Calquid P/L v A & D R Illes P/L

Supreme Court of NSW|2000-06-22|Before: Calquid P, Illes P, Santow J

INTRODUCTION 1 The reasons which follow, explain my answers to the two questions below. These were questions which the parties agreed should be decided separately, determining as they do the outcome of proceedings brought by the Plaintiff to set aside a statutory demand. The negative answers to those questions mean that the Plaintiff's application must fail. 2 These are the two questions and the answers I earlier gave:

First Question: Whether the summons and supporting affidavit under s459G of the Corporations Law were filed and served by the Plaintiff within twenty-one days of service upon the Plaintiff of the first of the two statutory demands dated respectively 1 December 1999 and 13 December 1999 ("the statutory demands")? Answer: No

Statement of Facts 6 What follows is to be taken as agreed, though only for the purpose of the present proceedings. This is save where I refer to the parties' competing contentions regarding service. 7 On 30 September 1998 the Plaintiff and the Defendant entered into a contract for the construction of four residential units at 109A Jersey Road Woollahra ("the Site"). That contract was required to comply with the provisions of the Home Building Act 1989 (NSW). Both parties agree that the contract does not comply with s7 of that Act in that it does not include the licence number of the builder; the contract price (if known) or, alternatively, a warning to that effect and an explanation of the variation procedure. Nor does it include the statutory warranties applicable to the work. 8 Following execution of the contract the Defendant undertook work at the Site. 9 Since commencing work the Plaintiff has paid to the Defendant the sum of $1,377,103.92 as certified by Clive Lucas, Stapleton & Partners Pty Limited (ACN 002 584 189) ("the Architect") in Certificates numbered 1 to 12. 10 Since payment of those monies due, monies became due for works included in Certificates 13 to 15 issued by the architect. Those are the monies claimed totalling $232,705.17 under the Defendant's first statutory demand dated 1 December 1999: Certificate Number Date Amount Due Certificate 13 20 October 1999 $121,118.08 Certificate 14 3 November 1999 $50,645.41 Certificate 15 16 November 1999 $60,941.68 Total $232,705.17

