Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd

[2002] NSWSC 219

Reported Decision: (2002) 20 ACLC 726

New South Wales

Supreme Court

CITATION:	Main Camp v Australian Rural [2002] NSWSC 219
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2716/01
HEARING DATE(S):	11/03/02
JUDGMENT DATE:	27 March 2002
PARTIES :	Main Camp Tea Tree Oil Limited - Appellant Australian Rural Group Limited - Respondent
JUDGMENT OF:	Barrett J

LOWER COURT JURISDICTION :	Supreme Court (Master)
LOWER COURT FILE NUMBER(S) :	2716/01
LOWER COURT JUDICIAL OFFICER :	Master McLaughlin

COUNSEL :	Mr K.R. Eassie - Appellant Mr C.C. Hodgekiss - Respondent
SOLICITORS:	Cordato Partners - Appellant Teys McMahon - Respondent
CATCHWORDS:	CORPORATIONS - winding up - statutory demand - essential nature of statement to the effect that debt is not only owing but also due and payable - essential that there be clarity as to amount claimed - relevance of recipient's pre-existing knowledge - statutory demand properly set aside - appeal dismissed
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CASES CITED:	Azed Developments Pty Ltd v Frederick & Co Ltd (1994) 14 ACSR 54 Daewoo Australia Pty Ltd v Suncorp-Metway Ltd (1999) 33 ACSR 481 Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456 Marriott Industries Pty Ltd v Mercantile Credits Ltd (1991) 9 BCL 256 Pitt Ltd v Corporation of the Town of Glenelg [1927] SASR 501 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226 Zenaust Imports Pty Ltd v Alembic Chemical Works Co Ltd (1998) 28 ACSR 465
DECISION:	Appeal dismissed with costs

- 17 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

WEDNESDAY, 27 MARCH 2002

2716/01 – MAIN CAMP TEA TREE OIL LIMITED & ORS
v AUSTRALIAN RURAL GROUP LIMITED

JUDGMENT

The proceedings

1 This is an appeal from a decision of a Master granting an order pursuant to s.459J of the Corporations Act 2001 (Cth) setting aside a statutory demand dated 2 May 2001 served by the appellant, Main Camp Tea Tree Oil Ltd (“Main Camp”) on the respondent, Australian Rural Group Ltd (“ARG”) . The grounds of appeal are stated as follows in the notice of appeal:

“a) The Master erred in finding there were defects in the Demand, or in the accompanying affidavit, which caused substantial injustice to the respondent, or which constituted ‘some other reason’ for setting aside the Demand;

b) The Master erred in not finding:

I. there were no defects in the accompanying affidavit;

II. the respondent had failed to prove it had suffered substantial injustice by reason of any defect in the Demand;

III. the respondent failed to show any defect in the accompanying affidavit was so substantial that it constituted ‘some other reason’ within s.459J(1)(b) to set aside the Demand.
c) the Master’s discretion was greater than he took it to be in relation to determining these issues;
d) the exercise of the Master’s discretion miscarried in those respects.

2 There was some debate before me about the correct approach in such an appeal. It is unnecessary to dwell on that matter. The relevant principles, as they apply here, are briefly stated in the judgment of Santow J in Zenaust Imports Pty Ltd v Alembic Chemical Works Co Ltd (1998) 28 ACSR 465 as follows:

“In dealing with an appeal from a Master, the proper ambit of review requires either an error of law or a mistaken inference of the kind that may properly be the subject of appeal on review and as from a single judge to the court of appeal, in accordance with the well settled principles set out in Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409 at 420, applying House v R (1936) 55 CLR 499 at 505.
It is clear that I am not here dealing with findings of fact but rather inferences from the materials before the Master so that I do not need to consider the scope for review in that former context: see Warren v Coombes (1979) 142 CLR 531 at 552-3; 23 ALR 405.”

