Jargon Pty Ltd v Good Earth Garden Products Pty Ltd
[2006] WASC 282
•15 DECEMBER 2006
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: JARGON PTY LTD -v- GOOD EARTH GARDEN PRODUCTS PTY LTD [2006] WASC 282
CORAM: MASTER NEWNES
HEARD: 30 OCTOBER 2006
DELIVERED : 15 DECEMBER 2006
FILE NO/S: COR 141 of 2006
BETWEEN: JARGON PTY LTD (ACN 008 956 214)
Plaintiff
AND
GOOD EARTH GARDEN PRODUCTS PTY LTD (ACN 008 999 120)
Defendant
Catchwords:
Corporations - Application to set aside statutory demand - Error in creditor's address for service - No substantial injustice - Judgment debt - Demand for less than actual amount of judgment debt - Whether demand must be accompanied by verifying affidavit - Whether genuine dispute as to debt - Default judgment - No extant application to set aside judgment
Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 8
Corporations Act 2001 (Cth), s 457J, s 459E, s 459G, s 459J
Corporations Law, s 460(2)(a)
Magistrates Court (Civil Proceedings) Act 2004 (WA), s 4, s 10, s 12
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr S V Smith
Defendant: Mr A J Prentice
Solicitors:
Plaintiff: Lawton Gillon
Defendant: Mossensons
Case(s) referred to in judgment(s):
Aldridge Electrical Industries Pty Ltd v Mobitec AB [2001] NSWSC 823
Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (2006) 24 ACLC 154
Daewoo Australia Pty Ltd v Suncorp Metway Ltd [2000] NSWCA 35
Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419
Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508
MEC Import Sales Pty Ltd v Iozzelli SRL (1998) 29 ACSR 229
Palmbay Nominees Pty Ltd v Fowler [2003] WASCA 217
Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2002] NSWCA 329
Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2002] NSWSC 402
Re Ad-A-Cab Holdings Pty Ltd, unreported; SCt of Qld (Mackenzie J); 25 October 1996
Re International Business Solutions Pty Ltd (1992) 10 ACLC 1247
Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 120 ALR 155
Case(s) also cited:
Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2001] WASCA 299
Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290
PDR Pty Ltd v Cottesloe Constructions Pty Ltd [2000] WASCA 62
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681
Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (In Liq) (1994) 12 ACLC 963
MASTER NEWNES: This is an application by the plaintiff ("Jargon") to set aside a statutory demand served by the defendant ("Good Earth") claiming the sum of $50,000 pursuant to a judgment obtained in the Magistrates Court. The statutory demand was served on or about 15 August 2006.
It is necessary first to turn to the circumstances in which the statutory demand came to be served.
On or about 9 May 2006, Good Earth commenced proceedings against Jargon in the Magistrates Court. Good Earth's claim was for the sum of $44,403.73 said to be owing by Jargon for goods sold to it by Good Earth between 2 February 2004 and 22 March 2006, and for interest on the outstanding sum up to and including 9 May 2006.
At the time of service of the proceedings, Jargon was not represented by solicitors and Mr Van Straalen, the sole director of Jargon, caused a notice of intention to defend to be lodged in the Magistrates Court. That notice, which is in a standard form, says, among other things, that within 14 days of receipt of the notice the claimant in the proceedings must file and serve a statement of claim, and within 14 days of receipt of the statement of claim the defendant must file and serve a statement of defence.
Mr Van Straalen says that he subsequently received a statement of claim in the proceedings, but he was not aware that Jargon was required to file a defence within 14 days of receipt of the statement of claim, failing which judgment could be entered in default. He says that Jargon intended to defend the action. When he made enquiries at the Magistrates Court to ascertain when Jargon was required to file its particulars of defence, he was informed that judgment had already been entered against it.
The judgment obtained by Good Earth was in the sum of $55,802.55. That was made up of the claim for $44,403.73, interest of $10,599.22 and costs of $711.60.
Mr Van Straalen then instructed solicitors to bring an application to set aside the default judgment. He swore an affidavit on 15 August 2006 in support of the application to have the judgment set aside. A copy of that affidavit is annexed to the affidavit in this application.
In the affidavit in the Magistrates Court, Mr Van Straalen, so far as relevant for present purposes, says that the amount claimed is incorrect because Jargon has paid cash on delivery for all invoices dated from September 2004. That is an amount of $32,235.87. Mr Van Straalen also denies that Jargon is liable for interest, disputing that he has ever received a copy of Good Earth's terms of trade setting out the liability to pay interest. He also says that an agreement was made with a representative of Good Earth in about November 2004 that interest would not be charged by Good Earth on overdue accounts in exchange for the use of a trademark which was the property of Jargon.
