Bruce v Vanmeld

1 MASTER: This is an application under s 459G of the Corporations Law to set aside a statutory demand dated 8 December 2000 for $67,026, being an indebtedness said to arise under a deed between the parties made in June 1999. 2 The plaintiff raised four formal defects in the demand but only pressed two in the hearing before me. They also relied on the existence of a genuine dispute and an off-setting claim. 3 The defendant raised a matter going to jurisdiction and I will deal with that matter first. This concerned the non-compliance with r 2.4 of the Corporations Law rules, which is in the following form: "2.4(1) Unless the Court otherwise directs, an originating process, or interlocutory process, must be supported by an affidavit stating the facts in support of the process.

(2) An affidavit in support of an originating process must annex or exhibit a record of a search of the records maintained by the Commission, in relation to the company that is the subject of the application to which the originating process relates, carried out no earlier than 7 days before the originating process is filed."

4 A valid application is made under s 459G of the Corporations Law if, within twenty-one days after the demand is served, an application and an affidavit supporting the application is filed and served. Importantly, an "application" under s 459G is not made unless a supporting affidavit is filed and served within time. See David Grant v Westpac (1995) 1 84 CLR 295. 5 The only affidavit filed and served in time is that of John Richard Bruce sworn 28 December 2000. Mr Bruce's affidavit does not annexe an ASIC search of the company that is the subject of the application. 6 It was submitted that Corporations Law r 2.4(2) is a mandatory rule. There is no express provision in the Corporations Law Rules for the Court to relieve the plaintiff from compliance with the requirements of the Rule (as is found elsewhere in the Corporations Law rules; e.g. r 2.2(2)). 7 It was submitted it would be contrary to the provisions of r 1.3(2) to allow the provisions of pt 1 r 12 of the Supreme Court Rules to relieve a plaintiff of the requirement to annexe an ASIC search and thus prove jurisdiction. Without a "supporting affidavit" filed within time, there is no application made under s 459G. See Graywinter Properties Pty Ltd v Gas and Fuel Corporation (1996) 21 ACSR 465. 8 There is nothing to suggest that the omission in any way affects the way in which the application under s 459G would be dealt with by the Court. The matter has been dealt with in two cases by Santow J. In Callite Pty Limited v Peter John Adams & 3 Ors (12 February 2001) the same point arose and his Honour dealt with it at paras 5 and 6 in these terms: "5. The first of these grounds of attack can be quickly dismissed. It is that the affidavit failed, as indeed it did, to contain the annexed company search as now required by the Corporations Law Rules cl 2.4(2). It is clear that while non-compliance with the Corporations Law Rules is a matter for the Court to consider in determining whether or not to grant any dispensation, that question is quite distinct from whether the affidavit meets the description in s 459G(3); that is to say, is it 'an affidavit supporting the application' in the sense usefully explained in Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 per Sundberg J at 459. That exposition described the degree of particularity required in terms that it might read like a pleading, in which only the ultimate facts are required, not the evidentiary facts to establish those ultimate facts. That pleading need not itself be a model of precision so long as those ultimate facts sufficiently appear expressly or it may be by necessary implication. Nor, I would add, are propositions of law required to be pleaded.

6. To omit such a company search is in that sense hardly to fail to provide, in a form that might read like a pleading, the basis for there being a genuine dispute."

9 He also referred to a similar argument in Bell Construction Services Pty Limited v Form-Kwip Building Services Pty Limited (10 February 2001). In that case his Honour dispensed with compliance with the Rules in this respect and, accordingly, I would be prepared to do so in the present case. Accordingly, there is a valid application. 10 The first matter of formal defect concerns the signature of the demand by Mr Jeans, as manager of the defendant. It was said that the ASIC search did not show him as the manager of the defendant. 11 The form of demand is prescribed and is contained in form 509H. The form 509H at note 1 provides that an executive officer or a corporation may sign. "Executive officer" is defined by s 9 to mean a person who takes part in the management of a corporation. Apart from Mr Jeans signing as a manager, the evidence of negotiations between the parties shows Mr Jeans is a person who takes part in the management of the corporation. I am satisfied the demand was signed correctly. 12 The second defect concerns paragraphs 1 and 2 of the demand. The demand was as follows:

"1. The Company owed Vanmeld Pty Ltd A.C.N. 003 440 499 (the 'Creditor') the amount of $100,000.00, being the total of the amounts of the debts described in the Schedule.

The amount of $67,026.00 is due and payable by the Company.

Attached is the Affidavit of JOHN ANTHONY JEANS dated 8 December 2000, verifying that the amount is due and payable by the Company.

The Creditor requires the Company, within 21 days after service on the Company of this demand:

(a) to pay to the Creditor the amount of the debt; or

(b) to secure or compound for the amount of the debt, to the Creditor's reasonable satisfaction.

The Creditor may rely on a failure to comply with this debt and within the period for compliance set out in subsection 459F(2) as grounds for an application to a court having jurisdiction under the Corporations Law for the winding up of the company.