The statutory demand and the alleged shortcomings

3 The statutory demand related to sums said to be owing to Main Camp by ARG in the context of a unit trust or similar scheme in which one of them acted as trustee or representative and the other as management company. The defects or alleged defects on which ARG relied before the Master are described in several paragraphs of the Master’s judgment which I shall set out in full:

“33. There are a number of asserted defects in the form of the demand. Those defects are identified in paragraph 4 of affidavit of Mr Teys bearing date 30 March 2001. The first is that the demand is not addressed to the plaintiff directly, but to the company secretary. I have already read out the form of that demand and it is directed ‘to the Company Secretary, Australian Rural Group Limited’, followed by the Australian Corporation Number and the address of the company.
34. The second complaint is described as, ‘There is a deletion in paragraph 1 of the address of the defendant’. However, what the plaintiff appears to be complaining about is that the address of the defendant does not appear in paragraph 1, that being an omission rather than a deletion of that address. Paragraph 1 commences with the words, ‘The Company owes Main Camp Tea Tree Oil Limited’, followed by the Australian Corporation Number of that Company, but omits to provide any address for the company.
35. The form of the demand, as shown as Form 509H, indicates that it should be addressed to the name and the Australian Corporation Number of the debtor company with the address of the company’s registered office, and that the first paragraph should include the name and address of the creditor.
36. Item (c) in paragraph 4 of Mr Teys’ affidavit raises the fact that the demand does not contain either a paragraph asserting that the amount referred to in paragraph 1 of the demand is due and payable or a paragraph stating that there attached to the demand an affidavit verifying that the amount is due and payable. The prescribed form contains, as set forth in the second paragraph thereof, the following:
‘The amount is due and payable by the company.’
‘Attached is the affidavit of [insert name of deponent of the affidavit], dated [insert date of affidavit], verifying that the amount is due and payable by the company.’
37. The statutory demand in the instant case does not contain either of those statements which appear in the prescribed form of the demand.
38. The final ground of the complaint concerning the form of the demand is that there are two completely different amounts shown in the demand. There is in paragraph 1 of the document an assertion that the plaintiff owes to the defendant the amount of $1,190,079, described as ‘being the total amounts of the debts described in the schedule’. However, the schedule contains two figures, one under the heading ‘Amount of the debt’, being $1,150,079; and the other appearing subsequently described as ‘Total amount’, being $57,470,89.”

4 The learned Master held that the first two alleged defects (those mentioned in paragraphs 33, 34 and 35 of his judgment), although technically defects, were not the cause of substantial injustice. In relation to the third of the matters complained of, being the matter dealt with at paragraphs 36 and 37, the Master found that it did not amount to a defect in the demand (affecting, as it did, the accompanying affidavit called for by s.459E(3)) but that it nevertheless represented a reason for setting aside the demand under s.459J(1)(b). In relation to the final matter, being the matter dealt with at paragraph 38 of his judgment, the Master found not only that it was a defect but also that it was of such a quality that, in terms of s.459J(1)(a), substantial injustice would be caused unless the demand was set aside. It is the Master’s finding in relation to each of these last two shortcomings that was canvassed upon the appeal.

The nature of the first shortcoming - the accompanying affidavit

5 Section 459E(3) of the Corporations Act requires that, unless the relevant debt is a judgment debt, a statutory demand be accompanied by an affidavit which satisfies two requirements. The first requirement is that the affidavit “verifies that the debt, or the total of the amounts of the debts, is due and payable by the company”, this being, clearly enough, a reference to the debt or debts to which the demand relates in accordance with s.459E(1). The second requirement is that the affidavit “complies with the rules”. The accompanying affidavit will thus satisfy the requirements of s.459E(3) only if it contains the verification contemplated by s.459E(3)(a) and, in addition, complies with the rules of this court, they being, in the present context, the “rules” as defined by s.9. The relevant provision of the rules is Corporations Act Rule 5.2 which, so far as relevant, is in the following terms:

“For the purposes of sub-section 459E(3) of the Act, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must:
(a) be in accordance with Form 7 and state the matters mentioned in that Form …”

6 The affidavit in Form 7 contains as its paragraph 4 the following:

“*The debt/*The total of the amounts of the debts mentioned in paragraph 1 of this affidavit is due and payable by the debtor company.”

7 It is thus apparent that the relevant part of Form 7 really does no more than to reinforce the separate and independent requirement imposed by s.459E(3). Both the section and the rules (by means of the form) require the affidavit to verify that the relevant debt (or the total of all relevant debts) “is due and payable by” the company concerned.

8 Despite this requirement (which I regard as effectively a single requirement arising from two sources), the relevant paragraph of the affidavit accompanying the statutory demand was in these terms:

“I have duly verified by perusing the financial records of the Creditor, that the Debtor is indebted in the amount now demanded, and as described in the demand, and believe the details set out in the demand are true and correct.”

