Saferack Pty Ltd v Marketing Heads Australia Pty Ltd

[2007] NSWSC 1143

Reported Decision: (2007) 25 ACLC 1,392

New South Wales

Supreme Court

CITATION:	Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143
HEARING DATE(S):	12/10/07
JUDGMENT DATE :	16 October 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Order that statutory demand be set aside; Question of costs reserved for future argument
CATCHWORDS:	CORPORATIONS - winding up - application for order setting aside statutory demand - whether originating process and supporting affidavits served within time - whether deficiencies in s.459E(3) affidavit may be relied on although not mentioned in supporting affidavit - Graywinter principle discussed - whether absence from s.459E(3) affidavits of statements that debt due and payable and not subject to genuine dispute warrants setting aside of demand - whether genuine dispute shown
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.109X(1)(a), 142, 459E(3), 459G, 459H(1)(a), 459J(1)(b), Supreme Court (Corporations) Rules 1999, rule 5.2
CASES CITED:	Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 ACTR 22 Callite Pty Ltd v Adams [2001] NSWSC 52 Elm Financial Services Pty Ltd v Macdougal [2004] NSWSC 560 Energy Equity Corporation v Sinedie Pty Ltd (2001) 166 FLR 179 Eyota Pty Ltd v Hanave (1994) 12 ACSR 785 Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321 Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd [2003] FCA 533 KW & KM Quinn Investments Pty Ltd v Deputy Commissioner of Taxation [2004] QCA 91 Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd (2002) 20 ACLC 726 Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd [2001] WASCA 360 Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 Neutral Bay Pty Ltd v Deputy Commissioner of Taxation [2007] QCA 312 Pathe Freres Cinema Ltd v United Electric Theatres Ltd [1914] 3 KB 1253 POS Media Online Ltd v B Family Pty Ltd (2003) 21 ACLC 533 Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45 Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 Rivercorp v Casement [2004] NSWSC 280 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
PARTIES:	Saferack Pty Ltd - Plaintiff Marketing Heads Australia Pty Ltd - Defendant
FILE NUMBER(S):	SC 3937/07
COUNSEL:	Mr M.R. Ellicott - Plaintiff Mr J.M. Miller - Defendant
SOLICITORS:	Hagan & Co - Plaintiff

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY, 16 OCTOBER 2007

3937/07 SAFERACK PTY LTD v MARKETING HEADS AUSTRALIA PTY LTD

JUDGMENT

1 The plaintiff applies under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 30 July 2007.

2 The debt or alleged debt the subject of the demand is in the sum of $57,102.35 and is described in the schedule to the demand as follows:

“The company owes the creditor $57,102.35 for services provided by the creditor to the company pursuant to an agreement dated 1 December 2005 for the provision of professional marketing services.”

3 The plaintiff’s originating process was filed on 8 August 2007 and bears that date. Filed at the same time were two supporting affidavits, one of the plaintiff’s solicitor, Mr Hagan, which was sworn on 7 August 2007 and annexed copy documents (including a copy of a document headed “Affidavit (Verifying Creditor’s Statutory Demand)” and the other of Mr Busby, a director of the plaintiff, sworn on 31 July 2007.

4 The plaintiff’s case is twofold. In contending that the statutory demand should be set aside, the plaintiff relies, first, on the ground made available by s.459J(1)(b) and, second, on the ground made available by s.459H(1)(a). The case under s.459J(1)(b) is based on certain deficiencies in the affidavit which accompanied the statutory demand, that is, the affidavit called for by s.459E(3). The case under s.459H(1)(a) is based on a genuine dispute as to the existence of the relevant debt.

5 The defendant contends that it is not open to the plaintiff to raise the first ground of objection, that is, the matter based on s.459J(1)(b). This is so, it is said, because of the so-called “Graywinter principle”. This is a matter to which I shall return. First, however, it is necessary to deal with a threshold issue raised by the defendant, namely, whether the originating process and a copy of each of the supporting affidavits were served on the defendant and, if they were, whether the date of service fell within the period of 21 days referred to in ss.459G(2) and 459G(3).

6 The mode of service the plaintiff claims to have adopted in relation to the originating process and each of the two supporting affidavits is one of the modes made available by s.109X(1)(a) of the Corporations Act, that is, “by … leaving it at … the company’s registered office”. ASIC records show that, since 5 January 2000, the registered office of the defendant has been:

“c/- Stratford Fisher & Associates, Level 4, 44 Miller Street, North Sydney NSW 2060.”

