In the matter of Kisimul Holdings Pty Ltd - Kisimul Holdings Pty Ltd v Clear Position Pty Ltd - [2014] NSWSC 338 - NSWSC 2013 case summary

Supreme Court of NSW|2013-03-13|Before: Stevenson J

ers (Plaintiff) Era Legal (Defendant)

Introduction 1There are two proceedings before me. In the first proceedings, the plaintiff, Kisimul Holdings Pty Ltd, seeks to set aside statutory demands served on it by the defendant, Clear Position Pty Ltd, dated 11 September 2013 for $58,579.87 ("the First Demand"). In the second proceedings, Kisimul seeks to set aside a statutory demand dated 2 October 2013 for $36,300 ("the Second Demand").

Preliminary matter - the form of the Originating Process in the second proceedings 2The Originating Process filed on 29 October 2013 in respect of the Second Demand seeks an order under s 459H of the Corporations Act 2001 (Cth) ("the Act") that the statutory demand dated "11 September 2013" be set aside. It also seeks, in the alternative, an order under s 459H(4) of the Act varying the amount claimed and a declaration that the demand, so varied, have effect from 2 October 2013. 11 September 2012 is the date of the First Demand. The 29 October 2013 Originating Process is intended to be directed to the Second Demand, which is dated 2 October 2013. 3Mr Dawson, who appeared with Mr Corbett for Clear Position, submitted that this was a "fatal flaw" in the second proceedings and that the result was that "there is no valid application within the terms of s 459G" in respect of the Second Demand. 4I do not accept that submission. 5An application under s 459G of the Act to set aside a statutory demand is a "composite of a claim for relief and supporting affidavit" (Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 per Sundberg J at 455). 6I am therefore entitled to have regard to both the 29 October 2013 Originating Process and the supporting affidavit of Mr Adam McNeill, a director of Kisimul, affirmed 29 October 2013, filed in the second proceedings to ascertain to what the proceedings are directed. 7Perusal of Mr McNeill's affidavit of 29 October 2013 makes clear that, in the second proceedings, Kisimul seeks to set aside the Second Demand, and that the reference in the Originating Process to a statutory demand of 11 September 2013 is an error. The fact that the Originating Process seeks a variation to have effect on 2 October 2013 (the date of the Second Demand) confirms that conclusion. 8Accordingly, I am satisfied that the second proceedings comprise a valid application to set aside the Second Demand. 9During the hearing on 13 March 2014, I granted Kisimul leave to amend the Originating Process in the second proceedings to correct the erroneous reference to "11 September 2013" (albeit to date only from 13 March 2014). On reflection, I do not consider this took the matter any further.

The relationship between the demands and invoices sent from Clear Position to Kisimul 10The First Demand relates to the amounts said to be due in respect of tax invoices sent by Clear Position to Kisimul dated 30 June 2013 and 31 July 2013. 11The Second Demand relates to a further tax invoice sent by Clear Position to Kisimul dated 29 August 2013. 12Each of the invoices is expressed to be in respect of work provided for the plaintiff by Mr Tom Simms for, amongst other things, the "management" of "IT Infrastructure". 13Kisimul had earlier, and without question, paid similar invoices from Clear Position dated 31 January 2013 ($6600), 28 February 2013 ($14,300), 31 March 2013 ($14,300), 30 April 2013 ($14,300), and 31 May 2013 ($27,500) (a total of $77, 000). 14Kisimul made partial payment of Clear Position's 30 June 2013 invoice ($29,700). An amount of $19,175.67 is owing in respect of that invoice. 15Kisimul has failed to pay anything in respect of Clear Position's invoice of 31 July 2013 ($37,950) and 29 August 2013 ($36,300)

