71 Paisley Street Footscray Pty Ltd v Vineyards Estate Pty Ltd [1995] FCA 635

Federal Court of Australia|1995-08-18|Before: Olney J

At the time that the unitholders' loans were made by the unitholders there was no agreement that such loans would be repayable on demand by any of the unitholders. It was acknowledged by the unitholders that if this were the case it would and could place financial constraints upon the respondent. It is my understanding that the unitholders agreed that such loans would only be repaid if there was a surplus on either a sale of the property or a winding up of the Trust. The property was sold at a loss. Further there have been no requests received from any of the unitholders to wind up the Trust. 7. I myself on behalf of Hampshire Forge Pty Ltd and I am informed by John Librizzi on behalf of Librizzi Nominees Pty Ltd, Aldo Di Natale on behalf of Pickwood Arch Pty Ltd and Jack Di Natale on behalf of Nestle Oaks Pty Ltd that they all, on behalf of the unitholding companies in the 71 Paisley Street Unit Trust, confirm: (a) That there was never any agreement that any loans made by any of the unitholders to the Trust would be repayable on demand by any of the unitholders; and (b) That the unitholders' loans would only be repaid if there was a surplus on either the sale of the property or the winding up of the Trust. PRELIMINARY ISSUE The respondent submitted as a preliminary issue that the affidavit filed in support of the application did not comply with the Federal Court Rules and for that reason was not "an affidavit supporting the application" as required by s 459G(3)(a). On that basis it was submitted that the application was not made in accordance with s 459G and further that as it was not open to the applicant subsequent to the expiration of 21 days after service of the demand to correct the inadequacy of the initial affidavit by filing a further affidavit, the application was incompetent. The particular provision of the Federal Court Rules relied upon by the respondent as the basis of its argument is Order 71 rule 36B which provides:

36B An application under subsection 459G(1) of the Corporations Law must be made in accordance with Form 5 and must be accompanied by an affidavit: (a) stating any material facts relied upon by the applicant in support of the application; and (b) identifying the grounds on which it is said that the Court should make an order under section 459H or 459J of the Corporations Law setting aside the demand. It is said that the affidavit was deficient in that it did not identify the grounds on which it is said the Court should make an order setting aside the demand. Although the provisions of O 71 r 36B cannot affect the proper construction of s 459G(3), it is fair to say that an affidavit which states the material facts relied upon by the applicant in support of an application would comfortably satisfy the description of "an affidavit supporting the application". On the face of it O 71 r 36B contemplates that the affidavit required by s 459G(3) is to be in the nature of a pleading in that it requires facts to be stated rather than the evidence to be relied upon. That this is so makes sense. It can hardly be expected that in the fairly limited period allowed for making an application to set aside a demand a company will be able to marshall all of its evidence and submit same in affidavit form. The purpose of the affidavit contemplated by s 459G(3) is to tell the creditor why it is said that the demand should be set aside and not necessarily to require the production of the evidence in admissible form which will be relied upon to support its case. In Scanhill v Century 21 Australasia Pty Limited 12 ACSR 341 Branson J expressed a similar view and I agree without reservation with her Honour's analysis of the function of the affidavit in the statutory scheme. It requires no great feat of imagination to conclude on reading the affidavit that the applicant disputes that the debt claimed in the demand is a debt (or debts) that it owes to the person making the demand that is (or are) due and payable (s 459E(1)). It is obvious that the only material facts relied upon by the applicant are facts which raise an issue as to the existence of a present liability on the applicant's part to pay the sum claimed. There is no suggestion that substantial injustice would be caused unless the demand is set aside (s 459J(1)(a)) nor is it suggested that for some other reason the demand should be set aside pursuant to s 459J(1)(b), and it is certainly not the case that the applicant asserts that it has an offsetting claim (s 459H(1)(b)). The only sensible conclusion open is that the affidavit raises facts putting in issue the question of whether the debt claimed is due and payable. This being so, the facts asserted identify the ground on which the applicant says that the Court should make an order under s 459H setting aside the demand. I am satisfied that the affidavit in support of the application complies with O 71 r 36B and that there is no substance in the preliminary issue raised by the respondent to the competence of the application.

THE EVIDENCE To the extent that it is in admissible form it is proper to treat the affidavit filed in support of the application as part of the evidence relied upon by the applicant. At the hearing of the application I indicated that I did not regard the contents of paragraph 7 as probative of any fact other than that the deponent confirmed on behalf of Hampshire Forge Pty Ltd the matters referred to in subparagraphs (a) and (b). I take the view that an application to set aside a statutory demand is an application for final relief. It is not an interlocutory application. If a party wishes to establish any fact it should prove that fact by admissible evidence. The assertions in paragraph 7 relating to persons other than the deponent are hearsay which is not otherwise admissible pursuant to the provisions of the Evidence Act 1995. Similar comments may equally be made in respect of some parts of paragraph 6, and may also apply to a paragraph of a subsequent affidavit of Di Natale which substantially repeats paragraph 7 of his affidavit of 30 March 1995. Affidavit evidence was filed by both parties pursuant to an order of the Deputy Registrar made on 11 April 1995. On behalf of the applicant Di Natale swore a further affidavit on 27 June 1995 in which reference is made to several other trusts involving the same 5 unitholders as are referred to in paragraph 3 of his affidavit of 30 March 1995. Reference is also made to certain proceedings in the Supreme Court of Victoria in which the present respondent and Boyle are the plaintiffs and the various trustees of the other trusts (but not the applicant) and directors of those trustees (including Di Natale) are defendants. At paragraph 9 of his affidavit of 27 June 1995 Di Natale says: One of the issues that is raised in the Supreme Court proceedings is whether there exists an agreement between the unitholders, as alleged by the Applicant, that all monies advanced by any of the five unitholders (referred to in paragraph 4 herein) or by any of their respective directors or shareholders to any of the trusts would be repaid with interest on the sale of particular trust property or on a winding up of the trust or if there were insufficient monies to repay unitholders' loans referrable to such trust then from surplus monies available from any of the other trusts or otherwise by agreement between the unitholders.

