In the matter of Pressure Pro Pty Ltd [2022] NSWSC 1635

Supreme Court of NSW|2022-11-09|Before: Black J

Solicitors: Mistry Fallahi Lawyers (Plaintiff) PCL Lawyers (Defendant) File Number(s): 2022/238885

Nature of the Application

By Amended Originating Process filed on 20 September 2022, the Plaintiff, Pressure Pro Pty Ltd ("PPPL") seeks declaratory relief in respect of a creditor's statutory demand dated 15 July 2022 ("Demand"), seeking to establish that the Demand was ineffective, or alternatively an order under s 459H or s 459J of the Corporations Act 2001 (Cth) ("Act") that the Demand be set aside.
The Demand was issued by Corroventa Avfuktning AB ("Corroventa"), a Swedish entity, in respect of the amount of EUR65,521.81. A schedule described the debt as the amount of EUR65,620.25 referrable to an invoice dated 3 December 2020 for goods provided to PPPL pursuant to a contract between PPPL and Corroventa dated 14 June 2018, less a part payment in the amount of EUR276.44, giving rise to the total amount claimed in the Demand.
The Demand was verified, or as PPPL contends, purportedly verified, by an affidavit dated 15 July 2022 of Mr Ekdahl, the chief executive officer of Corroventa, who referred to the debt claimed in the Demand and indicated that he believed there was no genuine dispute about its existence or amount. That affidavit was sworn by Mr Ekdahl in Sweden but witnessed by Mr Matters, who is an Australian legal practitioner, when he was in Melbourne, Victoria. The affidavit bore a note that: "This affidavit was electronically signed and sworn by the deponent by audio visual link in accordance with ss 25, 26 and 27(1A) of the Oaths and Affirmations Act 2018 (Victoria)".

Affidavit evidence

The parties relied on several affidavits in respect of the application. PPPL relied on two affidavits dated 12 August 2022 and 8 September 2022 of its director, Mr Warren. Mr Warren initially identified a genuine dispute as to the amount of the debt and an offsetting claim, although those matters were not pursued in submissions, and the genuine dispute which was put was directed to a different question, namely a suggested non-compliance with an arbitration provision to which I will return below. Mr Warren identifies a point taken in respect of "all formal defects in the [D]emand and supporting affidavit," and refers to two payments made by PPPL on 18 June 2021 and 19 January 2022, and claims that the balance outstanding as from 19 January 2022 was EUR56,397.76, not the sum of EUR65,352.81 specified in the Demand.
However, the Amended Originating Process did not seek to vary the amount claimed to reflect that claim, and PPPL also did not submit that the Demand should be varied to reflect that amount. The amount which Mr Warren concedes as owing is not sought to be proved by evidence, and does not reconcile with the amount that he said was originally owing, or to the amounts of the payments which he says were made in that respect. Mr Warren also refers to an offsetting claim, but no submission in respect of an offsetting claim was put. He takes a point as to jurisdiction, by reference to an arbitration provision, and I will refer to the submissions put in respect of that provision below. By his second affidavit dated 8 September 2022, Mr Warren indicates that the debt under the invoice "is disputed", in evidence limited, by consent of the parties, to evidence of his belief, and refers to the arbitration provision to which I will refer below.
Corroventa in turn leads evidence to seek to establish the debt claimed in the Demand and to address to address any criticism in respect of the quality of the goods it supplied, which may have supported an offsetting claim, although neither a variation in the amount of the Demand nor an offsetting claim were pressed, as I noted above. By his affidavit dated 15 September 2022, Mr Malmstrom addresses aspects of the functionality of products supplied by Corroventa, and no criticism of those matters was pressed in submissions by PPPL. By an affidavit dated 15 September 2022, Mr Larsson addresses invoices issued by Corroventa and Corroventa's records of payment, in order to support the amount claimed in the Demand. By his affidavit dated 15 September 2022, Mr Ekdahl in turn refers to the supply of products by Corroventa to PPPL, a matter which was again not ultimately relied on by PPPL in its application to set aside the Demand. A bundle of documents was tendered in respect of the application to set aside the Demand, but ultimately little reference was made to them, because, as I will note below, the position taken by PPPL was limited to an attack on the manner in which the affidavit verifying the Demand was sworn and the existence of the arbitration provision.