The bases available to set aside a statutory demand 16The Act provides two bases on which statutory demands may be set aside. 17First, a company served with a statutory demand can apply under s 459G of the Act to set aside the demand on the basis that, for the purposes of s 459H, there is either a "genuine dispute" or an "offsetting claim" in respect of the debt to which the demand relates. 18Alternatively the recipient of the demand can apply under s 459J of the Act to set aside the demand on the basis that there is a "defect" in the demand which will cause "substantial injustice" if the demand is not set aside (see 459J(1)(a)) or because there is "some other reason" why the demand should be set aside (see 459J(1)(b)). 19Section 459H(6) provides that s 459H "has effect subject to section 459J". 20In my opinion s 459H(6) does no more than make clear the legislative intention that s 459G and s 459H on the one hand, and s 459J on the other provide separate bases on which the court can set aside a statutory demand (Carwyn Constructions Pty Ltd v J&WL Consulting Services [2009] QCA 225; 73 ACSR 421 at [8] per Keane JA, with whom Holmes JA and Philippides J agreed). 21I see nothing in the Act to suggest the legislature intended that primacy be given to either basis. 22Further, in my opinion, the discretion to set aside a demand under s 459J may be informed by the strength, or otherwise, of the case made out under s 459G and s 459H.

Deficiency and defect 23Mr Wood, who appeared for Kisimul, drew attention to a deficiency in the affidavit accompanying each of the First Demand and Second Demand and what he submitted to be a defect in each of the demands themselves. Mr Wood submitted that this deficiency and these alleged defects provided a basis on which to set aside each demand under s 459J of the Act, independently of any "genuine dispute" or "offsetting claim" Kisimul was able to establish for the purposes of s 459H. 24I will deal with those submissions in due course. 25First I will deal with Kisimul's contention that there exists a "genuine dispute" about the debts claimed in the First and Second Demands and its (now abandoned) contention of an "offsetting claim".

Genuine dispute - principles 26In order to establish that there is a "genuine dispute" for the purposes of s 459G of the Act there must be evidence to satisfy the court that there is a "serious question to be tried" or "an issue deserving of an hearing" or a "plausible contention requiring investigation" (Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd [2013] NSWCA 344 at [30] at [70]). 27As Barrett J (as his Honour then was) has observed, the task of establishing a genuine dispute is not difficult or demanding. Thus his Honour observed in Roadships Logistics Ltd v Tree [2007] NSWSC 1084; 64 ACSR 671 at [24]: "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 contentions. If it sees any factor on rational grounds that indicates an arguable case on the part of the company it must find that a genuine dispute exists even where any case, even apparently available to be advanced against the company seems stronger." 28In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; 66 ACSR 67 at [71], Dodds-Streeton JA (with whom Neave and Kellam JJA agreed) said that a company seeking to establish a genuine dispute: " ... is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile... [I]t is not necessary for the company to advance, at this stage, a fully evidenced claim. Something 'between mere assertion and the proof that would be necessary in a court of law' may suffice." 29In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; 76 FCR 452 at 464; 24 ACSR 353 the Full Court of the Federal Court held that a "genuine dispute" must be "bona fide and truly exist in fact", and that the grounds for that dispute must be "real and not spurious, hypothetical, elusory or misconceived".

Genuine dispute - the facts 30In my opinion, for the reasons that follow and notwithstanding the undemanding nature of the task, Kisimul has failed to establish the existence of a genuine dispute. The matters advanced on behalf of Kisimul are no more than mere assertion or "bluster". My opinion is that Kisimul has failed to establish that there is a "serious question to be tried or "an issue deserving of a hearing". 31To understand why that is so, it is necessary to have regard, in some detail, to the facts leading up to the service of the First and Second Demands. 32Kisimul conducts business as a market research call centre. It purchased that business from the liquidators of the Kaliber Group in December 2012. 33Kisimul is controlled by interests associated with Mr McNeill with Ms Sonia Simms (the wife of Mr Simms). Mr McNeill and Ms Simms are the current directors of Kisimul. There are two issued shares in Kisimul; one owned by Mr McNeill and the other by Sonia Simms Pty Ltd, a company controlled by Ms Simms. 34In February 2013, Mr Simms was a bankrupt. He was discharged from bankruptcy on 26 March 2013. 35Mr Simms is currently the sole shareholder of Clear Position. Ms Simms is the sole director of Clear Position, having held that position since 18 May 2005. Mr Simms was also a director of Clear Position until 4 February 2010. I infer he ceased to be a director because of his bankruptcy. 36In February 2013 Mr McNeill and Mr Simms had this conversation: Mr McNeill: "Let's draw a line in the sand where I look after the sales and marketing team [at Kisimul] and Tom you look after security and maintenance of the database [of Kisimul] Mr Simms: That's a piece of cake. But I don't know what to call myself. Director of what? I'll come up with something." 37Mr McNeill said that: "[Kisimul] started operating in the last week of January 2013 with Mr Simms taking the title of Director of Technology Strategy. I took on the responsibility for marketing and sales". 38There is no evidence of any discussion between Mr McNeill and Mr Simms as to how their services would be delivered to Kisimul. 39However, at around that time, a company associated with Mr McNeill, Golden Archers Pty Ltd, commenced to send monthly invoices to Kisimul for "General Management Services". At the same time, Clear Position commenced to send monthly invoices to Kisimul for "Management of IT Infrastructure" (described as being "Services Provided by Tom Simms"). 40There is a striking similarity in the amounts charged to Kisimul by these companies, as revealed in the following table: Golden Archers (inclusive of GST) Clear Position (inclusive of GST) 26 February 2013 (for January) $6600 31 January 2013 $6600 26 February 2013 $14,300 28 February 2013 $14,300 28 March 2013 $14,300 31 March 2013 $14,300 28 April 2013 $14,300 30 April 2013 $14,300 14 May 2013 $27,500 31 May 2013 $27,500 3 July 2013 $27,500 30 June $29,700 6 August 2013 $36,300 31 July 2013 $37,950 15 September $19,800 29 August 2013 $36,300

