Business to All Australia Pty Ltd v North East Developments Pty Ltd

Judgment

1. GLEESON JA: The plaintiff, AMP Life Limited (AMP), seeks a declaration that a creditor's statutory demand dated 19 March 2018 served by the defendant, Mr Harold Albert Morrow, is a nullity, invalid and of no effect, or alternatively, an order under s 459G of the Corporations Act 2001 (Cth) setting aside the statutory demand. The debt to which the statutory demand relates is described in the Schedule to the demand as a "Common Law Commercial Lien in Tort" in the amount of $3,000,000 and gives the following particulars: (1) Craig Meller failed to answer a Common Law Commercial Lien in Tort served on him 17th of January 2018 in the prescribed time of 30 days from service. (2) Craig Meller was placed in default by a Default Notice issued on the 22th of February 2018, which gave Craig Meller 14 days to comply. (3) The full amount of $3,000,000, which has not been disputed is now payable. (4) The Tort was committed by Craig Meller the CEO of AMP Life Limited ABN 84 079 300 379 of Level 24, 33 Alfred Street Sydney NSW 2000, when he denied my TPD claim on 5th December 2017 and breached the Signature Super insurance contract.
2. In par 6 of the statutory demand, the address for service of the creditor is an address in Western Australia, which is the same address as that given in the affidavit accompanying the statutory demand, sworn by "Harold Albert of the family Morrow". He deposed to his belief that there is no genuine dispute about the existence or the amount of the debt.

Grounds of application

1. AMP seeks a declaration that the demand is a nullity on the ground that the demand does not comply with s 459E(2) of the Corporations Act. As the demand was served in New South Wales, but no address for service in this State is given, AMP says that the failure to comply with par 6 of the prescribed form (Form 509H) under Sch 2 of the Corporations Regulations 2001 (Cth), is a fundamental deficiency and deprived the demand of the character of a demand under s 459E(2)(e).
2. Alternatively, AMP seeks to set aside the demand on two grounds. First, it relies on the ground in s 459J(1)(a) or (b). It says that there are at least three fundamental defects in the demand that cause substantial injustice to AMP, as it does not know what debt it allegedly owes and how that debt came into being (s 459J(1)(a)), or that the gross overstatement of the amount of the debt constitutes "some other reason" to set aside the demand (s 459J(1)(b)). Second, it relies on the ground in s 459H(1)(a). It says that there is a genuine dispute about the existence of the debt.
3. Mr Morrow did not appear on the hearing of the application. There is evidence in the form of an affidavit of service of Mr James Blake that Mr Morrow was served on 17 May 2018 with the originating process filed on 16 May 2018 and the supporting affidavit. The application was initially returnable before the Court on 29 May 2018. There is evidence of compliance with the direction given by Registrar Walton on that day that AMP notify Mr Morrow of the hearing date before the Corporations List Judge at 10am on 4 June 2018. That evidence comprised a letter sent by by AMP's solicitors by express post on 29 May 2018 to the address of Mr Morrow in Western Australia. I am satisfied that Mr Morrow has had sufficient notice of the hearing date.