There is thus no statement or other indication that the debt or total “is due and payable”.

9 This departure from the required course of procedure cannot be made the subject of attack based on s.459J(1)(a). This is because that provision is exclusively concerned with a defect “in the demand”. A shortcoming which, although within the statutory concept of “defect” to which I am about to turn, is “in” the affidavit accompanying the demand rather than “in” the demand itself is not susceptible to the operation of a provision solely concerned with the content of the demand. The word “accompanied” in s.459E(3) emphasises the separateness of the two documents. But a “defect”, in the defined sense, in the affidavit is capable of activating s.459J(1)(b) as a basis for setting aside the demand without overstepping the line drawn by s.459J(2). All this emerges from the decision of the Full Federal Court in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452: see also the observations of Austin J in Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456.

The nature of the second shortcoming - specification of amount in the demand

10 Before dealing with the matter referred to in paragraph 38 of the Master’s judgment, I should say something about the meaning of “defect” in this context. The term is defined by s.9 so as to include, in relation to a statutory demand (a term itself defined by the same section as including a document which “purports to be” a demand served under s.459E), an “irregularity”, a “misstatement of an amount or total”, a “misdescription of a debt or total” and a “misdescription of a person or entity”. It is thus immediately clear that what are, in substance, minor matters are included in the concept of “defect”. The term itself imports no notion of proportionality. Thus, if two cumulative sums each of $10,000 were stated and their total was shown as $21,000, there would be a “defect” consisting of a misstatement of an amount or total. Likewise, if the company’s name was “Smith & Co Ltd” and the demand was addressed to “Smith & Son Ltd” there would be a defect because of a misdescription of a person or entity. The fact that the correct version may readily be inferred from the document or from the surrounding circumstances of which the company is (or should be taken to be) aware has no bearing on the question whether there is a “defect”, even though it will be highly relevant to the second part of the inquiry dictated by s.459J(1)(a), that is, whether substantial injustice will be caused if the defective demand is allowed to stand. For the moment, I confine myself to the question whether the matter dealt with by the learned Master at paragraph 38 is properly classified as a “defect” in the demand.

11 In accordance with Form 509H (being the prescribed form for the purposes of s.459E(2)(e)), the demand sets out in its first paragraph the amount said by the creditor to be owing by the debtor. The amount is stated to be “the amount of $1,150,079.00 being the total amounts of the debts described in the Schedule”. The schedule is as follows:

“SCHEDULE
Description of the debt: Date: Amount of
the debt:

______________________________________________________

Fees paid and recoverable
Refer Schedule Attached various $1,150,079.00
_______________________________________________________

_______________________________________________________
TOTAL AMOUNT: $57,470.89 ”

12 This schedule thus contains a reference to another schedule, being the “Schedule Attached”. That additional schedule consists of five pages. Each of the first four pages refers to one of four projects and contains, by reference to payment dates and amounts (plus a number of sub-totals), “particulars of trustees fees paid”, with a total at the bottom of the page for such fees in relation to each project. On the fifth page there appears “GRAND TOTAL”, followed by “$1,150,079.00”. If the full content of the “Schedule Attached” were transposed so that it appeared immediately under the reference to that attached schedule in the earlier schedule set out above, the “GRAND TOTAL” of $1,150,079.00 would be followed immediately by the “TOTAL AMOUNT” of $57,470.89.

13 Viewed within the confines of the document itself, these features must be seen as a “defect”. Where a “grand total”, itself the aggregate of four pages of separate items, is followed, on the last line of the description of debts, by a “total amount” which is considerably smaller, the situation is clearly one of “misstatement” or “misdescription” within paragraph (b) or paragraph (c) of the s.9 definition of “defect”.

