Kruger Ventures Pty Ltd v Alternative Engine Technologies Pty Ltd - [2009] SASC 349

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master)
KRUGER VENTURES PTY LTD v ALTERNATIVE ENGINE TECHNOLOGIES PTY LTD
[2009] SASC 349
Judgment of The Honourable Justice Duggan
26 November 2009
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENUINE DISPUTE AS TO INDEBTEDNESS - ASSESSING GENUINENESS - TESTS TO BE APPLIED
Appeal against order of Master setting aside statutory demand pursuant to s 459E of Corporations Act 2001 (Cth) - whether there is a genuine dispute as to the debt - whether respondent has a genuine offsetting claim - application to adduce fresh evidence on appeal.
Appeal dismissed - held that there was a genuine dispute about the existence of the debt at the time of service of the statutory demand and that the Master was correct in finding that the respondent has a genuine offsetting claim - application to call fresh evidence refused.
Corporations Act 2001 (Cth) s 459E, s 459G, s 459H, s 459J; Trade Practices Act 1974 (Cth) s 52, referred to.
John Shearer Ltd & Anor v Gehl Company (1995) 60 FCR 136; Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2007) 94 SASR 269; Re Brink; Ex parte Commercial Banking (1980) 44 FLR 135; Rohalo Pharmaceutical Pty Ltd v Pharmagel SpA & Ors (1994) 15 ACSR 347; Re Morris Catering (Australia) Pty Ltd (1993) 11 ACLC 919; Mibor Investments v Commonwealth Bank of Australia (1993) 11 ACSR 362; TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24, considered.

KRUGER VENTURES PTY LTD v ALTERNATIVE ENGINE TECHNOLOGIES PTY LTD
[2009] SASC 349
Appeal from a Master

DUGGAN J: This is an appeal against the order of a Master setting aside a statutory demand served on the respondent by the appellant pursuant to s 459E of the Corporations Act 2001 (Cth) (“the Act”). The demand claimed repayment of a loan of $485,000. The Master set the statutory demand aside after finding that the respondent had an offsetting claim against the appellant for misleading or deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”).
The respondent, Alternative Engine Technologies Pty Ltd (“Alternative”), was incorporated on 6 May 2005. The directors on incorporation were Benjamin Hodgson and Uli Kruger. The appellant, Kruger Ventures Pty Ltd (“Kruger”), was incorporated on 9 May 2003. The directors on incorporation were Uli Kruger and Martina Kruger.
Mr Kruger became involved in the development of a dual fuel for diesel engines. Its purpose is to replace the use of diesel with renewable fuels up to a 40 per cent level. The technology involves affixing an apparatus to the air intakes of compression ignition engines. Kruger became the proprietor of various patents associated with the technology. Mr Hodgson is an accountant who was associated with Mr Kruger in companies involved in the development project.
In due course Alternative acquired the right to manufacture and distribute the products associated with the technology. Mr Kruger resigned as a director of Alternative on 31 October 2008.
By an agreement dated 10 April 2006 Kruger loaned Alternative an amount of $485,000. It is not in dispute that Alternative received this amount. The statutory demand issued pursuant to s 459E of the Act is dated 4 May 2009.
On 22 May 2009 Alternative applied to this Court to set aside the statutory demand on the grounds that –
There exists a genuine dispute in relation to the debt and there is an offsetting claim or alternatively that not setting aside the Statutory Demand would cause substantial injustice.
The application was supported by an affidavit sworn by Mr Hodgson on 22 May 2009. It is asserted in the affidavit that in order to induce Alternative to enter into the loan agreement and the assignment of the licence to manufacture and distribute the products Kruger, through Mr Kruger, orally represented to Alternative that the products which were the subject of the patents were ready for manufacture and marketing to a mass market in that they were fully tested and documented.
It is claimed that Alternative entered into the loan agreement and the transaction based on these representations. It is alleged that the representations were false in that the products were not ready for manufacturing and marketing to a mass market and were not fully tested and documented. Alternative claims that it has suffered loss and damage and has spent in excess of $1,000,000 as a result of misleading and deceptive conduct within the meaning of various sections in the TPA and the Misrepresentation Act 1972 (SA).