7 No notice under s.142 of the Corporations Act in relation to any different address is recorded by ASIC as having been lodged, so that there is no basis on which it can be found that, at some time after 5 January 2000, some other location became the defendant’s registered office.

8 The acts upon which the plaintiff relies as constituting service by “leaving it at … the company’s registered office” are acts of Mr Hagan, the plaintiff’s solicitor. It is Mr Hagan’s evidence that he took the originating process and a copy of each of the supporting affidavits to Level 4 at 44 Miller Street, North Sydney on 8 August 2007. In the first of two affidavits sworn by him on the matter of service, Mr Hagan deposes that he saw on a desk in a reception area on Level 4 a sign “Stratford Fisher & Associates”. In the vicinity of the desk, a man approached Mr Hagan. Mr Hagan explained to the man that he was seeking to serve some documents at the registered office of Marketing Heads Australia Pty Limited, shown by ASIC records to be “at Stratford Fisher & Associates at this office”. The man replied, “Well they only come in on Wednesdays”, to which Mr Hagan responded, “Well actually it is Wednesday today, can you sign for them?” Mr Hagan’s evidence is that he then handed the documents and a covering letter to the man who handed back to Mr Hagan a copy of the covering letter on which the man had signed a notation “Received documents on behalf of per Stratford Fisher & Associates 8 August 2007”. This copy of the covering letter is in evidence. It bears a signature which is indecipherable but appears to start with the initials “BJ”. Mr Hagan has testified that this signature was placed on the copy in his presence by the man to whom he spoke.

9 Mrs Robyn Stratford, a chartered accountant, gave evidence that she is the principal of Stratford Fisher & Associates. She says that her practice was conducted at an office on Level 4 of 44 Miller Street until about March 2007 when the practice moved to premises at Bella Vista near Baulkham Hills. While at 44 Miller Street, the practice occupied Suite 17 on Level 4, one of four office suites on that floor. Mrs Stratford’s evidence is that Suite 17 now has on its door the name of a firm called “Evercommnetworks”.

10 Mrs Stratford went to Level 4, 44 Miller Street, North Sydney on 22 August 2007. She visited Suite 15, occupied by another accountancy firm, Vincent Di Bella & Associates. She says that she found there a bundle of documents sitting on a desk in the open part of Suite 15. The documents are exhibited to her affidavit. They are the documents Mr Hagen says he left with the unidentified man on Level 4 on 8 August 2007.

11 Having become aware when the matter was before the court on 28 September 2007 that the defendant intended to lead evidence on the question of service, Mr Hagan went back to Level 4, 44 Miller Street. He did so on that same day, 28 September 2007. Mr Hagan observed Suite 15 and, in particular, the open part of it accessible from the lift foyer through an open door. He saw a desk in the open part. He there took some photographs which are in evidence. They show a desk on which there is, among other things, a plastic tray of the typical “in-tray” type containing what appear to be two computer cables and with an A4 sheet of paper lying on the top bearing in large letters the words “Stratford Fisher & Associates, Chartered Accountants”. Stuck to the side of the tray is a strip of paper on which is printed in smaller type “Stratford Fisher & Associates”. Mr Hagan identified the sign on the A4 sheet of paper as the one he saw when he went to Level 4 on 8 August 2007 and left the documents with the unidentified man. His second visit enabled Mr Hagan to identify Suite 15 as the place where he left the documents with the man.

12 In the course of cross-examination, Mr Hagan clarified that the reception area he had referred to in his first affidavit was, in reality, the area inside the door of Suite 15 (the premises apparently occupied by Vincent Di Bella & Associates) in which the desk and the labelled in-tray were situated.

13 When Mrs Stratford was cross-examined, she stated that she attends from time to time at the office of Vincent Di Bella & Associates at Suite 15. It appears that she has some arrangement with that firm under which she may use its office from time to time for the purpose of seeing her own clients there. Mrs Stratford gave evidence that, since July 2007, she has seen clients at the Vincent Di Bella & Associates office five or six times, generally on a Wednesday.

14 Mrs Stratford also gave evidence that, when she goes to the Vincent Di Bella & Associates office to see clients, she places on the front door of Suite 15 a sheet of A4 paper bearing the words “Stratford Fisher & Associates, Chartered Accountants”. This is no doubt to make it easier for the visiting clients to find her. The description Mrs Stratford gave is consistent with the premise that it was this sheet of paper that Mr Hagan saw on both his visits to Level 4.