The quality of the first shortcoming

14 The judgment of the learned Master dealt as follows with the quality of the first shortcoming:

“60. Where, as here, there is no judgment debt the statute requires that the demand must be accompanied by an affidavit that does two things. They are, firstly, that it verifies that the debt is due and payable by the company; and, secondly, that it complies with the Rules. With respect, I am in total agreement with his Honour that in respect to the requirements of the Rules and the form of affidavit required by the Rules substance must take precedence over form. Thus, if it is apparent that the affidavit substantially complies with the requirements of the Rules and follows, although not in exact language, the prescribed form, then I would not treat any departure from the precise working of the Rules and the form as constituting ‘some other reason’ of the nature identified in subsection (1) of section 459J why the demand should be set aside.
61. However, the situation is quite different where the statute itself imposes a mandatory requirement that the demand must be accompanied by an affidavit that does two specific things.
62. One of those things that the affidavit must do is to verify that the debt is due and payable by the company. In the instant case the affidavit of Mr Gulson can properly be construed as verifying that the debt is due by the company, but it does not go so far as to verify that the debt is payable by the company.
63. It seems to me that the failure of the defendant to comply with a mandatory requirement of the statute concerning a matter which must, on any account, be regarded as significant where a claim is being made against a company for an alleged debt, constitutes some other reason of the nature contemplated by paragraph (b) of section 459(1). It does not seem to me that the failure of the defendant to comply with a mandatory requirement of the statute can be cured by reference to other areas of evidentiary material: for example, evidence concerning the relationship between the parties; evidence concerning recent communications between the parties; or the determination of the auditor considering construction, but not quantification, of the trust deeds.
64. In my conclusion, therefore, the failure of the defendant to comply with the requirement of verifying, in the accompanying affidavit, that the debt is payable, as well as being due, by the company, constitutes ‘some other reason’ why the demand should be set aside.”

15 Mr Eassie of counsel, who appeared for Main Camp, submitted that the Master fell into error in this part of his judgment in two respects: first, by finding that he had no discretion in relation to the failure of the affidavit to conform to the express words of s.459E(3), in particular, in not including the words “due and payable”; and, second, in finding that the affidavit, while sufficient to verify that the debt claimed was due, did not go so far as to verify that it was also payable.

16 I must confess immediately to difficulties with the Master’s finding that the affidavit effectively stated even that the debt was due. The words used are set out at paragraph 8 above. The operative term was “is indebted”. This was deposed to in the context of a demand which, in its paragraph 1, did no more than to say that ARG “owes” Main Camp a particular amount.

17 A statement that one person “owes” a particular sum to another and “is indebted” in that sum asserts no more than the existence of a debt, that is, an obligation to pay the sum concerned. It says nothing about the time at which the obligation must be performed. It therefore says nothing about whether the sum concerned is “due” or “payable”. It is, of course, axiomatic that a debt, in the form of a payment obligation, may be presently owing but not yet either “due” or “payable”. It may likewise be “owing” and “due” but not yet “payable”, although it is not possible for a debt “owing” to be “payable” but not “due”: Marriott Industries Pty Ltd v Mercantile Credits Ltd (1991) 9 BCL 256 per King CJ. A statement that a sum is “due and payable” thus connotes not only that it is “owed” (so that the debtor is “indebted”) but also that the time for payment has arrived and the obligation to pay is an unqualified and unfettered obligation requiring immediate performance.

18 On this basis, I consider that the Master went too far in finding that the word “indebted” in the affidavit, even viewed in conjunction with the word “owes” in the demand itself, conveyed the message that any sum was “due”. He was certainly correct, however, in holding that the words used carried no connotation that any sum was “payable”.

19 In the result, the Master came to the correct conclusion in deciding that the affidavit did not comply with s.459E(3)(a) or conform with Form 7, in that it did not verify that the debt or total to which the demand referred was “due and payable by the company”. Furthermore, the Master was in my view correct to regard that non-compliance and non-conformity as a “defect” in the s.9 sense (although, of course, not a “defect in the demand” as referred to in s.459J(1)(a)). That being so, if the non-compliance and non-conformity are to form the basis for an order that the demand be set aside, the case must be one within s.459J(1)(b). The reason for this has already been mentioned by reference to Spencer Constructions and Goldspar.

20 The Master did not explain the grounds on which he regarded the non-compliance and non-conformity (each, as I have explained, more substantial, in my view, than he recognised) as sufficient to constitute a reason why the demand should be set aside. But the reason seems to me to follow almost as a matter of course from the nature of the inadequacy.

