In the matter of Veysel's International Import & Export Pty Ltd

[2013] NSWSC 813

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Veysel's International Import & Export Pty Ltd [2013] NSWSC 813
Hearing dates:	6 June 2013
Decision date:	06 June 2013
Jurisdiction:	Equity Division - Corporations List
Before:	White J
Decision:	Refer to para [25] of judgment.
Catchwords:	CORPORATIONS - winding up - statutory demands - application to set aside statutory demand - whether exists genuine dispute about existence or amount of a debt to which the demand relates - disputed assignment of debt PROCEDURE - costs - departing from the general rule - order for costs on the indemnity basis - award of indemnity costs when party serving statutory demand maintained its validity when it acted unreasonably in doing so - Calderbank offer - real element of compromise of claim
Legislation Cited:	Service and Execution of Process Act 1992 (Cth)
Cases Cited:	Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529
Texts Cited:	F Assaf, Statutory Demands and Winding Up in Insolvency LexisNexis Butterworths, 2nd ed
Category:	Principal judgment
Parties:	Veysel's International Import & Export Pty Ltd (Plaintiff) Ozkan Pty Ltd (Defendant)
Representation:	Counsel: E Demir (Plaintiff) Solicitors: Demir Legal (Plaintiff)
File Number(s):	2013/91622

Judgment

1. HIS HONOUR: This is an application to set aside a statutory demand. The plaintiff received a creditor's statutory demand from the defendant on or about 15 March 2013. The demand was for payment of a debt said to be owed by the plaintiff of $111,000, being principal and interest under a loan agreement dated 27 January 2011 said to have been assigned by a deed of assignment dated 6 December 2012.

1. It appears that the defendant company is based in Queensland. The affidavit accompanying the statutory demand, sworn by a director of the defendant, included a statement that the director had inspected the defendant's books and had ascertained the debt of $111,000 mentioned in the statutory demand was due and payable by the plaintiff and included a statement that the director believed there was no genuine dispute about the existence or amount of the debt.

1. The demand provided that the address for service of any application to set aside the statutory demand was the address of the defendant's solicitor in Queensland. The prescribed form requires a creditor to state an address in the State in which the demand is served. Fortunately, in this case, no harm was done by that non-compliance because the originating process to set aside the demand (which was filed and served within time) was served on the defendant with the accompanying notice required under the Service and Execution of Process Act 1992 (Cth).

1. The loan agreement dated 27 January 2011 had been entered into by the plaintiff with a Ms Mariana Jordan. The defendant was not a party to the loan agreement.

1. It appears from the demand and from the evidence read on the application that Ms Jordan signed a deed of assignment of the debt owing under the loan agreement on 6 December 2012. The deed of assignment of 6 December 2012 from Ms Jordan to Mr Bilal Ozkan provided that the assignment was for consideration described as "partly in money, assistance and assets to an equal value transferred and provided to the assignee by the assignor". It appears that by a further deed of 6 December 2012 Mr Ozkan further assigned the debt to the defendant.

1. On 13 March 2013 (which was two days before the statutory demand was served) Demir Legal, the solicitor acting for the plaintiff, served on the solicitors then acting for the defendant a copy of a statutory declaration that had been made by Ms Jordan on 12 March 2013. In that statutory declaration Ms Jordan deposed in substance that she had been prevailed on by Mr Ozkan to sign a deed which she did not understand when she was drunk and that she did so on the basis of a representation by Mr Ozkan that he would use the document to recover a debt owed to her by the plaintiff for her benefit. In her statutory declaration Ms Jordan said she had not received any money or consideration from Mr Ozkan and that she felt she had been tricked into signing the document. She also said that she had received about $87,700 in repayment of the original loan of $100,000. The statutory demand makes no allowance for the reduction of the claimed debt for repayments of principal.

1. In correspondence with the plaintiff's solicitors, the solicitors for the defendant took issue with Ms Jordan's statements in her statutory declaration. The solicitors for the defendant said that Ms Jordan did not appear intoxicated when she signed the document and she was offered the opportunity to obtain independent legal advice but confirmed she was transferring the debt to Mr Ozkan. Nonetheless, there was a clear dispute of which the defendant was aware prior to the service of the statutory demand as to the validity of the assignment of the debt. In particular the assignor contended and still contends that the assignment is liable to be set aside. In substance, she alleged that the defendant took unconscientious advantage of a special disability and that the assignment should be set aside accordingly.