11 Then according to Certificate No. 16, a further $41,494.79 became due, which is the subject of the second statutory demand of 13 December 1999 (see later). 12 The Defendant ceased work on the Site in the beginning of November 1999 issuing a Notice of Suspension of Works. The Plaintiff claims (see affidavit of Edward Bonser 22 December 1999, para 8) that due to the suspension of work it has been unable to arrange for other tradespeople to complete aspects of the work and have thus suffered damage. The Plaintiff also claims (see para 10 of that affidavit) other aspects of the building work are defective and require rectification work. Further, the Plaintiff claims that it has received no evidence of the cost of the work done and materials provided by the Defendant in connection with the claims made in Certificates 13, 14 and 15 and, as such, the Plaintiff has no basis on which to assess the value of the work done (see para 9 of that affidavit). 13 On 16 November 1999 the Defendant asserts that the Plaintiff provided a cheque, dated 15 November 1999 on the account of Fairswan Pty Limited (ACN 075 298 798), to the Defendant in the sum of $108,000.00 in part payment of the amounts certified by the Architect in Certificates 13 and 14. That cheque was dishonoured upon presentation to the Bank (affidavit of Alexander Illes, a director of the Defendant, 27 March 2000, para 3). Upon cross examination Mr Bonser admitted that the cheque was provided on 16 November and that it was not met upon presentation (T, 15-21). 14 In December 1999, the Defendant served on the Plaintiff a Creditor's statutory demand for payment of Debt in relation to a debt of $232,705.17 (Certificates 13, 14 and 15). 15 The Defendant asserts that the statutory demand was served at 4.55 pm on 1 December 1999. This was, according to the Defendant when the statutory demand together with an affidavit pursuant to s459E of the Corporations Law of Mrs Deidre Illes (a director of the Defendant) plus a letter were left under the door of the "western most unit" of Number 19 Lavender Street, Lavender Bay (affidavit Allen Kavanagh, process server, of 27 March 2000). There had been, according to Mr Kavanagh's evidence in cross-examination, no answer at either unit (T, 9.15-19). The "western" of the two units at number 19 was indubitably unit 1, the registered office of the Plaintiff. It is also the residential address of the director of the Plaintiff, Edward Bonser. Mr Bonser asserted that at the relevant time, the numbers of each unit were on the building. However there were no numbers on the doors of the units (T, 4.41-58). 16 Alexander Illes (a director of the Defendant) asserts he had a telephone conversation with Edward Bonser on 2 December 1999 during which Mr Bonser asked "Why did you serve this statutory demand on us?" Conversation also allegedly took place to the effect that Mr Bonser was in Sydney and was to pay the Architect and Engineer on that day (affidavit Alexander Illes, para 7). These details were confirmed in a facsimile sent by the Defendant to the Plaintiff on the same day (Annexure F to affidavit Alexander Illes). Mr Bonser, in cross-examination, did not recall having this conversation and, if a conversation did take place, Mr Bonser denied that he would have asked about the statutory demand (T, 6.25-32; 7.28-35). 17 The Plaintiff, on the other hand, asserts that the statutory demand was not received at the registered office of the Plaintiff prior to Edward Bonser and his family departing for Noumea on 2 December 1999. The issue of the statutory demand "came to my attention and the attention of the Plaintiff when a copy of the demand was sent to me by facsimile in Noumea" (affidavit Edward Bonser 16 March 2000, para 4). The Plaintiff submitted that service was not executed until some time on or after 2 December 1999 or on or about 3 December 1999 when the statutory demand was received at the registered office of the Plaintiff by way of facsimile (affidavit Edward Bonser, para 5). 18 On 6 December the same statutory demand was mailed in a letter expressed to be "by way of service" to the Plaintiff's solicitor. He received it on 8 December 1999 (Annexure B to the affidavit of Bonser 16 March 2000). 19 On 9 December 1999 at 9.24 am the Defendant again purported to serve the same statutory demand on the Plaintiff. The process server Mr Wooldridge, from the same firm, attended incorrectly Unit 2 Number 19 Lavender Street, Lavender Bay, and delivered the documents to a female occupant who informed him that Edward Bonser and his family lived in Unit 1 but were, at that time, away (affidavit of John Wooldridge 27 March 2000). 20 On 13 December 1999, the Defendant served a second statutory demand on the Plaintiff in relation to a debt of $41,494.79 as certified by the Architect in Certificate 16 dated 30 November 1999. 21 On 23 December 1999, the Plaintiff filed and served the one summons commencing these proceedings seeking an order that the two statutory demands served on it by the Defendant be set aside. An undated affidavit of Mr Edward Bonser was filed and served with that summons.

The First Question - Service of first statutory demand. 22 When was the first statutory demand served? 23 The Defendant claims it was served on 1 December 1999 whereas the Plaintiff claims it was served on or after 2 December. The Plaintiff's proceedings to set aside were commenced on 23 December 1999. Therefore whether or not proceedings were validly commenced within twenty-one days in conformity with s459G of the Corporations Law turns upon the date of service of the first statutory demand. 24 I have concluded that the Defendant's claim should be accepted. Because that claim goes to a fundamental matter of jurisdiction, I have necessarily had to determine it on a final basis. For that purpose, I permitted cross-examination of Mr Bonser the Plaintiff and Mr Kavanagh for the Defendant, in each case in supplementation of the affidavit evidence that they have filed. 25 Mr Kavanagh is a process server with no interest in the outcome of the proceedings beyond the interest any person so engaged would have to show that he or she had done the task entrusted properly and efficiently. His evidence is clear and unambiguous. He refers to the unit on the western side of the building, the correct unit, as being where he first left the originals of the creditor's statutory demand with the accompanying affidavit; see para 2 of his affidavit of 23 March 2000. 26 Mr Kavanagh's evidence in cross-examination was not shaken. It was put to him that a fellow process server in his organisation, Mr Wooldridge, had attended the property some time in December, presumably later than Mr Kavanagh, and had served it not on the unit number 1 (the most western unit) but on unit number 2 and that this was incorrect. Mr Kavanagh was thus pressed on whether "there is uncertainty about which was 1 and which was 2"; see T, 10.32-.35. However, all that was put to him was whether he had any discussion with Mr Wooldridge. He acknowledged discussion had taken place and then follows these questions and answers (T, 10.46-.51): "Q. And can you remember what his explanation for how he determined which was the unit to be served is? A. My question to him was both properties are unnumbered. I said I left it under the door of the westernmost. He said, "That's correct, that is unit 1."

