Solicitors:
JemmersonFisher Legal (Plaintiff)
Z Moodini (Self-Represented)
File Number(s): 2024/223160
[2]
Nature of the application
By Originating Process filed on 17 June 2024, the Plaintiff, DiJones Property Services Pty Ltd ("DJPS") applies to set aside a creditor's statutory demand dated 27 May 2024 ("Demand") issued by the Defendant, Mr Moodini, on the ground that there is a genuine dispute between DJPS and Mr Moodini about the existence of the debt to which the Demand relates. I pause to note that that Originating Process squarely, and expressly, raised the question whether the debt to which the Demand relates existed, as a matter of fact or as a matter of law.
The Demand was dated 27 May 2024 and signed by Mr Moodini who identified his capacity as a creditor of DJPS. The Demand stated that:
"[DJPS] owes [Mr Moodini] [address] (the Creditor) the amount of $7,296.20 being the amount of the debt described in the Schedule."
The Schedule described the amount of the debt as: "Amount obtained from [Mr Moodini] by deception" and then referred to the figure of $7,296.20.
The Demand, in an orthodox manner, attached an affidavit also dated 27 May 2024 of Mr Moodini verifying that the amount of the debt claimed was due and payable by DJPS. Mr Moodini's verifying affidavit recorded his claim that DJPS was the "managing agent" and "executing agent" for the landlord under a lease agreement ("Agreement") for specified premises. He referred to emails which he says he received from DJPS containing a letter requesting access to the premises and stating that, if he did not provide access to the premises, a revisit fee of $250 would be applicable. He referred to his denying access to the premises and to subsequent proceedings brought by the landlord (as distinct from DJPS) against him in the New South Wales Civil and Administrative Tribunal ("NCAT").
Mr Moodini's evidence was that, on 6 April 2023, NCAT made orders that he pay the landlord $7,546.20 for the denial of access. Mr Moodini there fairly recognises that DJPS was not a party to the NCAT proceedings, but then contends that DJPS "failed to mitigate the landlord's costs as per clause 40 of the Agreement and as per the letter issued on 11 November 2022"; these were presumably references to the lease of the premises and the email letter to which Mr Moodini had referred in the affidavit. He also referred to proceedings that he commenced against DJPS in the Local Court of New South Wales, and to his claims in those proceedings having been dismissed, and he characterises the submissions there put by DJPS as wrongly denying that it was representing the landlord in respect of the lease of the premises. Mr Moodini there contends that, contrary to the position taken by DJPS in the Local Court, and accepted by the Local Court, it is the only holder of a business name "Di Jones Real Estate".
Mr Moodini also there refers to several matters on which he relies to contend that DJPS owes him a debt of $7,296.20 as claimed in the Demand, namely that:
"(a) my liability for revisiting the premises was limited to $250.
(b) [DJPS] knew that the landlord's and my liability was limited to $250.
(c) [DJPS] fraudulently facilitated a benefit for the landlord in the amount of $7,546.20 at my expense through NCAT orders.
(d) [DJPS] had a duty to mitigate the landlord's and my costs to $250.
(e) [DJPS] owes me $7,296.20 being the difference between $7,546.20 and $250."
I pause to note that this proceeding is an application brought by DJPS to set aside the Demand and the Court is here exercising the statutory jurisdiction conferred on it by s 459G of the Corporations Act 2001 (Cth) ("Act") in respect of the question whether the Demand should be set aside, and not an appellate jurisdiction from NCAT or the Local Court of New South Wales. Mr Moodini has not brought proceedings in this Court which would invoke any such appellate jurisdiction. That has a significant consequence, which may itself have been sufficient basis to set aside the Demand, namely that the application must be approached on the basis that NCAT has made the orders it has made; the Local Court has dismissed Mr Moodini's claim against DJPS; and both of those decisions and the consequential orders remain on foot. However, there is another basis on which the Demand should be set aside, which I will identify below.
[3]
Affidavit and other evidence
Turning now to the affidavit and other evidence led in the application, DJPS reads the affidavit dated 17 June 2024 of Mr May, who is a director of DJPS. He refers to the Local Court proceedings brought by Mr Moodini against DJPS and exhibits a series of documents relating to the proceedings, and refers to subsequent correspondence from Mr Moodini which advances various allegations as to DJPS's conduct of the proceedings, none of which have been, or can be, properly determined on their merits. Mr May in turn refers to the service of the Demand by Mr Moodini and, importantly, notes that Mr Moodini has not paid costs in accordance with the orders made by the Local Court. There is also no suggestion that Mr Moodini has paid to the landlord, still less to DJPS, the amount that he was ordered to pay in the proceedings in NCAT. Mr May also identified the basis for DJPS's claim to set aside the Demand, which includes denying that any money is owed by DJPS to Mr Moodini and contending that, by order of the Local Court made on 22 April 2024, Mr Moodini owes DJPS money. Mr May also there raises an issue, to which the parties directed some attention in submissions, whether DJPS was correctly named as a defendant in the Local Court proceedings, and whether a related company, rather than DJPS, conducts the property management business in respect of the premises rented by Mr Moodini from the landlord.
