HIS HONOUR: By originating process filed on 4 December 2014, the plaintiff company Unity Resources Group Australia Pty Limited seeks orders pursuant to (CTH) Corporations Act 2001, s 459G and s 459J, setting aside a statutory demand served on it by the defendant SV Partners Advisory (New South Wales) Pty Limited on or about 24 November 2014, which claimed a debt of $35,982.23 described in the schedule to the demand as being made up of four invoices dated between 17 January and 4 April 2014.
The demand was dated 28 October 2014. The schedule referred to the invoices as "verified as payable by the company in the affidavit of Ross Phillip Mottershead sworn 27 October 2014" - that is to say, one day before the date of the demand. The demand was accompanied by Mr Mottershead's affidavit sworn on 27 October 2014, which was in the prescribed form; it deposed that the total amount of the debts referred to was due and payable by the debtor company and that the deponent believed that there was no genuine dispute about the existence or amount of any of the debts.
It is not in issue that the plaintiff's application was made within the prescribed period of 21 days. The application raises two issues: first, the plaintiff contends that there is a genuine dispute as to the existence of the debt, the burden of that contention being that the defendant was retained not by the plaintiff, but by another company, to prepare the plaintiff's accounts; and secondly, the demand was not accompanied by a compliant affidavit, because the affidavit was sworn not contemporaneously with the demand, but one day before. As it seems to me that the present application can be determined on that second issue, it is unnecessary to refer to the evidence going to the question of genuine dispute.
Corporations Act, s 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 of the amounts of the debts, is due and payable by the company; and
(b) complies with the rules.
In order to verify that a debt "is due and payable" by the company, it seems to me that it is implicit in that subsection that the affidavit must speak as at the date of the demand. It is required to speak to the situation that obtains when the demand is issued. That view is consistent with authority. In Wildtown Holdings Pty Limited v Rural Traders Company Limited [2002] WASCA 196; (2002) 172 FLR 35, the Court of Appeal of Western Australia held that an affidavit executed two days before a statutory demand could not verify that demand. Other cases have taken the same view [Chadmar Enterprises Pty Limited v IGA Distribution Pty Limited [2005] ACTSC 39; (2005) 53 ACSR 645; (2005) 190 FLR 466 (Higgins CJ); Technology Licensing Limited v Climit Pty Limited [2001] QSC 84; [2002] 1 Qd R 556 (Chesterman J)].
In Technology Licensing, Chesterman J took the view that an accompanying affidavit that predated a statutory demand by four days provided some other reason for the demand to be set aside, observing that a statutory demand can only be issued with respect to a debt that is due and payable at the time of the demand. It was his Honour's view - which reflects that which I have already expressed in principle - that the intention of s 459E(3) is that the demand be verified by an affidavit that speaks to the circumstances when the demand was made.
There is authority in Queensland to the contrary - namely, the decision of Holmes J in McDermott Projects Pty Limited v Chadwell Pty Limited [2001] QSC 322; [2002] 2 Qd R 363 - but the balance of judicial opinion in Queensland supports the view of Chesterman J [Metro Interactive Australasia Pty Limited v Vixen Wholesale Limited [2007] QSC 285, [15]-[16] (Martin J); Ambassador at Redcliffe Pty Limited v Emerald Constructions Australia Pty Limited [2006] QSC 247; [2007] 2 Qd R 199; [2006] 58 ACSR 607, [32] (Douglas J)].
Holmes J's conclusions in McDermott Projects followed dicta in this Court of Santow J (as he then was) in Dolvelle v Australian Macfarms Pty Limited (1998) 43 NSWLR 717; 28 ACSR 175 (leave to appeal refused: Australian MacFarms Pty Limited v Dolvelle Pty Limited and Anor Matter No Ca 40379/98 [1998] NSWSC 480 (Sheller and Stein JJA)). However, that was a rather different case, because the question arose not on an application to set aside a demand, but in winding up proceedings. As it was no longer open to set aside the statutory demand, the presumption of insolvency had already arisen unless it could be established that the demand was no demand at all. His Honour held that the requirement of exact coincidence of date for verification of the statutory demand, though important, was not to be treated as such an essential integer of a demand that its absence meant that there was no demand at all. That view was no doubt also influenced by the reference in the Corporations Act that has the effect of including within the concept of a "demand" one that is a "purported demand". In my view, it does not follow that the same approach is to be taken on a timely application to set aside a demand. Moreover, particularly in the context of a national law such as the Corporations Law, a Judge at first instance should follow the intermediate appellate court of another State on the same legislative provision, at least unless satisfied that that decision is plainly wrong, which, far from being the case, I am satisfied is plainly correct.