27 None of this cross-examination however undermines the credibility of his testimony at its central care, namely that he served the relevant documentation on the unit on the western side of the building and did so on 1 December 1999. That Mr Wooldridge was confused is not to the point. 28 When one turns to the evidence of Mr Bonser for the Plaintiff, he very definitely does have an interest in establishing a later date of service, though that is not of itself sufficient to put in doubt his testimony. 29 However, he is not assisted by the slight fudging in paragraph 4 of his affidavit of 16 March 2000. He there says, "No original statutory demand was received at the property on 1 December 1999" [emphasis added] rather than that "no original statutory demand was left at the property on 1 December 1999". The reference to "receiving" the documents follows an earlier sentence which reads as follows: "prior to my departure, [2 December 1999] neither I nor the Plaintiff had received at the registered office the Statutory Demand dated 1 December 1999 issued by the Defendant." [emphasis added] Thus the repeated expression "received" is about whether he received the document personally, rather than being a straightforward denial that the document was ever left. 30 There is, however, a more cogent indication that Mr Bonser's evidence should not be preferred to Mr Kavanagh's. Mr Illes in his affidavit of 23 March 2000 states that, "on 2 December 1999 I had a telephone conversation with Mr Edward Bonser in relation to the 1 December 1999 statutory demand. To the best of my knowledge and belief, at the time of that conversation Mr Edward Bonser was in Sydney on his way to pay the Architect and Engineer." He then annexes a letter of 2 December 1999 what appears to conform the earlier phone call. That letter says, "I write to set out and confirm our phone discussion of this morning [2.12.99]. You will pay all outstanding monies on your return early next week (Tuesday 7.12.99). The Statutory Demand will not be removed until all monies are paid. ….."

31 It will be apparent that such a letter was written when no dispute as to service had yet arisen. It is consistent only with the writer's assumption that service had already been effected. While not clear beyond doubt, that was most likely on the previous day, rather than later on. The letter is written on the basis that Mr Bonser was aware of the statutory demand from the earlier phone call. 32 Mr Bonser's evidence in his affidavit of 16 March 2000 is that, "the issue, by the Defendant, of the statutory demand came to my attention and the attention of the Plaintiff when a copy of the demand was sent to me by a facsimile in Noumea." Against that, Mr Illes' conversation, if it occurred as he attests, must have been prior to the departure to Noumea so that it would have been then, not in Noumea, that Mr Bonser learned of the statutory demand. 33 In cross-examination of Mr Bonser, he was asked the following: "Q. On the morning of 2 December you telephoned Mr Illes? A. I don't recall telephoning him on that day. Q. I suggest that you telephoned Mr Illes when you were at the airport? A. No, that would not have been possible. Q. I suggest you telephoned him at the airport using your mobile telephone? A. Well, I would not have been at the airport if I did. I didn't have my mobile telephone at the airport." ……. Q. 2 December. I suggest you had a telephone conversation and you asked in the course of that conversation on 2 December, you asked Mr Illes why a statutory demand had been served on the company? A. I don't recall. Q. You have no recollection of that? A. I don't have any recollection of that conversation, No. "

34 Mr Bonser was then shown the letter of 2 December 1999 to which his response was, "I don't recall receiving it, but I have seen it before, yes, earlier when it was received." (T, 6.50-.52) 35 When shown the letter he still did not remember any telephone conversation with Mr Illes on 2 December. He gave further vague evidence as to whether he did or did not write to Mr Illes' company upon his return from Noumea having received that letter. Finally the following question and answer ensues in relation to the alleged conversation on the morning of 2 December: "Q. In that telephone conversation did you make any reference to a statutory demand being served upon your company? A. I don't recall that conversation. Q. And reading that letter doesn't assist your recollection at all. A. No. "

36 None of this evidence is particularly convincing. Mr Bonser at no point categorically denies the conversation, simply saying that he does not recollect it. Even accepting that lack of recollection as truthful, it does not lead me to conclude that there was no such conversation. Rather I conclude there was. And that conversation, coupled with the unshaken testimony of the process server, supports the conclusion that the statutory demand was earlier served on 1 December 1999. Nor do I consider that the subsequent "service" of further copies of the statutory demand amounted to a waiver of the first demand. Nor was there an unequivocal election to adopt the later re-communications of the statutory demand as the service intended to be relied upon. It is well settled that any such waiver would need to be unequivocal and in circumstances where there is a clear election made to adopt as service the later re-communication of the statutory demand. The later re-communications on 6 and 9 December 1999 are rather to be understood as a process of making assurance doubly sure, not any communication that the earlier service was not being relied upon.