PPPL's first submission

The matters in issue are therefore in somewhat narrow scope, although the submissions which have been put by Mr Chan, who appeared for PPPL, have a degree of complexity about them. Mr Chan identifies two issues which arise for determination, although additional matters arose in respect of those issues in the course of submissions. It was not necessary to hear from Mr Fernandes, who appears for Corroventa, in respect of these issues.
The first issue raised by Mr Chan is whether the Demand was properly supported by an affidavit as required by s 459E(3) of the Act, and PPPL contends that it was not, because the affidavit that purportedly supported the Demand was not an "affidavit" for the purposes of that section. That proposition is in turn relied upon for the declaration which is sought, or to set aside the Demand for some other reason under s 459J of the Act. Mr Chan analysed this first question on the basis that it was determined, or at least informed, by the statutory construction of s 21 of the OAA, which I address below.
Section 459E(3) of the Act relevantly provides that, unless a debt is a judgment debt, a creditor's statutory demand must be accompanied by an affidavit that verifies the debt, or the total of the amount of the debt, is due and payable by the company and complies with the rules. The question of what would constitute an affidavit for the purposes of that section was addressed by Barrett J in Fastlink Calling Pty Ltd v Macquarie Telecom Pty Ltd [2008] NSWSC 299 ("Fastlink"), where his Honour referred to the definition of "affidavit" in s 9 of the Act as including an affirmation. His Honour noted that the Act otherwise provided no guidance as to the meaning of the term "affidavit", but referred to the definition of the term "affidavit" in s 27(b) of the Acts Interpretation Act 1901 (Cth), as it stood at 1 November 2000, as applied by s 5C of the Act. His Honour also referred to the application of s 79 of the Judiciary Act 1903 (Cth), which relevantly apply the laws of each state, including the laws relating to procedure, evidence, and the competency of witnesses, in proceedings in courts exercising federal jurisdiction in a State. His Honour there noted that the question whether the document in issue in that case was, for relevant purposes, an "affidavit", was to be determined according to the law of New South Wales, and also there referred to the Oaths Act 1900 (NSW) and to the definition and to the description of "affidavit" in Bacon's Abridgement (Matthew Bacon, A New Abridgment of the Law (London, 1832)). I will not repeat his Honour's further analysis of the historical use of that term, commencing at paragraph 16 of his judgment. He there dealt with the question whether the deficiencies in which the relevant document was attested had the consequence that it was not an affidavit for the purposes of s 459E of the Act.
The decision in Fastlink was subsequently considered by the Court of Appeal in Bobolas v Waverley Council (2016) 92 NSWLR 406; [2016] NSWCA 139, to which Counsel did not refer, which again referred to the observations in Bacon's Abridgement as to the character of an affidavit. That decision is consistent with the approach adopted in Fastlink, which Mr Chan invoked in support of PPPL's case.
Mr Chan contends that the affidavit in support of the Demand is not an "affidavit" for the purposes of s 459E of the Act, because the manner in which the affidavit was sworn did not comply with s 21 of the OAA. That submission turns on the proposition that s 21 of the OAA does not permit an Australian legal practitioner to witness an affidavit which is sworn outside Australia, or possibly outside Victoria. However, before turning to that proposition, I should note two preliminary difficulties with the manner in which Mr Chan characterises the issue. The first, which emerged in the course of submissions, is that s 186 of the Evidence Act 1995 (Cth) provides that affidavits for use in an Australian Court (other than a Court of a territory) in proceedings involving the exercise of federal jurisdiction may be sworn before, relevantly, an Australian lawyer, without the issue of any commission for taking affidavits. The term "Australian lawyer" is defined in the Evidence Act 1995 (Cth) as, relevantly, a person who is admitted to the legal profession by a Supreme Court of a State under a law of a State specified in regulations. There is no suggestion that Mr Matters was not such a person and, on the face of it, that section authorised the relevant affidavit to be sworn before him for the use of proceedings in this Court, which it is a common ground involved on exercise of federal jurisdiction. The Evidence Act 1995 (NSW) in turn recognises the operation of that section, by a note which draws attention to it, in respect of Court proceedings involving the exercise of federal jurisdiction in the state. On the face of it, it seems to me that it is not to the point to suggest that Mr Matters was not able to witness the affidavit under the OAA, where he was authorised to do so under s 186 of the Evidence Act 1995 (Cth), as recognised by the note in the Evidence Act 1995 (NSW). I will return below to a further submission made by Mr Chan as to the manner in which the affidavit was attested by audio visual means.