The offsetting claim
A company may apply to the Court pursuant to s 459G of the Act for an order setting aside a statutory demand served on the company. Section 459H(1) sets out two sets of circumstances which may be relied upon for the setting aside of the demand. It states:
(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;
(b) that the company has an offsetting claim.
In the application before the Master the main focus was on whether the company had an “offsetting claim” which is defined in s 459H(5) as:
…a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as debt to which the demand relates).
In order to provide the basis for setting aside the statutory demand the amount of the company’s claim must equal or exceed the amount claimed in the demand.
The purpose of the power to set aside a statutory demand by reason of the existence of an offsetting claim was explained by the Full Court of the Federal Court in John Shearer Ltd & Anor v Gehl Company:[1]
Failure to comply with a statutory demand is taken to be evidence of insolvency. It is for that reason that application may be made to the Court to set aside a statutory demand in circumstances where the person against whom the demand is made has a genuine cross‑demand, at least equal to the amount of the sum demanded from him or her. If it should turn out that there was a real cross-demand of equal amount to the sum referred to in the statutory demand, the company failing to comply with the statutory demand would be wound up in circumstances where clearly it was not insolvent and where a proof of debt from the person giving the statutory demand might well be rejected in liquidation because of the existence of a set-off: cf Gye v McIntyre (1991) 171 CLR 609.
[1] (1995) 60 FCR 136 at 143.
There was some discussion in the present case as to the nature of Alternative’s claim and whether it was an “offsetting claim” as defined in the Act. In his affidavit of 22 May 2009 Mr Hodgson referred to Alternative’s claim as a “set-off”. Mr Tucker, for Kruger, drew attention to the explanation of the nature of a set-off in Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation[2] where Debelle J said:
A set-off is a sum of money due and payable by the person who has made the statutory demand to the person against whom the demand was made, and which will diminish or extinguish the amount claimed by the person who has made the demand. Generally speaking, a counterclaim is for an unliquidated amount but a set-off is for a liquidated amount.
[2] (2007) 94 SASR 269 at [43].
Mr Tucker submitted that the claim by Alternative did not answer this description and that, as Mr Hodgson had put forward Alternative’s claim on this basis, Alternative could not now rely on another category of offsetting claim.
This submission must be rejected. It is for the Court to determine the nature of the claim. No unfairness to Kruger has resulted from this misdescription, if such it is, in Mr Hodgson’s affidavit.
In my view Alternative’s claim is more appropriately categorised as a “cross-demand”. Section 459H(5) provides that a cross-demand need not arise out of the same transaction or circumstances as a debt to which the demand relates. It is clear that this concept is wider than the technical terms “counterclaim” and “set-off”. In John Shearer Ltd v Gehl Company the Full Court of the Federal Court stated in a joint judgment:[3]
The word “cross-demand” is a word of considerable width. While the words “counterclaim” and “set-off” are technical words, the meanings of which are confined, the same is not true of the word “cross-demand”. That is not a technical term. Thus in Re A Bankruptcy Notice [1934] 1 Ch 431, Lord Hanworth MR, after discussing the technical meaning of the words “counterclaim” and “set-off” in the context of bankruptcy legislation, said (at 438):
“I turn, therefore, to what to my mind is the wider word, ‘cross-demand’. If a cross-demand is only to be interpreted as meaning something which could have been introduced into the action by way of counterclaim, it adds nothing to the word ‘counterclaim’. ‘Cross-demand’ seems to me to be a word introduced in order to give a wider ambit to the meaning of these claims, something that would not be described, certainly, as a set-off, something that could not have been brought in the action, something that still lies outside a counterclaim, but is of a nature which can be specified and which is of such a nature that it equals or exceeds the amount of the judgment debt. I do not desire to say what ‘cross-demand’ may include, but it is not difficult to say that it does not include a claim of such uncertain nature as appears in these Chancery proceedings.”