Evidence on the application

1. The background to the statutory demand is set out in the affidavit of Ms Amanda Underwood affirmed 16 May 2018. Ms Underwood is a senior legal counsel employed by AMP Services Limited and she deposed that she has access to the books and records of AMP and is duly authorised to make her affidavit on its behalf.
2. AMP is a financial services company in Australia and New Zealand providing various superannuation and investment products, personal risk insurance products and self-managed super fund administration. On or about 1 June 2009, Mr Morrow became a member of the SignatureSuper Fund (Fund) by virtue of his membership of the Barrick Super Plan. His employer seems to have been Barrick (Kanowna) Limited. The trustee of the Fund is AMP Superannuation Limited which held a group life insurance policy (Policy) issued by AMP providing insurance cover in relation to certain members of the Fund.
3. It is not necessary to set out in any detail the terms of the Policy. It is sufficient to record that cl 7.3(a) of the Policy provides that AMP will pay a TPD Benefit on the Total and Permanent Disablement of an Insured Person with TPD Cover, subject to, relevantly, cl 7.12. Clause 7.12 provides that benefits are payable when AMP receives a claim in accordance with the Policy and is satisfied that benefits are payable by AMP to the trustee or at the trustee's discretion.
4. The definitions in cl 11 of the Policy relevantly include: "Totally and Permanently Disabled" and "Total and Permanent Disablement" and "TPD" An Insured Person is totally and permanently disabled if disability commences while they have TPD Cover and they are engaged: (a) in a Professional Occupation or Senior Managerial Duties in which they have been working for at least 35 hours per week for the 12 months immediately before suffering the illness or injury which led to the disability and they meet the definition in either Parts 1, 2, 3 or 5; or (b) in Regular Remunerative Work and they meet the definition in either Parts 1, 2, 3 or 5; or (c) full time home duties and they meet the definition in either Parts 2, 3, 4 or 5; or (d) in work and their disability meets the definition in either Parts 2, 3, 4 or 5. Part 1 (Unable to work) An Insured Person is totally and permanently disabled if he or she suffers an illness or injury while engaged in Regular Remunerative Work and: (a) the illness or injury wholly prevents the Insured Person from engaging in regular remunerative work for six months in a row; and (b) since the Insured Person became ill or injured they have been under the care and attention of a Doctor for that illness or injury; and (c) in AMP's opinion the illness or injury means that the Insured Person is unlikely to ever work in or attend to: (i) his or her Professional Occupation with any employer or as a self-employed person; or (ii) Senior Managerial Duties; or (iii) Regular Remunerative Work for which he or she is reasonably fitted by education training or experience, whichever they were engaged in when they suffered the illness or the injury. … Regular Remunerative Work The Insured Person is engaged in Regular Remunerative Work if they work in any employment, business, or occupation for at least 15 hours per week. The Insured Person must be doing this work for reward - or hope of reward - of any type.
5. Mr Morrow's insurance cover under the Policy included TPD cover of $457,450. In about June 2009, Mr Morrow injured his neck and back in a work-related accident and he ceased work on about 5 June 2009.
6. On or about 28 April 2017, Mr Morrow lodged a claim for a TPD benefit under the Policy with AMP.
7. On 12 October 2017, AMP wrote to Mr Morrow requesting further information to support the claim.
8. On 5 December 2017, AMP notified Mr Morrow by letter that it had rejected his claim giving two reasons: first, that he did not satisfy the Policy definition of "totally and permanently disabled". The letter stated that given the medical evidence from the date of assessment (to which reference was made, but it is unnecessary to set out here), AMP had formed the view that Mr Morrow had some capacity to return to work or participate in a return to work or vocational rehabilitation programme and therefore did not meet the definition of totally and permanently disabled. Second, that Mr Morrow was not totally and permanently disabled for six consecutive months following the date of ceasing work, which was a condition of entitlement to a TPD benefit under the Policy. The letter also notified Mr Morrow that the trustee of the Fund (AMP Superannuation Limited) had also rejected Mr Morrow's claim under the Fund for a TPD benefit.
9. Ms Underwood deposed that AMP does not have any record of receiving either notice of the alleged "Common Law Commercial Lien in Tort" served on Mr Meller on 17 January 2018, or a Default Notice issued on 22 February 2018, as referred to in the schedule to the statutory demand.

(1) Failure to specify address for service in the state in which the demand is served

