Stellar Projects (Vic) Pty Ltd v Cambridge Plumbing Pty Ltd

[2017] VSC 532

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S CI 2017 03151

IN THE MATTER of Stellar Projects (Vic) Pty Ltd (ACN 600 804 073)

BETWEEN

STELLAR PROJECTS (VIC) PTY LTD (ACN 600 804 073)	Plaintiff
v
CAMBRIDGE PLUMBING PTY LTD (ACN 063 801 909)	Defendant

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JUDGE:	RANDALL AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	30 August 2017
DATE OF JUDGMENT:	8 September 2017
CASE MAY BE CITED AS:	Stellar Projects (Vic) Pty Ltd v Cambridge Plumbing Pty Ltd
MEDIUM NEUTRAL CITATION:	[2017] VSC 532

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CORPORATIONS – Corporations Act 2001 (Cth) – Section 459G application to set aside a statutory demand – Section 459E(3) – Affidavit accompanying statutory demand – Affidavit sworn a day prior to the date of the statutory demand – Section 459J(1)(b) – Some other reason to set aside statutory demand – Conflicting authorities – Decision of intermediate appellate court.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms S Hooper	Mark Croft Legal
For the Defendant	Mr M Gronow	Marshalls & Dent

HIS HONOUR:

1. This is an application pursuant to s 459G of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand dated 14 July 2017.

1. The originating process relevantly includes:

On the facts stated in the supporting affidavit, the plaintiff claims:

1.An order that the defendant’s statutory demand dated 14 July 2017 be set aside on the basis that:

(a)there is a genuine dispute between the parties as to the existence and amount of the debt claimed in the statutory demand;

(b)the plaintiff has a genuine offsetting claim against the defendant.

1. On the first return date, in addition to the grounds set out in the originating process, the plaintiff’s counsel raised the date of swearing of the accompanying affidavit as a further ground to set aside the statutory demand pursuant to s 459J(1)(b).

1. I took it that the defendant was on notice or aware of the issue as I was referred to authority upon which the defendant wished to rely to propound a different position to that submitted by the plaintiff. I informed the parties that I would rule upon the s 459J(1)(b) issue and gave directions with respect to the further hearing of the originating process in the event that I rejected the plaintiff’s submissions.

The statutory demand and accompanying affidavit

1. The statutory demand claims the sum of $241,889.30.  The description of the debt set out in the schedule is as follows:

Description of the Debt	Amount of the Debt
Invoice #INV-0369 dated 31 May 2016	$3,817.00
Invoice #INV-0474 dated 30 June 2016	$56,100.00
Invoice #INV-0475 dated 1 August 2016	$57,075.00
Invoice #INV-0538 dated 30 August 2016	$66,137.50
Invoice #INV-0720 dated 30 November 2016	$2,200.00
Invoice #INV-0719 dated 6 January 2017	$33,569.80
Invoice #INV-0935 dated 20 March 2017	$22,990.00
TOTAL:	$241,889.30

1. The affidavit verifying the creditor’s statutory demand for payment of debt was sworn by Brett Anthony Marshall, a director of Cambridge Plumbing Pty Ltd on 13 July 2017.  There was exhibited to that affidavit a statement from the defendant directed to the plaintiff.  I note that the date of the exhibit was not actually inserted but nothing turns on that omission. 

1. The affidavit sets out:

3.Stellar Projects (Vic) Pty Ltd (ACN 600 804 073) (the Company) owes a debt in the sum of $241,889.30 (the Debt) to the Creditor being unpaid invoices for plumbing works which were provided to the Company at two separate development projects at 9-19 Levenswell Road, Moorabbin and 1 Powlett Street, Heidelberg between 31 May 2016 and 20 March 2017 claim, interest and costs in proceeding number SCI 2016 01156 (the project). 

1. Notwithstanding the reference to the Supreme Court proceeding in paragraph 3 of the affidavit, paragraph 4 of the affidavit verifies the debt set out in the schedule of the statutory demand by referring to the various invoices after taking into account two payments which were made, leaving a balance due of $241,889.30.  Although the reference to the proceeding in paragraph 3 of the affidavit might be considered confusing of itself, that inclusion or what ensued by reason of the reference was not argued. 

