Mundubbera Hotel Pty Ltd v Curran
[2001] QSC 332
•12 September 2001
SUPREME COURT OF QUEENSLAND
CITATION: Mundubbera Hotel Pty Ltd v Curran & Anor [2001] QSC 332 PARTIES: MUNDUBBERA HOTEL PTY LTD
ACN 095 390 131
(applicant)
v
DENNIS F J CURRAN AND RHONDA M CURRAN
(respondents)FILE NO/S: S 6634/2001 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court
BrisbaneDELIVERED ON: 12 September 2001 DELIVERED AT: Brisbane HEARING DATE: 16 August 2001 JUDGE: Philippides J ORDERs: 1. That the substantiated amount of the demand be $3,200;
2. That the demand be varied to $3,200;
3. That the demand be declared to have had effect, as so varied, as from when the demand was served on the applicant.
CATCHWORDS: CORPORATIONS – PRACTICE AND PROCEDURE – application to set aside statutory demand – whether supporting affidavit sufficient for purposes of s 459G(3) of the Corporations Act – whether genuine dispute – whether offsetting claim.
Corporations Act, s 459G, s 459G(3), s 459H
Brentwood Terrace Pty Ltd (unreported) 28/11/97 SCQld 648/97
David Grant & Co P/L (rec apptd) v Westpac Banking Corp (1995) 184 CLR 265.
Dromore Fresh Produce Pty Ltd v W Paton (Fertilizers) Pty Ltd (1997) 23 ACSR 230
Eden Bay Pty Ltd v Bennett & Co (1997) 15 ACLC 1634
Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581
L & D Audio Acoustics Pty Ltd v Pioneer Electronics Australia (1982) 1 ACLC 536.
Raffles Corp Pty Ltd v Cech (unreported) 4 May 2001 SCQld 129/2001COUNSEL: M J Campbell for the applicant
J W Peden for the respondentsSOLICITORS: Australasian Lawyers and Solicitors for the applicant
Rodney Boyce for the respondents
PHILIPPIDES J:
The Application
This is an application pursuant to s 459G of the Corporations Act (“the Act”) to set aside a Creditor’s Statutory Demand. The applicant must under s 459H of the Act satisfy the Court that there is either a genuine dispute about the existence of the debt or that the applicant has an offsetting claim.
The respondents oppose the application on the following grounds:
(a) the application is deficient in that it does not comply with the Corporations Act s 459G;
(b) there is no genuine dispute about the existence of the debt; and
(c) any offsets that the applicant has against the debt do not reduce the amount of the debt below the statutory minimum.
Background Facts
The Creditor’s statutory demand arises out of a contract for the purchase by the applicant from the respondents of certain rural property situated at Mundubbera, on which is located a hotel, for the sum of $1.35 million.
The contract also provided for the purchase of certain chattels and stock. The statutory demand concerns an alleged debt arising out of the provisions of the contract relating to the purchase of and payment for the stock of the hotel. The contract provided for an expert to carry out the stock-take, whose determination of the amount and price for the stock is binding on both parties.[1]
[1]Clause 17 of the Contract
The respondent’s affidavit material discloses that the applicant inspected the plant and equipment at the hotel and signed an acknowledgment that all plant and equipment was in “good working order and condition”[2] and also signed off on a 25 page list of the stock as having been checked and found to be correct,[3] which included a detailed listing of all items of stock, amounts for each item of stock and a total amount agreed as owing for stock of $53,185.09.
[2]See “A.03” to the affidavit of Rodney Boyce
[3]See “A.02” to the affidavit of Rodney Boyce
The amount due by the applicant to the respondents for stock was, according to the respondents’ material, due to be paid by 26 June 2001, on which date the applicant took possession of the hotel. On 27 June 2001, the applicant’s solicitors forwarded the sum of $45,627.41 for stock to the respondents’ solicitors in lieu of the $53,185.09, seeking to set off an amount of $7,557.68 against the $53,185.09.[4]
[4]See exhibit A to “AS2” to the affidavit of Sciacca
The respondents agree that $585 should be deducted from the amount owed for stock, and sought payment of the balance, being $6,972.68, in which amount the statutory demand was issued. However, for the purposes of the present application, the respondents concede that there is a dispute between the parties about the basis of the liability for the sum of $2,673.68, which is comprised in the $6,972.68, leaving a balance of $4,299.