Their Honours went on to say:[4]
It would seem to follow that in the context of the Law, a context similar to that in s 41(7) of the Bankruptcy Act 1966 (Cth), a cross-demand will include any claim for damages which exists at the time the application to set aside the statutory demand is made, which is for a monetary amount capable of quantification whether or not it arises out of the same transaction or circumstances as the debt to which the statutory demand relates. There can be no doubt that a claim for damages under the Trade Practices Act or for breach of an implied contractual term will satisfy the description of a cross-demand and thus be an off-setting claim, whether or not it could be relied upon as a defence by way of counterclaim or set-off in proceedings on a bill of exchange on which the person claiming damages is liable.[5]
In my view the claim by Alternative possesses the features of a “cross‑demand” which were identified by the Full Court in the above passage.
[3] (1995) 60 FCR 136 at 142.
[4] (1995) 60 FCR 136 at 143.
[5] See also Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 44 FLR 135 at 138.
Is there a genuine offsetting claim?
A “genuine dispute” must be established for the purposes of s 459H and a “genuine claim” is a necessary requirement for an “offsetting claim”. As Lindgren J said in Rohalo Pharmaceutical Pty Ltd v Pharmagel SpA & Ors: [6]
Paragraph (a) of subsection 459H (1) and the definition of "admitted amount" in subsection 459H (5) both refer to the existence of a "genuine dispute", and the definition of "offsetting claim" in subsection 459H (5) refers to the existence of a "genuine claim". Plainly, the intention is to refer to something more than the mere "raising" of a dispute and the mere "making" of a claim. The provisions assume that the dispute and offsetting claim have an "objective" existence the genuineness of which is capable of being assessed. The word "genuine" is included to sound a note of warning that the propounding of spurious disputes and claims is to be expected but must be excluded from consideration.
[6] (1994) 15 ACSR 347 at 353.
The task for the Court in determining the genuineness of a dispute about the debt or the genuineness of an offsetting claim was succinctly put by Thomas J in Re Morris Catering (Australia) Pty Ltd:[7]
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simple -- to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).
[7] (1993) 11 ACLC 919 at 922.
To similar effect is the comment by Hayne J in Mibor Investments v Commonwealth Bank of Australia:[8]
These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.[9]
[8] [1994] 2 VR 290 at 293.
[9] See also the discussion by Santow J in Edge Technology v Lite-On Technology (2000) 156 FLR 181 at 185.
It is common ground that, as a result of a series of transactions which were the subject of written agreements, Alternative acquired a licence to manufacture and market products which were the subject of patents held by Kruger.
Mr Hodgson has sworn an affidavit in which he states that he entered into these agreements because of representations made by Mr Kruger that the products were ready for manufacture and marketing to a mass market in that they were “fully tested and documented”.
Mr Hodgson states in his affidavit that Alternative commenced manufacturing and distributing the products, but that they did not work. He states that the products were not ready for manufacturing and marketing and that they were not properly tested. According to the affidavit Alternative was required to spend funds to repair damage caused by faulty products.
These allegations are repeated in the statement of claim filed in the action against Kruger in the District Court.
The representations alleged by Alternative are specified in paragraph 8 of the statement of claim. It is alleged that they were made by Mr Kruger between April and August 2006.
Alternative pleads reliance on the representations. It is pleaded that the representations were misleading and deceptive in that the statements were false.
According to the statement of claim Kruger entered into a licence agreement with another company, Duofuel Systems Pty Ltd (“Duofuel”), for the manufacture and distribution of the products and that, with Kruger’s consent, the rights and liabilities under the licence agreement were transferred to Alternative. Alternative pleads breaches of the licence agreement and the loan agreement between it and Kruger.
Kruger’s counsel submitted that the claims made in the affidavit material filed by Alternative lacked specificity and that the evidence advanced to identify the claim and establish a genuine offsetting claim is inadequate.
It is necessary to return to the nature of the task facing the Court. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd[10] Dodds‑Streeton JA (Neave and Kellam JJA concurring) stated:
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off‑setting claim. It is required to evidence the assertions relevant to the alleged dispute or off‑setting claim only to the extent necessary for that primary task. The dispute or off‑setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice.
[10] [2008] VSCA 70 at [71].
It is clear that the evidence supplied by Alternative could have been more extensive. However, there is no dispute concerning the relationship between Alternative and Kruger and the manner in which Alternative acquired the right to deal with the products. It is claimed that Mr Kruger made certain representations and the broad nature of the representations is identified.