By his affidavit dated 24 July 2024, Mr Moodini in turn gives evidence of service of the Demand, both by post and by email, and sets out the basis on which he contends a debt was owed by DJPS to him. He contends that DJPS was the sole holder of the business name "Di Jones Real Estate", and refers to the proceedings in NCAT which, as he rightly pointed out in submissions, were between him and the landlord and did not involve DJPS as a party, and then gives evidence that:
"I seek that [DJPS] repay me the amounts I was ordered to pay by NCAT to the landlord, on the basis: that [DJPS] incurred avoidable costs on behalf of the landlord; and that [DJPS] had an active duty to mitigate those costs under the residential tenancy agreement; and that [DJPS] willingly abrogated its duty to mitigate the costs; and [DJPS] shielded itself from the liability for those costs by conducting NCAT proceedings as a representative of the landlord against me."
Pausing there, those matters may or may not articulate an arguable claim against DJPS, but this application to set the Demand and not a proper forum for a determination of that claim on the merits, where the decisions of NCAT and the Local Court have not been set aside in an appeal or review application and remain binding on Mr Moodini. As will emerge below, a creditor's statutory demand can only be issued in respect of an existing debt, and not in respect of, for example, an undetermined and unliquidated claim.
Mr Moodini also refers to the proceedings in the Local Court, provides a detailed outline of the conduct of those proceedings and makes serious allegations, which also cannot properly be determined in this application, as to the conduct of those proceedings. I emphasise that, in referring to those allegations, I reach no conclusion that they are properly made, still less that they are properly founded. Mr Moodini in also refers to, and takes issue with, aspects of Mr May's evidence for DJPS in the proceedings.
Mr Moodini also tendered several documents, including a tenancy ledger which is, I understand, likely to be tendered to seek to establish that DJPS was acting as the lessor's managing agent in respect of the premises; an extract of the proceedings in the Local Court; and the application form and other documents in respect of the proceedings in NCAT.
[4]
Applicable principles
I should now refer to the applicable principles, before turning to the parties' submissions. The Act provides, in s 459G, that a company may apply to the Court for an order setting aside a creditor's statutory demand served upon it. Section 459H(1)(a) provides that the Court may, in a proper case, set aside a creditor's statutory demand where there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the creditor's statutory demand relates. That section plainly recognises that a genuine dispute, for the purposes of that section, may be established where there is a genuine dispute, as to whether a debt exists at all.
I summarised the applicable principles in, inter alia, Re PSR Refining Services Pty Ltd [2023] NSWSC 243 and Re Cat and Dog Hotel Pty Ltd [2023] NSWSC 628 and I adopt, without repeating, those summaries. I proceed on the basis, identified by Barrett J in Panel Tech Industries (Aust) Pty Ltd; Re Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18] that:
"Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing considerations. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger."
I also recognise that it is well established that, as I noted above, a creditor's statutory demand can only be served where the party serving that demand is owed a debt by the relevant company. In his leading commentary, Assaf's Winding up in Insolvency, 3rd Ed, at [3.41] Mr Assaf notes, "that an obligation to pay liquidated damages is not a debt and is not capable of supporting a statutory demand." He notes that, in some cases, a claim for liquidated damages under a contract may be a debt capable of supporting a creditor's statutory demand, but no such claim can be brought here, because Mr Moodini does not and could not here make a contract claim for liquidated damages.
Mr Assaf also refers (at [3.63]) to the decision in First Line Distribution Pty Limited v Whiley (1995) 18 ACLR 185 ("First Line Distribution"), where a statutory demand was issued in respect of a claim for breach of a distribution agreement and Cohen J held that the claim was merely for unliquidated damages, where the defendants had neither brought an action for damages and there was no judgment debt against the plaintiff company, and should be set aside. Mr Assaf also refers to Reinsurance Australia Group Pty Ltd v Odyssey Re (Bermuda) Ltd [2000] 36 ACLR 348 ("Reinsurance Australia") where a statutory demand for an amount claimed to be due under a reinsurance policy was also set aside, on the basis that no debt was due and payable, and the claim for breach of the policy gave rise to a right of unliquidated damages in a case of non-payment.
