as the same contained substantial defects and as the affidavit in support was not in compliance with the Federal Court Rules. Bryson J referred to a decision in McClelland CJ (in eq) in B & M Quality Constructions,[11] as follows:
The defendant’s failure to comply with the rules in the manner discussed, for the reasons I have indicated, provides a sufficient “other reason” for the purposes of s 459J(1)(b) why the demand should be set aside. The failure to comply with the rules in respect of the accompanying affidavit is not in my opinion a “defect” within the meaning of s 459J(2) which I think, having regard to sub-s (1), must be read as a “defect” in the demand itself (and see the definition of “defect” in s 9), and even if it were, the court would not be acting “merely” because of the defect, a phrase which connotes acting merely because there is a defect, without regards to the significance of the defect in the particular circumstances…
[10]Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd; Olan Mills Studio Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746.
[11]B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433.
Bryson J continued:
It will be seen his Honour’s view was that the failure of the affidavit to comply with the rules is not a defect in the demand itself and is not protected by s 459J(2).[12]
[12]Portrait Express (Sales) Pty Ltd at [306].
Further, in Radiancy (Sales),[13] White J said:
It does not follow that [the defendant] can oppose the winding up application on the ground that the application is an abuse of process because it relies on a statutory demand accompanied by a purported affidavit containing a forgery. Leave could only be given to rely on such ground if the ground were material to proof of [the defendant’s] solvency (s 459S(2)). The absence of verification of the statutory demand is not relevant to [the defendant’s] solvency.
However, this evidence is material to whether leave should be given to [the defendant] to rely on the ground that Radiancy (Sales) is not its creditor, or that the alleged debt is genuinely disputed.
[13]At [54]–[55].
I conclude that the absence of an affidavit verifying the statutory demand is not a defect in the demand itself. In the absence of an application pursuant to s 459S, the plaintiff is entitled to rely upon the defendant’s failure to comply with the statutory demand served upon the defendant on 18 April 2013.
There will be a winding up order.
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