Jurisdiction
A threshold question arises as to whether the application to set aside the statutory demand complies with s 459G(3) of the Act. The respondents contend that the application does not comply because the affidavit of Joseph Sciacca sworn 23 July 2001 does not as a minimum contain a statement of the material facts on which the applicant intends to rely to show that a genuine dispute exists. It is said that that affidavit contains statements of bare assertion of a dispute, which are insufficient.
The applicant seeks to rely on a further affidavit of Suzanne Gai Lawson sworn 13 August 2001, which was not filed within 21 days after the statutory demand was served,[5] but only seeks to rely on it to the extent that it expands upon the disputes raised within the 21 day period in the initial affidavit of Joseph Sciacca.
[5]The Creditor’s Statutory Demand dated 5 July 2001 was received by the applicant on 7 July 2001. The application and affidavit of Sciacca was served on the respondents on 24 July 2001.
It is well established that the court has no jurisdiction to set aside a statutory demand where an affidavit supporting the application to set aside is not filed and served within the 21 day period.[6] The affidavit must disclose facts showing there is a genuine dispute between the parties, but it need not go into the evidence. Nevertheless, a mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It must as a minimum contain a statement of the material facts on which the applicant intends to rely to show that a genuine dispute exists.[7] An affidavit which exhibits an exchange of correspondence between the parties or their solicitors from which it appears that a claim is made and rejected for specified reasons can qualify as a supporting affidavit.[8] An initial affidavit which satisfies the requirements of s 469G(3) of the Act may be supplemented after the 21 day period by further material, but this is not permitted where the initial affidavit fails the threshold test.[9]
[6]David Grant & Co P/L (rec apptd) v Westpac Banking Corp (1995) 184 CLR 265.
[7]See Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581 per Sundberg J at 587; approved by Lee J in re Brentwood Terrace Pty Ltd (unreported) 28/11/97 SCQld 9648/97; see also Dromore Fresh Produce Pty Ltd v W Paton (Fertilizers) Pty Ltd (1997) 23 ACSR 230
[8]Graywinter (supra) at 587.
[9]See Graywinter (supra) at 587; Eden Bay Pty Ltd v Bennett & Co (1997) 15 ACLC 1634, approved by Wilson J in Raffles Corp Pty Ltd v Cech (unreported) 4 May 2001 SCQld 129/2001
The initial affidavit of Joseph Sciacca states that there “exists a genuine pre existing dispute, known to the defendants and their solicitor as evidenced in the correspondence exhibited to the affidavit”. The affidavit exhibits a letter dated 27 June 2001 addressed to the respondent’s solicitors, wherein the applicant’s solicitors indicated they had deducted an amount of $7,557.68 from the amount of $53,185.09, such deductions being for the amounts of $585 and $2,673.68 and in addition for:
(a) the cost of a washing machine, which was not on the premises at the date of settlement ($1,099);
(b) the cost to pay-out security alarm system ($1,550);
(c) the promotion loss of business ($1,650).
The letter states:
“With respect to the security alarm system, our client had to pay the lease out, which was your client’s responsibility….In connection with promotions and loss of business, this we understand relates to a promotional game which your client had in place at the time and discontinued when he left the hotel and accordingly our client suffered a substantial loss in that a lot of patrons left the hotel in disgust because the particular promotion had been cancelled.”
Although it would have been preferable if more detail had been provided, in my opinion, the affidavit of Joseph Sciacca satisfies the threshold test. In exhibiting the relevant correspondence, it does more than merely deny the debt. There was a sufficient indication of the areas in dispute. Accordingly, it can be supplemented by the further affidavit of son in respect of matters already raised.
Existence of a Debt
The respondents claim an entitlement to the $53,185.09 on the basis that that amount is owing under the Contract, as determined in accordance with the procedure set out in clause 17 of the Contract. The respondents contend that, in the applicant’s solicitor’s letter dated 27 June 2001, the applicant has acknowledged the debt in the sum of $53,185.09.[10] There were no submissions to the contrary and no submissions directed to any dispute about the existence or amount of the debt, on the applicant’s own material. Accordingly, I shall proceed on the basis that the issue is whether there are any genuine offsetting claims.
[10]Ex “AS2” to affidavit of Sciacca
Offsetting Claims
Prior to the issue of the statutory demand, the applicant claimed, by its solicitor’s letter dated 27 June 2001, to be entitled to deductions in the amount of $7,557.68. As I have mentioned, prior to the statutory demand being served, the respondents conceded an offsetting claim in the amount of $585. In addition, the respondents now also concede for the purposes of this application a dispute as to matter of certain miscellaneous stock totalling $2,673.68. The remaining issue then is whether for the purposes of s 459H of the Act, the applicant has a genuine claim against the respondents by way of counterclaim, set-off or cross demand so as to bring the substantiated amount of the demand under the statutory minimum of $2,000.