41The close correlation between the amounts invoiced to Kisimul by Golden Archers for Mr McNeill's services and Close Position for Mr Simms's services suggests that Mr McNeill and Mr Simms were aware of the amounts being invoiced for the services provided by the other. 42Ms Simms deposed: "...no formal agreement existed between Mr McNeill, [Kisimul], and Mr Simms regarding invoicing of services performed by Mr Simms to [Kisimul]. Both Mr Simms and Mr McNeill would invoice [Kisimul] independently for the services they rendered to [Kisimul] through [Clear Position] and Golden Arches [sic] Pty Limited respectively". 43I read Ms Simms's reference to there being "no formal agreement" between Mr McNeill, Mr Simms and Kisimul to convey no more than that both Mr McNeill and Mr Simms chose the vehicle through which they would make their services available to Kisimul without the need for any agreement between them as to how this would be done. 44Ms Simms deposed that the work performed by Mr Simms included recommending contractors for Kisimul's call centre, relocating its computer systems containing a data base to a secure facility and commissioning a new operating system for use by Kisimul's staff. 45Clear Position's invoices to Kisimul specified how many days in each month Mr Simms's services had been provided and the daily rate charged for those services. 46As I have said, Kisimul paid Clear Position's January, February, March, April, May, and part of its June 2013 invoices without question. Kismul has not paid Clear Positions July and August 2013 invoices. 47Kisimul paid those invoices by instalments, making partial payments on an approximately weekly basis, as set out in the schedule that follows: Date Amount (inclusive of GST) Date Paid January 2013 $6,600 Partial payments: $2,500 21 February 2013 $2,500 28 February 2013 $2,000 1 March 2013 ($400 carried forward) February 2013 $14,300 Partial payments: $2,500 6 March 2013 $2,500 21March 2013 $2,000 5 April 2013 $5,000 10 April 2013 $1,400 12 April 2013 $2,000 16 April 2013 ($1,500 carried forward) March 2013 $14,300 Partial payments: $1,500 19 April 2013 $2,000 30 April 2013 $1,500 1 May 2013 $5,800 9 May 2013 $1,500 13 May 2013 $600 16 May 2013 ($100 carried forward) April 2013 $14,300 Partial payments: $2,000 30 May 2013 $4,000 28 June 2013 $2,000 1 July 2013 $7,000 9 July 2013 ($800 carried forward) May 2013 $27,500 Partial payments: $1,400 12 July 2013 $10,000 1 August 2013 $11,400 2 August 2013 $1,400 8 August 2013 $5,000 12 August 2013 ($2,500 carried forward) June 2013 $29,700 Partial payments: $529.00 16 August 2013 $239.90 28 August 2013 $8.95 29 August 2013 $5,000 3 September 2013 $1,917.40 4 September 2013 $329.08 11 September 2013 *Unpaid as to $19,175.67 July 2013 $37,950 Unpaid August 2013 $36,300 Unpaid

