RIMBLUE Pty Ltd v Australian Company Number 004 300 350 Pty Ltd

[2002] WASC 292

RIMBLUE PTY LTD -v- AUSTRALIAN COMPANY NUMBER 004 300 350 PTY LTD [2002] WASC 292

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2002] WASC 292
Case No:	COR:113/2001	Heard:	7 NOVEMBER 2002
Coram:	MASTER SANDERSON	Delivered:	4/12/02
No of pages:	6	Judgment Part:	1 of 1
Result:	Remand set aside
Category:	B
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Parties:	RIMBLUE PTY LTD (ACN 075 072 758) AUSTRALIAN COMPANY NUMBER 004 300 350 PTY LTD
Catchwords:	Corporations Act Application to set aside statutory demand Turns on own facts
Legislation:	Corporations Act, s 459G, s 459J
Case References:	B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 13 ACLC 88 Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 16 ACLC 1609 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1001 Barclays Australia v Mike Gaffikin Marine (1996) 14 ACLC 1367 Classic Ceramic Importers Pty Ltd v Ceramica Antiga SA (1994) 12 ACLC 334 Eumina Investments Pty Ltd v Westpac Banking Corp [1998] 824 FCA NQEA Australia Pty Ltd v ADI Ltd (1999) 17 ACLC 927 Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1994) 12 ACLC 111

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : RIMBLUE PTY LTD -v- AUSTRALIAN COMPANY NUMBER 004 300 350 PTY LTD [2002] WASC 292 CORAM : MASTER SANDERSON HEARD : 7 NOVEMBER 2002 DELIVERED : 4 DECEMBER 2002 FILE NO/S : COR 113 of 2001 MATTER : Section 459G of the Corporations Law BETWEEN : RIMBLUE PTY LTD (ACN 075 072 758)

Applicant

AND

AUSTRALIAN COMPANY NUMBER 004 300 350 PTY LTD
Respondent

Catchwords:

Corporations Act - Application to set aside statutory demand - Turns on own facts

Legislation:

Corporations Act, s 459G, s 459J

Result:

Remand set aside

(Page 2)

Category: B

Representation:

Counsel:

Applicant : Mr D F Gordon
Respondent : Mr S K Shepherd

Solicitors:

Applicant : Brickhill Banaszak
Respondent : Gordons

Case(s) referred to in judgment(s):

B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 13 ACLC 88
Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 16 ACLC 1609
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1001

Case(s) also cited:

Barclays Australia v Mike Gaffikin Marine (1996) 14 ACLC 1367
Classic Ceramic Importers Pty Ltd v Ceramica Antiga SA (1994) 12 ACLC 334
Eumina Investments Pty Ltd v Westpac Banking Corp [1998] 824 FCA
NQEA Australia Pty Ltd v ADI Ltd (1999) 17 ACLC 927
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1994) 12 ACLC 111

(Page 3)

1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. Although the application is said to be brought under the provisions of s 459G of the Corporations Act, a preliminary matter was raised by the plaintiff which amounted to reliance upon s 459J. The position is somewhat unusual and arises in this way.

2 A statutory demand and supporting affidavit was served on the plaintiff's registered office on 27 March 2001. A copy of the statutory demand and the supporting affidavit appears as annexure "KWB1" to the affidavit of Kevan Warren Badge, sworn 12 April 2001. The affidavit accompanying the statutory demand was sworn by Rodney Michael Williams on 13 December 2000. As is required by O 81G r 31, it conforms with form 7. The affidavit includes par 5 which is in the following terms:

"I believe that there is no genuine dispute about the existence or amount of any of the debts."

3 This is the second statutory demand served by the defendant on the plaintiff. Appearing as annexure "KWB9" to Mr Badger's affidavit is a copy of a statutory demand served on the plaintiff in September 2000. The amount claimed in both demands is exactly the same - $121,243.99. By originating process dated 6 October 2000 the present plaintiff applied to set aside the statutory demand served on 18 September 2000. The matter was first mentioned in chambers on 11 October 2000 and came on for hearing on 25 October 2000. Master Bredmeyer made orders in terms of the application - that is to say, the statutory demand was set aside and the defendant was ordered to pay the plaintiff's costs.

4 There is no evidence as to what occurred when the application was heard by the learned Master; no evidence was adduced at the hearing of this application by either party as to the circumstances which led to the demand being set aside. That may be due to the fact that both parties are now represented by solicitors who had no part in the earlier proceedings. Furthermore, an inspection of the court file of the earlier action gives no hint of why the statutory demand was set aside. No written reasons were prepared by the learned Master and the hearing appears not to have been recorded.

5 Against this background, counsel for the plaintiff made two submissions. First, it was said that to issue a second statutory demand in exactly the same terms as an earlier statutory demand, when that earlier demand had been set aside on the basis that there was a genuine dispute

(Page 4)

between the parties, amounted to an abuse of process. Secondly, it was said that the affidavit in support of the second statutory demand - that is the demand the subject of this application - was necessarily defective. The deponent to the affidavit in support of the demand, Mr Williams, attested by par 5 of his affidavit, that there was no genuine dispute about the debt. It was submitted that given the first demand in identical terms was set aside, that could not be right. The mere fact that the demand had been set aside on the basis that there was a genuine dispute meant that the affidavit was inappropriate and inadequate. There was, therefore, a defect in the accompanying affidavit which would justify the demand being set aside under s 459J(1)(b).

