Microjet Imaging Pty Ltd v Charara
[2010] VSC 446
•5 OCTOBER 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. S CI 2010 03975
| MICROJET IMAGING PTY LTD (ACN 093 693 353) | Plaintiff |
| v | |
| JAMAL CHARARA | Defendant |
---
JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 14 SEPTEMBER 2010 | |
DATE OF JUDGMENT: | 5 OCTOBER 2010 | |
CASE MAY BE CITED AS: | MICROJET IMAGING PTY LTD v CHARARA | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 446 | |
---
Corporations – Statutory demand – Judgment debt assigned – Whether accompanying affidavit required – Proof of assignment – Genuine dispute – Defect in the demand – Inconsistency in statement of the amount of the debt – Corporations Act 2001, ss 459E, 459G, 459H, 459J.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Möller | Batten Sacks Harvey Bruce |
| For the Defendant | In person |
HIS HONOUR:
This is an appeal by the defendant, Jamal Charara, by notice dated 23 August 2010 from an order made by Gardiner AsJ on 18 August 2010 setting aside Mr Charara’s statutory demand dated 6 July 2010. Mr Charara, who is not an Australian Legal Practitioner within the meaning of the Legal Profession Act 2004, appeared for himself. He had to travel from New South Wales for the hearing. Mr Charara describes himself on his stationery as:
A High Profile Very Experienced Self Represented Litigant in the Local Court, District Court, Supreme Court, Court of Appeal, the Federal Court and the High Court of Australia.
In response to a question from Mr Charara I explained to him at the commencement of the hearing before me that the appeal was by way of re-hearing and therefore that it was a matter of him making his submissions again in opposition to the application rather than him having to find any errors in the judgment of Gardiner AsJ.[1]
[1]Supreme Court (Corporations) Rules 2003, r.16.5(1); Supreme Court (General Civil Proceedings) Rules 2005, r.77.05.
The Facts
The application by the plaintiff, Microjet Imaging Pty Ltd (“Microjet”), under s 459G of the Corporations Act 2001 (“the Act”), was issued on 22 July 2010. The background to the dispute is set out in the affidavit of Su Su, a director of Microjet, sworn on 21 July 2010 in support of its application. In a proceeding in the Supreme Court of New South Wales (No. 2009/291533), Varkon Office Supplies Pty Ltd (“Varkon”) successfully applied on 8 March 2010 to have set aside a statutory demand served on it by Microjet in November 2009. Costs were awarded to Varkon. Mr Charara appeared on behalf of Varkon on that application. In correspondence from Mr Charara to Microjet’s solicitors he described himself as a “contributory” of Varkon.
On 10 March 2010 Microjet issued a complaint in the Magistrates’ Court at Melbourne claiming the sum of $6,280.12 for goods sold and delivered in May and June 2009. By its Notice of Defence dated 16 March 2010 Varkon denied owing Microjet any more than the sum of $1,089.05 after allowing for credits it claimed it was entitled to receive for alleged faulty stock which Microjet should have collected. Varkon further alleged that it was not indebted to Microjet at all, by virtue of the costs order in the Supreme Court of New South Wales and said that it was making a cross-claim for the balance of the two amounts. The Notice of Defence was purportedly signed by “Kathleen Geroche”, who was said to hold the position of director of Varkon.
In her affidavit Ms Su stated that on 6 July 2010 Microjet received the following documents:
(a)a letter dated 6 July 2010 from Mr Charara referring to the statutory demand and seeking payment of the sum of $2,497.71;
(b) the statutory demand from Mr Charara;
(c)a copy of a document headed “Assignment of Debt/Choses in Action” between Varkon and Mr Charara dated 7 June 2010 purportedly assigning to Mr Charara the costs ordered by the Supreme Court of New South Wales to be paid to Varkon on 8 May [sic] 2010 in relation to Microjet’s statutory demand dated 4 November 2009;
(d)a copy of the order made by the Supreme Court of New South Wales in proceeding No. 2009/291533 on 8 March 2010 and sealed on 16 March 2010;
(e)a copy of a Certificate of Determination of Costs in the sum of $1,917.00 “issued” by the Costs Assessor on 22 June 2010 and “sent” on 5 July 2010 by the Manager Costs Assessment;
(f)a copy of a Certificate of Determination of Costs of Costs Assessment in the sum of $580.17 “issued” by the Costs Assessor on 22 June 2010 and “sent” on 5 July 2010 by the Manager Costs Assessment.