48As can be seen from this schedule, although Kisimul has not paid Clear Position's July and August 2013 invoices, it made regular payments, throughout July, August and September 2013 in respect of earlier invoices (and some in respect of the June invoice). 49Quite apart from the inference to be drawn from the close correlation between the invoices rendered to Kisimul by Golden Archers and Clear Position (see [40] and [41] above), there is direct evidence that Mr McNeill was aware that Clear Position was submitting invoices to Kisimul for work done by Mr Simms. 50Thus, on 2 July 2013 Kisimul's accountant, Mr Hamed Dian sent an email to each of Mr Simms and Mr McNeill enquiring "I haven't received any invoice from you for [Clear Position] and Golden Archers for June. Are you going to send any?" 51Three days later, on 5 July 2013 Mr McNeill emailed Mr Simms "Did u [sic] put your invoice in - need to"; Mr Simms replied "Not yet but I will $25k plus GST" (the amount of Clear Position's 30 June 2013 invoice subject to a $2000 "adjustment"). 52On 13 August 2013 Mr Simms sent Mr Dian Clear Position's 31 July 2013 invoice (for $37,950 including GST for work done in July 2013) and said: "Please see attached invoice it is slightly different in the monthly amount to line up with [the invoice to be submitted by Mr McNeill] and I have adjusted the interest to reflect payment at the end of the month. I updated MYOB on Friday to reflect this can you check I got it right please". 53Mr Simms was referring to Golden Archer's invoice of 6 August 2013 for $33,000 ($36,300 with GST). 54Mr Dian replied on the same day: "I have noticed the changes yesterday afternoon, and I was wondering if I have made a mistake by typing the numbers in error. If the daily rate of $1650 is GST exclusive, then Yes, the total amount of $39,404.20 is correct". 55Mr Simms replied: "I had too so I checked my invoice and [Mr McNeill's] he went for the slightly higher number". 56These communications make clear that Mr Simms and Mr McNeill were cooperating closely to ensure that the invoices sent by Clear Position and Golden Archers to Kisimul were for corresponding amounts. 57On 3 September 2013 Mr Dian sent an email to Mr McNeill as follows: "Below is the payment list as you requested: RW: $5000.00 Liz: $3000 NCC: $5,000 Rent: $3850 Adam: $5,000 Tom: $5,000 Julia: $585 TS Travel Reimbursement: $513.00 RW Travel Reimbursement: $1,64.03 Total: $29597.03". 58The references to "Adam" and "Tom" are to Mr McNeill and Mr Simms. 59Mr McNeill responded by asking for details of "receipts due in next Friday" to which Mr Dian responded by saying that he expected that $73,257.50 would be received by Kisimul from various sources "next Friday". 60Mr McNeill responded: "Please pay Adam [that is Mr McNeill himself] and Tom [Simms] today with the balance on Friday". 61As emerges from the schedule at [47] above, an amount of $5000 claimed by "Tom" was paid to Clear Position on the same day, 3 September 2013. 62Thus Mr McNeill was well aware, up to early September 2013, that Kisimul was making payments to Clear Position in relation to the work done by Mr Simms. 63Clear Position ceased providing Mr Simms's services to Kisimul on 13 September 2013. 64The only evidence about that circumstance is the statement made by Mr McNeill in his second affidavit: "The arrangement for [Clear Position], through Mr Simms, to provide services to [Kisimul] was brought to an end on 13 September 2013." 65On 25 September 2013, Kisimul's solicitor wrote to Mr Simms making the following serious allegations: "1. You were a director of the Company until your resignation on 11 September 2013: 1.1. Notwithstanding your promises to our client not to do so, you performed acts and did things constituting directorship. A clearer case of a disqualified person pretending not be a director but being one hardly comes to mind. We refer to, in particular, but without limitation, the series of electronic letters and your activity at meetings in this regard. 2. At all material times until 16/3/2013 you were an un-discharged bankrupt. 