Mr Bell, who said everything that could reasonably and properly be said in favour of the contrary argument for the defendant, suggested - I think rightly - that no case had actually applied the principle to set aside a demand where the affidavit predated the demand by only one day. He further argued that there was no evidence of any injustice, let alone substantial injustice, such as would justify setting aside the demand.
As to the first of those arguments, the principle upon which Wildtown Holdings and the other cases to which I have referred depends derives from the implied intent that underlies s 459E that the affidavit speaks to the circumstances as at the date of the demand. If that be so, then, as it seems to me, it can make no difference whether the affidavit is sworn a month, a week, four days, two days or one day before the date of the demand. In principle, the same consequence must follow.
Moreover, it is far preferable in this relatively technical area, as a matter of policy, to have a clear line of delineation, rather than a rule which involves some element of discretion. If an affidavit sworn one day early were held to be compliant, then what is there to distinguish that from one two days early, as was held non-compliant in Wildtown Holdings, or four days early, as was held non-compliant in Technology Licensing, other than some approach akin to the length of the chancellor's foot. It seems to me that policy strongly supports the view that the line to be drawn is one which reflects the intention of s 459E, that the affidavit speak to the circumstances as at the date of the demand. As was said in Wildtown Holdings, an affidavit executed two days before a statutory demand cannot verify that demand. In my view, it follows that an affidavit executed one day before a statutory demand cannot verify that demand.
Mr Bell argued that the problem is cured by an updating affidavit of Mr Mottershead sworn 3 June 2015, which deposes that the debts referred to in the statutory demand were due and payable as at the date of the demand and are still due and payable. In my view, that cannot cure the problem. It is true that, in Dolvelle, Santow J required an updating affidavit to be filed but, as I have said, that was not in the context of an application to set aside the demand. It is also true that in Wildtown Holdings, reference was made en passant to the fact that no updating affidavit had been filed (at [58]). But it is difficult to see how an updating affidavit made and sworn months after the demand was served can result in it being said that the demand was accompanied by an affidavit that verified the debt. The better view, it seems to me, is that if an updating affidavit is made on or after the date of the demand and served in circumstances that can be regarded as accompanying the demand, that may well cure the problem. But, at the very least, that would require service within the 21 day period for compliance with the demand and it may well require service contemporaneously with the demand. A similar view was taken in Chadmar Enterprises v IGA Distribution.
Accordingly, it seems to me that in this case, the statutory demand was not accompanied by an affidavit that complies with the requirements of s 459E(3).
The absence of a compliant affidavit has not infrequently provided a basis for setting aside a statutory demand under s 459J(1)(b). It is well established that the "substantial injustice" criterion to which express reference is made in s 459J(1)(a) does not apply in the case of s 459J(1)(b) [see, for example, Kisimul Holdings Pty Limited v Clear Position Pty Limited [2014] NSWCA 262, [23] (Barrett JA)]. Section 459J(1)(b) will be invoked where it is necessary to preserve the undistorted operation of Corporations Act, Part 5.4, and to promote the objectives it is intended to serve [see Kisimul at [21] (Barrett JA)]. Thus, where the accompanying affidavit has failed to include the prescribed formula of belief that the debt is due and payable and belief that there is no genuine dispute, the demand has invariably been set aside, as it was in Kisimul, notwithstanding that it was accepted at first instance and not disputed on appeal that there was in fact no genuine dispute, and the first instance Judge found that no injustice would be caused if the demand were not set aside.
That demonstrates that the absence of a proper and compliant accompanying affidavit will typically, if not invariably, result in the demand being set aside. In this case, for the reasons I have given, there was no compliant affidavit. The undistorted operation of Part 5.4, which requires verification of the debt as at the date of the demand, has been departed from, and in those circumstances, the proper outcome is that the demand be set aside.
The Court therefore orders that the creditor's statutory demand served by the defendant on the plaintiff and dated 28 October 2014 be set aside. The Court orders that the defendant pay the plaintiff's costs assessed in the sum of $15,000.
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Decision last updated: 19 August 2015