21 By serving a statutory demand on a company, a creditor takes the first step towards bringing into existence a statutory presumption of insolvency on the basis of which the creditor may proceed to ask the court to supplant the existing custodians of the company’s property and affairs in favour of an officer of the court whose first duty is to attend to the interests of the general body of creditors. If the court accedes to that request, the established order of administration within the company is put into abeyance and a regime in which the interests of shareholders are subordinated or deferred comes to the fore. The first step to which I have referred involves, in essence, a clear delineation of the creditor’s assertion of an entitlement to receive payment of a debt in respect of which there exists not only an unquestionable obligation to pay but also an unconditional obligation to pay immediately. The message conveyed by the demand is effectively a message of last chance: that, unless the payment already unequivocally and immediately required to be made is in fact made within the period stated in the demand, the company will be vulnerable to the grave consequences which the court may, on application made, visit upon it on the basis of the statutory presumption of insolvency.

22 In the light of the radical consequences which may thus result from non-compliance with a statutory demand, the value to be placed on adherence in all material respects to the statutory requirements is necessarily high. It is not open to a creditor whose debt is merely owing to resort to the statutory demand procedure. The express words of both the legislation and the prescribed form of affidavit make it clear that the assertion of the debt’s status as being both due and payable is part of the message the creditor is compelled to convey in order to become entitled to the presumption of insolvency. This is not a matter of mere semantics or shades of meaning. Nor can it be suggested that slavish use of a particular verbal formula for its own sake is essential when exactly the same message may be quite adequately conveyed in different words: compare Daewoo Australia Pty Ltd v Suncorp-Metway Ltd (1999) 33 ACSR 481, a case to which the Master referred, where a requirement that an affidavit “state that the deponent believes those matters to be true” was held sufficiently satisfied where the deponent set out the relevant matters and concluded with the words, “and I so verify”.

23 What is essential is that the documents put the company on notice in an unambiguous way of all the matters the legislation requires. The creditor’s contention that the debt, as well as being a debt (that is, owing), is both due and payable is one such matter. That contention is indispensable to the full understanding the legislation requires a company receiving a statutory demand to obtain from that demand and its accompanying affidavit. That full understanding was not conveyed by the creditor in this case. It is true that a demand for payment within the specified period was made. But the important fact (or assertion) that the company was under a legal obligation to make that payment without any further step on the creditor’s part, without the satisfaction of any intervening condition and without the passage of any further time was omitted. It is to clear notification of that important fact (or assertion) that the legislation attaches particular significance by the clear requirements expressed by reference to the words “due and payable”.

24 The affidavit which accompanied the statutory demand did not convey the verification called for by s.459E(3)(a). In my judgment, the Master was correct in his conclusion that that failure on the creditor’s part was a sufficient reason under s.459J(1)(b) to set aside the demand.

25 In stating this conclusion, I do not lose sight of the submissions made by Mr Eassie by reference to the decision of Hayne J in Azed Developments Pty Ltd v Frederick & Co Ltd (1994) 14 ACSR 54. It is true that the affidavit in that case did not use the words “due and payable”. It is clear, however, that the deponent’s rather long recitation of the circumstances surrounding the debt sufficiently conveyed that message. The recitation included a statement that the company was:

“… truly indebted to the creditor in the sum of $120,456.19 as moneys had and received by the company to the use of the creditor, or as moneys paid by the creditor at the request of the company.”

This specification of the debts in terms in which common money counts might be pleaded, with its clearly implied message of an immediate right to sue, carries the necessary connotation of “due and payable”.

26 I should also refer specifically to Mr Eassie’s submission that the decision of the Master proceeded on the erroneous basis that there must always be “strict compliance” with s.459E(3)(a) and that, if there is not, there is automatically “some other reason” as referred to in s.459J(1)(b). I do not see that as being what the Master decided, at least in the sense of suggesting that some parrot-like resort to the words “due and payable” is necessary. That other words might well suffice to convey the necessary message is borne out be the decision in Azed to which I have already referred.

27 The Master’s concern was not that the affidavit did not use the words “due and payable” but, rather, that the message those words are apt to convey was not contained in the affidavit, at least in so far as the “payable” aspect was concerned. The significance, in this particular case, of that omission – or, on the view I take, of the more extensive omission of references covering both “due” and “payable” – becomes even more pronounced in the light of the immediately preceding correspondence between the parties to which I shall refer in due course. This is particularly so when a letter sent by Main Camp to ARG some nine days before service of the demand sought, by 1 May 2001, a statement “as to how ARG proposes to repay the debt … by no later than 31 May 2001” [emphasis added]. The statutory demand of 2 May 2001 to which the affidavit was so intimately related thus purported to impose a deadline of 23 or perhaps 24 May 2000 in relation to debts in respect of which a letter sent nine days earlier had referred to an expectation of payment by 31 May 2001.