In the circumstances of the case I do not think it was essential for Alternative to specify the actual conversations which are alleged to have given rise to the representations and the occasions on which they took place. As for reliance on the representations, I do not think it was necessary for Mr Hodgson to go beyond swearing to the fact that such was the case.
Mr Tucker submitted that there were substantial differences between the assertions made in the first affidavit of Mr Hodgson and the pleadings in the statement of claim. It was argued that there are also differences between claims made by Mr Hodgson in a letter he wrote to Kruger on 4 May 2009 as compared with claims in the affidavit and the statement of claim. According to the argument these discrepancies support Kruger’s argument that Alternative’s claim was not genuine.
I agree with the Master that the contents of the letter are generally consistent with what is stated in Mr Hodgson’s letter and that the statement of claim is also generally consistent with the affidavit. I also reject the argument that the statement of claim cannot be relied upon by Alternative because it raises a claim under the TPA when the precise nature of the claim was not mentioned in the original affidavit sworn by Mr Hodgson. The alleged misrepresentations were referred to in Mr Hodgson’s affidavit. The statement of claim pleads them in an appropriate form and formulates the relevant causes of action. It was not essential to make specific reference to a cause or causes of action in the affidavit.
Kruger also relies on a clause in the deed of settlement entered into between various parties on 7 August 2006. The settlement was in connection with a dispute between Kruger and the company which had been licensed to manufacture and distribute the products before this role was taken over by Alternative. Mr Tucker drew attention to clause 7 of the deed which provides for a mutual release between the parties for all claims, actions, suits or demands arising out of the previous distribution arrangements. The Master pointed out that the deed was between various groups of entities. Kruger and Alternative were joined in the same group. There is an obvious argument that it was not the intention for undertakings to be given by one member to other members in the same group. In any event, it is by no means clear how the undertakings would be relevant in any way to the misrepresentations alleged by Alternative. This is not an issue which can be resolved in the present proceedings.
Kruger submitted that there was a further deficiency in Alternative’s case for setting aside the statutory demand. It was pointed out that the loan agreement for the advance of funds to Alternative is dated 7 April 2006. The funds were transferred over the next few days. It was not until about two months later that Kruger gave notice to the previous licensee of the termination of its agreement.

Alternative claims that the funds were advanced so that it could enter into the transaction which eventually resulted in it becoming the licensee. It is Alternative’s case that Kruger made the representations to induce Alternative to enter into the loan agreement and the transaction. Alternative pleads in its statement of claim that the representations were made between April and August 2006. Counsel for Kruger submitted that this would have been after the loan had been obtained. It was argued that, having regard to this chronology, the alleged representations could not have influenced Alternative to enter into the loan.
If representations were made it is possible that some were made in April but before the loan agreement was signed. But Alternative’s case under the TPA does not confine the effect of the representations to their role in causing Alternative to enter into the loan agreement. It also alleges that they caused it to enter into the transaction which resulted in it acquiring the license to manufacture and distribute the products. This did not take place until August 2006. In my view the submissions made by Kruger on this issue do not detract from Alternative’s case that there is a genuine claim.
In my opinion, there was sufficient material before the Master to enable him to conclude that the claims were not implausible or spurious.
Application to call fresh evidence
Prior to the hearing of this appeal Kruger filed an interlocutory application seeking an order that it be permitted to adduce evidence on the hearing of the appeal which was not led before the Master.
The application is supported by an affidavit sworn by counsel for Kruger. It appears from the affidavit that, after the hearing in this matter before the Master, Kruger applied to the District Court for an order that Alternative provide security for Kruger’s costs in the District Court matter.
Alternative filed an affidavit in the District Court application sworn by Mr Hodgson. Exhibits to it included the financial statements of Alternative for the years ending 30 June 2007 and 30 June 2008. The affidavit was served on Kruger in those proceedings.
In response to this Kruger filed in the District Court an affidavit of Mr Nimmo, an accountant, in which Mr Nimmo commented on the accounts which had been filed by Alternative.
The affidavit of Kruger’s counsel filed prior to the hearing of the present appeal has exhibited to it copies of Alternative’s accounts which were filed in the District Court and a copy of Mr Nimmo’s affidavit commenting on those accounts.
