Kezarne Pty Ltd v Vital Security System Pty Ltd - [1996] FCA 553

IN THE FEDERAL COURT OF AUSTRALIA           )
  )
NEW SOUTH WALES DISTRICT REGISTRY          ) No NG 3343 of 1996
  )
GENERAL DIVISION  )

BETWEEN: KEZARNE PTY LTD

Applicant

AND: VITAL SECURITY SYSTEM PTY LTD

Respondent

Coram:        Davies J.
Date:           14 June 1996
Place:          Sydney

REASONS FOR JUDGMENT

The question before me is whether a valid application has been lodged pursuant to s.459G of the Corporations Law. That section provides:-

"459G(1)A company may apply to the Court for an order setting aside a statutory demand served on the company.

(2)An application may only be made within 21 days after the demand is so served.

(3)An application is made in accordance with this section only if, within those 21 days:

(a)an affidavit supporting the application is filed with the Court; and
(b)a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company."

Section 459H relevantly provides:-

"459H (1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:

(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

..."

In this case, the application as lodged was filled out by a solicitor in handwriting and read:-

"Application under Section 459G of the Corporations Law

On the grounds appearing in the accompanying affidavit the applicant claims

1.That there is no genuine dispute concerning the debt in the statutory demand of Vital Security System P/L.

2.Costs."

The application was supported by a handwritten affidavit, apparently also written out by the solicitor, but sworn by the project manager of the applicant company, Kezarne Pty Ltd, which read:-

"In the Federal Court of Australia
New South Wales District Registry
General Division

Vital Security System P/L & Kezarne P/L

Affidavit under Section 459E of the Corporations Law
on the 31st May 1996, I Sandra Voo of 16/37 Byron St, Coogee, project manager say on oath:-

1. I believe that there is no genuine dispute about the existence of the debt referred to in the Statutory Demand served on Kezarne P/L on the 13 May 1996

2.Kezarne P/L was not the contracting party with Vital Security System & therefore does not owe any money to it."

The issue is whether these documents constitute the making of a valid application for an order setting aside a statutory demand under s.459G in accordance with Order 71, rule 36B of the Federal Court Rules which provides:-

"36B. An application under subsection 459G(1) of the Corporations Law must be made in accordance with Form 5 and must be accompanied by an affidavit:

(a)stating any material facts relied upon by the applicant in support of the application; and
(b)identifying the grounds on which it is said that the Court should make an order under section 459H or 459J of the Corporations Law setting aside the demand."

It seems to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1996] FCA 553
Decision Date: 14 Jun 1996

CaseChat Overview and Summary

In the case of Kezarne Pty Ltd v Vital Security System Pty Ltd, the applicant, Kezarne Pty Ltd, sought to have a statutory demand set aside that was served on it by the respondent, Vital Security System Pty Ltd. The dispute centered on whether Kezarne had made a valid application to the court under section 459G of the Corporations Law, which allows a company to apply to the court to set aside a statutory demand within 21 days of it being served. The application was lodged with the Federal Court of Australia.

The primary legal issue before the court was whether the application and supporting affidavit, both of which were handwritten and appeared to be drafted hastily, constituted a valid application under section 459G of the Corporations Law. Specifically, the court had to determine if the documents substantially complied with the requirements of the relevant statute and the Federal Court Rules, particularly Order 71, rule 36B, which mandates the form and content of the application. The court also considered whether the error in the application, which stated that there was no genuine dispute about the debt when the applicant actually claimed there was a dispute, rendered the application invalid.

Justice Davies found that despite the evident haste and the error in the application, there was a valid application for the setting aside of the statutory demand. The court reasoned that anyone reviewing the document would understand that it was intended to be an application under section 459G, and the accompanying affidavit clearly stated the applicant's position on the existence of the debt. The court allowed for the application to be amended to correctly reflect the intended grounds and remitted the matter to the Registrar for further action on the application. Regarding costs, the court decided that each party should bear its own costs due to the poor drafting of the documents.

Orders