3. You held yourself out for financial gain to third parties as a director of the Company until your resignation on 11 September 2013; 4. You have been rewarded by the Company for work done for the Company; 5. You have purported to disguise your directorship by alleging that the work which has been done by you for the Company has been done by one Clear Position Pty Ltd, videlicet [sic], inter alia, by creating a series of sham instruments; 6. You have obtained during your tenure with the Company its confidential information: 6.1. confidential information here includes without means any information which is: (a) marked as confidential, (b) is by its nature confidential; or (c) you knew or ought to have known is confidential, (d) information acquired by you touching upon the industry of KG2 during your tenure which was not in the public domain, (e) information or documents regarding KG2's business affairs generally or specifically; (f) the affairs of its customers and others with whom it deals, and (g) the affairs of its employees or agents. 7. You have sought to and have used that confidential information for your own financial purposes and gain to the detriment of the Company; 8. You continue to so use that confidential information; 9. You have, in order to so use that confidential information, uttered injurious falsehoods regarding the Company; 10. You sought prior to your discharge from bankruptcy to have a shareholding in the company issues to another by way of a sham to avoid the exigencies of your legal impediment; 9.1 you sought to cause on Sonia Simms Pty Ltd to hold shares in the Company for you. Again, a clearer case of 'warehousing' of assets to hide them from the Trustee in Bankruptcy hardly comes to mind." 66Conspicuously absent from the solicitor's letter is any dispute in relation to the invoices sent by Clear Position to Kisimul between January and August 2013 or any allegation that Mr Simms had not carefully and diligently performed the work the subject of those invoices. 67At no time prior to service of Mr McNeill's affidavit of 3 October 2013 in support of the Originating Process in the First Proceedings, did Kisimul dispute that it had an agreement with Clear Position pursuant to which Clear Position would make available Mr Simms's services. Indeed, the passage from Mr McNeill's affidavit set out at [64] above shows that, at the date he swore that affidavit (29 October 2013) he did not dispute such an agreement; indeed he asserted its existence. 68Nor, prior to service of Mr McNeill's 3 October 2013 affidavit, did Kisimul or Mr McNeill make any suggestion that Mr Simms had not done the work for which Clear Position submitted its various invoices or that there was any shortcoming in relation to the work done. 69The first such suggestion was made in the following paragraphs from Mr McNeill's affidavit of 3 October 2013: "The reason why [Kisimul] has not paid any further amounts to Clear Position is that I had been concerned for some time that Mr Simms has not performed part of his role in managing and maintaining the IT infrastructure of [Kisimul]. That part of his role should have occupied approximately 50% of his time and should have included the following responsibilities: (a) Database maintenance and management; (b) Database security; (c) Managing third party IT providers namely [and two providers were named]. My concerns that Mr Simms was not performing the role of managing and maintaining [Kisimul's] IT infrastructure first arose in March 2013. I became concerned at that time because in March 2013 Mr Simms had sent out incorrect data records to Rural Bank Customers that were clearly marked as deletions in [Kisimul's] system. Those records should have been removed from the system so that they were not at risk of being passed on to customers." (emphasis added) 70I admitted this material only as evidence of Mr McNeill's state of mind and his contentions, and not as evidence of the facts asserted. 71Otherwise, Mr McNeill's affidavit of 3 October 2013 went no further than to assert the existence of some "deleted records", "lost data" and "issues with maintaining data" and to assert that "none of those problems and issues have been improved or resolved in the time that Mr Simms was in the role of Director of Technology Strategy" 72Mr McNeill's 3 October 2013 affidavit was sworn shortly after service of the First Notice and within the 21 day period during which Kisimul was obliged to respond to that notice. However, despite swearing later affidavits, Mr McNeill adduced no further admissible evidence relating to his "concerns" about Mr Simms or the basis for them. 73Mr McNeill asserted in this material that he had held these concerns he described "for some time" and that, indeed, they arose as early as March 2013. 