The second difficulty with Mr Chan's focus on the OAA is that, as is common ground, s 79 of the Judiciary Act applies in these proceedings, and, on the face of it, applies the law of New South Wales to this Court, in exercising federal jurisdiction in this State. The question whether a Melbourne solicitor can witness an affidavit, to be relied on in respect of a creditor's statutory demand that is in issue in proceedings in this Court, was considered by Barrett AJA in Shaolin Temple Foundation (Australia) Ltd [2016] NSWSC 1232, to which I drew the parties' attention, by reference to the provisions of the Oaths Act 1900 (NSW). His Honour there observed that the range of persons before whom an affidavit can be taken is expanded, by s 27 of the Oaths Act 1900 (NSW), to allow an Australian legal practitioner to take and receive such an affidavit, subject to exceptions which were not there, and are not here, relevant. Mr Chan submits that I should depart from his Honour's reasoning, by treating the limited scope of s 26 of the Oaths Act 1900 (NSW) as excluding s 27 of that Act. I see no reason to depart from the reasoning of Barrett J in that respect. In those circumstances, it is also not to the point that the OAA would not authorise Mr Matters to witness the affidavit, if that were the case, where he would be entitled to do so by reference to s 27 of the Oaths Act 1900 (NSW), and that section applies to an affidavit relied on in proceedings in this Court. I will return below to a further point taken by Mr Chan in respect of the witnessing of that affidavit by audio visual means.
In any event, I do not accept Mr Chan's reading of the OAA so that, even if the OAA was the only basis on which the affidavit was witnessed, it seems to me that it could properly be witnessed by Mr Matters. Mr Chan relies on s 21 of the OAA, which specifies certain persons who are authorised affidavit takers for the purpose of a person making an affidavit in a place out of Victoria for use in Victoria, expressly, "in addition to a person referred to in s 19". The persons listed in s 21 of the OAA do not include Australian legal practitioners. However, as Mr Chan fairly accepts, the persons listed in s 19 of the OAA do include Australian legal practitioners, who are authorised affidavit takers for the purpose of a person making an affidavit within Victoria for use in any Court or tribunal. It seems to me that, notwithstanding that Mr Chan points to a suggested ambiguity in that respect, s 21 applies the list of persons referred to in s 19 of the OAA, for the purposes of an affidavit being taken out of Victoria, and then expands that list by adding certain additional persons who have relevance to taking an affidavit overseas.
Mr Chan also submits that, irrespective of whether there is an ambiguity in the relevant provisions, the Court should, or may, have regard to the purpose of the relevant provisions and extrinsic materials in interpreting that section, by reason of s 35 of the Interpretation of Legislation Act 1984 (Vic). I accept that submission, although it does not seem to me to lead to the result for which Mr Chan contends. Mr Chan in turn has taken me, at some length, to the second reading speeches in respect of the OAA, and the high point of his submission is that there is no reference in the second reading speeches to any intent to expand by ss 19 and 21 of the OAA, the more limited list of persons who could take an affidavit outside of Australia under the predecessor Victorian legislation. It seems to me that the absence of such a reference provides no reason not to adopt the conclusion which, it seems to me, follows on the proper construction of s 21 of the OAA, where the second reading speech in the Legislative Assembly on 7 June 2017 recorded that the intent of the provisions was to "make these processes more efficient and reduce the chance of procedural error and costly mistakes". I find it impossible to see how the chance of procedural error, or costly mistakes, would be reduced by a provision which prevented Victorian practitioners witnessing affidavits, where sworn outside Australia.
The absence of specific reference to the scope of s 21 of the OAA in the second reading speeches otherwise does not assist Mr Chan. As is often the case, the second reading speeches are broad paraphrases of the scope of the legislation, and a person paraphrasing legislation will not necessarily identify all of its features. For that reason, even if the OAA were exclusively applicable, as Mr Chan's submissions would require, it seems to me that Mr Matters would have been entitled to witness the relevant affidavit in compliance with s 21 of the OAA.