15 Finally, so far as the facts are concerned, it is important to record that the directory board or tenant list at street level at the entrance to the building at 44 Miller Street lists “Stratford Fisher & Associates Chartered Accountants” among six firms and companies in the section devoted to Level 4. It is not disputed that the directory board was in that state on 8 August 2007.

16 It was submitted by Mr J.M. Miller of counsel, on behalf of the defendant, that, with the evidence in this state, it cannot be found that service was effected in the manner specified in s.109X(1)(a) of the Corporations Act. The documents, although left by Mr Hagan with the unidentified man at what he afterwards identified as Suite 15 on Level 4 were not, in Mr Miller’s submission, left at “the company’s registered office”. It was submitted that, until Mrs Stratford moved her practice to the Baulkham Hills district in March 2007, the registered office of the defendant was at Suite 17 on Level 4, being the particular part of Level 4 then occupied by Stratford Fisher & Associates. Thereafter, so the argument seems to run, the registered office became the whole of Level 4. This seems to be the basis for Mr Miller’s having accepted that delivery to the lift lobby area on Level 4 would have been good service. Mr Miller also accepted that had the alternative made available by s.109X(1)(a) been adopted (that is, posting the documents to the registered office) valid service would have been effected had the envelope containing the documents been addressed to the defendant “c/- Stratford Fisher & Associates, Level 44, 44 Miller Street, North Sydney NSW 2060” – even though the physical features of that floor and the connections of Mrs Stratford’s practice with it were as the evidence has shown them to be.

17 I am of the opinion that delivery of the documents by Mr Hagan in the way he described constituted delivery of them to the registered office of the defendant. It is not necessary to decide whether the unidentified man had authority to accept documents on behalf of Stratford Fisher & Associates. The capacity of any person on Level 4 at a particular time to act for Stratford Fisher & Associates is beside the point. The real issue is whether there was on 8 August 2007, a place identifiable as “c/- Stratford Fisher & Associates, Level 4, 44 Miller Street, North Sydney NSW 2060”.

18 The evidence about the in-tray bearing the “Stratford Fisher & Associates” label on its side and covered by the sheet of paper referring to that firm, coupled with the evidence that Mrs Stratford attended from time to time at Suite 15 to see clients and, when she did so, placed the sheet of paper on the door of Suite 15, justifies an inference, which I draw, that Suite 15 was, on 8 August 2007, a place at which Stratford Fisher & Associates conducted its practice, even though on a spasmodic and intermittent basis. Suite 15 was a place at which clients of Stratford Fisher & Associates were sometimes seen by Mrs Stratford in the course of the conduct of her practice. At the times she went to the premises for that purpose, Mrs Stratford caused the firm’s name to be affixed to the door. Even when Mrs Stratford was not at Suite 15, there was, just inside the door providing access to that suite, an in-tray marked with the name of her firm and this was readily observable by anyone looking through the door from the lift lobby.

19 All these factors lead to the conclusion that, on 8 August 2007, Suite 15 was the place on Level 4 of 44 Miller Street through which Stratford Fisher & Associates could be reached. Furthermore, I infer that Mrs Stratford or someone else associated with her practice had caused the reference to Stratford Fisher & Associates to appear on the directory board on the ground floor of the building at 44 Miller Street at or about the time that the practice began to be located in that building; also that Stratford Fisher & Associates had not taken (or pressed) steps to have the name removed from the directory board when the practice moved to the Baulkham Hills area in March 2007. There was, in that way, a continuing holding out by Stratford Fisher & Associates of a presence on Level 4, so that a person going to Level 4, as Mr Hagan did on 8 August 2007, would, after searching, have seen the in-tray marked in such a way as to show that it was a means by which Stratford Fisher & Associates could be reached.

20 I hold, therefore, that the originating process and a copy of each of the supporting affidavits were left at the defendant’s registered office on 8 August 2007 when Mr Hagan left them with the unidentified man at Suite 15. Given that the statutory demand is dated 30 July 2007 and must be taken to have been served on or after that date, the service effected by Mr Hagan was well within the period of 21 days referred to in ss.459G(2) and 459(3). The plaintiff’s application was therefore made in accordance with s.459G and forms a basis on which an order setting aside the statutory demand may be made.

