Re Ozlift Pty Ltd
[2018] VSC 824
•1 November 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2018 00215
IN THE MATTER of OZLIFT PTY LTD (ACN 169 695 888)
| OZLIFT PTY LTD (ACN 169 695 888) | Plaintiff |
| v | |
| VENTO ENERGY SUPPORT | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 April 2018 |
DATE OF JUDGMENT: | 1 November 2018 |
CASE MAY BE CITED AS: | Re Ozlift Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 824 |
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CORPORATIONS – Application to set aside statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) – Affidavit accompanying the demand sworn by solicitor who had no direct knowledge of facts who was deposing to instructions given by creditor’s director – Faji (Australia) Constructions Pty Ltd v AC Professional Accounting Pty Ltd Austech Institute for Further Education Pty Ltd v Britt applied – Demand set aside on basis that affidavit did not verify the demand under s 459E(3) – Finding that alleged offsetting claim raised is genuine and arguable and warrants further investigation.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Mason | MST Lawyers |
| For the Defendant | Mr A Silver | Best Hooper |
HIS HONOUR:
The plaintiff, Ozlift Pty Ltd (‘Ozlift’), makes application pursuant to s 459G of the Corporations Act 2001 (Cth) (‘the Act’) by originating process filed 23 January 2018 to set aside a statutory demand served on it by the defendant, Vento Energy Support (‘Vento’), dated 22 December 2017.
Ozlift provides cranage, installation and fit-out services for wind turbines at wind farms in Victoria. Vento, a Danish corporation, provides specialist services for repairing and maintaining the blades of wind turbines.
The demand claims that Ozlift owes Vento €60,946.00[1] which is said to be owing pursuant to two invoices. Invoice 11327, dated 31 May 2016, seeks payment of €32,671.00 and Invoice 12244, dated 28 July 2017 seeks payment of €28,275.00.
[1]Approximately $98,579.
The demand was accompanied by an affidavit of Rose Maina (‘Ms Maina’) sworn 22 December 2017 which purports to verify the demand in compliance with s 459E of the Act.
Vento accepts that the application has been made within the period prescribed by s 459G of the Act.
In support of its application, Ozlift relies on an affidavit of its director Cheryl Joan Hammerstein (‘Ms Hammerstein’) sworn 22 January 2018 and an affidavit of Beau Michel Hammerstein (‘Mr Hammerstein’) sworn 24 March 2018. In opposing the application, Vento relies on an affidavit of its Managing Director, Henrik Brink (‘Mr Brink’), affirmed 6 March 2018, and two affidavits of its employee Steen Hansen (‘Mr Hansen’) both affirmed 27 March 2018.
Ozlift contends that there are three grounds on which the demand should be set aside. First, it submits that the demand should be set aside under s 459J(1)(b) of the Act due to defects in the affidavit of Ms Maina accompanying the demand. Secondly, it contends that the demand should be set aside pursuant to s 459H(1)(b) of the Act because Ozlift has an offsetting claim which exceeds the amount of the debts to which the statutory demand relates. Thirdly, and in the alternative, it submits that there is a genuine dispute as to the existence of the debts to which the statutory demand relates and the amount of those debts. For the reasons which follow, I consider that Ms Maina’s affidavit which accompanied the demand did not adequately verify the demand in compliance with s 459E of the Act and for that reason the demand should be set aside. For completeness, I also consider that if I am not correct in my view in regard to Ms Maina’s affidavit, that Ozlift has established to the requisite standard that it has a genuine offsetting claim in relation to the debt the subject of the demand and that offsetting claim is sufficient to extinguish the debt on an application of the formula prescribed in s 459H of the Act. I do not consider it necessary in the circumstances to express a view on other grounds which Ozlift sought to raise such as the expression of the amount claimed in the demand in euros or the controversy in respect of the second invoice and whether it gives rise to a genuine dispute.
‘Some other reason’ – section 459J(1)(b) of the Act – did Ms Maina’s affidavit verify the demand in compliance with s 459E of the Act?
Mr Mason of counsel, who appeared on behalf of Ozlift, placed emphasis in his written and oral submissions on a contention that the affidavit of Ms Maina sworn 22 December 2017 which accompanied the demand failed to verify the demand in compliance with s 459E(3) in two respects. The first was that Ms Maina’s affidavit did not depose that the sum demanded was due and payable at the date of the demand. Second, he contended that Ms Maina did not have the required direct knowledge of the relevant facts necessary to be deposed to.
Section 459E(3) provides:
Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:
(a)verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and
(b)complies with the rules.
Rule 5.2 of the Supreme Court (Corporations) Rules 2013 provides:
5.2For the purposes of section 459E(3) of the Corporations 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;
(b)be made by the creditor or by a person with the authority of the creditor or creditors; and
(c)not state a proceeding number, or refer to a Court proceeding, in any heading or title to the affidavit.
Paragraph 4 of the affidavit in Form 7 of the Rules contains 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.
Ms Maina’s affidavit states:
I, Rose Maina of Level 9, 451 Little Bourke Street, Melbourne in the State of Victoria, Solicitor, say on oath:
1.I am a solicitor in the employ of Best Hooper and have the care and conduct of this action on behalf of Vento Energy Support (Creditor). I make this affidavit from my own knowledge save where otherwise stated. Where I refer to, matters based on information and belief, I believe the information to be true.
2.I have been informed, and instructed by Henrik Brink, Managing Director, who has had regard to the books and records of the creditor in respect of the debts and interest owed by the debtor relating to the total of the amounts detailed in the schedule to the accompanying statutory demand.
3.On 8 November 2017 a letter of Demand was sent to the Debtor Company which enclosed the two outstanding invoices totalling €60,946.00, being the total of the amounts specified in the accompanying demand is due and payable by the debtor to the creditor. Now produced and shown to me and marked “RM–1” is a true copy of the letter and invoices.
4.No response to the 8 November 2017 letter has been received.
5.I am informed by Henrick Brink, Managing Director, and believe that there is no genuine dispute about the existence or amount of the debts referred to in paragraph 3.
Sworn at MELBOURNE
on 22 December 2017 …
The letter of demand of 8 November 2017 referred to in paragraph 3 of Ms Maina’s affidavit states as follows:
8 November 2017
Ozlift Pty Ltd
ACN 169 965 888
Po Box 146MOUNT EVELYN VIC 3896
Dear Sir/Madam,
Vento Energy Support v Ozlift Pty Ltd (“the Company”)
Debt - €60,946.00
We act for Vento Energy Support. We are instructed that you are indebted to our client for the following amounts:
Invoice 11327 €32,671.00
Invoice 12255 €28,275.00
Total: €60,946.00
We enclose copies of these invoices for your reference. We understand that there is no dispute in relation to the services provided to you. In the circumstances, our client has formed the view that the Company is insolvent and not able to pay its debts as they fall due.