28 As the Full Federal Court observed in Spencer Constructions (above), the ultimate issue in s.459J(1)(b) cases of “other reason” is one of legislative intent. As I have already said, the legislative intent here is that the company is entitled to receive in the s.459E(3) affidavit a clear and unmistakable assertion that there is a present and unconditional obligation to pay. That assertion may be conveyed by various forms of words. It is not conveyed by the words used in this case.

29 I should also record that I have taken account of the general proposition, so far as Form 7 is concerned, that strict compliance with prescribed forms is not necessary. The precise source of any such rule in relation to Form 7 was the subject of some debate before me and in subsequent written submissions. It is sufficient for me to say that, even accepting the operation of such a rule in relation to this particular prescribed form, it does not and cannot apply in relation to the content requirements laid down by s.459E(3)(a). As Hayne J observed in Azed, the sufficiency of the verification required by the statute cannot be judged by arguing backwards from the content of the prescribed form. It was by reference to the requirements of the statute that the Master reached his conclusion on this part of the case with which I agree.

The quality of the second shortcoming

30 The Master dealt with this matter in his judgment as follows:

“48. In Topfelt Pty Limited v The State Bank of New South Wales Limited (1994) 120 ALR 155 Lockhart J, in the Federal Court of Australia, said:
‘It is not asking too much that creditors who issue statutory demands under the Corporations Law should ensure that the demands are expressed in clear, correct and unambiguous terms. If the creditors wish to have the benefit of the presumption of insolvency, the least they can do is to tell the debtor companies in clear terms what amounts are due, whether they include interest or not, and, if so, the amount .”
49. It is all very well for the defendant here to submit that the plaintiff could have been under no misconception as to the amount which the defendant was, by the statutory demand, requiring it to pay. The defendant in this regard relied upon immediately preceding communications between the parties and the relationship between the parties, a reference to the auditor of the defendant company and to a determination by that auditor. However, the audit related solely to the construction of certain trust deeds and not to the quantification of any amount that might, in the light of that construction, ultimately have been considered to have been owing by one party to the other.
50. Further, a letter which was sent by the defendant to the plaintiff on 22 April 2001, preceding the service of the statutory demand, refers to two amounts, one being the amount of $57,470.89 (which was the amount appearing in the demand under the description ‘total amount’) and the other being the amount of $1,457,045. That latter figure is vastly different from the figure of $1,150,079, which is one of the amounts appearing in the statutory demand.
51. I am in agreement with the submissions of the plaintiff that any objective reader of the demand would be confused as to what it was that the defendant was requiring the plaintiff to pay.
52. I am satisfied that the use in the demand of those two separate and extremely divergent figures could have the effect of causing substantial injustice. That conclusion enlivens the discretion vested in the Court by subsection (1) of section 459J.”

31 His conclusion was:

“66. Further, I consider that the use of the two completely disparate figures in the demand itself constitutes a defect because of which substantial injustice will be caused unless the demand is set aside.”

32 Maincamp says, and I accept, that there had been substantial discussion and correspondence with ARG about the state of the latter’s indebtedness to the former. The discussion and correspondence had centred on two matters: first, what was termed the “unremitted amount” (a sum of about $57,000.00) and, second, trustee fees. Certain dispute resolution and expert determination processes were undertaken by the parties. It is not necessary to go into the details. It is sufficient to note that, on 24 April 2001, that is, some nine days before the statutory demand was served, Main Camp wrote to ARG in the following terms:

“MAIN CAMP TEA TREE OIL PROJECTS NOS 1,2,3 AND 4 TRUSTEE FEES

I refer to the recent joint referral to the Auditor, Mr Stuart Cameron of Court & Co., of Main Camp Tea Tree Oil Projects No.s 1 to 4 (‘the Projects’) as to whether amounts paid to and claimed by the Representative as Trustee’s fees in relation to the Projects constitute either:

i. a liability of a Project;
ii. part of the gross income of a Project; or

a liability of the Manager payable out of the Manager’s assets.
As you are aware by letter dated 23 April 2001, the Auditor has made the decision that the Trustee’s fees are an expense of the respective Projects.
As at the date of this letter, $1,457,845.00 worth of Trustee’s fees and expenses have been incorrectly paid to ARG based on the auditor’s findings.
Therefore, this money is a debt owing to Main Camp Tea Tree Oil Limited, the Manager.
Could you also kindly arrange for the release of $57,471.00 held in your Trust account to the Manager forthwith. You will recall that these funds have been withheld by ARG since October 2000 and has been the subject of considerable correspondence between us.
You are invited to respond by COB 1 May 2001 as to how ARG proposes to repay the debt of $1,457,845.00 by no later than 31 May 2001.”