1. The prescribed form (Form 509H), par 6, requires a creditor's statutory demand to contain "the address for service of the documents in the State or Territory in which the demand is served on the company, being, if solicitors are acting for the creditor, the address of the solicitor". As indicated, in this case the statutory demand did not comply with the prescribed form as required by s 459E(2)(e) because address for service in par 6 of the demand was an address in Western Australia, not in this State where the demand was served.
2. Corporations Act, s 9 provides that "defect" in relation to a statutory demand, includes a mis-description of a debt or other matter and a mis-description of a person or entity. In LSI Australia Pty Ltd v LSI Holdings Ltd [2007] NSWSC 1406; (2007) 25 ACLC 1602, Austin J remarked at [54]: A statutory demand is required by Form 509H to "describe" the debt that is claimed. If the demand is so vague or ambiguous that it fails to identify, to a reasonable person in the shoes of a director of the debtor company, the general nature of the debt to a sufficient degree that the director can assess whether there is a genuine dispute as to the existence or amount of the debt or an offsetting claim, then there is a lack of something necessary for completeness, and therefore a defect in the demand. In my opinion, for the reasons I have given, that is the case in respect of both of the statutory demands presently before the court.
3. A defect can occur, not merely in the quantification of the alleged debt, but also by reason of a failure to specify the nature of the amount claimed by identifying the source or basis of the claimed debt: Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq) [2011] NSWSC 1121; (2011) 85 ACSR 610 at [84]-[91] (Ward J); Business to All Australia Pty Ltd v North East Developments Pty Ltd (recs and mgrs apptd) [2011] NSWSC 668 at [9]-[11] (Hammerschlag J).
4. It has been said that a deficiency in the form of a demand may be so fundamental that it is "incapable of assuming the description of statutory demands, within the meaning of the Corporations Act": Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 120 ALR 155 at 167 (Lockhart J). In Crema (Vic) Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd [2006] VSC 338 at [110]; (2006) 58 ACSR 631, Dodds-Stretton J expressed the view that only deficiencies of a gross and exceptional character would deny a document the status of a statutory demand.
5. There is conflicting authority on the question of whether, and in what circumstances, the failure to specify in the statutory demand an address for service in the State in which the statutory demand is served may be a fundamental deficiency that deprives the demand of the character of the demand under s 459E(2) and therefore render the demand a nullity.
6. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 (Spencer Constructions), the Full Court of the Federal Court did not regard the incorrect provision of any interstate address for service of any application or affidavit as constituting such a fundamental deficiency, in the circumstances of that case. The Full Court held at 458 that, "in the case of a defect in, or in relation to, a demand, strict compliance with the relevant statutory provisions is not a pre-condition to the validity of the demand, which means that such a defect does not result in invalidity".
7. In Re International Materials & Technologies Pty Ltd (2013) 282 FLR 362; [2013] NSWSC 782 at [16]-[21], Brereton J held that, on the facts of that case, non-compliance with the requirement to provide an address for service within the State in which the demand was served deprived the debtor company of the ability to make a valid application to set aside the demand, and was calculated to mislead it into making an ineffective application. His Honour considered that the defect was so serious and fundamental as to deprive the demand of the quality or character of the demand under s 459E because it failed, in a material and fundamental way, to comply with the prescribed form referred to in s 459E(2)(e). Given his view that the demand was a nullity, Brereton J declared the demand as null and void, which had the effect of precluding any subsequent reliance on it.
8. Importantly, in Re International Materials & Technologies Pty Ltd at [23] and later in Re Glenevan Pty Ltd [2015] NSWSC 201 at [2]-[5], Brereton J accepted that the inclusion of an inter-state address in par 6 of a statutory demand, although non-compliant with the prescribed form, will not in all cases cause the statutory demand to be a nullity, nor provide a basis on which it would have been set aside, referring to the remarks of Barrett J in Everkind Pty Ltd v Hazenforn Pty Ltd [2010] NSWSC 1031 at [19]. In Everkind, other possibilities of service were open, including service at the registered office of the defendant which was in New South Wales, the same State as that in which the demand was served on the debtor company.
9. In PrimeSpace Property Investment Ltd v Vienne Pty Ltd [2015] FCA 326 Griffiths J observed at [25], the Full Court in Spencer Constructions did not reject the possibility that there may be cases where deficiencies in the form of a demand are so fundamental that the demand is incapable of meeting the definition of a demand in s 9 of the Corporations Act.
10. Nonetheless, the approach in Re International Materials & Technologies Pty Ltd has not met with universal acceptance: see Sustainable Organics (Wooshaway Pty Ltd) v Ranger Loaders Pty Ltd [2011] QSC 45 at [19] (Philippides J); PrimeSpace Property Investment v Vienne Pty Ltd at [24] (Griffiths J); Slap Corporation Pty Ltd v Civil, Infrastructure & Logistics Pty Ltd (2017) 50 VR 542; [2017] VSC 168 at [73]-[74] (Randall AsJ). See also Re Leasing Holdings Pty Ltd (formerly Charlie Lovett Pty Ltd) [2015] NSWSC 771 at [15]-[28] where many of the authorities are reviewed by Black J.
11. In the present case, the non-compliance with par 6 of the prescribed form (Form 509) did not have the effect of misleading AMP as to how to commence a valid application under s 459G to set aside the statutory demand. The application was validly served on Mr Morrow in Western Australia, together with the attached notice in accordance with Form 1 for service of process out of the State as required by s 16 of the Service and Execution of Process Act 1992 (Cth) (SEPA). Having regard to the view I have reached in relation to the other grounds relied upon by AMP, it is not necessary to determine this application by reference to the nullity submission.

