Re Brentwood Terrace Pty Ltd

[1997] QSC 222

IN THE SUPREME COURT

OF QUEENSLAND

No 9648/97
Brisbane

[Re Brentwood Terrace Pty Ltd]

IN THE MATTER of the Corporations Law

- and -

IN THE MATTER of BRENTWOOD TERRACE PTY LTD ACN 005 956 267

IN THE MATTER of AN APPLICATION TO SET ASIDE A STATUTORY NOTICE

REASONS FOR JUDGMENT - W C LEE J

DELIVERED:           28 November 1997     

CATCHWORDS:     CORPORATIONS - Statutory Demand - application to set aside - whether supporting affidavit showed genuine dispute - whether supplementary affidavits admissible to raise new grounds when original ground not established - application dismissed: Corporations Law ss. 459G, 459H.

Re Louisbridge Pty Ltd [1994] 2 Qd R 144 distinguished; John Holland Construction and Engineering Pty Ltd v. Kilpatrick Green Pty Ltd (1994) 14 ACSR 250, Graywinter Properties Pty Ltd v.  Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581, Dromore Fresh Produce Pty Ltd v.  W Paton (Fertilizers) Pty Ltd (1997) 23 ACSR 230 applied; David Grant & Co Pty Ltd v.  Westpac Banking Corporation (1995) 184 CLR 265 referred to.

COUNSEL:Mr M D Martin for the applicant

Mrs C E Holmes for the respondent

SOLICITORS:          Baker Johnson for the applicant

Primrose Couper Cronin Rudkin for the respondent      

HEARING DATE:    11 November 1997

REASONS FOR JUDGMENT - LEE J

Judgment delivered 28 November 1997

This is an application filed 24 October 1997 to set aside a statutory demand for payment of a debt pursuant to s.459G of the Corporations Law. It was returnable on 11 November 1997. The respondent issued the demand on the applicant on 18 August 1997, although according to the affidavit of Kevin Richard Leonard sworn and filed on 10 November 1997, the demand was not served on the applicant until 3 October 1997. Thus the application, filed 24 October 1997, was not filed until the last day of the 21 day period stipulated by s.459G(2). On that date a purported supporting affidavit sworn by Kevin Richard Leonard was also sworn and filed with the application.

Sections 459G and 459H(i) provide:

“Company may apply
459G (1)  [Application to set aside statutory demand] A company may apply to the Court for an order setting aside a statutory demand served on the company.

459G(2) [Time limit on application] An application may only be made within 21 days after the demand is so served.

459G(3) [Requirements for effective application] An application is made in accordance with this section only if, within those 21 days:

(a)an affidavit supporting the application is filed with the Court; and

(b)a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.

Determination of application where there is a dispute or offsetting claim

459H (1) [Application of section] This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:

(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

(b)that the company has an offsetting claim.”

The application itself simply asks for an order that the statutory notice be set aside and for costs, hence the importance of the supporting affidavit in which paragraphs 4, 5 and 6 thereof are as follows:

“4.There is a genuine dispute between AEC Electrics and Brentwood Terrace Pty Ltd about the existence of a debt.

5.The basis of this dispute is that AEC Electrics carried out electrical work in New South Wales without holding the necessary licenses and entitlement.

6.Annexed hereto are copies of ss.4, 6, 7, 10, 14 and 19 of the Building Services Corporation Act 1989 (NSW) ACT 149.”

No other ground or basis was stated for the assertion that there was a “genuine dispute”.

Section 459H provides that where the Court is satisfied that there is a genuine dispute as to the existence or amount of the debt in question, the Court may in certain circumstances set aside the demand.   As indicated, the reason for this dispute, stated in para 5 of the affidavit, was said to be that the respondent was not properly licensed pursuant to NSW legislation. 

It is clear from the material filed by the respondent, and as much was properly admitted in this Court by Mr M D Martin, counsel for the applicant, that the respondent was in fact properly licensed, and that the assertion in Mr Leonard’s affidavit filed 24 October 1997 was groundless.  It was further submitted by Ms Holmes, Counsel for the respondent, that the Building Services Corporation Act above referred to did not apply to the relevant contract essentially because the contract was made in Queensland.  It was further submitted that nothing demonstrated that that Act had any application to the actual work carried out in New South Wales.  It was submitted that s.10 of the Act prevented any action on the contract for damages  or to enforce any other remedy only where the contract was entered into in contravention of s.4 (unlicensed contracting) or s.6 (Contracts to be in writing).  It was further said that there was nothing in the applicant’s material whether within the definitions of that Act or otherwise, which was not performed by an individual holding a licence or working under a qualified supervisor.  See s.14.