74I find Mr McNeill's assertions impossible to reconcile with Kisimul's conduct in paying, without question, the amounts I have set out in relation to Clear Position's invoices, especially in circumstances where, as the evidence makes clear, Mr McNeill was well aware of the nature and extent of those payments. 75Mr McNeill allegedly had "concerns" as to the work Mr Simms was doing "for some time", and indeed as far back as March 2013. Yet Mr McNeill cooperated closely with the payment, without complaint, by Kisimul to Clear Position of amounts on account of its invoices over the period detailed in the schedule set out above. 76In relation to the Second Demand, which was for the amount unpaid in respect of Clear Position's August 2013 invoice (for work done by Mr Simms in that month), Mr McNeill said in his affidavit of 29 October 2013: "[Clear Position] did not perform any services, through Mr Tom Simms or otherwise for [Kisimul] in the period 1 August 2013 to 31 August 2013 in accordance with Mr Simms' role and responsibilities as outlined in [particular paragraphs in Mr McNeill's 3 October 2013 affidavit which, to the extent they were admissible, went no further than I have outlined above]". 77In my opinion, this assertion, qualified as it was by reference to Mr Simms's "roles and responsibilities as outlined" in Mr McNeill's earlier affidavit, took the matter no further. 78There is a further aspect of Mr McNeill's evidence that causes me concern. 79According to its Originating Process in both proceedings, Kisimul alleged that not only was there a "genuine dispute" for the purposes of s 459H of the Act in relation to the claims made in the First Demand and the Second Demand, but that there was also an "offsetting claim" for the purposes of s 459H arising from the submission to Kisimul of an invoice by a company known as Data into Profit Pty Ltd for $10,670. 80In relation to that invoice, Mr McNeill gave this evidence: "On about 21 June 2013, [Kisimul] received a tax invoice dated 21 June 2013 from Data into Profit for an amount of $10,670 (inclusive of GST)... The engagement of Data into Profit by Mr Simms was not authorised by [Kisimul] and I was unaware that Data into Profit had been engaged to perform work for [Kisimul] until the tax invoice was sent to me internally to authorise the payment. [Kisimul] has not paid the tax invoice but Data into Profit is maintaining that [Kisimul] is required to pay the tax invoice. In the event that [Kisimul] pays the invoices, [Kisimul] will make a claim against Clear Position for recovery of the amount of the tax invoice." 81However, on 16 April 2013, Mr Simms forwarded to Mr McNeill copies of emails between Mr Simms and a representative of Data into Profit, Mr Richard Riddle. In one of those emails Mr Riddle said: "I would like to get cracking on this as soon as possible". 82Further, on 31 May 2013 Kisimul entered into a "Confidentiality Agreement" with Data into Profit which recited that Kisimul and Data into Profit wished to have "discussions in relation to development of intellectual property and information technology" and that in the course of their discussions there would be disclosure of confidential information. 83Mr McNeill executed the Confidentiality Agreement on behalf of Kisimul. It is obvious from this fact alone that his evidence set out at [80] cannot be right. He well knew of the engagement of Data into Profit by Kisimul. 84Kisimul received Data into Profit's invoice some three weeks after the date of that agreement. 85At best Mr McNeill's evidence concerning Data into Profit was incomplete to the point of being misleading. At worst it was knowingly false. 86Unsurprisingly, in the course of final submissions, Mr Wood abandoned Kisimul's assertion of an "offsetting claim". 87I am not satisfied there is any "genuine dispute" about the claims made by Clear Position in the First and Second Demand. No dispute was raised about that claim prior to service of the First Demand. Invoices for work of the same kind now said to be the subject of Mr McNeill's long held "concerns" were paid without question and with Mr McNeill's knowledge and authority over a period of eight months. The "evidence" given to support the claim of a "genuine dispute" was unsatisfactory in form and unpersuasive in substance. The assertion of an "offsetting claim" was groundless. 88I find that the claim made by Kisimul of a "genuine dispute" to be a "merely spurious claim, bluster or assertion". 89I reject it.