(2) Whether other defects in the demand cause substantial injustice if the demand is not set aside, or some other reason to set aside the demand

1. AMP relies upon three other defects in the demand which it submits are fundamental and substantial injustice will be caused if the demand is not set aside under s 459J(1)(a).
2. First, AMP submits that the description of the debt as a "Common Law Commercial Lien in Tort" is confusing, ambiguous and fails to set out any identifiable basis on which a debt could be owed. That submission should be accepted. Absent a determination of a court, a claim in tort is a claim for unliquidated damages, not a debt. Further and in any event, there is no recognised legal obligation or cause of action known as a "Common Law Commercial Lien in Tort". Given the absence of any identifiable basis on which a debt could be owed, the demand is vague or ambiguous in the sense referred to by Austin J in LSI Australia Pty Ltd v LSI Holdings Ltd at [54].
3. It does not assist Mr Morrow that he may have contractual rights against AMP if he is dissatisfied with AMP's decision to reject his claim under the Policy for a TPD benefit. Before a debt could arise under the Policy, Mr Morrow would need to establish a breach by AMP of its contractual obligations and obtain a determination by a court as to the amount owing under the Policy: Edwards v Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113; Hannover Life Re of Australasia Ltd v Sayseng [2005] NSWCA 214; (2005) 13 ANZ Ins Cas 90-123 at [36]; TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [60].
4. Second, AMP submits that the alleged debtor in the demand is misdescribed as Craig Meller, the (now former) Chief Executive Officer of AMP, rather than AMP itself. AMP accepted that par 1 of the demand stated that "[t]he company/individuals owe Harold Albert of the family Morrow … the amount of $3 million, being the amount of the debt described in the schedule and the amount is due and payable by the company and the individual Craig Meller, the CEO of AMP Life Limited". However, no "company" is identified in the demand and there is no suggestion in the demand that AMP is vicariously liable for the alleged tort by Mr Meller. There is a lack of something necessary for completeness in identifying the alleged debtor company, and this is a defect in the demand: LSI Australia Pty Ltd v LSI Holdings Ltd at [54].
5. Given the nature of two defects referred to above, I am satisfied that substantial injustice would be caused if the demand is not set aside under s 459J(1)(a).
6. Third, AMP submits that since the maximum amount of insurance cover provided under the Policy in respect of a TPD benefit is $457,450, the amount claimed in the demand of $3 million is a gross overstatement and this amounts to an abuse of process in issuing the demand and provides "some other reason" to set aside the demand under s 459J(1)(b).
7. In First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939 at 951, Santow J expressed the view that there may be some circumstances in which a substantial overstatement of the amount claimed in a statutory demand might constitute "some other reason why the demand should be set aside" under s 459J(1)(b), and that this is so despite such overstatement also constituting a "defect" and despite a lack of substantial injustice. His Honour reasoned that, where a statutory demand has been so grossly inflated as almost exclusively to comprise matters which it should have been obvious from the outset were in genuine dispute between the parties at the time the demand was served, then an order under s 459J(1)(b) setting aside the demand may well be required to prevent such an abuse of the regime under Pt 5.4.
8. If I was not otherwise satisfied that the demand should be set aside under s 459J(1)(a) for the reasons already given, I would exercise the power under s 459J(1)(b) to set aside the demand for this reason.
9. Having received notice on 5 December 2017 of AMP's rejection of his claim under the Policy for a TPD benefit, Mr Morrow has not sought to challenge that decision and obtain a determination by a court that he is entitled to a TPD benefit under the Policy. Instead, he has adopted the course of asserting a claim against Mr Meller, which, on the face of its description as a "Common Law Commercial Lien in Tort" is unknown to the law. I would infer in those circumstances that there is a lack of bona fides on the part of Mr Morrow in serving the statutory demand. I would also infer that Mr Morrow has recklessly demanded an amount substantially higher than the maximum TPD benefit under the Policy which is tantamount to an abuse of use of the statutory demand process: Equuscorp Pty Ltd (formerly Equus Financial Services Ltd) v Perpetual Trustees WA Ltd (1997) 80 FCR 296 at [300]; (1997) ACSR 675 at 700.