The above documents were exhibited to Ms Su’s affidavit as exhibit “SS2”. Also included as part of that exhibit, but not referred to in the affidavit, was a copy of a letter from Varkon to Microjet dated 7 June 2010, which commenced:
Dear Microjet,
Re:Varkon Office Supplies P/L v Microjet Imaging P/L NSW Supreme Court #5514/09 [sic]
This is to inform you that Varkon Office Supplies P/L today assigned the cost [sic] that was awarded in the above matter to Mr Jamal Charara.
The letter was purportedly signed by “Kathleen Geroche”.
Mr Charara filed an affidavit sworn on 3 August 2010 in opposition to Microjet’s application. In that affidavit he stated that he was “the lawful owner of the debt that the applicant owed” and that he did not owe the plaintiff anything so that there was no possible “offset against the debt”. He also said that the plaintiff’s debt for which it was suing “the assignor” in the Magistrates’ Court could not be “offset” against the debt that the plaintiff owed to him. Mr Charara finally said in his affidavit:
In making this affidavit I referred myself [sic[ to the one bundle document [sic] annexed hereto and marked with the letter “JC1”.
With one exception, the exhibit to Mr Charara’s affidavit reproduced copies of the documents already produced as exhibit SS2 to Ms Su’s affidavit, together with some extra correspondence between Mr Charara and Microjet’s solicitors about the statutory demand. The one exception was that the letter dated 7 June 2010 from Varkon to Microjet, exhibited to Mr Charara’s affidavit, bore an original signature purportedly of “Kathleen Geroche”.
Consideration of the Issues
In the written submissions prepared on behalf of the plaintiff, the following three grounds were advanced for the setting aside of the statutory demand:
(a)there was a genuine dispute concerning the alleged assignment to Mr Charara;
(b) the statutory demand was an abuse of process; and
(c)there were two defects in the statutory demand which required that it be set aside.
However, the argument before me took a slightly different course. First, it is obvious from the above list of documents served on Microjet on 6 July 2010 that there was no affidavit accompanying the statutory demand. Section 459E(3) of the Act states that 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”.
Mr Charara submitted that s.459E(3) did not apply because the debt in question was “a judgment debt”. He submitted that after the assignment to him of the debt constituted by the costs ordered to be paid by Microjet he became the judgment creditor in respect of that “judgment debt”.
I was told by Mr Möller of counsel, who appeared for the plaintiff, that he could find no authority on whether a judgment debt remains “a judgment debt”, within the meaning of s.459E(3), after assignment of the debt by the judgment creditor to a third party. In Anderson Formrite Pty Ltd v CASC Hire Pty Ltd[2], a judgment debtor had made two payments of $50,000 pursuant to an agreement to pay the judgment debt by instalments. The judgment creditor served a statutory demand claiming the balance of the debt. Siopis J held that an accompanying affidavit was required:
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. … 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.[3]
[2][2005] FCA 1424.
[3][2005] FCA 1424, [62]-[63]. The contrary result was reached in Jargon Pty Ltd v Good Earth Garden Products Pty Ltd [2006] WASC 282, [41] (Master Newnes).
In my opinion, the reasoning of Siopis J is applicable to this case. Whilst the judgment spoke for itself as to the amount due and payable by Microjet to Varkon, there has been, according to Mr Charara, the maker of the statutory demand, an extraneous intervening event or circumstance, namely, the alleged assignment of the judgment debt by Varkon to Mr Charara. Thus, I do not agree with the submission that the debt constituted by the costs ordered to be paid by Microjet remained “a judgment debt” even after the alleged assignment. There was no judgment against Microjet in favour of Mr Charara. His entitlement, if any, to make the demand results from the alleged assignment of the costs debt by Varkon to him. His claim is that the debt is owed to him as assignee. As recognised by s.459E(4) of the Act, this is a legitimate basis for making the demand, but because I have concluded an assigned debt is no longer “a judgment debt”, there should have been a verifying affidavit accompanying the statutory demand.