Conclusion 37 I am satisfied that the first statutory demand was served on 1 December 1999. This has the consequence that the Plaintiff's application to set it aside is fatally out of time pursuant to s459G of the Corporations Law and thus the application must fail on that ground alone.

The Second Question - Challenge to application to set aside statutory demand by reason of application applying to two statutory demands and by reason of alleged deficiencies in the accompanying affidavit. 38 I have earlier concluded that this challenge must also succeed. What follows are my reasons. 39 The challenge is based on the proposition that an application to set aside cannot comply with s459G of the Corporations Law where, as here, the one summons and accompanying affidavit are relied upon to set aside more than one statutory demand, being for different indebtedness though (allegedly) owed to the same creditor. Here successive claims are made for money due under a building contract. The first statutory demand is for indebtedness separate and distinct from that grounding the second statutory demand, though arising under the same building contract for different portions of the work. 40 In Help Desk Institute Pty Limited v Adams (1999) 17 ACLC 18, Young J concluded that s459G required that there only be one summons dealing with one demand. 41 His starting point was the Acts Interpretation Act 1901 s23(b), rendered applicable to the Corporations Law by s10(1) of the Corporations (NSW) Act 1990. This makes it clear that, unless the context otherwise provides, the singular includes the plural and vice versa. Here, the context is afforded by s459G of the Corporations Law which must serve the purposes of Pt 5.4. Part 5.4 is intended, according to the Explanatory Memorandum, to "allow disputes in relation to the existence or amount of a debt to be dealt with quickly and in a way which will not impede the resolution of an application for the winding up of a company in insolvency"; see para 665 of the Explanatory Memorandum to the Corporate Law Reform Bill 1992 introducing the changes to the statutory demand regime recommended by the Law Reform Commission's report No. 45 on general insolvency ("the Harmer Report"). 42 Here, we are dealing with two separate and distinct debts, though they arise out of the same contract, each the subject of a separate statutory demand. As against that, the Plaintiff says two things. First, that the ground for challenging the statutory demand is the same in each case, namely deficiency in the work done. There is likewise a common legal substratum, though derived not from the accompanying affidavit to the summons, but by what appears to have been an afterthought, namely non-compliance with the Home Building Act (NSW) 1989. The short answer is that at least the factual substratum for successive claims based on deficient workmanship must differ as between each statutory demand. This is because each claim relates to separately certified work, that is work that is distinctly and separately identified in the architects certificates. The common legal substratum, even if allowed as a basis of claim, despite the lack of articulation in any affidavit, is again in respect of distinct debts for distinct work. The situation is therefore very different from that which I dealt with in Femley Pty Limited v Salkan Engineering Pty Limited (1999) 17 ACLC 828. There I distinguished Help Desk on the basis that before me was a joint debt owed by a partnership such that each partner was individually indebted for precisely the same indebtedness. That was a situation where, had the creditor so chosen, it could have used a single statutory demand against all of the partners for the debt was a common partnership debt. 43 Thus turning to the present circumstances, while the two demands deal with similar disputes which might have been joined under Pt 8 of the Supreme Court Rules, s459G sets up a statutory regime which is incompatible with an application to set aside being in respect of two statutory demands for separate and distinct debts. Thus, as Young J points out in Help Desk at 20: "If more than one demand was contemplated one would have expected the legislature to have said, 'after the demand is so served or if more than one demand is served, by twenty-one days after the first of such demands is so served', when dealing in s459G(2) with the mandatory twenty-one day requirement for the application to set aside to be made within time. 44 Indeed here, with two separate statutory demands served on different days, the first as I have earlier determined on 1 December 1999 and the second on 13 December 1999, the twenty-one days runs from different points of time. That is the very situation that Young J referred to in Help Desk as illustrating the difficulty of reconciling s459G(2) of the Corporations Law with the use of one application to deal with a multiplicity of statutory demands in respect of distinct debts. 