If payment in full of the debt is not received by our office by 4:00pm on Tuesday 14 November 2017, we are instructed to take immediate action against you without further notice, which may include:-
(a)serving you with a statutory demand for payment under s. 459E Corporations Act 2001 (Cth), which if not complied with, may result in your company being liquidated; or alternatively
(b)issuing proceedings against you in the Magistrates’ court of Victoria.
Our client also requests that you attend to payment of our legal fees to date in the sum of $1,650.00 (incl. GST). If required, a tax invoice can be provided.
If further action is taken, our client will seek additional costs from you. Our client hopes this course will not be necessary.
We await receipt of your payment by return.
Yours faithfully
BEST HOOPER
Matthew Francke
Principal LawyerEnc:
Ms Maina’s affidavit was apparently made with the authority of Vento as contemplated by Rule 5.2(b). That provision enables an affidavit accompanying the demand to be sworn by a person who is authorised by the creditor but who is not an officer or employee of the creditor, provided that the deponent has direct knowledge of the relevant facts. Mr Mason placed emphasis on paragraph three of Ms Maina’s affidavit which is set out above which he contended should be read as deposing that as at 8 November 2017, (the date of the letter of demand as distinct from the date of the statutory demand) the amount of €60,946.00 was due and payable.
Mr Mason contended that Ms Maina does not, as the Act requires, verify that the total of the amounts of the debts were due and payable as at the date of the statutory demand, 22 December 2017.
In support of this submission, he referred to the decision of Barrett J in Main Camp v Australian Rural (‘Main Camp’) in which the policy underlying s 459E was discussed.[2] In Main Camp the deponent averred that ‘the Debtor is indebted in the amount now demanded’ and a belief that ‘the details set out in the demand are true and correct’. At [21]–[25] of Main Camp, Barrett J stated:
[2][2002] NSWSC 219.
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.
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. 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”.
23What 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”.
24The 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.
25In 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”.[3]
[emphasis added]
[3]Ibid [21]–[25].
Mr Mason contended that the affidavit, when tested against the standard described by Barrett J, did not have the requisite clarity that the Act required, indeed, he put it as high as that when read literally it contained no attestation at all. In addition, he contended that there was what he described as ‘an interesting complication’ which arose from an email of Mr Brink of Vento to Mr Hammerstein of 1 August 2017. The email reads as follows:
Hi Beau,
I’m really sorry about this situation and the fact that you haven’t been able to paid [sic] us for the services we have provide [sic] to you during more than 23 weeks in 2016 with a blade specialist serving OzLift.
I’m truly sorry that I trusted you and didn’t require upfront payment or payment during the projects. I have attached the 1st invoice we sent as well as the 2nd invoice which was never sent as you stopped the dialog with us.
We did receive below 3 payments from Ozlift last year;
18.08.2016 3.197,50 EUR
18.08.2016 3.215,00 EUR
31.08.2016 3.170,00 EUR
so the remaining part of the first invoice is; 23.088,50 EUR + the draft invoice on 28.275,00 EUR = total of 51.363,50 EUR.
We would like to get this sorted without external assistance, so please let me know how you want to solve it before end of business day Friday the 4th august.
Yours sincerely/Med venlig hilsen/Mit freundlichen Grüßen
Henrik Brink
Managing Director
Mr Mason stated that by reference to this email it appears that Vento’s position is that the amount remaining owing on the first invoice is €23,088.50, the original invoice being €32,000 plus the draft invoice of €28,000 totalling €51,000. Accordingly, €9,582.50 had been paid as of August 2016. Mr Mason contended this discrepancy, when coupled with the text of paragraph three of Ms Maina’s affidavit, gives rise to a defect such that s 459J(1)(b) is enlivened.
Mr Silver, counsel for Vento, submitted that when read in context, it is clear that paragraph [3] of the affidavit contains the requisite verification. He contended that the comma after the money sum mentioned in paragraph [3] of Ms Maina’s affidavit was critical and the words which followed ‘being the total of the amount specified in the accompanying demand is due and payable by the debtor to the creditor’ contains sufficient verification. He submitted that there is no doubt when regard is had to the context that the ‘accompanying demand’ refers to the statutory demand accompanying the affidavit which is quite a different document to the letter of demand of 8 November 2017. He conceded that a comma should perhaps have been inserted after the words ‘accompanying demand’. Mr Silver submitted that the position was quite different to that considered by Barrett J in Main Camp where there was no verification at all and the demand was set aside.
I accept Mr Silver’s submission on this issue. Paragraph 3 in my view is unhappily drafted but I consider that a reasonable construction of the paragraph as a whole verifies that the debt claimed in the demand was due and payable at the date of the demand in compliance with s 459E. I would not set aside the demand under s 459J(1)(b) on that ground.
As to the discrepancy which arises from the matters raised in Mr Brink’s email of 1 August 2017, I do not consider that that is a reason to set aside the demand but rather should result in the three payments referred to being deducted from the amount claimed in the demand by reason that there is a genuine dispute as to that part of Vento’s claim, which would result in a reduction of €9,582.50 of the admitted amount[4] in accordance with the statutory regime of s 459H.
[4]See s 459H (2) and (5).
The next matter raised in respect of the deficient aspects of Ms Maina’s affidavit was that the affidavit was inadmissible by reason of its hearsay nature. In paragraph [2] Ms Maina describes the source of her knowledge i.e. her instructions from Mr Brink, who in turn had had regard to the books and records of Vento when giving his instructions. In paragraph [5] of her affidavit she describes the source of her information as to a belief that there is no genuine dispute about the existence of the debts in the demand, that source again being Mr Brink.
In Statutory Demands and Winding Up In Insolvency,[5] the author surveys several authorities dealing with the issue of where a creditor authorises a person to swear an affidavit on its behalf to verify the demand. At the outset of his discussion the author observes:
Where a creditor authorises a person to swear an affidavit on its behalf it is crucial that the deponent’s source of knowledge is reliable and certain and properly identified in the body of the affidavit in support. This is because the recipient of a statutory demand is entitled to expect sworn assurance from the creditor that the debt the subject of the demand exists, is due and payable and there is an absence of a genuine dispute about its existence or amount. This requirement will often preclude anyone else other than a creditor itself (in the case of a natural person) or in the case of a corporate creditor, its directors and officers, from deposing to the matters required by Form 7. It will be difficult in most cases, for a person other than the creditor (or its officers if a corporation) to inform himself or herself adequately of ‘the matters in relation to the debt’ required to be verified by Form 7 and Rule 5.2.[6]
[5]Farid Assaf, Statutory Demands and Winding Up In Insolvency (LexisNexis Butterworths Australia, 2nd ed, 2012).