Although it has also been held that “there is no iron clad rule that a defective affidavit will mandate the setting aside of the demand”,[4] here the affidavit was not defective, it was non-existent. In my opinion, the omission of the affidavit required by s.459E(3) constitutes “some other reason why the demand should be set aside”.[5] As Cox J said in Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (in liq):[6]
it is not asking too much of a creditor whose debt is not the subject of a judgment to verify on oath that the debt is due and payable as specifically required by the Act.
[4]Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 296, 301 (French, Kiefel and Sundberg JJ).
[5]Corporations Act 2001, s.459J(1)(b).
[6](1994) 14 ACSR 565, 568.
I turn then to the submission by Microjet that there was a genuine dispute concerning the alleged assignment of the debt by Varkon to Mr Charara. Essentially, Microjet’s argument was that there was no evidence proving the assignment. As Mr Möller submitted, proof of the assignment was important because, without it, Mr Charara had not established that he was a creditor entitled to serve a statutory demand. Mr Möller accepted that subject to proof that the assignment was a valid act of Varkon, the statutory demand itself could constitute notice of the assignment for the purposes of s.12 of the Conveyancing Act 1919 (NSW),[7] as Austin J had held in Bennell v Netlink Australia Pty Ltd that:
the same instrument may constitute express notice of the assignment for the purposes of s 12 and also a valid statutory demand for the purposes of s 459E.[8]
I also consider that there was a sufficient description of the alleged assignment contained in the demand to satisfy the requirements of s.459E(2) of the Act.[9]
[7]Clause 1.7 of the assignment stated that it was to “be construed and governed in accordance with the laws in force in New South Wales”.
[8](2002) 42 ACSR 680, [43].
[9]Condor Asset Management Ltd v Excelsior Eastern Ltd (2005) 56 ACSR 223, [35] (Barrett J).
However, the real question is whether it was proved that the assignment was a valid act of Varkon. As stated above, the document purporting to be the assignment was exhibited to both the affidavit of Ms Su and the responding affidavit of Mr Charara. But nowhere did Mr Charara state on oath that this document was the assignment of the debt on which he relied, or give any explanation of the circumstances in which this document came into existence or that it was signed by someone authorised to do so on behalf of Varkon. Nor was there any evidence from Varkon to the effect that it had assigned the costs debt to Mr Charara.
This was a particularly important omission, in my opinion, because, as Mr Möller submitted, given that Varkon had alleged the set-off of the costs debt in the Magistrates’ Court proceeding, Microjet needed to be able to ensure that Varkon had in fact assigned the debt to Mr Charara. Otherwise, Microjet would run the risk of having to pay Mr Charara the costs debt in order to avoid the statutory presumption of insolvency and then finding that Varkon still ran the set-off argument in respect of the costs debt on the ground that it had not made the purported assignment.
Mr Charara rather half-heartedly sought an adjournment of the hearing in order to file material which he said would prove the assignment. I refused the application for an adjournment. Special leave to file further material could have been sought by Mr Charara before the hearing before me commenced,[10] following his unsuccessful opposition to the setting aside of the statutory demand at first instance. No such leave was sought. Moreover, the costs of an adjournment would only have increased the costs of a dispute which were already out of proportion to the amount involved. Therefore, I decided that the appeal had to be determined on the material then before the Court.
[10]Supreme Court (General Civil Proceedings) Rules 2005, r.77.05(7)(b).
Nevertheless, Mr Charara argued that the existing evidence proved that the purported assignment had validly occurred. He submitted that the assignment document was signed by one “Kathleen Geroche” as “Director and Office Holder” of Varkon and that a company search of Varkon contained in the material exhibited to Ms Su’s affidavit established that Kathleen Geroche had been a director of Varkon since 23 October 2009. He asserted that the signature of Ms Geroche was the same as the signature of “Kathleen Geroche” appearing on the letter from Varkon to Microjet dated 7 June 2010 which was exhibited to both the affidavit of Ms Su and to his affidavit, and the same as the signature of “Kathleen Geroche” on the Notice of Defence in the Magistrates’ Court proceeding. Mr Charara also tried to make a link between Varkon and the facsimile number appearing on various of the documents..