Whether those submissions are correct is not a matter which I need determine today because of the view otherwise formed.  It is sufficient to say that both parties agree that the original affidavit of Mr Leonard filed 24 October 1997 did not disclose any real basis to dispute the debt.  Miss Holmes submitted that the mere assertion in the supporting affidavit that there was a “genuine dispute” could not save the application as filed because it failed to show a relevant genuine dispute: John Holland Construction and Engineering Pty Ltd v. Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 per Young J at 253.

In Graywinter Properties Pty Ltd v.  Gas and Fuel Corporation Superannuation Fund (1996) 21 ACSR 581, Sundberg J in the Federal Court at Melbourne said (inter alia) that the supporting affidavit must as a minimum contain a statement of the material facts on which the applicant intended to rely to show that a genuine dispute exists. His Honour analysed the legislation and referred to various authorities, including the High Court decision in David Grant & Co. Pty Ltd v.  Westpac Banking Corporation (1995) 184 CLR 265 and Re Louisbridge Pty Ltd [1994] 2 Qd R 144. On the facts of the case, His Honour held that the supporting affidavit filed within time satisfied the minimum requirements by setting out the facts which showed that there was a genuine dispute between the parties. His Honour in fact adopted the approach of Ryan J. in Re Louisbridge Pty Ltd, but did not follow Hire Works Pty Ltd v. Elexpo Pty Ltd (1995) 19 ASCR 114.

Graywinter Properties Pty Ltd was applied by Young J in Dromore Fresh Produce Pty Ltd v.  W Paton  (Fertilizers) Pty Ltd (1997) 23 ACSR 230. His Honour also declined to follow Hire Works Pty Ltd v. Elexpo Pty Ltd. His Honour’s decision is clear authority for the proposition that the supporting affidavit referred to s.459G(3) must show real reason for any dispute. His Honour said at 235:

“When one examines s.459G of the Law, one can see that it is mandatory that there be a supporting affidavit. This ordinarily means an affidavit which backs up the claim that is made. As I said in John Holland Construction & Engineering Pty Ltd.  v.  Kilpatrick Green Pty Ltd (1994) 14 ACSR 250, 253, there must be something more than mere assertion: See also Re Louisbridge Pty Ltd [1994] 2 Qd R 144, 145. In the present case there is nothing more than a solicitors’ assertion that the plaintiff’s claim is disputed. This is insufficient. I consider the learned Master was correct to follow the thinking of Sundberg J in the Graywinter case and to hold that there was no supporting affidavit in the present case.”

His Honour dismissed an appeal from a Master’s decision striking out the application with costs.

The proposition expounded in that case was not challenged in this Court, nor do I see that it rightly could be. Thus, were the matter to stand solely on Mr Leonard’s affidavit of 24 October 1997, the application must fail. That affidavit discloses no real basis to dispute the debt, and in that respect is less than a “mere assertion”. The basis of the claimed dispute having disappeared, there is in fact no assertion made. The affidavit then can not be said to be a supporting affidavit in terms of s.459G with the consequence that there is no valid application showing a genuine dispute.

However, the applicant has since filed two further affidavits in support of its application.  The first, a further affidavit by Mr Leonard, sworn and filed 10 November 1997 and the second was another affidavit by him sworn 11 November 1997, filed that day by leave given by me.  Those two later affidavits swear to a number of points of dispute between the parties relating to the debt.  The assertions include faulty workmanship on the part of the respondent, and failure on the part of the respondent to comply with contractual obligations.  These and other matters are now relied upon as a new basis on which the debt the subject of the demand is said to be disputed.

The respondent has filed material disputing these assertions including an affidavit by Andrew Peter Wyeth, partner in the firm which served the demand.  In paragraphs 14 and 15 (exs. I and J) it is stated that the debt had previously been acknowledged by the applicant as far back as 17 October 1997 and 8 November 1996, hence the submission by Ms Holmes that there is no genuine dispute in any event.  Whether there is in substance a genuine dispute is a matter which I do not have to determine. 