The applicant’s material asserts that there are three off-setting claims totalling $4,299, as follows:
(a) a claim for the cost of a washing machine, which the applicant claims was not on the premises at the date of settlement of $1,099 (“the Washing Machine Claim”);
(b) a claim for the cost of payout of an alarm system of $1,550 (“the Alarm System Claim”); and
(c) a claim for loss suffered for promotion loss of business of $1,650 (“the Promotion Loss”).
The Washing Machine Claim of $1,099:
The applicant, by its solicitor’s letter alleges that the washing machine was not on the premises at the date of settlement.[11] The inventory referred to a Kleenmaid commercial HD machine. The respondents assert that the machine referred to in the inventory was on the premises at the date of settlement and that the applicant signed an acknowledgment on 20 April 2001 that it had inspected the plant and found it all to be present and in good working order.[12]
[11]See ex AS2(A), Australasian Lawyers and Consultants letter dated 27 June 2001, at page 1, affidavit of Sciacca
[12]The respondents’ material referred to independent evidence from Murray Voss Electrical Pty Ltd that it had sold a washing machine originally to the Mundubbera Hotel (when the respondents owned it), had serviced it just prior to the sale to the applicant and that the washing machine was on the premises at the date of sale to the applicant: See Ex “B” to affidavit of Rodney Boyce.
The affidavit of Suzanne Gai son states:[13]
“... when I inspected the item … in the inventory ... it was a new washing machine. It was the same machine I inspected prior and after I executed the contract Only after settlement was finalized was I aware the washing machine that was inspected was no longer there; I was at no time advised that the new machine was not what I purchased … The vendor’s agent advised me that he believed it was the vendor’s daughter’s, which is why it was not there. A much older machine of the same brand was substituted in its place which had to be replaced with a new machine which I purchased … as the substituted machine … was inoperable.”
[13]See para 11.
There is evidence in the affidavit of Rodney Boyce that indicates that the Kleenmaid washing machine the subject of the Contract was not at the hotel on one of the occasions when the applicant inspected the hotel, possibly because it was away being repaired as reflected in the electrical store’s letter and receipt. Instead, a domestic machine belonging to the daughter of the respondents was being used. Counsel for the respondents asserted that that may be the cause of the applicant’s claim.
It seems that a Kleenmaid washing machine was on the premises at the date of settlement, but there is a dispute as to whether that machine was the machine agreed to be sold.
In my opinion the offsetting claim is sufficiently raised. The applicant’s claim is not fictitious or merely colourable.[14]
[14]Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37
The Alarm System Claim of $1,550
According to the affidavit of Joseph Sciacca, the applicant claims that it had to pay the lease out for the system, which it maintains was the respondent’s responsibility.[15]
[15]See ex AS2(A), Australasian Lawyers and Consultants letter dated 27 June 2001, at page 2, affidavit of Sciacca.
The respondents assert that there is no basis for any offsetting claim in respect of the alarm system because there was only one alarm system at the hotel, that which had been hired from Signature Security Group Pty Limited for $30 per month[16], and in respect of which the applicant was provided with a copy of the hire agreement prior to the contract being signed.[17] The respondents claim that under clause 23 of the Contract, the applicant was liable for ongoing lease payments for the alarm system and if any lessor didn’t consent to the applicant assuming liability for the ongoing payments, the applicant agreed to be liable for the payout under any hire agreement.[18]
[16]Affidavit of Boyce at para 3.02.
[17]Affidavit of Boyce at para 3.02 and exhibit “C”.
[18]See the Contract; Ex A.01 to the affidavit of Boyce.
In the affidavit of Suzanne Gai son, a further ground is raised. It is stated that:[19]
[19]See para 12 –14
“12. Security Systems: I claim there was a security monitoring code alarm system that was disclosed to the company it involved sensor’s, strobe lights for the purpose of monitoring as set out in the lease specified in the contract. Annex hereto, I now refer to Exhibit “SGL4”. Copy of lease of Alarm system annexed to the Contract and receipt for payment of Alarm Systems/Security Cameras.