I am not persuaded that the assignment was properly proved. First, the search of Varkon was dated 5 February 2010 so that it was not established that Ms Geroche was a director of, or had any authority to sign the assignment on behalf of, Varkon on 7 June 2010. Secondly, there was no proof that any of the purported signatures were in fact the signature of Ms Geroche. Thirdly, Mr Charara’s evidence about the similarity of the signatures of Ms Geroche was inadmissible. He was not a handwriting expert entitled to express an opinion about whether the signatures were the same. Fourthly, apart from the fact that it appeared to be on Varkon’s letterhead, there was no proof that the letter dated 7 June 2010 was sent by or on behalf of Varkon. Fifthly, the facsimile number and the use of it needed to be linked to Varkon.
All of these points could have been put to rest if Mr Charara had sworn an affidavit to accompany the statutory demand. In that affidavit he could have deposed to the circumstances of the assignment of the costs debt to him and explained how he could say that Varkon had in fact made the assignment. For example, the document may have been signed by Ms Geroche in his presence or he may have been familiar with the signature of Ms Geroche. However, none of this was done.
I also reject Mr Charara’s submissions that it was sufficient for him to state in his affidavit that he was the lawful owner of the debt by reference to the instrument that made him such, and that because the document containing the assignment satisfied the requirements of s.12 of the Conveyancing Act 1919 (NSW) that made the instrument valid. Both of these submissions ignored the critical need for Mr Charara to prove that the assignment to him was validly made by Varkon.
I have, therefore, reached the conclusion that, on the material before the Court, Microjet was correct in submitting that there was a genuine dispute[11] concerning the alleged assignment of the debt to Mr Charara.
[11]Corporations Act 2001, s.459H(1)(a).
One of the two defects relied on by Microjet for the setting aside of the statutory demand was the inconsistency, on the face of the demand, concerning the amount to which it related. Whereas paragraph 1 on page 1 of the demand made a claim for $2,497.41, “being the amount of debt described in the Schedule”, the Schedule on page 2 identified the amount as $3,200.00 and lower down on page 2 the two certificates of costs were said to total “the debt amount of $2,497.71”. Mr Möller submitted that this was confusing in that Microjet did not know what amount it had to pay to Mr Charara in order to avoid the consequence of the presumption of insolvency from not complying with the statutory demand.
Mr Charara submitted that the reference in the Schedule to the amount of the debt as being $3,200.00 was merely a typographical error, but that even if it fell within the definition of “defect” no substantial injustice had been caused to Microjet because it clearly knew from the documents accompanying the statutory demand that the amount of the judgment debt owed to Varkon was $2,497.41 and that the amount of the debt assigned to him was $2,497.41. Therefore, he submitted that in accordance with the provisions of s. 459J, the statutory demand should not be set aside.
In my opinion, the reference in the Schedule to the amount of the debt as being $3,200.00 was a “defect in the demand”. In s.9 of the Act, the definition of “defect” in relation to a statutory demand, is said to include “(b) a misstatement of an amount or total”. I consider that the confusing reference to two different amounts being owed by Microjet would cause substantial injustice to the plaintiff unless the demand is set aside. The reason for this conclusion was clearly explained by Burley J in Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd,[12] where the facts were not dissimilar to the facts in this case. His Honour said:
If a statutory demand is not met by payment of the amount demanded or by securing or compounding the amount of the debt, the failure to comply with the requirements of the demand enables the creditor to seek the winding up of the debtor on the ground of insolvency. The only means by which the debtor can avoid these consequences is to pay the amount demanded or apply to set aside the statutory demand. If it is unclear what is demanded, or if what is demanded is not verified by affidavit, the debtor should not be put in a position of having to pay the amount claimed. It would in my view be a substantial injustice to the debtor to require it to pay the amount demanded where the notice is defective in the manner of Ex P1. Put another way, substantial injustice to the plaintiff would occur if it was not clear from the notice and the accompanying affidavit that the amount demanded constituted a justified demand. Support for that approach is to be found in the judgment of Lockhart J in Topfelt Pty Ltd v State Bank of NSW Ltd[13] … :
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 tell the debtor companies in clear terms what amounts are due, whether they include interest or not and, if so, the amount.
That case involved a claim in the demand for an unspecified amount of interest but the general comment made by his Honour is applicable to the facts of this case.[14]
[12](1997) 23 ACSR 339.
[13](1993) 12 ACSR 381, 396.
[14](1997) 23 ACSR 339, 341.