The Issue

1. Section 459E(3) provides as follows:

(3)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 amount of the debt is due and payable by the company; and

(b)complies with the rules.

1. Paragraph 2 of Form 509H, the form of the statutory demand, sets out in the case of a non-judgment debt:

Attached is the affidavit of [insert name of deponent of the affidavit], dated [insert date of affidavit], verifying that the amount is due and payable by the company. 

1. Rule 5.2 of the Supreme Court (Corporations) Rules 2013 sets out:

5.2For the purposes of s 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)…

1. In Dornay Nominees Pty Ltd v Blackbutt Nominees Pty Ltd[1] Senior Master Mahony said as follows:

Form 7 of the Corporations Rules is the form prescribed for an affidavit under s 459E (3). The first paragraph of the ‘affidavit’ specifies the relationship of the deponent to the creditor ‘named in the statutory demand, which this affidavit accompanies, relating to the *debt/debts owed by [name of debtor company]’. Since this is a document the contents of which are to be sworn or affirmed to be true, it would seem that the statutory demand must be duly completed by signature at the time at which the document is produced to the person authorised to administer the oath or affirmation. In other words, an affidavit following the form can only be made if the statutory demand is already in existence. (The definitions of ‘statutory demand’ in s 9 of the Corporations Law do not assist. The first is ‘a document that is, or purports to be, a demand served under section 459E’ (my emphasis); and the other is ‘such a document as varied by an order under subsection 459H(4)’. The definitions, then, apply to a document which has been served and not to that expression as used in Form 7.)[2]

…

If it were necessary to choose between the forms, these considerations suggest that Form 509H should operate in preference to Form 7. Further, s 459E (2)(e) expressly contemplated the prescription of a form of statutory demand and the reference in s 459E (3)(b) did not suggest that ‘the rules’ would contain a form of affidavit, a fortiori a form of affidavit inconsistent with the form of statutory demand prescribed under subs (2)(e). In the circumstances, I do not consider the fact that it is apparent, rather than hidden, in the documents served which was created before the other, should, of itself, constitute a reason within s 459J (1)(b) why a statutory demand should be set aside. For the reasons set out in paragraph 18 this is especially so where, as in this case, it is apparent that the affidavit was made first.[3]

[1][2001] VSC 20.

[2]At [13].

[3]At [19].

1. Assaf[4] posits:

A close reading of Form 509H and Form 7 suggests that the affidavit in support is to be sworn prior to the statutory demand – Form 7, for example, refers to ‘the proposed statutory’ demand and Form 509H refers to the attached affidavit verifying that the amount is due and payable by the company.  Notwithstanding this, it is suggested that both the affidavit and statutory demand be finalised contemporaneously to avoid challenges to that demand.  An affidavit sworn prematurely, for example, even a few days before the statutory demand is prepared, is likely to constitute ‘some other reason’ for the demand to be set aside. 

[4]Statutory Demands and Winding Ups in Insolvency at [3.36].

Authorities relied upon by the defendant

1. The defendant relied upon Dornay Nominees, McDermott Projects Pty Ltd v Chadwell Pty Ltd[5] and Dolvelle Pty Ltd v Australian Macfarms Pty Ltd.[6]

   [5][2001] QSC 322.

   [6](1998) 16 ACLC 1371.

1. In Dolvelle Pty Ltd the affidavit in support of each statutory demand was executed two days before the date of the demand.  Santow J dealt with the efficacy of a prematurely sworn affidavit in the context of a winding up application.  Santow J held:

The requirement (of exact coincidence of date for verification of the statutory demand), though important, is not to be treated as an essential integer of the relief sought; … s 467A of the Corporations Law is applicable and that no substantial injustice would be caused by the defect or irregularity, subject to an affidavit now being filed in conformity with s 459E(3) stating the up-to-date position.