13. At all times the security camera’s spelt out in the inventory schedule, situated under the heading BACK BAR-INSIDE BAR AREA “POKIE ROOM contd and the Alarm system set out under the heading STOREROOM TO GARATE is not listed or described in the lease described as Alarm Services, nor is it covered in Clause 23 of the Contract. These Items have subsequently being returned to their rightful owner and this company has had to purchase new equipment. There was a third Security Camera in the Bottle Shop, which is not included in the inventory.
14. It at all times was purported to be owned by the then vendors it is clearly different to the security equipment that is defined in the lease schedule. I spoke to the Signature Alarm Company, a person named Mr Woods, he advised me that the rental for monitoring and using of his Equipment was not $30.00, rather an amount of a further $80.00 which was being charged monthly for the use of that Equipment described in the inventory, not the lease referred to in paragraph 12 above.”
As initially raised in the affidavit of Joseph Sciacca, the issue was one as to who bore the liability to pay the lease payments. Insofar as the supplementary affidavit of son raises other new matters concerning the security system, it cannot be relied upon. I do not consider that any offsetting claim arises in respect of the liability for lease payments, which is clearly covered by the contract.
The Promotion Loss Claim of $1,650
The applicant claims[20] that the respondents discontinued a particular promotion when they sold the hotel and that the applicant “has suffered a substantial loss in that a lot of the patrons left the hotel in disgust because the particular promotion had been cancelled”. The respondents assert that they were no longer in possession of the hotel after they sold it and had no possible way of continuing any promotions after they left possession and that promotions are a matter for the applicant, once it takes possession of the hotel.
[20]See p 2 of the applicant’s solicitor’s letter dated 27 June 2001.
The affidavit of Suzanne Gai son states:[21]
[21]See para 17 – 20.
“17. Promotion Monies: the vendor committed personally to putting up a cash prize, prior and during the time the Hotel was under contract. Part of the promotion was that the defendants had purported to customers of the Hotel and to me and the Plaintiff Company, that Mr Curran a Defendant, stated he was depositing $50.00 per week, this promotion as at the date of settlement had been run for a period of 33 weeks. The prize to accrue until a customer drew a wild card i.e. the Joker was an amount of $1,650.00.
18. I claim that as the vendor had arranged the promotion and attained the Cash takings originating from the promotion. The prize monies that he personally undertook to pay to me on behalf of the Plaintiff Company for and on behalf of the Hotels Clients as to have been paid as his undertaking. On the day of the settlement of the Hotel, Mr Bob Christensen, the Defendant’s agent advised me that Mr Curran was reneging on the arrangement even though he attained the benefit of the promotion.
19. The monies that he had placed into the promotion fund should have been paid to the Plaintiff to account for monies to pay out to the winner of the promotion. His refusal subsequently to pay the weekly accruing prize monies that was to be available to the proposed winning person caused a loss of trade and considerable aggressive behavior by some of the Clientele.
20. Some of the Clients of the Hotel left the hotel, refusing to patronize it thereafter, causing me subsequently loss of income. I would have paid out the money myself but I was advised that the promotion was illegal. I say that the counterclaim of the $1650 I have made does not in any way set off the duress and loss of income that has occurred due to the conduct of the Plaintiffs.”
I do not consider that this matter properly raises an offsetting claim. The money allegedly raised by the respondents did not belong to the applicant and given that the applicant asserts the promotion was illegal, it is difficult to see any value in the claim. No contractual relationship is alleged. I consider the claim to be frivolous.
Abuse of Process
The applicant alleges that there has been an abuse of process in that the respondents are using the process of issuing the statutory demand in order to collect a debt, asserting that the demand should be put in the wider picture of the payment to date out of $1.35 million for the hotel and $45,627.41 for stock.[22] It is said that the statutory demand should be set aside as an abuse of process. I reject that proposition and see no evidence of abuse of process. In any event, given my conclusions as to there being offsetting claims, nothing turns on this issue.
[22]See L & D Audio Acoustics Pty Ltd v Pioneer Electronics Australia (1982) 1 ACLC 536.
Conclusion
I am of the opinion that the applicant has offsetting claims in the sum of $1,099. The consequence is that the substantiated amount is $3,200, (being $6,972.68 less the sum of $2,673.68 and $1,099), and is more than the statutory minimum of $2,000.
I make an order varying the demand to the amount of $3,200 and declaring the demand to have had effect, as so varied, as from when the demand was served on the applicant.
I shall hear submissions as to costs.
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