21 I turn now to the question whether it is open to the plaintiff to rely on the ground based on s.459J(1)(b). The contention of the plaintiff is, in essence, that the affidavit accompanying the statutory demand (that is, the affidavit called for by s.459E(3)) was deficient in three respects: first, because it did not state that the debt the subject of the demand was “due and payable”; second, because it did not state a belief of the deponent as to the absence of genuine dispute about the existence and amount of the debt; and, third, because it did not state the source of the deponent’s knowledge of the matters stated in the affidavit.

22 It was submitted on behalf of the defendant these alleged deficiencies could not be raised by way of challenge under s.459J(1)(b) because they were not identified in either of the affidavits supporting the s.459G application, that is, Mr Hagan’s affidavit of 7 August 2007 and Mr Busby’s affidavit of 31 July 2007. The defendant thus calls in aid the principle emerging from Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 according to which an applicant under s.459G is limited to grounds appearing from the supporting affidavit or affidavits filed and served within the period of 21 days mentioned in that section.

23 Valuable discussion of this principle and its precise content may be found in the recent judgment of White J in Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321. In that case, his Honour regarded as too strict the approach taken by me in Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45 and Elm Financial Services Pty Ltd v Macdougal [2004] NSWSC 560. White J was of the view that my observation to the effect that the ground of challenge must be raised expressly in, or appear by necessary inference from, the supporting affidavit suggested too demanding a requirement. He referred, in that connection, to observations of Austin J in POS Media Online Ltd v B Family Pty Ltd (2003) 21 ACLC 533 to the effect that the approach I had taken in Process Machinery arguably took the observations of Sunberg J in Graywinter further than they were taken by the Court of Appeal of the Supreme Court of Western Australia in Energy Equity Corporation v Sinedie Pty Ltd (2001) 166 FLR 179 and might be inconsistent with Callite Pty Ltd v Adams [2001] NSWSC 52.

24 White J then dealt with the case of a ground obvious on the face of an identified document but not expressly enunciated in the supporting affidavit. In the POS Media case, Austin J had inclined to the view that, if the relevant document (such as an agreement) was annexed to the supporting affidavit, a ground obvious on the face of the document would be available even though not mentioned or suggested in the text of the affidavit (I had indicated in Process Machinery that the text would have to say something about the relevant matter). Austin J did not need to decide the point but it became the subject of the following observations of White J in the Hansmar case by reference to the decision of Santow J in Callite Pty Ltd v Adams:

“[ 31] Such a mode of reasoning would be consistent with Callite . There, a solicitor served a statutory demand demanding payment of an amount of unpaid legal costs. One of the grounds of challenge to the demand was that the solicitor had failed to make the disclosure required by s 175 of the Legal Profession Act 1987 (NSW). Santow J (as his Honour then was) held that this ground of challenge was not available because no facts were deposed to from which one could infer that there was no fee disclosure and no costs agreement. However, the affidavit did depose to the receipt of accounts and those accounts were annexed. Santow J held (at [10]) that a perusal of the accounts showed that they lacked the prescribed statutory content as required by s 192 of the Legal Profession Act and reg 22A of the Legal Profession Regulations 1994 (NSW). Section 192 of the Act precluded any action being taken for recovery of costs until 30 days had passed after the provision of a bill of costs which complied with the Act. Santow J held (at [12]) that the legal consequences which flowed from the form in which the accounts were rendered were not required to be pleaded in the affidavit. His Honour set aside the statutory demand on the basis that public policy precluded a statutory demand being used to bypass the safeguards of the Legal Profession Act.

[32] I doubt that it could be said that in Callite it was a necessary inference from the affidavit that this ground of challenge was raised. However, it was an available inference, so that it could fairly be said that the ground was raised in the supporting affidavit.”

25 With the benefit of the analysis by Austin J in POS Media and White J in Hansmar Investments, I am persuaded that my earlier approach is indeed too strict. In the Graywinter case itself, the minimum requirement with respect to a supporting affidavit was said by Sunberg J to be that it must “contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute” [emphasis added]. That was, of course, a s.459H(1)(a) case. But the same reasoning applies where the challenge is under s.459J. In endorsing the approach taken by Sunberg J, the Full Court of the Supreme Court of Western Australia, in Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd [2001] WASCA 360, said that the supporting affidavit is “required to reveal a genuine dispute” [emphasis added]. These statements, coupled with the approaches taken by Austin J and White J and the decision of Santow J in Callite, persuade me that a ground is “raised”, as referred to in Energy Equity, if the ground is evident from the supporting affidavit, even if only because it can be discerned from some annexed document the content of which “reveals” it.