Upon the first hearing of the application to set aside the judgment in the Magistrates Court there was no appearance for Jargon and the application was dismissed.
A further application was subsequently made to have the judgment set aside. On the hearing of that application, on 18 September 2006, the Magistrate indicated that he was prepared to set aside the judgment provided Jargon paid the sum of $44,000 into court on or before 3 October 2006. The matter was adjourned to 6 October 2006. On 6 October 2006, there was no appearance for Jargon. It also turned out that the sum of $44,000 had not been paid into court. Jargon's second application to set aside the default judgment was therefore dismissed.
In the meantime, on 15 August 2006, Good Earth had served the statutory demand on Jargon. In the statutory demand, Good Earth says that "the amount of $50,000" is owing to it by Jargon. The debt is described in the schedule to the statutory demand as "Magistrates Court Judgment obtained on 19.07.06 $50,000".
Good Earth's solicitor says that Good Earth elected to limit the sum demanded in the statutory demand to $50,000 to keep it within the jurisdiction of the Magistrates Court.
I should say that, having obtained judgment for $55,802.55, why it was thought necessary to limit the amount in the statutory demand to $50,000 is not apparent. Moreover, it appears that that judgment was within the jurisdiction of the Magistrates Court. Section 4 of the Magistrates Court (Civil Proceedings) Act 2004 (WA) provides that the monetary jurisdictional limit of the Magistrates Court is $50,000. Section 10 of that Act, however, provides that for the purpose of deciding whether or not a claim is within the jurisdiction of the Magistrates Court, among other things, interest under s 12 of that Act and post‑judgment interest under s 8 of the Civil Judgments Enforcement Act 2004 (WA), is to be disregarded. Section 12 of the Magistrates Court (Civil Proceedings) Act provides that the Magistrates Court may award interest at a rate decided by the Court from the time the cause of action arose until judgment or award a lump sum in lieu of interest. The amount for which judgment was entered, as certified by a Registrar of the Magistrates Court, was $44,403.73 for the claim, $711.60 for costs and $10,599.22 for interest, totalling $55,802.55. There is nothing to suggest that the Court entered judgment for an amount in excess of its jurisdiction.
Counsel for Good Earth could not explain why the amount of the judgment had been reduced in the statutory demand, other than to suggest that the solicitor having the conduct of the matter had misunderstood the jurisdictional limit of the Magistrates Court.
The plaintiff's submissions
It was submitted on behalf of Jargon that the statutory demand was defective in two respects. First, it was not for the actual amount of the judgment debt but a lesser amount. It therefore had to be, but was not, accompanied by a verifying affidavit pursuant to s 459E of the Corporations Act 2001 (Cth) ("the Act"). Secondly, the address for service of Good Earth set out in the statutory demand was incorrect.
It was submitted on behalf of Jargon that where a statutory demand is not for the specific sum for which judgment was given, it must be accompanied by a verifying affidavit. If it is not so accompanied, it ought to be set aside under s 457J of the Act. Counsel for Jargon relied on the recent decision of the Federal Court in Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (2006) 24 ACLC 154.
In the present case, the schedule to the statutory demand simply describes the debt as being "Magistrates Court Judgment obtained on 19.07.06 $50,000". There is no reference to the action number in the Magistrates Court and it misdescribes the amount of the judgment in fact obtained by Good Earth on 19 July 2006. In the circumstances it would be necessary for Jargon to enquire whether the amount claimed was in fact the judgment debt in the relevant action.
It was submitted that it is not the obligation of the debtor to make certain and specific something which the creditor has left uncertain and unspecified: Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 120 ALR 155 at 171. The purpose of the verifying affidavit is to prevent Jargon having to make such enquiries and to explain why the amount claimed is different to the sum in respect of which judgment was entered. Where, on the other hand, the demand is for the very amount of the judgment debt, the need for verification falls away.
It was further submitted that the statutory demand should be set aside under s 459J as the address for service of the creditor was incorrect. The statutory demand gives the address of Good Earth for service of any application and affidavit as "C/- Mossensons, 4th Floor, Mint House, 326 Hill Street, Perth", whereas the correct address of Mossensons is 326 Hay Street, Perth.
It was further argued that there was a genuine dispute as to Jargon's indebtedness to Good Earth, and Jargon relied upon Mr Van Straalen's affidavit filed in the Magistrates Court, a copy of which was annexed to his affidavit in support of this application, for that purpose.