1. In Dornay Nominees, Senior Master Mahony said:

If, then, the validity of a statutory demand were to depend on whether it was signed before or after an affidavit in accordance with s 459E (3) was made – and, as I have mentioned, paragraph 2 of the prescribed form of statutory demand suggests that the affidavit necessarily must precede the demand – that the documents were signed and made on the same day would not relieve the court in every application under s 459G from making a determination of validity based on evidence as to the times of signing the demand and making the affidavit. It is not without significance that this has not been the practice and is plainly not intended by Part 5.4 to be the practice. First, s 459E does not contemplate that the requirement that an affidavit accompany a demand in the case of a non-judgment debt should obtain until service is effected. Secondly, the summary nature of an application under s 459G means that the court would be obliged to resist the creation of any such cumbersome practice. Thirdly, that any such inquiry could only show that one form had been complied with, and the other not, would also militate against such a course. Accordingly, one concludes that no exception to the general rule applies. But this does not mean that the general rule applies so as to reflect a requirement that the statutory demand and the affidavit must be signed and made on the same day. Since such a course merely disguises which event occurred first so as to prevent an allegation as to which form has not been followed strictly, and since the respective provisions in the forms are not required for the proper operation of s 459E (3), the imposition of a gratuitous requirement of ‘exact co-incidence of date for verification of the demand’ would be an unwarranted fetter on the performance by the creditor of the creditor’s obligations under the section.[7]

…

If, as in this case, an affidavit is made a day before there is signed a statutory demand in Form 509H concerning the same debt, or two days before (as in Dolvelle), the difference from the case where such an affidavit is made five minutes, or half an hour, before such a demand is signed, is only a matter of degree.  In each case the reference in the affidavit to the statutory demand would not be correct, but those in the statutory demand to the affidavit would be just as apparently contemplated by Form 509H.  The opposite would be so if the affidavit were made five minutes or half an hour after the statutory demand was signed.  Then it would be the references in the statutory demand to the affidavit which would be incorrect while the affidavit would be as apparently contemplated by Form 7.  The position if the affidavit were made a day, or two days, after the statutory demand was signed, however, would be different.  In such a case, paragraph 2 of the statutory demand could not be completed until after the affidavit was made and completion of that paragraph after that event would be a material alteration to the document.  Considerations of practicality indicate that since the statutory demand must contain the particulars required by paragraph 2 of Form 509H, in every case where the affidavit is not made on the same day as that on which the statutory demand is signed, it will be made on a day before, rather than a day after, that event.  It may be that ‘backdating’ of the jurat is used in some cases to make it appear that a later affidavit has been made on the same day as the demand was signed; and it may be that paragraph 2 of the statutory demand is completed after it has been signed.  That would be deceitful but pragmatic.  This is not such a case and no more need be said of it than that it is conceivable that it may be a deceit and a pragmatism which, in certain circumstances, a creditor’s practitioner not without reason may consider has been forced upon the creditor by the forms.[8]

…

[7][2001] VSC 20 [16].

[8]Ibid [18].

1. In McDermott Projects Pty Ltd v Chadwell Pty Ltd,[9] Holmes J declined to follow Technology Leasing Limited v Climit Pty Ltd,[10] and preferred the decision of Santow J in Dolvelle. 

   [9][2001] QSC 322.

   [10][2002] 1 QdR 566.

Section 459E(3) of the Corporations Act 2001 requires that a statutory demand be ‘accompanied by an affidavit that … verifies that the debt, or the total of the amounts of the debts is due and payable by the company’. Relying on the decision of Chesterman J in Technology Licensing Limited v Climit Pty Limited (2001) QSC 84 the applicant contended that the requirements of s 459E(3) had not been met because the demand was not verified by an affidavit as to indebtedness existing at the time of demand. In that case his Honour decided that a mandatory requirement of s 459 E(3) had not been met where an affidavit was sworn four days before the demand was issued (as was the case here). He referred to a decision of Santow J in Dolvelle Pty Ltd v Australian Macfarms Pty Ltd (1998) 43 NSWLR 717, in which it was argued that a 2 day hiatus between an affidavit verifying the debt and the notice of demand took the notice of demand outside the proisions of Part 5.4 of the Corporations Act. However, he concluded firstly, that what was said in Dolvelle was dicta (because the point not having been taken on an application to set aside the statutory demand could not be taken on a winding-up application) and secondly, that it was ‘clear from his Honour’s reasons’ that had the point been taken at an appropriate time it would have resulted in a setting aside of the statutory demand.[11]

[11]McDermott Projects Pty Ltd v Chadwell Pty Ltd [2001] QSC 322 [7].