26 In the present case, the three grounds of objection advanced by reference to s.459J(1)(b) are evident on the face of the affidavit accompanying the statutory demand, being the affidavit a copy of which was annexed to the affidavit of Mr Hagan of 7 August 2007 which was in turn one of the affidavits supporting the s.459G application. This is because the grounds involve the absence of required content from the affidavit accompanying the statutory demand - a deficiency therefore obvious on the face of that affidavit. The grounds of objection are therefore available to be advanced by the plaintiff.

27 In approaching any claim based on s.459J(1)(b), the court must immediately remind itself of the scope and purpose of that provision. It creates a jurisdiction to set aside a statutory demand where there is “some other reason why the demand should be set aside”, with “other reason”, clearly enough, referring to a reason not otherwise indicated by the legislation as a ground for the setting aside of a statutory demand: Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at p.459.

28 Section 459J(1)(b) creates a remedial jurisdiction. The Court of Appeal of the Australian Capital Territory (Crispin P, Gray and Marshall JJ) said this of the provision in Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 ACTR 22 at [27]:

“What is contemplated by s 459J(1)(b) is a discretion of broad compass which extends to conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice: Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 at 317 to 318.”

29 In that case, the creditor had agreed to withdraw the statutory demand but later reneged on its agreement. Those circumstances were seen as coming within the relevant concept of unconscionability.

30 The criterion based on whether the person serving the statutory demand had engaged in conduct that “was unconscionable, was an abuse of process or had given rise to substantial injustice” (these being the words of Black CJ, Einfeld and Sackville JJ in Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 at pp.317-318) had earlier been applied by the Queensland Court of Appeal in KW & KM Quinn Investments Pty Ltd v Deputy Commissioner of Taxation [2004] QCA 91.

31 In Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229, the New South Wales Court of Appeal observed that substantial injustice has been confirmed by case law as a criterion for setting aside a statutory demand. It was emphasised, however, that “injustice” must be judged by reference to the purposes Part 5.4 is intended to serve. Thus, Santow JA observed (at p.235):

“There being no defect in the demand, reliance was placed upon whether there be ‘some other reason’ as would satisfy s 459J(1)(b). The claimants contend that such reason cannot be based simply on some need to bring to the relationship between the parties some broad form of perceived fairness or reasonableness. Rather there must be ‘sound or positive ground or good reason’ to set aside the statutory demand for ‘some other reason’, which was consistent with the legislative intent of Pt 5.4 of the Act: Portrait Express (Sales) Pty Ltd v Kodak (A’asia) Pty Ltd , above, at 757 per Bryson J; Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11 at 18 per Austin J.”

32 Also particularly pertinent are the observations of Young CJ in Eq (at p.240):

“[57] I agree with Santow JA and with his reasons. I merely wish to add one or two observations.

[58] Although the wording of s 459J(1)(b) of the Corporations Act appears wide, its context and history requires reading it down to encompass in general terms only cases where the court is satisfied that injustice will be caused unless the demand is set aside because of a defect relating to, but not in, the demand: see Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11 at 17.

[59] In Portrait Express (Sales) Pty Ltd v Kodak (A’asia) Pty Ltd (1996) 20 ACSR 746 at 757, Bryson J truly said that the discretionary power under s 459J(1)(b) should not be activated ‘unless the decision to do so is supported by some sound or positive ground or good reason which is relevant to the purposes for which the power exists’.

[60] It is not possible to set out fully the cases that might fall within s 459J(1)(b) nor if it were possible would it be wise to do so. The sort of case that will be covered will include gross defects in supporting affidavits and documentation and where the alleged creditor has made statements or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor’s position.

[61] A judge is not at liberty to set aside a demand under s 459J(1)(b) merely because he or she subjectively considers it fair to do so.”

33 This case shows, in my opinion, that the operation of s.459J(1)(b) is not confined to cases coming within established categories (such as unconscionability and abuse of process) and that the section applies whenever there is a need to counter some attempted subversion of the statutory scheme: see also the recent decision of the Queensland Court of Appeal in Neutral Bay Pty Ltd v Deputy Commissioner of Taxation [2007] QCA 312 (28 September 2007), particularly at [84].