The defendant's submissions
Good Earth argued that the contention as to the incorrect address was not open to Jargon because it was not a matter raised in the original affidavit in support of the application to set aside the statutory demand. Counsel referred to Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419 and submitted that if there is no mention of a ground in the supporting affidavit, it is not open to the debtor to rely upon that ground.
It was argued that, in any event, the error in the address did not give rise to substantial injustice within the meaning of s 459J of the Act. Jargon was well aware of the address of Good Earth's solicitors and indeed served the application and supporting affidavit at that address within the 21‑day time limit.
It was submitted on behalf of Good Earth that the difference between the amount of the judgment debt and the amount claimed did not mean that a supporting affidavit had to be served with the statutory demand. Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (supra) was not authority for such a proposition, but depended upon its particular facts. In that case, extraneous events or circumstances had intervened causing the amount to change, whereas in the present case the basis of the claim remained the judgment debt but the amount had been reduced in the belief that that was necessary so that the amount remained within the jurisdiction of the Magistrates Court.
In any event, no substantial injustice would be caused if the statutory demand was not set aside as the amount claimed is less, rather than more, than Jargon is obliged to pay and Jargon cannot be confused as to the basis of the obligation to pay. Moreover, as Jargon has already failed to pay a sum of $44,000 into the Magistrates Court in order to have the default judgment set aside, there was never any prospect that the demand would have been complied with.
It was submitted that there could be no genuine dispute as to the amount claimed. It was the subject of an existing judgment of the Magistrates Court, in respect of which there was now no application to set it aside, two previous applications having been dismissed.
Should the statutory demand be set aside?
I do not consider that the error in Good Earth's address for service would warrant the statutory demand being set aside.
In Re International Business Solutions Pty Ltd (1992) 10 ACLC 1247, the demand served under s 460(2)(a) of the Corporations Law failed to specify the creditor's address. However, the debtor was aware of that address. The question was whether the omission of the address rendered the demand ineffective. It was held that it did not. The fact the debtor was aware of the creditor's address could not be ignored. Whilst the omission from the demand of the address of the creditor was capable of having the effect of depriving the debtor of a right or opportunity to exercise a right, mere theoretical possibilities were not to be given effect in the face of a contrary fact, whether obvious to the Court from the demand itself or established by the evidence.
In Quitstar Pty Ltd v Cooline Pacific Pty Ltd[2002] NSWSC 402, the insertion of a post office box address as the address for service was regarded as a defect in the statutory demand, but it was not sufficient to cause the demand to be set aside under s 459J, as the company was nevertheless able to serve the application and affidavit in time. That decision was affirmed on appeal: Quitstar Pty Ltd v Cooline Pacific Pty Ltd[2002] NSWCA 329.
In Daewoo Australia Pty Ltd v Suncorp Metway Ltd[2000] NSWCA 35, the failure to specify an address within the State was regarded as a defect in the statutory demand, but on the facts no substantial injustice was caused within the meaning of s 459J. On similar facts to that case, the same conclusion was reached in Re Ad-A-Cab Holdings Pty Ltd, unreported; SCt of Qld (Mackenzie J); 25 October 1996.
In the present case, in his affidavit in support of this application, Mr Van Straalen simply notes that the address is incorrect and says that he has ascertained there is no such address as "326 Hill Street". It is, however, evident that Jargon was aware of the correct address for service of Good Earth and indeed was able to, and did, serve the originating summons and supporting affidavit at the correct address of Good Earth within the 21‑day period specified in s 459G.
In my view, the incorrect address for service in the statutory demand simply amounts to a defect and no basis has been shown which would warrant setting aside the statutory demand under s 459J of the Act on that ground.
It is necessary then to turn to the contention on behalf of Jargon that the statutory demand was defective because it was not served with an accompanying affidavit.
Section 459E of the Act provides, so far as relevant:
"(1)A person may serve on a company a demand relating to:
(a)a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; …
(2)The demand:
(a)if it relates to a single debt - must specify the debt and its amount; …
(3)Unless the debt … is a judgment debt, the demand must be accompanied by an affidavit that:
(a)verifies that the debt … is due and payable by the company; and
(b)complies with the rules."