6 It is convenient to deal with this second point first. The question of the consequences of a defect in an affidavit supporting a demand have been considered on a number of occasions. In Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 16 ACLC 1609, Austin J considered a number of authorities, including Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1001 and B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 13 ACLC 88. These two cases appeared to show a different approach was adopted by McLelland CJ in Eq in the Supreme Court of New South Wales and the Full Court of the Federal Court. Austin J in Kezarne explained the apparent conflict in this way (at 1614):

"The point of difference between the Full Federal Court and McLelland CJ in Eq is this: McLelland CJ in Eq construed the word 'defect' in s 459J(2) as referring to a 'defect in the demand' of the kind dealt with in s 459J(1)(a). Therefore, the court is proceeding under s 459J(1)(b) because the complaint is not about a defect in the demand itself, his Honour would take the view that s 459J(2) is irrelevant. In the Full Federal Court's view the word 'defect' in s 459J(2) is wider than the expression 'defects in the demand' in s 459J(1)(a) (76 FCR at 756), and consequently s 459J(2) is relevant to an application under s 459J(1)(b) based on a defect in relation to but not in the demand, such as a defect in the accompanying affidavit."

7 Having highlighted the differences between the two approaches, his Honour went on to say (at 1614):

"As long as it is clear (and, with respect, the Full Federal Court's judgment makes it clear) that a defect in the demand itself cannot be dealt with otherwise than under s 459J(1)(a), the

(Page 5)

difference between McLelland CJ in Eq and the Full Federal Court as to the construction of s 459J(2) may not be of any great significance. As McLelland CJ in Eq observed (at 15 ACSR 436), if a defect in the accompanying affidavit is (contrary to his view) a defect for the purposes of s 459J(2), the court's intervention to set aside the demand in circumstances such as those before him would not be 'merely' because of the defect, but rather on the basis that the defect operated in the particular circumstances in a manner which provided good reason for intervention."

8 That, it seems to me, is the case here. Mr Williams has attested under oath that he does not believe that there is a genuine dispute in relation to the debt. He makes this statement against the background of an earlier statutory demand being set aside on the basis that there was a genuine dispute as to the debt. It may be that Mr Williams has a sound basis for believing that there is no genuine dispute as to the debt. For instance, it may be that there was some reason unconnected with the merits of the application why it was not contested. For instance, the defendant may simply have not had the funds to instruct solicitors. However, if there is some basis for Mr Williams' conclusion that there is no genuine dispute about this debt, it was incumbent upon him to explain why he reached that conclusion. He simply has not done so.

9 It is important to look again at what the legislative regime of statutory demands is seeking to achieve. If the demand is not set aside, the company on which it is served is presumed to be insolvent and is liable to be wound up. The Court must be sure that the debt is owing and there is no genuine dispute in relation to it. Austin J explained the position with great clarity in the Kezarne case: see page 1614. With respect I would adopt entirely what his Honour had to say.

10 What is required of creditors and their legal advisors is that they give careful consideration to the affidavit which accompanies the statutory demand. While it is true that r 31 requires that the affidavit accompanying the demand "must" be in accordance with form 7, that does not mean the form is to be followed slavishly, irrespective of the surrounding circumstances. The accompanying affidavit must "state the matters mentioned in (the) form". That means in a case such as this, if Mr Williams believes that there is no genuine dispute about the debt, he should have explained why the earlier demand was set aside. That would require him to turn his mind to the question of whether or not there was a "genuine dispute" about the debt. It may have been necessary for him to

(Page 6)

seek legal advice on this question to satisfy himself that, given the way Courts have interpreted the expression "genuine dispute", there was indeed no genuine dispute in this case. In my view, that would necessarily have involved explaining why the earlier demand was set aside. Failure to explain the earlier successful application is more than a mere defect. It is a significant omission which would justify the demand being set aside.

11 Although it is not strictly speaking necessary for me to do so, I should say that had I not reached the conclusion the demand should be set aside under s 459J, I would nonetheless have set the demand aside under the provisions of s 459G. I have reached that conclusion for the following reasons.

12 Mr Badge, in his affidavit, says that the plaintiff was an agent in Western Australia for Don Smallgoods Co Pty Ltd between October 1996 and July 1999. Don Smallgoods was the trading name of the defendant. From time to time, the defendant supplied smallgoods to the plaintiff. The evidence indicates that over a period of time a substantial amount of product was supplied by the defendant to the plaintiff. Mr Badge says that the plaintiff had difficulty reconciling the accounts for goods supplied as against goods received. The position was compounded because in April 1997, certain of the defendant's products were recalled subsequent to a health scare. Mr Badge says that although credit was requested for the recalled goods, none were received: see par 6(ii) of his affidavit of 12 April 2001.

13 Given the large number of transactions between the plaintiff and the defendant, it seems to me that it is not possible, in the context of a statutory demand, to conclude that there is no genuine dispute between the plaintiff and the defendant. What is required is a reconciliation between the plaintiff's and the defendant's records, taking into account product the plaintiff says was returned to the defendant and all other matters which give rise to a question as to the accuracy of the defendant's accounts. In my view, the plaintiff has raised a genuine dispute and I would set the statutory demand aside under the provisions of s 459G.

14 For these reasons I would set aside the statutory demand. I will hear the parties as to costs.