The defect in the affidavits accompanying the demands 90Each of the First Demand and Second Demand was accompanied by an affidavit sworn by Ms Simms, as director of Clear Position. 91Section 459E(3) of the Act states that, with an irrelevant exception, a statutory demand: "...must be accompanied by an affidavit that: (a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (b) complies with the rules." 92Rule 5.2 of the Supreme Court (Corporations) Rules 1999 provides that, for the purpose of s 459E(3) of the Act, the affidavit accompanying a statutory demand must: "...be in accordance with Form 7 and state the matters mentioned in that Form...". 93Form 7 includes a requirement that the affidavit contain a statement: "I believe that there is no genuine dispute about the existence or amount of the debt". 94There was no such statement in Ms Simms's affidavits accompanying the First Demand and Second Demand. 95Section 459J of the Act is in the following terms: "(1) On an application under section 459G [to set aside a statutory demand], 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. (2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect." 96The failure of Clear Position to comply with the rules concerning Ms Simms's affidavits is not a "defect" in the demand for the purposes of s 459J(1)(a): B & M Quality Constructions Pty Ltd v Buyrite Steel Supples Pty Ltd (1994) 15 ACSR 433 at 436 per McLelland CJ in Eq. 97However, the absence of a "no genuine dispute" clause in Ms Simms's affidavits is capable of providing a basis to conclude that there is "some other reason" why the demands should be set aside under s 459(1)(b). 98The reference in s 459J(1)(b) to "some other reason" to set aside a demand is a reference to a reason not otherwise indicated by the Act (for example in s459H) as a ground to set aside a demand: for example Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143; 25 ACLC 1392 at [27] per Barrett J. 99There will be "some other reason" to set aside a demand "whenever there is a need to counter some attempted subversion of the statutory scheme": per Barrett J in Saferack at [33]. 100The failure to include a "no genuine dispute" statement in a demand has been described as a "material failure of significance" and not a "mere defect" within the meaning of s 459J(2): per Tamberlin J in IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd [2003] FCA 533 at [22] and [24]. 101In B & M Quality Constructions Pty Ltd the affidavit accompanying the demand did contain a "no genuine dispute" clause but in an affidavit sworn by a mercantile agent with no personal knowledge of the facts. McLelland CJ in Eq set aside the notice on that basis but also said: "The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources." (at 435-436) 102McLelland CJ in Eq's observations have been cited with approval of numerous occasions: see Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39; 190 FLR 466; Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11; Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746; Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 493; 54 ACSR 489; Ambassador at Redcliffe Pty Ltd v Emerald Constructions Australia Pty Ltd; sub nom Ambassador at Redcliffe Pty Ltd v Barreau Peninsula Property Pty Ltd [2006] QSC 247; [2007] 2 QD R 199; Rapcivic Contractors Pty Ltd v Mapol Nominees Pty Ltd t/as Amalgamated Painting Services [2008] QSC 310; [2009] 1 Qd R 21; Ri-Co Holdings (Australia) Pty Ltd v Allied Sandblasters Pty Ltd (2009) 72 ACSR 103. 103There are other cases where the absence of a "no genuine dispute" clause has been one of the bases upon which statutory demands have been set aside: for example Technitrade Pty Ltd v Compucon Computers (SA) Pty Ltd [2002] SASC 309 per Burley M at [14]; Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2001] WASCA 299; (2002) 20 ACLC 352 per Miller J at [32]; Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196 per Templeman J (Miller and Steytler JJ agreeing) at [70] - [72]. 104However, in the particular circumstances of this case, I do not consider that the failure by Ms Simms to include a "no genuine dispute" clause in her affidavits provides "some other reason" to set aside either of the First or Second Demands. 105This for two reasons. 106The first is the unsatisfactory and unpersuasive manner in which Kisimul sought to propound the existence of a "genuine dispute" and "offsetting claim". 107I have found that there was no basis upon which Kisimul could properly assert that there was a "genuine dispute" about the amounts claimed in the First and Second Demands. The claim to an "off-setting claim" was abandoned in the circumstances to which I referred. 108The second is that, in my opinion, the absence of a "no genuine dispute" assertion in Mr Simms's affidavits could not possibly have made any difference to Mr McNeill's, and thus Kisimul's, response to the First and Second Demands. The deficiency is the affidavits has not caused any confusion, let alone injustice to Kisimul. 109In the particular circumstances of this case, I do not consider that the deficiency in Mr Simms's affidavits has caused any "subversion" of the statutory system, or provides any "other reason" why the demands should be set aside.