In support of its contention, Jargon relied heavily on the decision in Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (supra). In that case, the defendant had obtained a default judgment against the plaintiff in the District Court in the sum of $195,554.13. The plaintiff agreed to pay the debt by instalments of $50,000. Two payments of $50,000 were made, one in March 2003 and one in May 2003, but the plaintiff did not make the next payment due. There were subsequently discussions between representatives of the parties in an endeavour to settle the balance of the debt, in the course of which it was agreed that the plaintiff would assign to the defendant a debt of $48,884 owing to the plaintiff by a third party and that the plaintiff would deliver a hoist to the defendant to be sold by the defendant to discharge the balance of the debt. The plaintiff's representative said the hoist had a market value of $50,000 to $60,000. On the sale of the hoist the defendant was to pay to the plaintiff any amount by which the proceeds of sale exceeded the balance of the debt. The debt owed to the plaintiff was subsequently assigned to the defendant and the hoist delivered to it.
As it turned out, the defendant received no payment under the assigned debt and the debtor went into liquidation. The hoist was unusable in Western Australia without the addition of a safety system costing $15,000. The defendant was unable to sell the hoist.
The defendant subsequently served on the plaintiff a statutory demand claiming the sum of $95,554.13. That amount was described in the statutory demand as being the balance of the judgment of $195,554.13 less the payments of $50,000 made in March 2003 and May 2003. No affidavit accompanied the statutory demand.
The plaintiff has applied to set aside the statutory demand on various grounds, including that, as the amount demanded was not the specific amount of the judgment, s 459E required that the statutory demand be accompanied by an affidavit verifying the debt. There was also a dispute between the parties as to whether the agreement reached by the representatives of the parties was a final agreement or was subject to it being reduced to writing, and as to whether the assignment of the debt and transfer of the hoist by the plaintiff was in full settlement of its debt to the defendant or whether it was subject to sufficient money being actually recovered by the defendant from those sources to meet the debt.
In setting aside the statutory demand, Siopis J said (at [62] ‑ [63]):
"The rationale for exempting a statutory demand for the very sum of a judgment, from the need for verification by an accompanying affidavit is apparent. The judgment speaks for itself as to the amount which is due and payable and, prima facie, also in relation to the absence of a genuine dispute.
However, once the statutory demand is for a sum different from the sum in the judgment, the rationale for the exemption from the verification no longer applies because extraneous events or circumstances have intervened. There is then a need to identify the amount claimed by reference to the extraneous intervening events and circumstances. Further, these intervening events and circumstances are capable of giving rise to disputes as to the amount of an outstanding debt and, also, as to the continued existence of the debt. Thus, it is possible, depending on the nature of any agreement that the debtor and creditor may have reached in relation to the compromise or further payment of the judgment debt, that liability in respect of the judgment debt may have been discharged, to be replaced by a different contractual obligation (see McDermott v Black (1940) 63 CLR 161 at 183‑185). In these circumstances, the same considerations which underlie the introduction of the legislative requirement for verification of statutory demands for amounts that were never the subject of a judgment, apply equally to demands for amounts different from the sum in respect of which a judgment was given. It follows, in my view, that a narrow construction should be given to the words 'judgment debt' in s 459E(3) of the Act so that the exemption is confined to demands for the very amount in respect of which judgment was obtained, and not for any different amount."
It is the case, as submitted by counsel for Good Earth, that the facts of the present case are quite different. Counsel argued that that case is distinguishable in that in the present case there were no "intervening events and circumstances [which] are capable of giving rise to disputes as to the amount of an outstanding debt and, also, as to the continued existence of the debt." Counsel for Jargon, on the other hand, contended that the decision was authority for the proposition that, whenever the amount demanded was not the very amount for which judgment was obtained, the statutory demand had to be accompanied by a verifying affidavit.
I do not consider that in Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (supra), Siopis J intended to suggest that in any circumstances where the amount demanded was different to the amount of the judgment sum the statutory demand had to be accompanied by an affidavit. Rather, I understand his Honour to be referring to circumstances where the amount is different and, as in that case, there are intervening events and circumstances that are capable of giving rise to disputes as to the amount of the outstanding debt or as to the continued existence of the debt.
In my view, it is not necessary for the demand to be accompanied by an affidavit whenever the amount demanded is different from the amount of the judgment sum. The difference may be obvious and plainly unrelated to any issue as to the amount or existence of the debt. The most obvious example is where payments have been made by the debtor in reduction of the judgment sum and the demand is expressed to be for the remaining balance of the judgment sum.
Those situations are to be contrasted with situations where it is not apparent on the face of the statutory demand how the amount demanded has been calculated, such as where the judgment was in a foreign currency and the demand is expressed in Australian dollars but the rate of exchange or the date upon which it has been calculated are not apparent.