[6]Ibid 3.29 et seq.
In Faji (Australia) Constructions Pty Ltd v AC Professional Accounting Pty Ltd (‘Faji’),[7] the creditor’s solicitor swore the affidavit which accompanied the statutory demand. He deposed in his affidavit that he had knowledge of the facts stated in the statutory demand and believed that the amount demanded was due and payable by the debtor to the creditor. He deposed to his belief that those matters were true and that there was no genuine dispute about the existence or amount of the debt. In Faji,[8] Barrett J stated:
[7][2009] NSWSC 180 (per Barrett J).
[8]Ibid [23]–[29].
Having regard to that content, it is clear that the deponent’s solicitor does not identify the source of the knowledge which he considers enables him to make the statements he makes. It may be that he had a copy of the memorandum of fees referred to in the schedule to each statutory demand. But that would have given him no insight into the dealings between the Faji companies and the defendant. Beyond actual sight of the invoices or memoranda of fees, he could only have relied on what he was told by someone — quite possibly Mr Chen; so that when he says, for example, that he believes that the amount specified in the demand is due and payable, he can only be reporting something that he was told by someone else, namely, that the amount became due and payable and that it has not been paid. His own belief cannot be anything but a reflection of someone else’s belief communicated to him.
In para 3 of the document the solicitor says, ‘I believe these matters to be true’. Again, his position as a solicitor could not be expected to give him independent knowledge of anything enabling him to say that.
In para 4, he deposes to a belief on his part that there is no genuine dispute about the existence or amount of the debt. That presupposes an insight on his part into communications and discussions between the principals (that is, the defendant company and each of the Faji companies) from which the absence of allegations of dispute by the Faji companies is entirely absent. As with the earlier statements, he can have known nothing of these matters except what he was told by his client.
In the Portrait Express case (above) at p758, Bryson J saw fit to observe that the court must ‘register clearly and appropriately the importance of the requirement of verification of demands’.
In B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433, McLelland CJ in Eq referred to the requirements that are now imposed by a combination of Rule 5.2(a) of the Supreme Court (Corporations) Rules 1999 and paragraphs 4 and 5 of Form 7 prescribed by those rules. After referring to the specifications in predecessor rules concerning affidavits for s 459E(3) purposes, his Honour said at pp.435 to 436
It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute if there is one makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability. I therefore do not regard what has occurred in the present case as a merely technical breach of the rules.
These observations of McLelland CJ in Eq caused me to say in Standard Commodities Pty Ltd v Société Socinter Départment Centragel[2005] NSWSC 254; (2005) 54 ACSR 489 at [13]:
McLelland CJ in Eq regarded the hearsay nature of the statements in the affidavit as constituting ‘some other reason’ for setting aside the statutory demand under s 459J(1)(b). His Honour expressed a like opinion in L M & W J Taylor Pty Ltd v Armour Timber & Trading Pty Ltd, above. In Hamilhall Pty Ltd (in liq) v A T Phillips Pty Ltd (1994) 54 FCR 173 ;(1994) 15 ACSR 247, Branson J referred to the need for the s 459E(3) affidavit to be made by someone who could depose to the relevant matters from his or her own knowledge. In Delta Beta Pty Ltd v Vissers (1996) 20 ACSR 583, Nicholson J said, in relation to an accompanying affidavit made by a solicitor, that ‘the hearsay assertions of the deponent bring to the statutory demand a verisimilitude to which it is not entitled’. His Honour regarded this as a sufficient ‘other reason’ to set aside the demand under s 459J(1)(b).
The affidavit in this case makes it clear that the deponent did not have first-hand knowledge of the matters to which he deposed. The sworn assurance that the recipient of a statutory demand is entitled to expect as to the essential substance of the demand, the existence of the debt, its quality as a debt due and payable, and the absence of genuine dispute about its existence or amount, was denied the Faji companies in this case. No one who might have been expected to have first-hand knowledge of those matters – for example, a company officer with access to the books and records of the defendant company – was put forward by the defendant company to give that sworn assurance.
[emphasis added]
Barrett J set aside the demand under s 459J(1)(b) by reason that the solicitor did not identify the source of the knowledge that the solicitor considered enabled him to make the relevant statements and that the solicitor’s belief that the amount specified in the relevant creditor’s statutory demand was due and payable could only be reporting something that he was told by someone else.
In Austech Institute for Further Education Pty Ltd v Britt[9] the affidavit accompanying the statutory demand was also sworn by the creditor’s solicitor who deposed:
…
2. Based on my perusal and knowledge of the Lease and the notices sent to the Debtor Company from the creditor’s managing agent, Brookes Partners, I am aware of the circumstances giving rise to, and the state of, the indebtedness of the Debtor Company to the Creditor.
3.The total of the amounts of the debts mentioned in paragraph 1 of this affidavit is due and payable by the Debtor Company.
4.I believe that there is no genuine dispute about the existence or amount of any of the debts.[10]
[9][2010] NSWSC 56.
[10]Ibid [6].
In Austech, counsel for the applicant contended that the evidence as to the existence of the debt and to the absence of a genuine dispute must be hearsay and reliance was placed on several authorities in that regard including the decision of Barrett J in Faji. Palmer J cited an earlier passage of Faji:[11]
Of particular significance is the last case because there Barrett J held that, even though there was no genuine dispute as to the existence of the debt, a Statutory Demand should be set aside under s 459J(1)(b) because the affidavit supporting the Demand had been sworn by a solicitor, who simply stated that he had knowledge of the facts stated in the Statutory Demand, believed the debt to be owing and believed there would be no genuine dispute.
[11]See Austech at [11].
Palmer J then reasoned why he regarded the affidavit of the creditor’s solicitor as being deficient. At paragraphs [10] to [13] he stated:
10In my opinion, the affidavit of Mr Groundwater complies with the requirements of Rule 5.2 and Form 7 to the extent that it states the source of Mr Groundwater's knowledge of how the alleged debt arises and how it is quantified. He states what documents he has read in order to form his belief as to those two matters. All that Rule 5.2 and Form 7 require in relation to how the debt arises is that the source of knowledge is stated when the person making the affidavit is not the person who has dealt with the debtor but is a person authorised by the creditor to make its affidavit.