I agree with his Honour’s reading of Santow J’s reasons as to the first but not as to the second matter. It seems to me that the point made by Santow J was that s 459E(3) was not mandatory in its effect: ‘The requirement (of exact coincidence of date for verification of the statutory demand) though important, is not to be treated as an essential integer of the relief sought’ (p 727). In any event his Honour would have concluded that s 467A of the Corporations Law applied so as to prevent dismissal of the winding-up application, since no substantial injustice would be caused by the defect or irregularity (at 728).[12]

The decision of Justice Chesterman is not, of course, binding on me although there are strong arguments for comity. However, the reasoning of Santow J has considerable appeal, and with some reluctance I conclude that I should adopt it and depart from the view taken by Chesterman J. That is, I consider that the non-concurrence of the respective dates of the statutory demand and verifying affidavit does not invalidate the statutory demand but rather constitutes a ‘defect’ within the meaning of s 4459J of the Corporations Act. In circumstances where there is no suggestion that any part of the debt was paid in the intervening four days, I do not consider that the situation is one where the defect in the demand will cause substantial injustice. This ground therefore, does not justify a setting aside of the statutory demand under s 459J of the Corporations Act.[13]

…

[12]Ibid [8].

[13]Ibid [9].

1. Each of Dornay Nominees, McDermott Projects and Dolvelle treated the exact coincidence of the date for verification of a statutory demand as not being an essential integer of the provisions.  What was considered important was the verification of the debt being due rather than reference to the statutory demand.  The Senior Master said:

In my view, but for Form 7, an affidavit would suffice for the purposes of s 459E (3)(a) if it did not identify the debt by reference to the statutory demand at all, but by amount (as the form provides) and a description which is the same as, or sufficiently similar to, the description of the debt in the schedule to the demand (provided, of course, that that description is adequate).  If that were the case at the point of service of the demand and  affidavit, an alleged debtor company would have no such difficulty as confronted the plaintiff in this case, irrespective of when the demand was signed and the affidavit made.  Obviously, it would be similarly beneficial if paragraph 2 of Form 509H were also reconsidered.

Authorities relied upon by the plaintiff

1. The plaintiff relied upon Wollongong Coal Limited v Gujarat NRE India Pty Ltd.[14]   Wigney J said:

   [14][2015] FCA 221.

Since at least the decision of the Full Court of the Supreme Court of Western Australia in Wildtown Holdings Pty Ltd v Rural Traders Co Ltd (2002) 172 FLR 35 (Wildtown), the following four principles or propositions can be considered to be well established: first, an accompanying affidavit that predates a demand does not or cannot verify the demand; second, such an affidavit does not satisfy the requirement in s 459E(3); third, the requirement in s 459E(3) is an important safeguard in the statutory scheme and is therefore mandatory; and fourth, except perhaps in one situation, non-compliance with s 459E(3) will justify, if not compel, the setting aside of the demand under s 459J(1)(b) of the Act. It is not necessary to point to any substantial injustice. The authorities that establish these principals include: Ambassador at Redcliffe Pty Ltd v Barreau Peninsula Property Pty Ltd [2007] 2 Qd R 199; (2006) 202 FLR 459 (Ambassador) at [18]-[20]; R2M Pty Limited v Gourlay [2011] FCA 168 (R2M) at [31]-[36]; Ri-Co Holdings (Australia) Pty Ltd v Allied Sandblasters Pty Ltd [2010] 1 Qd R 293 (Ri-Co Holdings) at [23]; Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd (2005) 190 FLR 466 (Chadmar) at [54]-[56]; Technology Licensing Limited v Climit Pty Limited [2002] 1 Qd R 566 (Technology Licensing) [24]-[25].[15]

[15]At [83].

