Oretech Pty Ltd v Crossword Investments Pty Ltd No. Scgrg-00-240

ORETECH PTY LTD V CROSSWORD INVESTMENTS PTY LTD

[2000] SASC 269

1................ JUDGE BURLEY......... The plaintiff has applied to set aside a statutory demand dated 14 February 2000. The demand, which is supported by a verifying affidavit, states that the plaintiff is indebted to the defendant in the sum of $30,996.20 for goods sold and delivered by the creditor (defendant) to the company (plaintiff) at the plaintiff’s request.

The affidavits admitted into evidence on the application are as follows:
(1)... Affidavit of JM Hunt sworn 16 March 2000 and the exhibits thereto.
(2)... Affidavit of SN Robson sworn on 11 April 2000 and the exhibits thereto.
(3)... Affidavit of John Malcolm Hunt sworn on 11 April 2000 with the qualification that the first and last sentences of paragraph 5 of that affidavit have been admitted de bene esse.
(4)... Affidavit of BM Featherby sworn on 1 May 2000 and the exhibits thereto.
(5)... Affidavit of SN Robson sworn on 26 May 2000.
(6)... Affidavit of JM Hunt sworn on 26 May 2000, except for paragraph 5 thereof. The exhibits to that affidavit have also been admitted.
Mr Hunt is a director of the plaintiff. The plaintiff is a retail supplier of cellular phones, car audio, car security and home security products. The plaintiff has purchased car security products from the defendant since about July 1998. In his first affidavit Mr Hunt asserted that various models of car security products supplied by the defendant were unreliable with the result that there have been numerous customer warranty claims made against the plaintiff. Mr Hunt also asserted that under the trading agreement between the plaintiff and the defendant, the defendant is required to indemnify the plaintiff against any genuine retail customer warranty claim.
According to Mr Hunt, in about mid-September 1999 he sought indemnity from the defendant in respect of a warranty claim made by a customer in respect of goods supplied by the defendant. No satisfactory response was received from Mr Featherby of the defendant company. Mr Hunt made similar allegations in relation to indemnity sought from the defendant by a Mr Tolley, an employee of the plaintiff. He has stated that no warranty claims made since September 1999 by the plaintiff have been met by the defendant.
Mr Hunt’s first affidavit, if taken in isolation, discloses that the plaintiff may have a genuine off-setting claim to the extent of $6,000.00 (paragraphs 12 and 13 of the affidavit), but by paragraph 14 of his affidavit he asserts that “many more warranty claims will be made which should also be set off against any monies currently owed to the Defendant”. In my view, that assertion cannot be relied upon to support the existence of an off-setting claim beyond that which is established in paragraphs 12 and 13 of the affidavit. In arriving at that conclusion I have taken into account the non-specific nature of the allegation and also a fascimile transmission dated 11 February 2000 from the plaintiff’s solicitors to the defendant’s solicitors where it is said that the plaintiff “has claimed in excess of $10,000.00” under the warranty arrangement.
In his second affidavit Mr Hunt deposed to the fact that he has carried out a more detailed analysis of the plaintiff’s sales of products purchased from the defendant. In paragraph 3, he has set out the warranty costs in relation to a number of items totalling $12,825.75. That evidence, taken in isolation, would support the existence of an off-setting claim of $12,825.75. In paragraph 5 he makes a general assertion that he expects further breakdowns in relation to equipment sold and estimates that the costs may be as high as $35,000.00. However, this is based on a complete failure of the various units leading to a replacement cost of $200.00 per unit. Even if it is accepted that the plaintiff is allowed to make an off-set against the debt owed by it to the defendant to cover future warranty claims, it could not possibly be on the basis that all of the units will fail totally because the plaintiff’s experience of total failure to date has only been 25 out of 200 units. It is not possible to quantify any additional off-setting claim which the plaintiff may have by reference to paragraph 5 of Mr Hunt’s second affidavit.
Mr Featherby is a director of the defendant. In his affidavit of 1 May 2000 he asserts that all warranty claims have been met. In addition he has exhibited to his affidavit a document called “Customer Sales Detail” and a statement of transactions which dispute Mr Hunt’s contention that he has purchased goods from the defendant after 1 September 1999.
Mr Featherby also disputes the assertions made by Mr Hunt in his second affidavit relating to warranty claims in excess of $12,000.00.
After I had reserved my decision in this matter the plaintiff was given leave to file an additional affidavit of Mr Hunt explaining that reference in his initial affidavit to September 1999 should have been September 1998.
The plaintiff contends that it has an off-setting claim greater than the amount of the debt. The provisions of Section 459H of the Law have been invoked. I must determine the genuine level of the claim contained in the statutory demand and the genuine level of the off-setting claim, as opposed to determining the actual indebtedness arising from each: Re Morris Catering (Aust) Pty Ltd (1993) 11 ACLC 919 at 922, 11 ACSR 601 at 605.
On the evidence before me there can be no dispute that the genuine level of the defendant’s claim is $30,996.20. For the reason stated earlier, I do not consider that the plaintiff has made out a case for an off-setting claim the same as or exceeding the amount claimed in the statutory demand. At best, the genuine level of the plaintiff’s off-setting claim is $12,825.75.
The plaintiff also relied upon two alleged defects in relation to the statutory demand. In a letter dated 29 March 2000 from the plaintiff’s solicitors to the defendant’s solicitors, it was stated:
“In addition to our argument that the plaintiff has a genuine dispute in relation to your client’s Statutory Demand we contend that the affidavit which purportedly supports the Statutory Demand does not comply with Section 459E(3) because it does not accord with the South Australian Corporations Rule 5.2 as it is not in accordance with Form 7 of the South Australian Corporations Rules. Further the demand and affidavit are defective in that there is no coincidence between the date of the affidavit and the demand the former being sworn 5 days before the demand.”
Two matters may be mentioned briefly: first, the plaintiff’s defence has not been that the debt is genuinely disputed but rather that the plaintiff has a genuine off-setting claim; second, the contention that “there is no coincidence between the date of the affidavit and the demand”, cannot lead to the setting aside of the demand. If there were evidence from the plaintiff that a relevant payment had been made between the date of the swearing of the affidavit and the date of the demand, some substance might be lent to the contention but there is no such evidence. It has not been disputed by the plaintiff that the defendant has supplied goods to the plaintiff at the request of the plaintiff totalling $30,996.20.
There remains for consideration the contention that there has been non-compliance in that the form of the demand is not in accordance with the South Australian Corporations Rules. Reliance was placed upon the decision of Master McCreadie in Beta Trading Co Pty Ltd v Specialised Laminators (1997) 15 ACLC 270 where his Honour followed the earlier decision of the Supreme Court of New South Wales in B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1995) 13 ACLC 88. In Beta Trading Co Pty Ltd the statutory demand was made by a Queensland creditor in a form which complied with the Queensland rules in respect of a debtor who carried on business in New South Wales. The form was not in accordance with the New South Wales requirements. It was held that the lack of compliance constituted a defect requiring the demand to be set aside.
The defendant relied upon the decision of the Full Court of the Federal Court in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 24 ACSR 353.
On the question of compliance with the rules of a particular Court the Full Court (Northrop, Merkel and Goldberg JJ) said at 361:
“At the time a statutory demand is served, the court in which any application to set it aside or any petition for the winding up of the company in the event of non-compliance with the demand might be brought is not pre-determined. In the case of the appellant, it was open to it to apply to the Federal Court, the Supreme Court of New South Wales or the Supreme Court of Victoria to set aside the demand. It was open to the respondent to apply for a winding up of the appellant in each of those courts.
In principle, in these circumstances, there is no reason why the accompanying affidavit may not be sworn in any of the forms prescribed by the rules of a court having jurisdiction in respect of the demand or the winding up of the appellant as a result of non-compliance with the demand.”
Later their Honours said at 362:
“The appellant relied on B & M Quality Constructions Pty Ltd v Buywrite [sic] Steel Supplies Pty Ltd, supra, where a statutory demand was set aside because the accompanying affidavit did not comply with the Rules of the Supreme Court of New South Wales as to the manner of verification of the debt. McLelland CJ in Eq (at ACSR 433; ACLC 91) held that the failure to comply with the rules was a sufficient ‘other reason’ to set aside the demand for the purposes of s 459J(1)(b). The appellant also relied on Portrait Express (Sales) Pty Ltd v Kodak (A’asia) Pty Ltd (1996) 20 ACSR 746; 14 ACLC 1095 in support of its submission that if an affidavit was not in a proper form, the statutory demand should be set aside. In that case the accompanying affidavits did not comply with the rules of the Federal Court or of the Supreme Court of New South Wales in important respects. However, in neither case did the court have to consider the situation arising before us in which the affidavit did comply with the rules of another court having jurisdiction in the matter.
In our opinion, there is nothing in the Corporations Law or the cross-vesting scheme in respect of statutory demands which requires that the determination of which rules are the rules which govern the form of an accompanying affidavit, is to be by reference to the registered office of the company the subject of the demand, or the ascertainment of relevant facts relating to the debt, the debtor and the creditor and their connection with a particular court.
Adoption of the rules of a court ‘as the case requires’ [see definition of ‘rules’ in Section 9 of the Corporations Law] is apt to cover the rules of any court which has jurisdiction to hear and determine any application in relation to, or arising out of, the service of a statutory demand... No reason of policy or principle requires that the rules of any one court, potentially having jurisdiction in a matter arising out of the service of a statutory demand, be preferred over the rules of another court having the same jurisdiction.”
In my view, the approach taken by the Full Federal Court in Spencer Constructions is preferable to that taken by the New South Wales Supreme Court in Beta Trading and B & M Quality Constructions. In particular, the decision of the Full Court of the Federal Court involved a case where there was compliance with the rules of one court but not another. That is the same as the case before me. It is not in dispute that the affidavit accompanying the statutory demand complies with the provisions of the Western Australia Rules of Court.
Even if it were not, there has been no suggestion that there has been any prejudice to the plaintiff. In that light it is difficult to see that “there is some other reason why the demand should be set aside”: s 459J(1)(b).
For these reasons I do not think that there is any material defect in the statutory demand or the affidavit supporting it.
As stated earlier in these reasons, the plaintiff has only been able to establish an off-setting claim to the extent of $12,825.75. Consequently, in accordance with Section 459H(4) there will be an order varying the statutory demand by reducing the amount of same to $18,170.45. There will also be a declaration that the demand as varied had effect from when the demand was served on the plaintiff, namely 24 February 2000.

[2000] SASC 269

11 August 2000