11It is true that what was contained in the notices from Austech’s managing agent may well have included hearsay, but I do not think that that alone would be sufficient to warrant setting aside the Statutory Demand under s 459J(1)(b). No complaint could have been made if the affidavit had said, following the example suggested in Form 7, “I have inspected the business records of the creditor in relation to the debtor company’s account with the creditor”, yet such business records could well have included hearsay. The fact that the deponent of the affidavit relies upon hearsay is, therefore, not in itself and without more a ground for criticism, as long as the source of the information relied upon is stated.
12However, Mr Groundwater does not state the source of his belief that the debt is not genuinely disputed. Paragraph 3 of Form 7 requires the deponent to state the source of knowledge “of the matters stated in the affidavit in relation to the debt”. Matters “in relation to the debt” encompass not only how the debt arises and is quantified, but also as to whether there is a genuine dispute, which the deponent must aver in paragraph 5 of Form 7.
13It is clear from Mr Groundwater's affidavit that he has not investigated any records which could inform him as to whether a genuine dispute exists which arises outside the terms of the lease and by reason, for example, of representations said to have been made which induced the entering into of the lease. Accordingly, Mr Groundwater’s averment that there is no genuine dispute as to the existence of the debt must be founded either on a complete absence of knowledge of the circumstances which would justify such an assertion, or else must be based on hearsay from a source not identified. In my opinion, for the reasons advanced in the authorities to which Barrett J refers in Faji, the affidavit of Mr Groundwater in this regard is glaringly deficient.
[emphasis in the original text]
In Austech Institute at paragraphs [18] and [19], Palmer J stated:
18This case affords a salutatory reminder that, as a general rule, Statutory Demands ought not to be supported by an affidavit from the creditor's solicitor. It will be difficult, in most cases, for a creditor's solicitor to inform himself or herself adequately of “the matters in relation to the debt” required to be verified by Form 7 and Rule 5.2. Common experience shows that in most cases the creditor will simply inform his or her solicitor that a debt is owing pursuant to a contract and has not been paid. The creditor will probably not go into the surrounding circumstances as to any dispute with the debtor, at least in any more than a perfunctory way. In those circumstances it is easy for a solicitor, in good faith but without proper foundation of factual knowledge, to simply aver that he or she believes that there is no genuine dispute as to the existence of the debt. If the creditor himself or herself, or if the creditor’s officer with personal knowledge of the circumstances, were required to swear such an affidavit, he or she might well pause, in the light of what he or she actually knows.
19The Court should be astute to ensure the integrity of the Statutory Demand process by being satisfied that the person who says that he or she believes there is no genuine dispute as to the existence of the debt is qualified by personal knowledge or proper and sufficient instruction to make that statement. If the affidavit supporting the Statutory Demand is sworn by a solicitor who says no more than, for example, “I have inspected the books and records of the creditor and have taken instructions from the creditor” as the source of belief that the debt is owing and that there is no dispute, the affidavit would comply with r 5.2 and with Form 7, but the debtor would be justified in requiring the solicitor for cross examination in an application under s 459G for the purpose of testing whether the records of the creditor which the solicitor inspected and the detail of the instruction taken from the creditor is sufficient to support a reliable statement that the debt is owing and is not genuinely disputed. The difficulties in a solicitor divulging communications with the client are self evident. If the solicitor can say nothing of any particularity as to what his or her instructions were, then the Court will find it difficult to conclude that the solicitor has a reasonable basis for believing that the debt is not genuinely disputed. Considerations such as these show why it is highly desirable, as a general rule, that the creditor himself or herself, or a properly qualified officer of a corporate creditor, should make the affidavit under s 459E(3), rather than the creditor’s solicitor.
In the matter ofGeitonia Pty Ltd,[12] Black J again considered whether the subject demand should be set aside on the basis that the affidavit accompanying the demand was sworn by the creditor’s solicitor. His Honour was concerned with whether the creditor’s solicitor had sufficient personal knowledge to swear the affidavit accompanying the demand. He referred in the course of his analysis to B & M Quality Constructions, Faji and Austech Institute with approval but distinguished them on the facts.
[12][2016] NSWSC 1243.
In Geitonia the solicitor who swore the verifying affidavit deposed that he was the solicitor with the carriage of the creditor’s dealings with Geitonia and acted in relation to the assignment of the mortgage which was the subject of the debt claimed in the demand. He deposed that he was able to confirm from his own knowledge that no payment had been made in respect of the debt and that there was no genuine dispute about the existence or the amount of the debt. At paragraph 20 of Geitonia Black J stated:
I do not understand the authorities on which Mr McDonald relies to establish any general proposition that a solicitor who has appropriate knowledge of the relevant facts and has the creditor’s authority to verify the creditor’s statutory demand may not do so on the creditor’s behalf. It seems to me that the present case is plainly distinguishable, as a matter of fact, from the position considered in Faji (Australia) Constructions Pty Ltd v AC Professional Accounting Pty Ltd above and Austech Institute for Further Education Pty Ltd v Britt above. Mr Kerr’s affidavit made clear that he was confirming the amount of the debt owed to Westpac and paid by Huizhong to Westpac from his personal knowledge, derived from his carriage of Huizhong’s dealings with Geitonia and having acted in relation to the assignment of the mortgage from Westpac to Huizhong. I understand his further statement of his awareness that Geitonia had made no payment under the mortgage since 15 May 2015 to have been made on the same basis.[13]
[13]Ibid [20].
At paragraph 21 Black J observed:
It is plain that Mr Kerr had a proper basis for such personal knowledge and that this was not a case where he was relying on having been informed of the relevant matters by, for example, an officer of [the creditor]. …
At paragraph 23 he stated:
I am satisfied that [the creditor’s solicitor] had sufficient personal knowledge of the relevant matters so as to depose to the amount of the relevant debt, the absence of payment by Geitonia, the fact that the debt was due and payable by Geitonia and the absence of any genuine dispute as to the existence or amount of the debt. Geitonia’s application to set aside the Demand on a basis of a deficiency in the verifying affidavit would therefore fail, even if that application were open to it.