34 Against that background, I turn to the three perceived deficiencies in the s.459E(3) affidavit upon which the plaintiff seeks to rely by reference to s.459J(1)(b) (they are outlined briefly at [21] above). The requirements with respect to the content of a s.459E(3) affidavit arise in part directly and in part indirectly from that section. Section 459E(3)(a) requires that an affidavit accompanying a statutory demand “verifies that the debt, or the total of the amounts of the debts, is due and payable by the company”. Other content specifications are made by s.459E(3)(b) which requires that the affidavit comply with “the rules” - that is, the rules of the Federal Court of Australia or the rules of the Supreme Court of the State or Internal Territory “as the case requires” (see the definition of “rules” in s.9). For present purposes, there is no distinction to be drawn between the several potentially relevant sets of rules and the case before me was argued by reference to the Supreme Court (Corporations) Rules 1999 of this court. Rule 5.2 of those rules is in the following terms:

“ Affidavit accompanying statutory demand (Corporations Act s 459E (3))—Form 7

For the purposes of subsection 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, and
(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.”

35 It is made clear by rule 5.2(b) that, if the creditor is a corporation and therefore incapable of swearing an oath (Pathe Freres Cinema Ltd v United Electric Theatres Ltd [1914] 3 KB 1253), the affidavit must be sworn by an individual acting with the creditor’s authority. Form 7 in Schedule 1 to the Supreme Court (Corporations) Rules requires that the deponent of the affidavit state his or her relationship to the creditor, “eg … ‘a director of the creditor’ …”. The making of the affidavit by a corporate creditor’s director is therefore, not surprisingly, a common occurrence expressly contemplated.

36 Form 7 also contains paragraphs as follows:

“3 [ State the source of the deponent’s knowledge of the matters stated in the affidavit in relation to the debt or each of the debts, eg ‘I am the person who, on behalf of the creditor(s), had the dealings with the debtor company that gave rise to the debt’, ‘I have inspected the business records of the creditor in relation to the debtor company’s account with the creditor’ ].

4 *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.

5 I believe that there is no genuine dispute about the existence or amount of the *debt/*any of the debts.”

37 The affidavit relied upon by the defendant in this case as an affidavit in conformity with s.459E(3) is the affidavit of Mr Wakeling sworn on 30 July 2007. That affidavit is in somewhat unusual form. After stating that he is a director of the defendant and is authorised by it to make the affidavit on its behalf, Mr Wakeling deposes:

“Annexed and marked ‘A’ is a true copy of a creditor’s statutory demand for payment of debt under s.459E(2)(e) of the Corporations Act 2001, dated 30 July 2007 (‘the Demand’).”

38 Annexed to Mr Wakeling’s affidavit is the form of statutory demand which, in its own clause 2, says:

“Attached is the affidavit of John Wakeling, director of the creditor, dated 30 July 2007, verifying that the amount is due and payable by the company.”

There is not, however, any annexure to the form of statutory demand which, as I have said, is itself an annexure to the affidavit of Mr Wakeling.

39 This rather odd juxtaposition of documents is relevant to the first of the deficiencies upon which the plaintiff seeks to rely. Mr Wakeling does not say in the text of his own affidavit that the debt of $57,102.35 is due and payable by the plaintiff, although he does say that the plaintiff is “indebted” to the defendant in that sum. The annexure to the affidavit, being a copy of the statutory demand, contains a statement that the amount is due and payable by the defendant. But the words in the statutory demand come from the defendant which issued it, not from the director of the defendant by whom the affidavit was made. The requirement in s.459E(2)(e) that a statutory demand be in the prescribed form imports, via the Corporations Regulations 2001 (Cth) and Form 509H, a requirement that the demand itself state that the debt is due and payable. The separate and independent requirement concerning verification of that attribute comes from s.459E(3)(a) and is a requirement imposed in relation to the affidavit. It is thus envisaged by the legislation not only that a company which claims to be a creditor will state in the demand itself that the debt is due and payable but also that some human being acting with the authority of that company and capable of swearing an affidavit (and therefore of being punished for perjury) will independently form and state an opinion that the debt is due and payable. The latter requirement is not satisfied in this case.