…

In this regard, some reference should be made to two authorities relied on by Gujarat NRE India.  The first case relied on by Gujurat NRE India is In the matter of Gemaveld Pty Limited [2012] NSWSC 582. In that case, Black J dealt with an argument that a verifying affidavit sworn on the same day as the demand was defective because it was sworn earlier that same day. His Honour resolved the matter on the basis that the plaintiff had not established the factual basis of that challenge. His Honour nevertheless went on to say that an affidavit sworn earlier, but on the same day, as a demand could verify the debt. His Honour said (at [14] - [16]):

There are, of course, a number of cases where affidavits sworn prior to a statutory demand have been held not to verify that statutory demand, and that has been held to give rise to a defect for the purposes of s 459J of the Corporations Act.  However, those cases variously related to affidavits sworn between a day and several days prior to the date of the statutory demand:  Wildtown Holdings Pty Ltd v Rural Traders Pty Ltd [2002] WASCA 196; Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39; Ri-Co Holdings (Aust) Pty Ltd v Allied Sandblaster Pty Ltd [2009] QSC 122 [2010] 1 Qd R 293; R2M Pty Ltd v Gourlay [2011] FCA 168. It is obvious enough that an affidavit sworn on, say, 14 or 18 October could not, in fact, verify a debt claimed to exist on 19 October, because that debt might well have been repaid in the intervening day or days.

By contrast, I would not accept that, as a matter of fact, an affidavit sworn at 11.55am or 11.59am on 19 October could not verify a debt asserted to be due and payable in a statutory demand signed at noon on that day. I do not consider that that such a construction of the section is required by the terms of s 459E(3) of the Corporations Act or by any of the authorities dealing with affidavits sworn prior to the day on which the statutory demand is signed.  I can see no reason why the Court should adopt an approach which, first, will encourage arid inquires as to which of the signature of a statutory demand and the swearing or affirmation of the verifying affidavit occurred first within a short time frame on the same day and, second, is likely to have the consequence that statutory demands will fail for technical reasons. 

That approach would, in my view, be inconsistent with Parliament's intent when introducing Pt 5.4 of the Corporations Act, namely to ensure that disputes in respect of statutory demands would be resolved on the basis of the “commercial justice” of the matter rather than on the basis of “technical deficiencies”:  Explanatory Memorandum to the Corporate Law Reform Bill 1992 (Cth) para 688; F. Assaf, Statutory Demands:  Law and Practice at [7.1].  That approach would also, in my view, be inconsistent with the general approach that the law does not take account of fractions of a day:  Lester v Garland (1808) 15 Ves 248; 33 ER 748; Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd above at [55].[16]

…

[16]At [91].

1. In Wildtown Holdings Pty Ltd v Rural Traders Company Ltd[17] Templeman J, with whom Steytler and Miller JJ agreed, considered Santow J’s judgment in Dolvelle and concluded that Dolvelle ought to be distinguished on the basis that Santow J’s consideration was in the context of an application for winding up:

Hence, as Santow J said, an irregularity in the verification of the statutory demand is not fatal to a winding up application based on a failure to comply with that demand.[18]

[17][2002] WASCA 196.

[18]At [55].

1. Templeman J said:

It is noteworthy that despite the conclusion reached by Santow J, he required an affidavit to be filed “in conformity with s 459E(3) stating the up-to-date position”. In other words, even though the inadequacy in the affidavit which accompanied the statutory demand was insufficient to invalidate the winding-up application, it was nevertheless necessary to comply with s 459E(3) of the Law.

In my view, the position is a fortiori in the present case. An affidavit executed two days before a statutory demand cannot verify that demand. The fact that no updating affidavit was filed is, in my view, another reason why the demand should be set aside pursuant to s 459J(1)(b). With all respect to the Master, I do not think it was open to him to waive compliance with a statutory requirement relating to the contents of an affidavit accompanying a statutory demand.[19]

[19]At [57]–[58].