It seems clear that Ms Maina when she swore her affidavit had no direct knowledge or knowledge to the degree that the creditor’s solicitor had in Geitonia and she was, in good faith, deposing as to what her client Mr Brink had told her. She does not depose to any familiarity at all with the facts giving rise to the alleged debt rather she was deposing to matters that she was told by Mr Brink. The affidavit does not contain any evidence that she independently informed herself adequately of the matters relating to the debt required to be verified by Form 7 and rule 5.2. It is not enough for her to merely depose as to the source of her instructions; she must depose as to how she came to have direct knowledge of the matters which entitled her to contend as a matter of fact that there was no genuine dispute as to the existence of the debt. If one is to identify the underlying policy requiring an affidavit verifying a statutory demand where there is no judgment debt, it is appropriate to recall the passage of B & M Quality Constructions cited above, and referred to at pp 435 and 436 of the judgment which describes the purpose of the affidavit as providing:
… a significant mechanism for filtering out cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources.
I recognise the possible difficulty of arranging for the swearing of affidavits by clients who are overseas and why a solicitor would find it preferable to swear the affidavit accompanying the demand, but I consider that Ms Maina, when making her affidavit had no personal knowledge of the transactions between the parties as the legislation requires. For this reason I consider that on an application of the authorities discussed above, the demand should be set aside under s 459J(1)(b) of the Act.
If I am not correct in my analysis of the issue regarding the deficiencies in Ms Maina’s affidavit, I set out for completeness my view as to whether Ozlift has established that it has a genuine offsetting claim in respect of the debt claimed in the demand.
The plaintiff’s affidavit evidence
In her affidavit of 22 January 2018, Ms Hammerstein states that on 11 August 2015 Ozlift and Vento entered into a Joint Venture Agreement for a minor works sub‑contract with Goldwind Australia Pty Ltd (‘Goldwind’) (‘the Goldwind sub‑contract’). The contract with Goldwind related to the application of a protective coating to the blades of 13 wind turbines at Mortons Lane Wind Farm. Ozlift was to perform the majority of the work with Vento being required to perform works in relation to the blades.
Ms Hammerstein exhibits an email exchange on 8 June 2016 between Mr Hammerstein on behalf of Ozlift and Mr Brink on behalf of Vento which is said to evidence that the parties agreed that Vento would invoice Ozlift €32,671 for the work that Vento was to perform. On 8 June 2016, Mr Hammerstein emailed Mr Brink stating:
Hi Henrik
I understand that you will invoice Ozlift $43,000 approximately for the salary for Steen as this is a full account of Steen’s costs to travel and work with Ozlift in Australia.
Ozlift: earnings for Steen over the period that Steen spent working in Australia was $67,472 Ozlift’s cost for that period was $10,635
Earnings: $67,472
Ozlift cost: $10,635
Vento cost: $43,000
So in my calculation Vento has payed out $43,000 Ozlift have payed out $10,635 and both Vento and Ozlift had made for the period of work that Steen has work in Australia was $67,472
Earnings $67,472
VENTO -$43,000
Ozlift -$10,635
Profit $13,837
Vento share $6,918.50
Ozlift share $6,918.50
HENRIK do you agree with the calculation on the cost sharing.
So Ozlift would expect and invoice cost of $49,918.50 approximate. These figures are ex GST.
Mr Brink responded to Mr Hammerstein that day by email stating:
Hi Beau,
I agree on the figures – can you accept me to invoice in Euros (€)
If so then I’ll invoice you 32.671,00 EUR. Please sent me your invoice details.
Thanks in advance
Yours sincerely / Med venlig hilsen
Henrik Brink
Mr Hammerstein responded by email requesting that Mr Brink send the invoice to Mr Hammerstein’s email and that Mr Hammerstein would then forward the invoice to Ozlift’s accounts department. Mr Brink responded enquiring whether it was in order that the invoice be in euros, to which Mr Hammerstein responded ‘Yes in Euro’.
Ms Hammerstein contends that the amount claimed in the demand is in excess of the amount agreed to be invoiced by Vento and that, based on the matters stated in her affidavit, there is a real dispute as to the amount that Vento is entitled to invoice Ozlift.
After Vento had performed the work, Goldwind served a Notice of Defects dated 16 December 2016 on Ozlift. The Notice refers to the Goldwind sub-contract and notifies Ozlift of defects in relation to the protective coating works to 39 blades of the wind turbines and directs Ozlift to, at its risk and cost:
(a) with the prior consent of Goldwind, attend the wind farm and inspect the defective blades as soon as reasonably practicable;
(b) provide Goldwind with a rectification plan no later than close of business Friday 13 January 2017; and
(c) rectify the Defect no later than 31 March 2017 unless otherwise agreed in writing by Goldwind.
Ms Hammerstein states that the protective coating work to the 39 blades were works to be performed by Vento.
Following receipt of the Notice of Defect, Mr Hammerstein discussed the notice with Mr Hansen, who was based in Australia and was Vento’s principal representative, requesting that Vento perform the works required to rectify the defects. A series of text messages ensued between Mr Hammerstein and Mr Hansen between 3 July 2017 and 25 July 2017 discussing the defects.
Ms Hammerstein states that Mr Hansen informed Mr Hammerstein that he would discuss the Notice of Defect with Mr Brink. In or around September or October 2017, Mr Hammerstein and Mr Brink spoke on the telephone regarding payment of Vento’s invoice and the Notice of Defect. She states that Mr Hammerstein informed Mr Brink that the Notice of Defect had to be attended to by Vento and that the expected rectification cost was in the region of $360,000 (being the anticipated rectification cost at that time). Ms Hammerstein states that notwithstanding these requests by Ozlift for Vento to attend to the rectification of the work they had performed on the blades, Vento took no steps to perform any rectification.
Ms Hammerstein deposes that pursuant to Ozlift’s attempts to address the specific requirements of the Notice of Defect, it obtained a quote for rectification from Direct Wind Service on 8 December 2017. This quotation is exhibited to her affidavit and states that the rectification cost would be in the region of $165,425. Ms Hammerstein states that Ozlift is continuing to discuss the rectification costs with Direct Wind Services and expects that the rectifications costs may be approximately 30% greater than this quotation.
On the basis of the Notice of Defect and the quotation from Direct Wind Services, Ms Hammerstein states that Ozlift has a genuine off-setting claim against Vento in the sum of approximately $165,000, and intends to commence legal proceedings against Vento if Vento does not take steps to either rectify the defects or make payment to Ozlift for the sum ascertained to be the rectification costs.
Much of Mr Hammerstein’s affidavit of 24 March 2018 deals with the formation of the relationship between Ozlift and Vento and in my view has no direct relevance to the issues for consideration in this application. For that reason what follows is a summary of what I consider to be the relevant evidence from what is a lengthy affidavit, in particular the evidence he presents in respect of the alleged dispute and offsetting claim.