40 The legislative intention is that, where a corporation claims to be a creditor entitled to serve a statutory demand, some natural person acting in the interests of (and with the authority of) the corporation must turn his or her mind consciously and deliberately to one of the fundamentals of the statutory scheme – namely, that there is not only a debt in existence but also that the debt is due and payable. The fundamental nature of that matter comes from the description in s.459E(1) of the type of debt in respect of which a statutory demand may be served. Having considered the characteristics of the debt, the person concerned must say on oath that the debt is due and payable. There is no such sworn statement in this case. So far as Mr Wakeling’s affidavit is concerned, he says, by using the words “is indebted”, no more than that the debt exists.

41 For reasons discussed in a number of cases to which Mr M. R. Ellicott of counsel for the plaintiff referred (see, in particular, Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd (2002) 20 ACLC 726 and Rivercorp v Casement [2004] NSWSC 280), failure of the creditor or, in the case of a corporate creditor, some natural person on its behalf to verify on oath the qualities of the debt as a debt due and payable (as distinct from merely owing so as to cause the company to be “indebted”), these being qualities going to the root of the statutory scheme, is a material departure from the statutory demand process envisaged by s.459E.

42 The second matter complained of by reference to s.459J(2)(b) is the creditor’s failure to provide a sworn statement of the belief of the absence of genuine dispute as to the existence and amount of the debt, being a belief of the person authorised by the company to make the affidavit. That a debt be undisputed is another aspect of the foundation upon which the statutory scheme rests. A creditor resorting to the statutory demand procedure has a duty to consider and to convey to the alleged debtor company certain sworn confirmations about the quality of the debt on which reliance is placed with a view to obtaining the benefit of a presumption of insolvency if the demand for payment is not met. The significance of the sworn confirmation that there is no genuine dispute regarding the debt was referred to in a passage in the judgment of Tamberlin J in IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd [2003] FCA 533 to which Mr Ellicott made reference on behalf of the plaintiff:

“[22] Independently, and in addition to this conclusion, April Chen, in her affidavit of 8 November 2002 in support of the Statutory Demand, does not swear that there is a belief that there is no genuine dispute as to the existence of amount of debt. This is a material failure of significance. The assertion that the proponent believes there is no genuine dispute about the existence or amount of the debt provides an important protection to the recipient of such a notice given the dire consequences which can ensue where there is no compliance. It would in my view be unfair to the recipient not to insist upon observance of this statutory requirement.
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[24] The legislature has specifically provided for a commitment to the position and an expression of a belief that there is no genuine dispute. This is a valuable safeguard against possible abuse of statutory demands in circumstances where there may be a genuine dispute known to the creditor or the creditor's authorised representative yet it is sought to exert pressure for payment. In the present case, where there is a total omission to insert such a paragraph, it cannot be suggested that there has been any substantial compliance with this requirement. Nor can it be described in the minimalist language used in the Act as ‘a mere defect’. The express requirement of a statement that there is a belief as to the absence of any genuine dispute is additional to the requirement that the debt is due and payable. A simple assertion that a debt is due and payable does not necessarily entail the consequence that there is no genuine dispute about the existence or amount of the debt or any belief as to the absence of a genuine dispute: see Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd (2002) 20 ACLC 352 at [32]; Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196 at [68]-[71]. The matter was also the subject of consideration by McLelland CJ in Eq in B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433 at 435-436 where his Honour pointed out:

‘... the departure from the relevant rule in respect of the affidavit accompanying the statutory demand is a matter of substance. ... 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 merely a technical breach.’”

43 Although these observations relate directly to the second objection taken by the present plaintiff, they apply with equal force to the first. The legislation allows a creditor to adopt the statutory demand procedure in relation to a debt only if that debt is of a particular kind. If a creditor fails in the duty to provide sworn confirmation regarding qualities essential to the character of the debt as one capable of being the subject of a statutory demand, that creditor is seen to be attempting to use the procedure otherwise than in the way the legislature intends it to be used. The recipient of the demand is entitled to confirmation on affidavit that the creditor or, in the case of a corporate creditor, the person authorised by it has turned the person’s mind to essential characteristics of the debt and has found them to be such that the debt is of a kind that ought to be paid upon pain of a presumption of insolvency. If the recipient is not given that assurance, the creditor can be seen to be using the demand for a purpose and in a way not contemplated by the provisions under which a creditor may obtain the benefit of such a presumption. Section 459J(1)(b), as an instrument for avoiding subversion of the statutory scheme then comes into play.