Genuine dispute

1. The approach which the court should take to the assessment of a genuine dispute is well-established. It is for an applicant to prove the existence of such a dispute, but the burden of proof is analogous to that which confronts a party on an application for an interlocutory injunction or summary judgment.
2. The function of the court is merely to determine the existence of a genuine dispute; it is not to determine whether the debt exists. The court does not weigh the merits of the dispute or engage in a balancing exercise in relation to competing contentions: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362 at 366-367 (Hayne J); Panel Tech Industries (Aust) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18] (Barrett J).
3. The bar for establishing a genuine dispute is not set high; a "plausible contention requiring investigation" will suffice: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 (McLelland CJ in Eq). Other expressions to similar effect can be found in the authorities including that the dispute is "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)": Spencer Constructions at 464 (Northrop, Merkel and Goldberg JJ); Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605 (Thomas J). The court's state of mind concerning the existence of a genuine dispute may range from a clear conviction that the debt does not exist to an opinion that the genuine dispute hurdle has only just been cleared: Creata (Aust) Pty Ltd v Faull [2017] NSWCA 300 at [29] (Barrett AJA, Gleeson and White JJA agreeing).
4. Although it is not necessary to express any concluded opinion on the merits of Mr Morrow's claim against AMP (and I refrain from doing so), this is a case where I have a clear conviction that the alleged debt does not exist, given the terms of the Policy and the rejection by AMP of Mr Morrow's claim for a TPD benefit. It is not necessary in this regard to refer to the medical evidence summarised in the letter from AMP to Mr Morrow dated 5 December 2017 giving reasons for rejecting his claim.
5. Plainly, the dispute in relation to Mr Morrow's claim under the Policy to a TPD benefit is genuine; it is bona fide, and is based on real, not spurious, hypothetical, illusory or misconceived grounds. I am satisfied that there is a genuine dispute concerning the existence of the debt the subject of the statutory demand.

Costs

1. As to costs, there is no reason why costs should not follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

Other matters - jurisdiction of this Court

1. After the Court reserved judgment in this matter, counsel for the plaintiff sought leave on 8 June 2018 to mention the matter to draw to the Court's attention two communications received by AMP's solicitors from Mr Morrow, one dated 22 May 2018, the other dated 31 May 2018. Those documents were marked MFI-1. It is only necessary to refer to the later document, which was also received in the Registry on 5 June 2018 headed "Lawful Notice". The document was addressed "To whom it may concern" and asserted that this proceeding is not listed in this State because that is a clear breach of s 51(xxiv) of the Commonwealth Constitution and an attempt to pervert the course of justice. The document also stated, in response to notification of the hearing date that had been given to Mr Morrow by the solicitors for AMP: Any attempt to hear this case anywhere other than Western Australia is an attempt to pervert the course of justice and is in direct contravention of the Commonwealth Constitution 1901.
2. Section 51(xxiv) of the Constitution provides that the Commonwealth Parliament shall have power to make laws with respect to the service and execution throughout the Commonwealth of the civil and criminal process and the judgments of the courts of the States.
3. Section 15(1) of the SEPA provides that an initiating process issued in a State may be served in another State. Section 16 of SEPA provides that service is effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served. In this case, as mentioned, a Form 1 notice to the defendant was attached to the originating process served on Mr Morrow, as required by s 16 of the SEPA and reg 4 of the Service and Execution of Process Act Regulations 1993 (Cth). No application was made by Mr Morrow to have the proceeding transferred to another Supreme Court, or another superior court.
4. One further matter should be mentioned concerning the jurisdiction exercised by this Court in this matter. Federal jurisdiction was attracted upon institution of the proceeding, given AMP's claim for relief under s 459G of the Corporations Act. Such jurisdiction is conferred on this Court by s 1337B(2) of the Corporations Act. Mr Morrow has not applied to transfer this proceeding to either the Federal Court, Western Australian Registry, or to the Supreme Court of Western Australia: s 1337H(3) and (5). There is no reason why this Court ought transfer the proceeding on its own motion under s 1337M of the Corporations Act. It is not in the interests of justice to do so given the hearing has concluded, AMP's registered office is in this State and the statutory demand was served on AMP in this State.
5. There is no merit in Mr Morrow's contention that this Court does not have jurisdiction to determine the application.

Orders

1. For the reasons given above, the Court makes the following orders: 1. The statutory demand dated 19 March 2018 and served on the plaintiff by the defendant be set aside. 2. The defendant pay the plaintiff's costs of the proceedings.

Amendments 14 June 2018 - 2 x minor typographical errors - [15], [43]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 June 2018