Conflicting authorities

1. Although I find it difficult to fault the reasoning set out by Senior Master Mahony in Dornay, I said this in Slap Corporation Pty Ltd v Civil, Infrastructure & Logistics Pty Ltd:[20]

According to rules of precedent, ‘courts are bound to apply principles laid down by courts higher in the appellate hierarchy’.[21] As an Associate Justice determining an application under s 459G of the Act, pursuant to r 16.5(3) of the Supreme Court (Corporations) Rules 2013, any appeal from my decision would be heard by the Court of Appeal rather than a single judge as provided for in s 17(3) of the Supreme Court Act 1986 (Vic). I am bound by decisions of the Court of Appeal and the High Court. Arguably, this may also extend to decisions of a single judge at a time when it appeared that s 459G appeals from a Master were to a single judge only.[22] 

In the context of uniform national legislation, an intermediate appellate court and the courts below it should not depart from an interpretation adopted by another intermediate appellate court.[23]  Further, while courts of equal rank in differing jurisdictions are not bound by each other, according to principles of judicial comity decisions of such courts should be followed in the absence of binding authority unless they are considered to be ‘clearly wrong’.[24] The principle is flexible however, depending upon the circumstances of each case.[25] Where two single judges conflict, a later judge should reconsider the issue for him or herself.[26]

[20][2017] VSC 168.

[21]See Westlaw Australia, Laws of Australia (at 15 April 2013) 25 Interpretation and Use of Legal Sources ‘25.4 Judicial Statements’ [25.4.150] quoting Trident v McNiece (1988) 165 CLR 107, 129.

[22]See eg Crema v Land Mark Property [2006] VSC 338.

[23]Farah Constructions v Say-Dee [2007] HCA 22 [135]; see Lexis Nexis, Halsbury’s Laws of Australia (at 17 February 2017) 125 Courts and Judicial System, ‘(2) Jurisdiction of Courts’, [125-160].

[24]La Macchia v Minister for Primary Industries (1992) 110 ALR 201; See Westlaw Australia, The Laws of Australia, 25. Interpretation and Use of Legal Sources, ’25.4 Judicial Statements’[25.4.270].

[25]La Macchia v Minister for Primary Industries (1992) 110 ALR 201, 204.

[26]Westlaw Australia, Laws of Australia, 25 Interpretation and Use of Legal Sources, ‘25.4 Judicial Statements’ [25.4.280].

1. Wigney J said:[27]

In its written submissions, Gujarat NRE India appears to submit that Wildtown and the cases that have followed it were all wrongly decided. That submission, if made, is rejected. Wildtown is a decision of an intermediate appellant court in relation to national legislation. It should be followed unless plainly wrong: Ri-Co Holdings at [14]; R2M at [34]. There is no sound reason to conclude that Wildtown is wrong, let alone plainly wrong. It has been repeatedly followed by single judges in this Court and in numerous state courts. 

[27]Wollongong Coal Limited v Gujarat NRE India Pty Ltd [2015] FCA 221 [98].

1. Wildtown has been followed in a plethora of cases.  Notwithstanding my comment about the reasoning set out by Senior Master Mahoney, I cannot conclude that Wildtown ‘is wrong, let alone plainly wrong.’[28] Accordingly, I should not depart from Wildtown.

   [28]Wigney J at [98].

1. I further observe that there is no utility in granting leave to the defendant to serve a further affidavit pursuant to s 459E as the initial 21 day period has well and truly elapsed.  Further, I note that in Wollongong Coal, Wigney J, after determining that there was ‘some other reason’ to set aside the statutory demand, then determined the substantial grounds.  At [100], Wigney J said:

Given the somewhat technical nature of this ground, and the fact that, at a practical level, the problem exposed by this ground could be cured by Gujarat NRE India simply serving a new demand, consideration should also be given to Wollongong Coal’s more substantive grounds based on s 459J(1)(a) and s 459H of the Act.

1. I will not embark upon that course.  Particularly as I have required further material to be filed in the event that I did not set aside the statutory demand. 

1. The demand dated 14 July 2017 is set aside pursuant to s 459J(1)(b) of the Act. The defendant pay the plaintiff’s costs on a standard basis.

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