44 The third deficiency alleged by the plaintiff in its s.459J(1)(b) case is that Mr Wakeling did not state in his affidavit the source of his knowledge of the matters to which he deposes. It is true that there is no explicit statement to the effect contemplated by paragraph 3 of Form 7. But there is, I think, an implicit indication that it is Mr Wakeling’s status as a director that enables him to make the statements he makes. The position of a director of a company is, of course, distinguishable from the position of, for example, an employed clerk. The way in which a person of the latter kind has obtained information to which he or she deposes may well be of significance. In the case of a director, however, the right of full access to company records for the purpose of discharging directorial functions and the expectation that the director will have broad knowledge of the company’s affairs as a whole makes a statement of the source of knowledge less significant. It follows that while the absence of such a statement from Mr Wakeling’s affidavit represents a non-compliance with the requirement arising from paragraph 3 of Form 7, the deficiency is not one which can reasonably be regarded as productive of injustice.

45 In summary, therefore, the first two matters raised by reference to s.459J(1)(b) warrant an order setting aside the statutory demand and such an order will be made.

46 I proceed nevertheless to deal briefly with the case advanced by the plaintiff under s.459H(1)(a), that is, the contention that there exists a genuine dispute about the existence of the debt the subject of the statutory demand. In doing so, I remind myself of well known cases such as Eyota Pty Ltd v Hanave (1994) 12 ACSR 785, Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 and Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (above). As I have said before, these cases make it clear that the task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of the s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company 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 on rational grounds that indicates an arguable case on the part of the company it must find that a genuine dispute exists even where any case, even apparently available to be advanced against the company seems stronger.

47 The alleged debt in the present case is for marketing services said to have been provided by the defendant to the plaintiff under a written agreement dated 1 December 2005. As I have said, the amount of the alleged debt is $57,102.35. By a statement of claim filed in the District Court in December 2006, the present defendant, as plaintiff, sued the present plaintiff, as defendant, claiming an amount of $57,102.35 on outstanding invoices with reference to a written contract for the provision of marketing services. By a defence filed in January 2007, the present plaintiff, as defendant in the District Court, denied liability for the sum of $57,102.35. In the defence, it was stated that the written agreement did not constitute the whole of the contract between the parties and had effect in the context of certain oral agreements between them, one pre-dating the written agreement and the other made after the written agreement had been made. Defences based on possible variation of contract, waiver and estoppel are suggested by the District Court defence. That defence is verified by an affidavit of Ms Foster, a director of the present plaintiff.

48 Mr Miller submitted on behalf of the present defendant that, even allowing for the position that had been reached in the District Court some six months before the statutory demand dated 30 July 2007 was issued, it could not be said that there was a “genuine” dispute as to the existence of the debt. He referred to the fact that the matters pleaded in the District Court defence were not expressly referred to in the affidavit of Mr Busby in which the material on which the plaintiff relies on the genuine dispute aspect is contained. More specifically, he pointed out that Mr Busby did not refer explicitly to the alleged oral agreements upon which the defence verified by the affidavit of Ms Foster is based.

49 I do not accept that this aspect of the content of Mr Busby’s affidavit causes the obvious dispute between the parties to be otherwise than “genuine”. It appears that no reply has been filed in the District Court proceedings, with the result that issue may now have been joined. There is accordingly pending an action at law which will in due course establish whether, as the present defendant alleges in the District Court proceedings, the present plaintiff is indebted to it in the sum of $57,102.35 or whether, as the present plaintiff alleges, there is no such indebtedness. With the District Court litigation in the state I have described, I am of the opinion that there could not be a clearer case of dispute about the existence of the alleged debt the subject of the statutory demand. Furthermore, it is, to my mind, obvious that the dispute clearly delineated in the District Court some six months before the issue of the statutory demand is genuine and not, for example, something trumped up or manufactured for the purpose of seeking to have the statutory demand overturned.

50 The plaintiff has therefore established the s.459H(1)(a) ground as well as the s.459J(1)(b) ground.

51 The order of the court will be that the statutory demand dated 30 July 2006 served on the plaintiff by the defendant be set aside.

52 Mr Ellicott indicated at the conclusion of the hearing that his client would wish to be heard on the question of costs should the result be as I have indicated. I shall reserve the question of costs and make directions regarding argument on that matter.

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