Mr Hammerstein has been employed by Ozlift as a supervisor since 2014. In that role, he quotes work for Ozlift’s customers, assembles teams to work on Ozlift’s projects, and supervises work as it is performed.
Mr Hammerstein states that the wind turbines Ozlift installs and maintains contain three blades which are typically made of fibreglass. A protective coat is applied to these blades to protect them from the constant exposure to the elements. It is necessary to prime and prepare the blades properly before they are coated as otherwise the coating agent will not properly adhere to the blades. These services are usually provided by specialist blade technicians who have the necessary certifications and accreditations required by the blade manufacturers. A manufacturer’s warranty may be voided if a technician without the necessary certifications and accreditations works on a blade they have produced. Ozlift and its personnel do not have those certifications or accreditations and Vento, which does, was engaged as a specialist blade technician.
Mr Hammerstein states that he was first introduced to Mr Brink some time before 2015. From that time he and Mr Brink would occasionally have discussions about Ozlift and Vento working together on wind farms in Australia. Mr Brink indicated that Vento was interested in entering the Australian market to provide maintenance services for wind turbines. Mr Hammerstein states that he was interested in such a collaboration because Ozlift did not have the specialised skills or certifications to perform the maintenance work on wind turbine blades. An arrangement between Ozlift and Vento would increase the services Ozlift could offer its customers.
Mr Hammerstein states that in late February 2015, he together with Mr Brink, Torben Bjerg of Vento, Jeff Ware of Ozlift, and others attended a meeting at an hotel, at which time they discussed the work opportunities that might be available to Ozlift and Vento. Mr Hammerstein states that his conversations with Mr Brink about Ozlift and Vento’s combined offering continued after the meeting at an hotel. Mr Hammerstein states that during his conversations with Mr Brink, it was agreed that profits from the projects on which Ozlift and Vento worked together would be shared equally, and that Ozlift was not to pay a premium on account of converting Australian dollars into euros when transferring its share of any profits to Vento.
Mr Hammerstein states that he made arrangements with Mr Brink for Vento to supply a technician to visit Australia and assist Ozlift provide wind turbine maintenance services. On 11 February 2016 Mr Brink sent Mr Hammerstein an email attaching Mr Hansen’s CV, who was an experienced blade technician. In that email, Mr Brink also states:
Did you consider how to price the service?
I would be happy to share all profit for the blade activities 50/50. Meaning working with open books so both you and I know the cost and invoices. What do you think of that?
The reason for sharing all blade activities 50/50 (hours and materials) is that the project on the Danish technician is lower due to higher salaries, travel cost etc, and we have the same motivation or saving costs if we have the same goal. What do you think?
Mr Hammerstein responded to Mr Brink’s above email by a return email sent that same day which reads:
Hi Henrik
I believe your proposal of a 50/50 share on the blade tech profit sounds good I am currently getting $1637 a day for a blade tech Aus and that includes all related cost so then Vento will invoice Ozlift for the blade tech and we will share in the remaining project
Mr Brink then sent a further email to Mr Hammerstein which is dated 12 February 2018 and which reads in part:
Hi Beau
I actually meant 50% profit of both your tech (the technician who perform LEP) and our technician + materials as the profit of only our technician is very low compared to European standards. Especially when it’s a 50/50% share.
From around February 2016, Mr Hammerstein states, Ozlift and Vento worked together at Goldwind’s Mortons Lane Wind Farm, and at wind farms at Challicum Hill and Toora. Mr Hammerstein states that the work performed for Goldwind at Mortons Lane Wind Farm involved sanding back the blades on its wind turbines, and applying a top and bottom coat of hardened paint. He says that Mr Hansen was in Australia from around February 2016 and assisted in that work. While working at Mortons Lane Wind Farm, Mr Hansen worked with Jake Maddox of Ozlift (‘Mr Maddox’). He says that before Mr Maddox worked at Mortons Lane Wind Farm, he told him that he was not to touch a wind turbine blade unless Mr Hansen had authorised it.
Mr Hammerstein states that Mr Maddox stated to him that Mr Hansen showed him how to prepare and apply the paints used for the maintenance of the blades of the wind turbines at Mortons Lane Wind Farm. Mr Maddox said to him that Mr Hansen showed him how to apply the paint at the correct temperature, and that Mr Maddox said he repeated this process in his later blade repair work at Mortons Lane Wind Farm. Mr Maddox also said to him that Mr Hansen selected the paints used and taught Mr Maddox how to correctly mix the paints. Mr Hammerstein states that Mr Maddox said he then repeated this process when applying paint on all the blades at Mortons Lane Wind Farm.
Mr Hammerstein states that after he received Goldwind’s Notice of Defect, he started investigating the cause of the problem. He states that a possible cause he considered was whether the paint used on the wind turbine blades was inappropriate. To this end, he notes that on 3 July 2017, Mr Hansen said to him in a text message received in the late afternoon ‘Maybe we have used the wrong paint’. This text message is one of the text messages exhibited to Ms Hammerstein’s affidavit, described above at paragraph 41. He also exhibits an email to his affidavit, sent from Mr Hansen to Mr Hammerstein that evening, in which Mr Hansen states:
Hi Beau
Have look in to it and I think that paint system Valspar we use is the problem
I have attach 2 link
Think that Windmastic Carboline is the best product
Have work with it and it’s a good product
You can get primer and ral 7035 but you have to look into it if you can get it in Australia
Maybe Jake need to use corn 60 sand paper when he’s gonna fix it
One of the web page also have some more repair kit for blade
Please let me know if i can assist you if you gonna get some problem
Ozlift made a formal agreement by letter dated 20 February 2018 that Ozlift would pay Goldwind $165,000 plus GST in respect of the defects listed in the Notice of Defect.
Mr Hammerstein notes that the first invoice, number 11327 attached to Vento’s statutory demand is for €32,671. He states that, although it is dated 31 May 2016, it was issued on around 8 June 2018, which he notes was after he and Mr Brink exchanged emails between 5 and 8 June 2016 discussing the profit sharing calculation whereby Ozlift would pay Vento its share of the profits in euros rather than Australian dollars. Mr Hammerstein contends that the calculation did not provide that Ozlift was to pay Vento the cost of a blade technician travelling to Australia or that technicians’ salary, but that those costs were instead reflected in the profit share. He states that Invoice 11327 relates to the services Vento provided between February and July 2016.