1. Ms Jordan entered into an agreement with the plaintiff on 12 March 2013 whereby she and the plaintiff agreed there was an amount of $80,000 outstanding and agreed on a timetable for the repayment of that sum by 30 May 2014.

1. The defendant was served with the originating process and supporting affidavit of Mr Bektas on 2 April 2013. No notice of appearance for the defendant has been filed but it is clear that the solicitors who acted for the defendant on the service of the statutory demand had instructions in relation to these proceedings.

1. Procedural directions were made by consent of the parties on 12 April 2013. The directions included an order that the defendant file and serve any evidence on which it relied by 6 May 2013. No evidence for the defendant was filed or served. The defendant's solicitors have been given notice of the adjourned dates of 6 May 2013 and of today's hearing. When the matter was called there was no appearance for the defendant.

1. I was advised by the solicitor for the plaintiff that he had been told by the solicitors formerly acting for the defendant that they no longer had instructions.

1. I am satisfied there is a genuine dispute as to whether or not the defendant is a creditor entitled to recover whatever amount is still owing under the loan agreement of 27 January 2011. That there is such a dispute is confirmed by an affidavit of Ms Jordan which has been read on the application which, in substance, repeats the matters contained in her statutory declaration.

1. Accordingly the statutory demand should be set aside.

1. The plaintiff sought not only the usual order that the defendant pay its costs, but an order for costs against the defendant on the indemnity basis.

1. The plaintiff also sought an order that the solicitor who had acted for the defendant pay the plaintiff's costs. I declined to entertain that application. No notice had been given to the solicitor. If any such application is to be made, it should be done by a notice of motion with a supporting affidavit so that the solicitor concerned has an appropriate opportunity to deal with the claim.

1. So far as the claim for indemnity costs against the defendant is concerned, it is not uncommon for such orders to be made in statutory demand cases, given the modest threshold for establishing that there is a genuine dispute about the claimed debt. (See, for example, Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529 and F Assaf, Statutory Demands and Winding Up in Insolvency LexisNexis Butterworths, 2nd ed at [8.12]-[8.15].)

1. Such orders can be warranted where it can be seen that the statutory demand was served, or its validity maintained in disregard of known facts or clearly established law, and the party maintaining the validity of the demand has acted unreasonably in so doing.

1. The defendant was aware that the validity of the assignment was disputed. In the light of Ms Jordan's statutory declaration, I think it must have been plain to the defendant that there was a genuine dispute about the validity of the assignment. This made it inappropriate for the defendant to proceed by way of statutory demand rather than by an action in debt.

1. Indeed, the defendant threatened to canvass proceedings against a director of the plaintiff who was a guarantor under the loan agreement. It must have been known that such proceedings against a guarantor would be defended on the same basis as the claim against the company would be opposed. Moreover, the demand made no attempt to quantify the amount of the debt that is outstanding under the loan agreement, but simply claimed the amount of principal and interest of $16,000, said to be then outstanding, less a payment received of only $5,000.

1. On 9 April 2013 the plaintiff's solicitor made an offer, described as a Calderbank offer, to settle the matter if the defendant agreed to an order setting aside the demand, and agreed to pay the plaintiff's costs in the amount of $3,500, which was said to be a significant compromise of the plaintiff's claims for costs.

1. Having regard to the affidavit that had been prepared by that time, plus the filing fees, I am satisfied that the offer of $3,500 of costs did include a real element of compromise of the claim.

1. So far as appears, there was no response to the offer. The offer also set out the reasons as to why the demand would be set aside, including that it is not the role of the court, on the present application, to resolve the dispute as to the validity of the assignment.

1. The letter from the plaintiff's solicitor also contended that it should be inferred that the purpose behind the issue of statutory demand was to apply pressure to the plaintiff to pay a disputed debt. I accept that is a proper inference.

1. In the circumstances, I do not consider that the defendant acted reasonably in serving the statutory demand. It has not attempted to defend the validity of the statutory demand, nor did it consent to the orders sought in the originating process. Clearly, as it was not opposing the relief sought, the defendant ought to have promptly consented to the orders.

1. In all of the circumstances, an indemnity costs order is warranted. For these reasons I order that the statutory demand dated 13 March 2013 served by the defendant on the plaintiff be set aside. Secondly, I order that the defendant pay the plaintiff's costs of the proceedings on the indemnity basis. The exhibits may be returned.

Decision last updated: 20 June 2013