These matters have also recently been considered by the Supreme Court of Victoria. In Re Simmoll Pty Ltd [2021] VSC 693 ("Simmoll") at [45], Hetyey AsJ observed that:
"Although the term 'debt' is not defined in the Corporations Act, it should be construed in a practical and common sense manner, consistent with its context and the underlying statutory purpose. In Rothwells Ltd v Nommack (No 100) Pty Ltd [[1990] 2 Qd R 85] a case which involved an application to restrain a winding up proceeding, McPherson J succinctly described a debt as 'a liquidated sum in money presently due, owing and payable' by a debtor to a creditor. A debt can therefore be distinguished from a claim of damages for breach of contract or any other unliquidated claim. In the context of the insolvent trading provisions found in Division 3 of Part 5.7B of the Corporations Act, a debt which is incurred for the purpose of s 588G of the legislation must be for a liquidated amount capable of being ascertained, as distinct from an unascertained claim for damages. Similarly, there is abundant authority for the proposition that an obligation to pay unliquidated damages is not a debt capable of supporting a statutory demand [citing Re Elgar Heights Pty Ltd [1985] VR 657 at 669, 671; Rothwells v Nommack at 88 (McPherson J); [First Line Distribution] at 188 (Cohen J); [Reinsurance Australia] at 355 (Macready M); CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100 , 103 (Barrett J); Re Towncars Franchises Sydney Pty Ltd [2013] NSWSC 1235 [29]-[30] (Brereton J) This is consistent with the legislative policy underpinning Part 5.4 of the Corporations Act that the statutory presumption of insolvency in s 459C(2)(a) should be available only in clear cases of indebtedness where the reason for non-compliance with a statutory demand is an inability of the debtor company to pay and where no other inference for non-payment can be drawn, such as the debt being presently unrecoverable or unenforceable." [some citations omitted]
Subsequently, in Re Coles Supermarkets Australia Pty Ltd [2022] VSC 438, where Hetyey AsJ drew attention to his discussion of the concept of a "debt" in Simmoll and to the scope of s 459E of the Act, and held that an amount which was not ascertainable, immediately payable or presently recoverable or enforceable absent any judgment of a court or tribunal in respect of the relevant claims, did not support a creditor's statutory demand.
I should add to my oral ex tempore judgment that, in Forex Capital Trading Pty Ltd (In Liq) v Invesus Group Ltd [2024] NSWSC 867 at [39], Ball J recently considered the ordinary meaning of the word "debt" and observed that:
"Although the parties took somewhat different approaches to the meaning of that word, ultimately it seemed to be common ground that a debt was a liability to pay an ascertained amount or an amount that could be ascertained by arithmetic calculation or that was "fixed by any scale of charges or other positive data": see Spain v Union Steamship Co of New Zealand Ltd (1923) 32 CLR 138 at 142 per Knox CJ and Starke J, quoting WB Odgers, The principles of pleading and practice in civil actions in the High Court of Justice, 5th ed, 1903, Stevens and Sons, Limited at 41. Or, to use the somewhat different language of Olsson J in Powell v Fryer [2001] SASC 59; (2001) 159 FLR 433 at [73], referring to the decision of Gleeson CJ in Hawkins v Bank of China (1992) 26 NSWLR 562 at 572 in the context of the insolvent trading provisions of the then Corporations Law, "a debt is taken to have been incurred when, by its conduct or operations, a company has necessarily subjected itself to a conditional, but unavoidable obligation to pay a sum of money at a future time". Relevantly, a debt involves a liability to pay an amount and the amount must be ascertained or ascertainable. A "liability" in this sense is an existing legal obligation to pay the relevant amount."
[5]
The parties' submissions and determination
I now turn to the parties' submissions, which I can address relatively briefly, where this application is capable of determination and should be determined, on narrow grounds.
Mr Reynolds, who appears for DJPS, refers to the history of the proceedings in NCAT and subsequently in the Local Court. He sets out multiple extracts from the transcript in NCAT, on which DJPS initially sought to rely, although they were ultimately not tendered. It is not necessary to have regard to those submissions in order to determine this application. Mr Reynolds in turn points to the basis on which Mr Moodini derives the suggested "debt" which is the subject of the Demand, as the difference between the amount of $7,546.20, that NCAT ordered that he pay the landlord, and the amount of $250, which he claims should have been the limit of what he was liable to pay. Mr Reynolds in turn addresses a number of difficulties with that submission, which it is not necessary to address. Mr Reynolds submits that, by reference to that range of matters, there is a genuine dispute about the existence of the alleged debt.
Mr Moodini, in response, addresses the question whether the entity providing management services in respect of the lease was DJPS, or another entity. In doing so, he disregards the difficulty that that question has already been determined, at least in the Local Court, and there is no occasion for this Court, which is not exercising an appellate jurisdiction from the Local Court in this application, to revisit the correctness or otherwise of that determination which stands as a binding resolution of the dispute as between Mr Moodini and DJPS as the parties to the Local Court proceedings. Mr Moodini also submits that there is a "nexus" between DJPS and the claimed "debt", and develops in that respect the arguments which he puts to contend that the "debt" exists. Mr Moodini also submits that the quantum of the liability can be ascertained with respect to the monetary order made by NCAT against him, and addresses the circumstances in which any offsetting claim might be determined.