The statement of claim and defence in the Supreme Court proceedings are both in evidence in this proceeding but when invited to indicate where in the pleadings the issue as to the applicant's liability to repay the respondent's loan account is raised counsel for the applicant conceded that that issue is not directly raised. The concession was entirely appropriate. For one thing, the applicant is not a party to the Supreme Court proceeding, but apart from that, having had the opportunity since reserving judgment to peruse the statement of claim (which has 100 paragraphs occupying some 33 pages) and the defence (102 paragraphs and 20 pages) I have been unable to detect any aspect of the pleadings which raises, either directly or otherwise, the question of whether the respondent's loan account in the books of the applicant became due and payable upon the respondent making demand for the payment of same on 9 June 1994 (as the respondent alleges) or whether the loan accounts of unitholders in the trust of which the applicant is trustee are repayable out of any surplus on the sale of the trust property or the winding up of the trust (as the applicant alleges). The applicant does not dispute that the respondent has advanced money to it for the purposes of the trust (although there may be some minor dispute as to the exact amount advanced) but does take issue with the claim that the amount in question is due and payable. On behalf of the respondent Boyle has deposed, in an affidavit sworn 16 June 1995, as follows: 3. Vineyards Estate has never been a party to an agreement that the funds advanced to Paisley Street would be repayable subject to the conditions outlined in paragraph 6 of Paul Di Natale's affidavit. These sums were advanced to Paisley Street as loans and are described as such in the company's accounts as "unitholders loans". Now produced and shown to me marked "BJ1" is a copy of the balance sheet of Paisley Street for the year ended 30 June 1994. The only liabilities disclosed in the balance sheet are current liabilities. These include a liability of $70,763.22 for unitholder loans, $31,817.66 of which comprises loans made by Vineyards Estate. 4. I wrote to Paisley Street on 9 June 1994 on behalf of Vineyards Estate demanding repayment of $31,817.66, which is the sum claimed as a debt in the statutory demand the subject of these proceedings. That letter met with no reply and further letters were sent on 7 July 1994 and 5 August 1994. 5. On 15 August 1994 I received a reply from Paisley Street's accountants on their behalf. That reply admits that there is a sum owing to Vineyards Estate of $31,202.78. It does not mention any of the conditions regarding repayment of the debt alleged in Paul Di Natale's affidavit. I believe that the difference of $614.88 between the debt I claim and the debt admitted in the accountant's letter of 15 August 1994 is due to the accountants not being informed of an advance made by Vineyards Estate of that amount of 5 April 1991, which was applied towards the payment of council rates.

The various letters referred to by Boyle are in evidence. I do not think that any inference can be drawn from the absence from the accountant's letter of 15 August 1994 of any reference to the conditions regarding repayment of the respondent's loan account. The accountant's letter is clearly not directly responsive to the respondent's demand of 9 June 1994 and refers only to accounting details relating to the subject trust and several others. A GENUINE DISPUTE? There is no objective evidence before the Court touching upon the entitlement of the unitholders in the trust to obtain repayment of their loan accounts. One would have thought that the trust deed might provide an indication as to the rights of a unitholder who has lent money to the trustee but the trust deed was not put in evidence although both counsel agreed that it contains no provision relevant to the matter in issue. There is no doubt that the parties are in dispute as to whether the respondent has a present entitlement to repayment. The assertions of each party are contradicted by the other. It is not the practice in this type of application for the Court to inquire into the credit of the respective deponents (see Eyota Pty Ltd v Hanave Pty Ltd 12 ACSR 785). Neither case is so compelling nor so obviously lacking in plausibility as to warrant a conclusion that the dispute is plainly vexatious or frivolous (see Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd 13 ACSR 37). On the material before the Court there is clear evidence that the dispute is genuine. The matter can only be resolved by litigation in an appropriate forum. CONCLUSION The applicant has satisfied me that there is a genuine dispute as to the existence of the debt claimed in the demand in that there is a genuine dispute as to whether or not the sum claimed is due and payable. It follows that the statutory demand should be set aside and that the respondent should pay the applicant's costs. I certify that this and the preceding 9 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Associate: Dated: Heard: 11 August 1995 Place: Melbourne Judgment: 18 August 1995

Appearances: Mr S.R. Horgan (instructed by Best Hooper) appeared for the applicant. Mr J. Carney (instructed by Secombs) appeared for the respondent.

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Judgment (7 paragraphs)

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