A similar approach was adopted by Barrett J in Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd:
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. … 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.[15]
[15][2002] NSWSC 219, [37].
Mr Charara’s position may have been strengthened if there had been an accompanying affidavit sworn by him verifying the amount of the debt that was said to be due and payable. However, I do not have to decide whether or not such an affidavit would have been sufficient to overcome the substantial injustice argument because, as discussed above, there was no accompanying affidavit.
I have, therefore, concluded that the statutory demand should be set aside on the ground that there was a defect in the demand[16] because of the inconsistency in the amounts set out in the demand. The second defect in the demand relied on by Microjet was the failure to include the “warning box” required by the prescribed form of the statutory demand. However, Mr Möller correctly conceded that as Ms Su had taken steps to set aside the statutory demand within time, it was not really open to Microjet to maintain that it had been caused any “substantial injustice”.
[16]Corporations Act 2001, s.459J(1)(a).
The remaining ground is that the statutory demand was an abuse of process. Mr Möller submitted that this ground was made out by a combination of two unusual factors. First, there was the fact that Varkon had raised the costs debt as a set-off in the Magistrates’ Court proceeding and then allegedly assigned that debt to Mr Charara. Secondly, there was what was said to be the “menacing and high-handed tone” of Mr Charara’s correspondence. In the letter which accompanied the statutory demand, he stated:
Without giving legal advice, it would be cheaper and quick [sic] if you post your cheque within the 21 days period and that will complete the satisfaction of the demand. However, if you wished [sic] to go to court our costs will exceed $35,000.00
Then, in a letter dated 16 July 2010 to Microjet’s solicitor, Mr Charara stated:
You should ensure that your client pays [sic] my money within the 21 days period from the date of service or file in the Supreme Court it’s [sic] contention, otherwise I will commence an application to wind up.
I can assure you that I will pursue your client vigorously without hesitation, I also put you on notice that in the event your client attempt [sic] to set aside the lawful demand and fails, my costs will exceed $35,000.00
Not only that I will conduct part of the proceeding, I may instruct a Senior Solicitor and a Queen’s Counsel and all the materials intended to be used in any challenge to your client will be prepare [sic] by a well known legal firm which may even end up been [sic] more costly. I am very well known to be a man of no failure by many legal practitioners across Australia.
In my opinion, this ground fails because, as Mr Charara submitted, the fact that Varkon had pleaded a set-off in respect of the costs debt did not prevent it from subsequently assigning that debt to Mr Charara. What that meant was that when it came to the hearing in the Magistrates’ Court, Varkon would not be able to rely on the set-off if it had in fact validly assigned the costs debt to Mr Charara.
Further, on their own the two letters from Mr Charara referred to above do not, in my opinion, establish abuse of process or constitute “some other reason” for setting aside the statutory demand.[17] The high-handed and exaggerated wording of the letters mirrors Mr Charara’s extraordinary description of himself on his stationery. Nevertheless, whilst such a threatening tone should not have been used by Mr Charara, as any legal practitioner would know, the fact is that the costs recovered by Mr Charara would only be those awarded by the Court, not necessarily the costs which Mr Charara would seek.
[17]Corporations Act 2001, s.459J(1)(b).
There remains the argument that the statutory demand was an abuse of process because it was based on an assignment of a debt which had only been made in an attempt to pressure Microjet into immediate payment rather than having the claims and set-offs between Varkon and Microjet resolved in the logical way in the proceeding in the Magistrates’ Court. As I have already concluded that the statutory demand should be set aside, I propose to leave the determination of that argument to another day.
Costs
I decided at the conclusion of the hearing that because of the small amount involved I would fix the costs of the successful party myself rather than have the parties involved in yet another dispute. As discussed at the time, I proposed that I would invite the successful party to put in writing a figure for costs with an explanation of how that figure is calculated and then I would allow the unsuccessful party to make any submissions in writing in opposition to the costs claimed by the successful party.
As it happens, Microjet had already prepared its detailed claim for costs and Mr Charara received a copy of that document at the conclusion of the hearing. I will, therefore, direct that Mr Charara have until 4.00 pm on 19 October 2010 in which to file and serve any written submissions in opposition to Microjet’s application that its costs be fixed in the sum of $2,966.
---
1
10
0