45 I should add that the fact that Young J in Help Desk was dealing with statutory demands issued by different creditors does not relevantly distinguish the reasoning in that case from the situation presently before me. 46 The difficulties of the contrary interpretation are further illustrated by the problems which arise when s459G(3) is considered. That subsection requires an affidavit "supporting the application" to be filed with the Court and served on the person who served the demand on the company. Where, as here, there is a separate and distinct indebtedness, though arising out of the same contract, an affidavit supporting the application necessarily has to deal with a plurality of distinct subject matters, even if it so happens that the plaintiff lodging the summons and accompanying affidavit elects to use the same grounds in that accompanying affidavit. One can imagine the complexities that would then follow if the subsequent elaboration of the subject matter of that single affidavit had to bifurcate and deal with each of two distinct debts. Such a contemplation is hardly compatible with the object of Pt 5.4, namely that, "disputes in relation to the existence or amount of a debt be dealt with quickly ….". 47 Nor can s467A of the Corporations Law be called in aid, directing latitude for any defect or irregularity in expression, absent substantial injustice. This was because s467A requires an application "under" Pt 5.4 of the law and this application is, as I have explained, not made in conformity with its basic requirements so as to meet that description of being under Pt 5.4. 48 In these circumstances it is not necessary that I consider further whether the affidavit of 22 December 1999 meets the description in s459G(3)(a) as "an affidavit supporting the application". Clearly enough, it does not support a conforming application satisfying s459G of the Corporations Law and thus can have no efficacy by itself. However, it is fair to say that the criticism advanced by the Defendant in relation to that affidavit further illustrates the reasons why the Summons does not conform to s459G of the Corporations Law. Only in a very general sense can it be said that the same ground supporting the single application applies to the work comprised in certificates 13, 14 and 15 (first statutory demand) as applies to the work comprised in certificate 16 (the second statutory demand). But this ignores a crucial difference. Each of the two sets of certificates is the subject of a separate statutory demand. That recognises that each demand is in respect of distinct work and relies on a separate claimed debt in respect of that distinct work. Clearly enough the factual evidence in relation to alleged deficiency in work may be different as between the two statutory demand. To the extent that testing is permitted to see whether the Plaintiff has a "plausible contention requiring further investigation" (Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669 at 671-2) that testing in many cases would not be capable of being done in relation to the one application to set aside a multiplicity of statutory demands; certainly not "quickly and in a way that will not impede resolution of an application for the winding up of a company in insolvency". 49 Furthermore, there is the jurisdictional matter that the affidavit must be a sufficient explanation of the grounds for concluding that there is a genuine dispute. An affidavit that is fundamentally insufficient cannot be supplemented at a later date, though supplementation to a lesser degree is otherwise possible; Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 21 ACSR 581 at 587-8 and Eaton Bay Pty Ltd v Bennett & Co (1997) 15 ACLC 1634 at 1638. Thus it must at least contain a statement of the material facts relied upon and if so drafted measure up as if a pleading; Graywinter Properties (supra). The Plaintiff states baldly, ignoring the effect of the certificates, that it has received no evidence of the cost of the work done and materials provided. It thus (it says) has no basis on which to assess the value of that work. Accordingly, "the Defendant cannot establish any entitlement to payment or the existence of any debt due from the Plaintiff"; see para 9 of the affidavit of 22 December 1999 of Mr Bonser. That falls short of a sufficient particularisation of the basis of the application to set aside. 50 Para 10 refers to damage to the roof. But there is no indication of whether the claimed deficiency in "aspects of the building work carried out" applies to the building work the subject of the relevant certificates. 51 Thus, if it were necessary for me to decide, I would conclude that the affidavit of 22 December 1999 fails sufficiently to disclose grounds for concluding that there is a genuine dispute. It certainly does not adequately disclose the additional ground apparently relied upon, namely non-compliance with the Home Building Act 1989 (NSW). Merely to annex the copy of an agreement under which the building work was carried out, as Mr Bonser does as para 3 of his affidavit of 22 December 1999, is not to provide something analogous to at least a pleading. 52 I do not need to consider further the question of the affidavit's conformity with s459G of the Corporations Law and in particular whether it has been properly sworn. It suffices to say that the affidavit fails, since the application on which it depends does not satisfy the requirements of s459G of the Corporations Law.

Last Modified: 09/26/2000 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.

CITATION : Calquid P/L v A & D R Illes P/L [2000] NSWSC 558 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 5211/99 HEARING DATE(S) : 27/03/00 JUDGMENT DATE : 22 June 2000

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