The question is simply whether those two further affidavits of Mr Leonard filed 10 and 11 November 1997 are supporting affidavits within the meaning of s.459G(3) and whether they can convert what is not a valid application into one that is. If they are not, then the application must fail, simply because the applicant has not complied with the Corporations Law, which requires that an application to set aside a statutory demand must be accompanied by a supporting affidavit. 

It was argued for the applicant that the decision of Ryan J in Re Louisbridge was relevant and justified reliance upon the subsequent two affidavits.  That was a case where the applicant  in an application to set aside a statutory demand sought to adduce further affidavit material outside the 21 day time limit in support of a valid application made within that time limit.  At 145 Ryan J said:-

“It was submitted for the respondent that the affidavits should not be received, since s.459C requires the application to be accompanied by an affidavit in support.  I do not think that this means that supporting affidavits may not be filed after the 21 day period, provided that an affidavit is filed and served within the 21 day period which supports the application by providing grounds for concluding that there is a genuine dispute between the company and the creditor about the existence or amount of a debt to which the demand relates, or that the company has an offsetting claim.”  (emphasis added)

That case is quite different to the facts now before the Court.  The approach is similar to that adopted in Graywinter Properties Pty Ltd and Dromore Fresh Produce Pty Ltd.  

In my opinion it is difficult to see how either of the two latter affidavits can be said to be supporting affidavits. An application to set aside must, pursuant to s.459G(2) be made within 21 days of the service of the statutory demand. This is a strict time requirement, as the High Court has recently unanimously affirmed in David Grant & Co Pty Ltd v. Westpac Banking Corporation.  Gummow J, with whom the other members of the Court agreed, said at 276-277:-

“In providing that an application to the court for an order setting aside a statutory demand ‘may only’ be made within the twenty-one day period there specified and that an application is made in accordance with s.459G only if, within those twenty-one days, a supporting affidavit is filed and a copy thereof and of the applications are served, sub-ss (2) and (3) of s.459G attach a limitation or condition upon the authority of the court to set aside the demand. In this setting, the use in s.459G(2) of the term ‘may’ does not give rise to the considerations which apply where legislation confers upon a decision-maker an authority of a discretionary kind and the issue is whether ‘may’ is used in a facultative and permissive sense or an imperative sense. Here, the phrase ‘an application may only be made within 21 days’ should be read as a whole. The force of the term ‘may only’ is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s.459G. An integer or element of the right created by s.459G is its exercise by application made within the time specified. To adapt what was said by Isaac J in The Crown v.  McNeil (1922) 31 CLR 76 at 100-101, it is a condition of the gift in sub-s.(1) of s.459G that sub-s.(2) be observed and, unless this is so, the gift can never take effect. The same is true of sub-s.(3).”

As indicated, this application was made on the last day of the 21 day time limit. Section 459G(3) provides that an application is made in accordance with the section only if, within those 21 days, a supporting affidavit is also filed. If this is not done, there is simply no application. Here, the only affidavit filed within time, Mr Leonard’s affidavit of 24 October 1997, is, as I have indicated earlier, not a supporting affidavit for the purposes of s.459G(3). As neither of the two affidavits were filed within the time limit, s.459G has not been complied with and there simply has not been a valid application made.

To accede to the application and allow the applicant to rely upon late affidavits as supporting an application, would allow the applicant to circumvent the 21 day limit by showing a complete change of the basis on which the application was originally made. This is clearly in contravention of s.459G. Therefore the application was not effectively made and there is no power in the Court to allow any extension of time within which the applicant may repair the damage. See David Grant & Co Pty Ltd v.  Westpac Banking Corporation at 279. 

As Gummow J pointed out in that case at 273, for the purposes of a winding-up application, the consequences of failure to comply with the statutory demand within the specified time limit creates a presumption which must be taken by the Court that the company is insolvent.  However His Honour continued:-

“In so far as an application for a company to be wound up in insolvency relies on failure by the company to comply with a statutory demand, the company may not oppose the winding up application on a ground that the company relied on for the purposes of an application to set aside the demand.  Nor may the company oppose the winding up application on a ground on which it could have so relied but did not, whether or not in fact it sought to set aside the demand (s.459S(1)).  It is true that, in these circumstances, the court may grant leave to oppose the application on such a ground.  Nevertheless, the court must not grant such leave unless it is satisfied that the ground is material to proving that the company is solvent (s.459S(2)).”

For the foregoing reasons, I have no option but to dismiss the application with costs.