The alleged defect in the demands 110Mr Wood also identified what he submitted to be a number of "defects" in the First and Second Demands. A "defect" in a statutory demand enlivens the Court's jurisdiction to set side the demand under s 459J(1)(a) of the Act if (but I would add, only if) "substantial injustice" would otherwise be caused to the debtor. 111Section 459E(2) deals with the requirements of the demand and provides: "The demand: (a) if it relates to a single debt-must specify the debt and its amount; and (b) if it relates to 2 or more debts-must specify the total of the amounts of the debts...". 112In Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226; 12 ACSR 381, Lockhart J said (at 396): "It is not asking too much that creditors who issues statutory demands under the Corporations Law should ensure that the demands are expressed in clear, correct and unambiguous terms. If the creditors wish to have the benefit of the presumption of insolvency, the least they can do is to tell the debtor companies in clear terms what amounts are due, whether they include interest or not, and, if so, the amount." 113It has been held that the description in the demand must be sufficiently clear and accurate 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 the amount of the debt or [any] offsetting claim" (LSI Australia v LSI Holdings; LSI Australia v LSI Consulting [2007] NSWSC 1406 per Austin J at [54]). 114The First Demand provided the following "Description of the debt": "Money Due and Payable by the company to the Creditor as at September 10th 2013 pursuant to service provided to the Company by the Creditor for the period January 15th 2013 August 31st 2013." 115In fact, as I have said at [10], the amount claimed in the First Demand ($58,579.87) represents the amount unpaid in respect of Clear Position's invoices of 30 June 2013 and 31 July 2013. 116The "Description of the debt" in the Second Demand was: "Money Due and Payable by the company to the Creditor as at October 2nd pursuant to service provided to the Company by the Creditor for the period August 1st 2013 August 31st 2013." 117The amount claimed in the Second Demand ($36,300) was the amount of Clear Position's invoice of 29 August 2013 (which was in respect of work done by Mr Simms in August 2013). 118Mr Wood submitted that the description of the debt in each demand was defective in that: (a)it did not identify the contract or arrangement pursuant to which the demand was made; (b)it referred to services provided "by the Creditor" and was thus misleading; and (c)should have specified, individually, the invoices pursuant to which the claim was made. 119As to (a), it is true that neither of the First Demand or the Second Demand identifies, in terms, the contract or arrangement pursuant to which debt is claimed. However, for the reasons that emerge from my discussion of "genuine dispute" above, no reasonable person in the shoes of a director of Kisimul could have had the slightest doubt as to the contract or arrangement pursuant to which the demands were being made. Indeed Mr McNeill's evidence shows that he was able to perform a calculation of the amounts unpaid in relation to Clear Position's invoices during the period January to August 2013. 120So far as (b) above is concerned, Mr Wood's submission was that whatever services were provided by Mr Simms were not provided by Clear Position because there was no evidence that Mr Simms was an employee of Clear Position or was otherwise authorised by Clear Position to provided services on its behalf. Although there is no evidence before me as to the arrangements between Clear Position and Mr Simms, it is clear from the course of dealings between the parties that whatever services Mr Simms provided to Kisimul were provided by Clear Position. The conduct of the parties, as I have outlined it above, from January to September 2013 makes quite clear that there was a contract between Kisimul and Clear Position for the provision by the latter to former of Mr Simm's services: for example see Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [25] per Heydon JA. 121As to (c), it is true that the First Demand claims an amount arising from a number of invoices, and those invoices were not separately identified. However, so far as the First Demand relates to two or more debts, s 459E(2)(b) of the Act requires no more than to "specify the total of the amounts of the debts". The First Demand satisfies that requirement. The Second Demand was in respect of only one invoice and thus under s 459E(2)(a) needed only to specify the amount claimed. It clearly does so. 122Mr Wood submitted there was a further "defect" in the First Demand, in that it refers to services provided between 15 January 2013 and 31 August 2013 whereas the invoices on which the demand is based relate only to June and July 2013. To that extent, the demand is not "correct" and is arguably ambiguous. However, in my opinion, no "substantial injustice" has thereby been caused to Kisimul. Indeed, in my opinion, no "injustice" at all, has been occasioned to Kisimul as, through Mr McNeill, Kisimul was well aware of the true position.

Conclusion 123Kisimul's applications to set aside the First and Second Demands fail. 124The Originating Process in each proceeding should be dismissed.

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: 26 March 2014

In the matter of Kisimul Holdings Pty Ltd - Kisimul Holdings Pty Ltd v Clear Position Pty Ltd

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (15 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (19)

Cited By (3)