33 By this letter, Main Camp made it clear that it sought payment by ARG of, first, $1,457,845.00 for trustee fees incorrectly paid and, second, $57,471.00 which had been “withheld since October 2000 and … the subject of considerable correspondence between us”. It is, I believe, common ground that the second of these (the sum of $57,470.89, which I am content to regard as the same as $57,571.00) was in fact paid in response to the request conveyed in the letter of 24 April 2001 and that the payment occurred before 2 May 2001, the date of the statutory demand.

34 I mention these matters because it was argued before the Master that, in light of the correspondence and other events leading up to the service of the statutory demand, ARG could not have been under any misapprehension as to what it was that Main Camp required it to pay, despite the clearly confusing juxtaposition of “grand total” and the much smaller “total amount” in the statutory demand itself. The Master considered that the uncertainty engendered by the terms of the demand was still sufficient to be productive of substantial injustice. With respect, I entirely agree.

35 The immediately surrounding circumstances were that, by the letter of 24 April 2001, Main Camp had clearly identified as the subject of its claim upon ARG a sum of $1,457,845.00 and a sum of $57,471.00; that, within a short time thereafter, ARG paid the latter (or, to be precise, $57,470.89 which, as I have said, I regard as the same thing); yet that, on 2 May 2001, Main Camp asserted through the statutory demand what was, on one view, no more than a right to the $57,471.00 which had just been paid or, on another view, that plus a sum of $1,150,079 which was the “grand total” of the separate items in the four preceding pages of the attached schedule or, on a third view, just that “grand total” figure. And this was in a context where the “grand total” of $1,150,079 bore no resemblance or readily discernible relationship to the total of $1,457,845.00 referred to in the Main Camp letter received by ARG just over a week before service of the statutory demand on it.

36 Even allowing for the state of its pre-existing knowledge, what was ARG expected to make of all this? Inclusion, as either the sole sum demanded or one of two sums demanded, of the $57,470.85 which it had just paid would have been confusing enough. Reference to the new sum of $1,150,079, even though obviously related to the items in respect of which the letter had sought $1,457,845.00, would have left it in a state of much greater confusion. Did that mean that Main Camp had abandoned part of its claim in relation to trustee fees? If the smaller amount were paid, would there be continuing exposure for the balance? What were the source of and explanation for the sudden and unheralded change?

37 An essential feature of a statutory demand is that it inform the addressee company in unambiguous terms what it must do to forestall the statutory presumption of insolvency. The debtor is not expected (indeed, cannot be expected) to guess which of several possible courses suggested by the terms of the document is demanded of it, or to initiate inquiries of its own in order to ascertain the required course. Some familiarity on the debtor’s part with the relevant subject matter may be presumed, but it is not obliged to speculate exactly what it is that the creditor demands. This is recognised both in Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226, referred to at paragraph 48 of the Master’s judgment, and by the Full Federal Court in Spencer Constructions (above). Where, as here, the demand, because of its form and phraseology, leaves its recipient in the unfair and invidious position of not knowing with certainty how much it is expected to pay, substantial injustice will be caused unless that recipient is relieved of the consequences of failure to comply.

Conclusion

38 The statutory demand and its accompanying affidavit did not fully and fairly inform ARG of essential matters. The failure to specify in the affidavit that the claimed debt was “due and payable” (whether in those words or in others conveying the same message), viewed in the context of a letter sent nine days earlier referring to payment by a specified future date which was after the deadline specified in the demand itself, caused an essential statutory element to be omitted. Confusion arose, virtually as a matter of course, from the specification of amounts in the demand itself. The Master was correct in regarding these as matters both justifying and requiring setting aside of the demand pursuant to s.459J.

39 The appeal is dismissed with costs.

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Last Modified: 03/28/2002