Also exhibited to the affidavit of counsel are bank statements of Alternative. These are statements for the period 10 April 2006 to 30 June 2008 in relation to an account with the Commonwealth Bank of Australia. There are also statements for the period 27 May 2008 to 30 June 2008 in relation to an account with Westpac Bank. The affidavit states that the statements were obtained by Mr Kruger’s trustee of bankruptcy in August 2009.
Counsel for Kruger then proceeds in his affidavit to analyse the statements, providing his own opinion on their effect. Much of the affidavit is in the form of argument.
I indicated that I would rule on the admissibility of the affidavit and the documents exhibited to it in my final reasons. However, I permitted both counsel to make submissions on the relevance of the material.
After hearing counsel I am satisfied that, even if the material were to be admitted it would not affect the ultimate result of the appeal. However, there are other reasons for refusing to admit the material.
It would be highly unsatisfactory for the Court to draw inferences from the statements and account records without assistance. The comments by Mr Nimmo are in an affidavit which was not filed in this matter. They are not directed to the precise issues in the present matter, but were prepared in relation to the application for security for costs. Counsel for Alternative cannot cross‑examine Mr Nimmo on an affidavit which was not filed in this Court and when he was not called as a witness in the present proceedings. Added to these difficulties is the fact that the only commentary on the accounts is in the affidavit of counsel for Kruger.
I refuse the application to tender the affidavit of counsel and the documents exhibited to it.
The quantum of the offsetting claim
The Master noted that Mr Hodgson deposed in his affidavit to having spent in excess of $1 million as a result of the representations. The Master said he was prepared to accept this as a “ballpark figure” and, as it is over twice the amount of the debt, there was a substantial margin for error. He found that the offsetting total was in excess of $485,000.
The statement of claim specifies the sum of $320,000 as the total of refunds paid to customers because of the faulty products. It is claimed that $1 million was spent on the manufacturing and distributing process. It is not in dispute that Alternative set up facilities for manufacturing and distributing the products and that the facilities were operating for a time. Alternative has provided a specific figure in respect of refunds and I am prepared to draw the obvious inference that the cost of setting up and operating the business, when added to the cost of refunds, would result in an amount comfortably in excess of the loan figure of $480,000.
I have reached the conclusion that the Master acted correctly in setting aside the statutory demand because of the existence of a genuine cross‑claim for an amount in excess of the amount claimed in the statutory demand.
Section 459J
Alternative put forward a further argument that there was justification for setting aside the statutory demand pursuant to the power given to the Court under s 459J of the Act which provides:
(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b) there is some other reason why the demand should not be set aside.
(2)Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.
Alternative relied on s 459J(1)(b). This power was considered by Young CJ in EQ in Meehan v Glazier Holdings Pty Ltd[11] where His Honour said:[12]
Although the wording of s 459J(1)(b) of the Corporations Act appears wide, its context and history requires reading it down to encompass in general terms only cases where the Court is satisfied that injustice will be caused unless the demand is set aside because of a defect relating to, but not in, the demand, see Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11 at 17.
In Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746, 757, Bryson J truly said that the discretionary power under s 459J(1)(b) should not be activated “unless the decision to do so is supported by some sound or positive ground or good reason which is relevant to the purposes for which the power exists.”
It is not possible to set out fully the cases that might fall within s 459J(1)(b) nor if it were possible would it be wise to do so. The sort of case that will be covered will include gross defects in supporting affidavits and documentation and where the alleged creditor has made statements or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor's position.
A judge is not at liberty to set aside a demand under s 459J(1)(b) merely because he or she subjectively considers it fair to do so.
[11] [2005] NSWCA 24.
[12] [2005] NSWCA 24 at [58]-[61].
First it was submitted that Mr Kruger was associated with Alternative and Kruger at the time the loan was entered into and that, as a director of Alternative he had a fiduciary duty to the company. According to the allegations he breached that duty by making the alleged misrepresentations.
Secondly, it was said that Alternative is a company in which shareholders have invested $440,000 and there is good reason why the District Court action should be allowed to proceed in order to provide a resolution of the dispute. It was argued that if the company went into liquidation there was no guarantee the liquidator would pursue the District Court action.
In my view the matters which have been summarised do not justify the exercise of the Court’s power under s 459J(1)(b).