For the reasons I have noted above, the fundamental difficulty with the Demand is that the debt on which it relies does not exist. Mr Moodini's claim does not give rise to an amount due by DJPS (or its related company) that is ascertainable, immediately payable or presently recoverable or enforceable. It depends upon a somewhat convoluted argument, articulated by Mr Moodini in submissions, so as to link DJPS (if it were, in fact, the entity providing management services) with the conduct of the proceedings in NCAT; it disregards the findings of NCAT, and the Local Court, which have not been set aside; it then develops an unliquidated claim for compensation, based on a calculation that is open to dispute, which seeks to rely on the difference between the amount which NCAT ordered Mr Moodini pay the lessor and the limit which he contends is applicable. That is not a liquidated amount payable, for example, under an invoice or contractual provision, but simply the manner in which Mr Moodini contends that any compensation that is payable to him should be determined. There is no judgment of a court or tribunal against DJPS in respect of Mr Moodini's claim, and, to the contrary, the Local Court has dismissed it in a judgment that binds Mr Moodini. Where there is no debt, there is no proper basis for the Demand. DJPS has therefore at least established that there is a genuine dispute as to the existence of the Demand, although the correct position is more likely that it has also established that that debt simply does not exist, in a manner which is capable of supporting the Demand.
[6]
Costs
An order would ordinarily follow that Mr Moodini pay the costs of the proceedings, applying the usual principle that costs follow the event. Mr Reynolds, who appears for DJPS, submits that Mr Moodini should pay those costs on an indemnity basis from 2 August 2024. That would cover some part of the preparation of this matter for hearing, and the period of hearing of the application this morning.
That submission was put on the basis of the principles in Calderbank v Calderbank [1975] 3 All ER 333. I should add to my oral judgment that the applicable principles in respect of such an order were summarised by Ward J (as the President of the Court of Appeal then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]-[15] and I summarised them in Re Alsafe Security Products Pty Ltd (atf Alsafe Trust) (in liq) [2016] NSWSC 575 at [8] as follows:
"[T]he fact that a party ultimately achieves a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the other party should be awarded indemnity costs, unless it can be said that it was unreasonable for the first party not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [above] at [9]-[15]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14] , [16]. In Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26], Stevenson J observed that:
"If a Calderbank offer is made, but not accepted, the court's discretion to make a special order is enlivened. The court's discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7] -[8]."
I also recognise that a Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable: Ofria v Cameron (No 2) [2008] NSWCA 242 at [20].
Mr Reynolds here relies on an email dated 30 July 2024 from the solicitors for DJPS to Mr Moodini, which had made an offer to "settle" the proceedings on DJPS's behalf on the basis of judgment for DJPS (which was not apt, where this was not a claim, for example, for a money amount); that the Demand issued by Mr Moodini be set aside, an order which DJPS has achieved; and that Mr Moodini pay DJPS's costs up to 4pm on 2 August 2024 on an ordinary basis, as agreed or as assessed. That letter also contended that:
"It would be unreasonable for you not to accept this offer as you have no basis for issuing a Statutory Demand, particularly in circumstances that [DJPS] has a court order against you. By accepting this offer you will avoid further costs being incurred at the hearing, whereby our client will be seeking its costs on an indemnity basis."
There was force in the proposition that Mr Moodini had no basis for issuing the Demand, as has emerged in the judgment which I have delivered above. Having said that, I am not satisfied that this offer, or Mr Moodini's rejection of it, is such as to create a basis for an award of indemnity costs. The difficulty with the offer, it seems to me, is that it did not have any element of compromise about it. It was simply an invitation to Mr Moodini to surrender, and pay costs on the ordinary basis as would be attached to that surrender. Mr Moodini chose not to do so; he went to the hearing; he has been unsuccessful at the hearing; and, in the ordinary way, he will be ordered to pay the costs that follow from the hearing. It does not seem to me that, absent any element of compromise in the offer, it was unreasonable for him to reject it, or that it can be said that his not accepting it supports a further order for indemnity costs. I therefore do not order indemnity costs against Mr Moodini.
[7]
Orders
For these reasons, I order that:
The statutory demand dated 27 May 2024 issued by Mr Moodini be set aside.
Mr Moodini pay the costs of this application on the ordinary basis, as agreed or as assessed.
[8]
Amendments
15 August 2024 - Amending Dijones to DiJones; deleting words "trading as Di Jones" from first sentence of para 1.
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Decision last updated: 15 August 2024