Mr Hammerstein states that Ozlift paid Vento in three instalments in respect of Invoice 11327 and that Mr Brink acknowledged payment by way of an email which is referred to at paragraph 17 above, stating ‘we did receive below 3 payments so the remaining part of the first invoice is; 23.088,50 EUR + the draft invoice on 28.275,00 EUR = total of 51.363,50 EUR’. Mr Hammerstein notes that the amounts referred to in Mr Brink’s email as unpaid in respect of the first invoice total €32,671 which is the full amount of Vento’s invoice dated 31 May 2016. As I have said above in paragraph 21, I consider that the demand should be reduced by the amount of that discrepancy if the demand was an effective demand.
In respect of the second invoice, Mr Hammerstein states that he did not have any record of any other conversation with Mr Brink or any other representative of Vento regarding the amount of Vento’s second invoice in the sum of €28,275. He also states that the second invoice relates to work purportedly performed between 31 May 2016 and 29 July 2016, which is a duplicate in part of the profit share already captured in Vento’s first invoice.
Mr Hammerstein deposes that the first time the second invoice was received by Ozlift not in draft form is when it was attached to the letter of demand from Vento’s solicitors dated 8 November 2017 and that Mr Brink had advised him by email that the invoice ‘was never sent as [Ozlift] stopped the dialog [sic] with us’. Mr Hammerstein states that the second invoice relates to payment for 435 hours’ work that Vento purportedly performed but he does not know on what basis the figure was calculated, given the timesheets Mr Hansen maintained record approximately 200 hours of work. Mr Hammerstein states his belief was that the first invoice was for the work completed by Mr Hansen with Ozlift in Australia. Mr Hammerstein further states that the invoice applied an hourly rate of €65 and he is unaware as to how this rate was arrived at as he did not participate in any discussions with any representatives at Vento, nor did he have any discussions to the effect that payment for the work would be in euros.
Mr Hammerstein states that Ozlift agreed with Goldwind to settle Goldwind’s claim for defects at Mortons Lane Wind Farm and did not make any profit in respect of that work. Mr Hammerstein states he understood the problems with the wind turbines at Mortons Lane Wind Farm were as a result of the paint used, the paint mixing technique and the application of the paint.
Vento’s material in opposition to the application
In his first longer, affidavit affirmed 27 March 2018, Mr Hansen deposes that he worked for Vento as a blade technician from February 2016 to August 2016. He states that he travelled to Australia on two occasions. He states that on the first occasion he was in Australia between 19 February and 14 May 2016, and on the second, from 31 May 2016 to 29 July 2016. He states that his role as a blade technician for Vento was to inspect and service wind turbine blades in accordance with the requirements of the Wind Turbine Manufactures guidelines and work instructions, and to train an Ozlift blade technician.
Mr Hansen deposes that he was required to prepare a weekly note which accounted for his daily activities on the wind farms, which were then forwarded to Vento after being approved by Ozlift. Consistently with Mr Hammerstein, he states that he worked at three wind farms during his time in Australia, namely Mortons Lane Wind Farm (also known as Goldwind), Toora Wind Farm, and Challicum Hill. More particularly, he deposes that he worked on Mortons Lane Wind Farm from 27 April 2016 to 29 April 2016 for a total of 16 hours and from 14 July 2016 to 16 July 2016, for a total of 17.5 hours, which is a total of 33.5 hours. He states that during his time at Mortons Lane Wind Farm, he worked on wind turbine generator number 3. He states that he worked on only 2 of the 39 blades on the 13 wind turbine generators at Mortons Lane Wind Farm and that he was not involved in servicing the rest of the blades or the wind turbine generators.
Mr Hansen states that when he left Australia in July 2016, he had not finished training Mr Maddox on how to apply leading edge protection. He deposes that Mr Hammerstein sent him a Facebook message seeking advice on the coating of the blades, and that to his knowledge, work on only one turbine was completed. He states that he is not aware who completed the remainder of the leading edge protection to the other 13 wind turbine generators as he only trained Mr Maddox on the two blades that were completed there before his departure.
In his shorter affidavit, also affirmed 27 March 2018 and sworn in response to Mr Hammerstein’s affidavit, Mr Hansen deposes that the paint system used was selected by Mr Hammerstein and not by him. He states that when he received an email from Mr Hammerstein regarding the paint, his first assumption was that the Valspar paint system might be the problem. He states that he advised Mr Hammerstein of this in his email dated 3 July, which is exhibited to Mr Hammerstein’s affidavit and reproduced at paragraph 53 above. He states that he was not requested to go back to look into what the cause of the issue was.
Finally, Mr Hansen states that as he was not involved in the majority of the work done on Mortons Lane Wind Farm he does not know what happened after his departure from Australia. He states that he is unaware of how the remaining blades were repaired and does not know and was not consulted after his departure on how Ozlift could apply the coating in the right way which he states requires proper sanding and cleaning prior to application.
In his affidavit affirmed 6 March 2018, Mr Brink states that he is the managing director of Vento. He states that in 2014 he was introduced to Mr Hammerstein through Greg Miller (‘Mr Miller’) who knew Mr Hammerstein and who was also in the wind turbine business.
Mr Brink says that in January 2015 he travelled to Australia to visit Mr Hammerstein at which time they discussed entering into a joint venture business with Mr Miller and Jeff Ware to provide wind turbine related services to companies such as Goldwind and Senvion Wind Farms, amongst others. He states that the intention of the parties was to incorporate a new entity to provide the services (which is consistent with Mr Hammerstein’s evidence). Mr Brink notes, however, that in October 2015 Mr Hammerstein advised that he needed to focus on his ‘core business’ and would not be proceeding as contemplated.
Mr Brink states that in early 2016, Mr Hammerstein suggested that an agreement should be entered into between Vento and Ozlift, where a blade technician in the employ of Vento would travel to Australia to assist in applying lead protective coating onto wind turbine generator blades and train a technician engaged by Ozlift in applying leading edge protection. Mr Brink states that the agreement was documented in various emails, and that the general terms were:
(a) Vento would send a blade technician to Australia to inspect and service wind turbine blades in accordance with the requirements of the Wind Turbine Manufactures (OEM) guidelines and work instructions.
(b) Ozlift would pay to Vento:
(i) the costs to have the blade technician travel to Australia and stay for the duration required; and
(ii) the blade technician’s salary.
(c) that the parties were to keep ‘open books’ for costs and profits;
(d) profits from what Ozlift receives from the relevant wind farms for the blade technician were to be shared 50/50; and
(e) a number of wind farms were to be serviced.