Dispute as to the existence of the debt
Although it is common ground that there was a loan agreement for $485,000 and that Alternative received that amount, there is a dispute as to whether the repayment was due at the time the statutory demand was served. The Master found it unnecessary to decide whether the statutory demand should be set aside by reason of this dispute.
Clause 7 of the loan agreement provides that the principal sum is repayable upon the receipt of a notice given by Kruger to Alternative specifying the amount payable and directing Alternative to pay the amount forthwith. Clause 10 provides that notice may be given by either party by electronic mail and the notice is deemed to have been received immediately upon receipt of a return email “evidencing the email as having been opened”.
There is evidence that Kruger’s solicitors sent an email to Mr Hodgson at 10.47am on 13 March 2009 which stated:
Dear Ben,
Please see the attached Notices of Demand that were posted to the Registered Office of Alternative Engine Technologies Pty Ltd on 17 February 2009.
Regards
Briony Hutchens
The copy of the email which is exhibited to an affidavit filed by Martina Kruger does not include any attachments. Although there is reference to attached documents in the email they were not part of the exhibit.
Mr Hodgson replied to the email on the same day at 1.10pm. His email states:
Also,
KV is unregistered.
Regards
Presumably “KV” refers to Kruger.
In his affidavit of 22 May 2009 Mr Hodgson stated:
The plaintiff never received a copy of the Demand from the Defendant dated 17^th February 2009 as post was not delivered to the address on the Demand. The Plaintiff’s postal address was PO Box 162 Hindmarsh SA 5007.
Exhibited hereto and marked “BH-9.” is a true copy of the Demand which was emailed to the Plaintiff’s solicitors on the 13^th May 2009.
The Notice of Demand BH-9 is dated 17 February 2009.
At the hearing before the Master, counsel for Alternative pointed out that Mr Hodgson claimed in his affidavit of 22 May 2009 that he did not receive the notice of demand until 13 May 2009. This was after the statutory demand had been received. Accordingly, it was argued that the debt was not due for payment at the time the statutory demand was served.
On 12 October 2009 Kruger filed a further application to call fresh evidence on the hearing of the appeal. Kruger sought to tender a copy of the email to Mr Hodgson dated 13 March 2009 and a copy of the notice of demand dated 17 February 2009. The application to call fresh evidence was supported by an affidavit sworn by counsel for Kruger. He stated that the document “is a true copy of the email dated 13 March 2009 from Ms Hutchens to Mr Hodgson and all annexures thereto”.
The purpose of the affidavit and evidence was to prove that the notice of demand was an attachment to the email of 13 March 2009.
However, the affidavit does not prove by admissible evidence that Ms Hutchens sent the attachments. She has not deposed to this at any time. Counsel simply states in his affidavit that she did so. The affidavit contains hearsay evidence on a contested matter which should be given by the person with firsthand knowledge of the events. Furthermore, there seems to be no reason why evidence on the issue could not have been presented to the Master in an admissible form. I refuse to admit the affidavit and the exhibits to it as fresh evidence on the hearing of this appeal.
There remains the question whether, on the evidence before the Master, there was a genuine dispute as to the existence of the debt on the ground that it was not due and payable as at the time the statutory demand was served.
Martina Kruger stated in her affidavit of 9 June 2009 that a copy of the notice of demand was emailed by Kruger’s lawyers to Mr Hodgson on 13 March 2009. She said receipt of this mail was acknowledged by Mr Hodgson by return email on the same day. A copy of the email was exhibited to her affidavit but, as previously observed, the notice of demand was not exhibited to the affidavit. Her evidence is also hearsay.
In any event, there is a clear dispute on the evidence as to when Mr Hodgson first received the notice of demand. He claims that it was not until 13 May 2009. It is argued on Kruger’s behalf that it is open to draw the inference that Mr Hodgson opened the attachments to the email. However it is not for me to decide which of these competing versions should be accepted.
In my view the circumstances disclose that there is a genuine dispute about the existence of the debt as at the time the statutory demand was served. As I have pointed out, the resolution of this dispute turns on when Mr Hodgson received the notice of demand provided for in the loan agreement. This is a further reason which justifies the setting aside of the statutory demand.
The appeal will be dismissed.