Thus, in Topfelt Pty Ltd v State Bank of New South Wales Ltd (supra), the applicant contended, among other things, that the statutory demand was defective because it did not state the source or rate of the interest which was claimed as a continuing liability. Lockhart J held that the statutory demand obliged the applicant to make inquiries of various kinds in order to calculate the amount of interest claimed. It thus could not be complied with on its face, and although no substantial injustice was alleged, the deficiencies, which gave rise to uncertainty, constituted reason why the statutory demand should be set aside pursuant to s 459J(1)(b).
In MEC Import Sales Pty Ltd v Iozzelli SRL (1998) 29 ACSR 229 at 236, it was held that if (which was not decided) it were permissible in a statutory demand to make demand for an amount expressed in Australian dollars in respect of a judgment obtained in a foreign currency, the statutory demand would have to be accompanied by an affidavit proving that the sum demanded was "due and payable" by explaining and verifying the date and exchange rate of the conversion made. That is because a demand in Australian dollars was not a demand for the judgment debt but a demand for a different sum in another currency. In addition, it required the debtor to make inquiries, which it was not obliged to make, in order to ascertain the sum payable because the conversion date used by the respondent was unknown.
In Aldridge Electrical Industries Pty Ltd v Mobitec AB [2001] NSWSC 823, a schedule attached to the statutory demand set out both the date and rate by which the Australian dollar equivalent of the Swedish krone had been calculated. It was held that it was sufficient that the date of conversion and the rate at that date was identified either on the face of the statutory demand or in its accompanying affidavit or schedule. There was then no burden placed on a debtor to make its own inquiries as to whether the sum demanded was a proper representation in Australian dollars of the debt at some date appropriate under the law for conversion and the debtor was not therefore impermissibly burdened with the need to make inquiries outside the materials it held. That was unlike the debtor in Topfelt Pty Ltd v State Bank of New South Wales Ltd (supra) for whom no interest rate had in fact been specified and on whom fell the onus of calculating the interest.
No such difficulties of determining the amount required to be paid to satisfy the debt for which demand was made arise in the present case. The only issue in the present case is the discrepancy between the actual amount of the judgment debt and the lesser amount specified in the statutory demand.
It is clear that a minor misstatement of the amount of the debt will not render a statutory demand defective, unless the misstatement will cause substantial injustice within the meaning of s 459J(1)(a) of the Act: see Topfelt Pty Ltd v State Bank of New South Wales Ltd (supra).
Although in this case there was not a misstatement in the sense, for instance, of some clerical or typographical error in the amount of the debt, in my view, in the circumstances of this case, the same considerations apply. I did not understand it to be contended by counsel for Jargon, and certainly there is nothing to suggest, that the discrepancy between the actual amount of the judgment debt and the amount claimed in the statutory demand will cause substantial injustice. The total amount demanded was clear and the basis upon which that amount was said to be due and payable - by reason of a judgment of the Magistrates Court obtained on 19 July 2006 - was also clear. What amount Jargon had to pay to satisfy the demand was plain. There were no intervening factors which might have given rise as to disputes as to the amount or existence of the debt. The only difficulty was the misstatement of the amount of the judgment sum. That misstatement was due to what appears to be an erroneous belief on the part of Good Earth's solicitor that in order to remain within the jurisdiction of the Magistrates Court the amount had to be limited to $50,000.
It is clear from the affidavit filed in support of this application that Jargon was under no doubt as to the judgment to which the statutory demand referred and, indeed, Jargon seeks to set aside the statutory demand upon the basis that there is a genuine dispute as to the debt.
In the circumstances, I do not consider that the demand was required to be accompanied by a verifying affidavit or that it was defective in any sense that would warrant it being set aside.
In the light of that finding, it is necessary to consider whether there is a genuine dispute as to the amount claimed. In my view, there is not. The debt is the subject of an extant judgment in the Magistrates Court in respect of which there is no stay, nor any pending application to set it aside. Two consecutive applications by Jargon to have the judgment set aside have been dismissed, the last of which was dismissed for, among other things, failure to meet a condition imposed by the Magistrates Court as a condition of having the judgment set aside.
It has been held that the entry of a default judgment will not give rise to res judicata or an issue estoppel, there having been no determination on the merits: Palmbay Nominees Pty Ltd v Fowler [2003] WASCA 217 at [56]; cf Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508. That, however, is not to say that a default judgment is a provisional or contingent judgment. While it is amenable to being set aside in some circumstances, it has full effect while it stands. In the light of the existing judgment and the two failed applications to set it aside - albeit they in turn were not determined on the merits - I do not consider that for the purpose of this application there can be regarded as existing any genuine dispute as to the debt.
Conclusion
For the reasons I have given, I would dismiss the application to set aside the statutory demand. I will hear the parties on costs.
11
9
4