Mr Brink refers to Mr Hammerstein’s email sent 11 February 2016 and outlined at paragraph 50 above, within which Mr Hammerstein says that he was currently getting ‘$1637 a day for a blade technician’. Mr Brink states that the calculation of profit was therefore the difference between this amount, or any other amount that was received for the blade technician, less the blade technician’s salary and the expenses relating to the blade technician.
Vento, Mr Brink deposes, did not sign any agreements with any wind farms. Mr Brink says that he believes that Ozlift submitted tenders and subsequently entered various agreements with the wind farms to be serviced.
Mr Brink states that it was agreed that Mr Hansen would fly out to Australia on or about 16 February 2016, and that he was to:
(a) inspect and service wind turbine blades in accordance with the requirements of the Wine Turbine Manufactures guidelines and work instructions; and
(b) fill in a weekly time sheet which would be forwarded to Vento.
Mr Brink states that Mr Hansen was to work on a number of wind farms, and that the majority of the work performed by Mr Hansen was on Tour Wind Farm and Challicum Hill Wind Farm for Pacific Hydro. Mr Brink deposes that he is informed by Mr Hansen that during his time at Mortons Lane Wind Farm, he worked on wind turbine generator 3. He states that of the 33.5 hours Mr Hansen spent working at Mortons Lane Wind Farm, 25.25 hours were spent working on wind turbine generator 3. He exhibits to his affidavit weekly notes documenting the work and responsibilities undertaken by Mr Hansen which are signed by representatives of Ozlift. He states that the above calculation corresponds with the information in the signed weekly notes.
Mr Brink states that he is informed by Mr Hansen, and believes, that that the rest of the work undertaken on the Mortons Lane Wind Farm was undertaken by Mr Maddox. Mr Brink states that he was further informed that Mr Hansen was not able to complete training the Ozlift technician or finish working on wind turbine 3 or any of the other 13 wind turbines before he left Australia.
Mr Brink states that he was informed by Mr Hammerstein on 25 July 2016 that he would not require Mr Hansen back in Australia until the weather improved.
Mr Brink states that on 8 June 2016, an agreement was reached that Ozlift would pay €32,671.00 to Vento for the first trip, and that Vento subsequently issued the first invoice. Mr Brink exhibits an email chain between himself and Mr Hammerstein which proposes a calculation of the parties’ cost share arrangement.
Mr Brink states that on 26 October 2016 Mr Hammerstein acknowledged that payment of Mr Hansen’s first trip would be paid. He exhibits an email chain of correspondence occurring that day. The first email is sent by Mr Brink to Mr Hammerstein in which Mr Brink asks Mr Hammerstein to explain the breakdown in their communication, and states that he would be extremely happy to resume dialogue. Mr Hammerstein replies to this email expressing that he is in the lowest part of his business life, and things have ‘collapsed’ around him with companies not paying. Mr Brink replies to Mr Hammerstein that day and asks again when he can expect ‘the payment for Steen’s first trip to Australia’ and ‘also the second journey we haven’t calculated’ and states that he is happy to make a better deal on the second trip if he can get his costs covered. Mr Hammerstein’s next response reads:
Hi Henrik
We have full intentions of paying for Steen’s first trip but be patient we don’t have any money at the moment but we will pay!! As to Steen’s second trip I would appreciate you sending me through what you believe are your costs and I will look over the costs and get back to you.
Mr Brink states in reply that the ‘cost for Steen’s second trip is 19.000 € (approx… 27.500 AUD)’.
Mr Brink states that an invoice was rendered subsequent to the communications on 26 October 2016, which was based on the terms of the agreement and the calculations attached to an email exhibited to Mr Brink’s affidavit and sent by Mr Hammerstein on 5 June 2016.
Mr Brink states that he received a number of emails from Mr Hammerstein advising that he had been unable to pay Vento’s account as he and Ozlift were in financial difficulty. Mr Brink exhibits to his affidavit email correspondences by which Mr Hammerstein informed him, variously, of his and Ozlift’s financial difficulties.
Finally, Mr Brink states he never received nor was advised of any defect in the works done on the wind turbines at Mortons Lane Wind Farm by Mr Hammerstein. He deposes that the first time he saw the Notice of Defect was upon receipt of Ms Hammerstein’s affidavit. Mr Brink states that Mr Hansen advised him that messages were exchanged and forwarded a copy of the messages to him, as exhibited to Ms Hammerstein’s affidavit. Mr Brink contends that it is clear from the messages that only one turbine was worked on during the time Mr Hansen was in Australia, and the bulk of Vento’s invoices relate to work undertaken by Mr Hansen on other sites. He states further that Mr Hansen worked on only 2 of the 39 blades on the Mortons Lane Wind Farms and assumes that the Ozlift technician carried out the rest of the work. Mr Brink states that he has not heard of any other defects on the other sites that Mr Hansen worked on and he does not believe that Vento can be responsible for any defects to the wind turbines at the Goldwind farm.
Legal principles
The principles applicable in applications to set aside statutory demands were summarised in the decision of the Court of Appeal in this State of Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq),[14] as follows (citations omitted):
[14][2015] VSCA 330, [47]–[51].
The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.
In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim. It is therefore not helpful to perceive that one party is more likely than the other to succeed or that the eventual state of the account between the parties is more likely to be one result than another. Further, the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised.
The court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that the criterion of a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.
The court is not required to accept uncritically every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.
Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd involved a demand for payment of a debt alleged to be due under a contract for the supply of goods. The applicant relied on four matters, each of which had the potential to affect the respondent’s entitlement to be paid the entire amount of the debt. Barrett J held that all four matters were sufficiently plausible to raise a genuine dispute. He relevantly stated:
The [applicant] will fail in [the] task [of establishing a genuine dispute] only if … the contentions upon which it seeks to rely … are so devoid of substance that no further investigation is warranted. Once the [applicant] shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.
There are controversies in the evidence for example as to what number of blades Vento was actually involved in finishing and what role its representatives had in the choice of paint and its application. This proceeding is not apt for resolution of that controversy. Ozlift has quantified the amount which it contends it is liable to meet in rectification costs to its head contractor. There is in any view no aspect of implausibility in the evidence that Ozlift presents in support of this claim. This is a situation where the claim by Vento and the offsetting claim by Ozlift will need to be the subject of conventional inter partes proceedings.
In my view, on an application of these principles and the relevant standard, Ozlift has established that the alleged offsetting claim which it raises is genuine and arguable and has sufficient prima facie plausibility to warrant further investigation. The amount of that claim, $165,000 is sufficient to extinguish the debt claimed in the demand being €60,946.00, approximately $98,579 and I consider that for that reason also the demand should be set aside.
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