Section 459G of the Corporations Law provides that a company served with a demand may apply to a court having jurisdiction under the Corporations Act setting the demand aside. An application must be made within 21 days after the demand is served and, within the same period:

(a) an affidavit supporting the application must be filed with the Court; and

(b) A copy of the application and a copy of the affidavit must be served on the person who served the demand.

The address of the creditor for service of copies of any application and affidavit is:

Vanmeld Pty Ltd Level 1 65 York Street Sydney 2000

Description of the debt Amount of the debt $67,206 The indebtedness of the Company to the Creditor arises as payment for consulting services rendered by the Creditor to the Company as acknowledged in a deed dated June 1999 between the Creditor and the Company

Signed: John Anthony Jeans; Capacity: Manager, Vanmeld Pty Ltd A.C.N. 003 440 499

1. The form must be signed by the Creditor or the Creditor's solicitor. It may be signed on behalf of a partnership by a partner, and on behalf of a corporation by a director or by the secretary or an executive officer of the corporation.

2. The amount of the debt or, if there is more than one debt, the total of the amounts of the debts, must exceed the statutory minimum of $2,000.00.

3. Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:

(a) verifies the debt, or the total of the amounts of the debts, is due and payable by the company: and

4. A person may make a demand relating to a debt that is owed to the person as assignee."

13 Immediately noticeable are the different figures in paragraphs 1 and 2. The power to set aside a demand on grounds other than the existence of a genuine dispute or offsetting claim is contained in s 459J. That provides as follows: "459J(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside, or

(b) there is some other reason why the demand should be set aside.

459J(2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect."

"Defect" in relation to a statutory demand is defined in s 9 as follows: "'Defect', in relation to a statutory demand, includes:

(c) a misdescription of a debt or other matter; and

14 The presence of $100,000 in para 1 is alleged to be a defect, even a misstatement of the amount. See s 9(b) definition of "Defect". It is said to be not misleading as para 1 refers to "the total amounts of the debts described in the schedule". The schedule refers to the deed of June 1999 in the amount of $76,026, which is the amount stated in para 2 and also the amount verified by the accompanying affidavit. There was no suggestion in the evidence of any confusion caused by the discrepancy. Given the contents of para 2 and the Schedule, I do not think there is any real chance of confusion. Accordingly, I do not think that there is any substantial injustice. 15 I turn to the offsetting claim. Paragraph 5 of Mr Bruce's affidavit of 20 April 2001 was in the following form: "5. I have, on behalf of the plaintiff, instructed its solicitors to serve a notice under section 459G of the Corporations law upon the defendant claiming the sum of $375,000.00 for work done and services rendered by the plaintiff to the defendant invoices for which have been rendered to the defendant and remain unpaid."

16 That, it was submitted, was evidence of an offsetting claim. It certainly is not that in its express terms. What is the basis of the claim proposed to be made is not elucidated. In short, there is no evidence of the existence of any offsetting claim. 17 I turn to the dispute which has been raised. The liability referred to in the demand arises out of a deed of 11 June 1999 when the parties compromised a dispute over fees. There was agreed to be paid a sum of $100,000. That has, over time, been reduced to the amount now claimed in the deed. 18 The dispute is said to arise as a result of fraudulent misrepresentation of the status of certain projects at the time of entering into the deed. The evidence read on the application did contain evidence of statements made by the principal of the defendant which were relevant representations. Their falsity was not the subject of any admissible evidence before me. What I am asked to infer is that they may be false and that consequently a genuine dispute may exist from the fact that the plaintiff has commenced Federal Court proceedings to set aside the deed. These were commenced on 16 March 2001 after these proceedings commenced. They were threatened before the demand was served. 19 I have had the benefit of a number of submissions in respect of the principles to be applied and I think probably the most useful summation is that given by McLelland CJ in Eq in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At p 671 his Honour made the following comments in respect of the expression "genuine dispute": "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be' not having 'sufficient prima facie plausibility to merit further investigation as (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.'

20 In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: 'There is little doubt that Division 3... prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim".

It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simply - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).' I respectfully agree with those statements."

21 An affidavit has been filed in the Federal Court proceedings asserting the representations were false. That has not been read in these proceedings. It was tendered in these proceedings not as evidence of the facts asserted in the affidavit but as evidence that an affidavit asserting certain facts had been filed in the Federal Court proceedings. 22 One matter which the defendant emphasised in its submissions is the long history of payments since the 1999 deed and the sudden change of heart with no explanation of why the falsity was not discovered before now. The fact of the matter is that proceedings have been commenced. This demonstrates a level of seriousness on the part of the plaintiff. Such proceedings are costly and require affidavits in support for commencement. The existence of such an affidavit, to my mind, demonstrates the fact the dispute is genuine. Once legal proceedings were threatened the basis of the dispute was put forward in the letter of 8 December 2000. 23 I am satisfied there is a genuine dispute in respect of the liability under the deed. Accordingly, I make Orders 1 and 2 in the application. 24 The exhibits may be returned. 25 So far as the order for costs which I have just made is concerned, that can be the subject of a further application, provided that application is made to my Associate before 4pm tomorrow afternoon (Friday 27 April 2001).

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