PPPL's second submission

Mr Chan developed an alternative submission that, even if the affidavit was sworn in accordance with the Oaths Act 1900 (NSW), it did not comply with the Electronic Transactions Act 2000 (NSW) ("ETA"), because it did not contain the endorsement specifying the manner in which the affidavit had been executed in accordance with s 14G(2)(d) of the ETA. That is because, as I noted above, the relevant affidavit contained the corresponding endorsement under the corresponding provisions of the Victorian legislation. It is not necessary here to consider whether the failure to endorse a document, in the manner provided by the ETA, has the capacity to deprive an affidavit of the character of an affidavit, where it is endorsed in the corresponding manner provided by the Victorian legislation, although I am inclined to think that that result would be absurd. It is not necessary to consider that manner because, here, I have concluded that the affidavit was properly witnessed in accordance with the OAA, quite apart from its compliance with the Evidence Act 1995 (Cth), and there is no suggestion that it did not contain the endorsement required by the corresponding Victorian legislation.

PPPL's submissions as to the Hague Convention

I have not neglected the fact that Mr Chan makes further submissions as to the scope of The Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, opened for signature 18 March 1970, 847 UNTS 231 (entered into force 7 October 1972) ("Hague Convention"), and the way in which that Convention may inform the conduct of Australian proceedings. Having noted that, where it seems to me that the affidavit was sworn in accordance with at least the Evidence Act 1995 (Cth), the Oaths Act 1900 (NSW) and the OAA, it is not necessary to address the Hague Convention further.

Conclusion as to the declaration sought by PPPL and s 459J of the Act

For these reasons, I am satisfied that the declaration sought by PPPL, that the service of the Demand was ineffective, should not be made, where it was based only upon the proposition that Mr Ekdahl's affidavit in support of the Demand was not validly made in accordance with s 21 of the OAA and was not an affidavit within the meaning of s 459E(3) of the Act.
No basis to set aside the Demand under s 459J of the Act could be established, by reason of any defect in the affidavit supporting the Demand, because no such defect has been established. Even if such defect had been established, it is not apparent to me that the defect was one that would undermine the integrity of the creditor's statutory demand regime, in a manner that would have supported setting aside the Demand under s 459J of the Act.

PPPL's reliance on an arbitration provision

Alternatively, PPPL seeks an order setting aside the Demand under s 459H of the Act, or s 459J of the Act, on the basis of an arbitration provision contained in the Distribution Agreement which governs the relationship between PPPL and Corroventa. That agreement provides, in article 19.1, that: "This Agreement shall be governed by the substantive laws of Sweden. Any possible dispute between the parties shall be finally settled by arbitration by one sole arbitrator who shall be appointed by the chairman of the Swedish bar association. The arbitration shall take place in Jonkoping, Sweden. The language to be used in the arbitral proceeding shall be English."
Plainly, the reference to "possible dispute" being finally settled by arbitration must be construed in a commercial manner and cannot contemplate that a dispute that is possible, but unknown to either or both parties, will be settled by arbitration before it is identified. Plainly, the provision must refer to a known dispute, which is capable of being settled by arbitration.
Mr Chan in turn refers to the provisions limiting the disclosure of confidential information in the Distribution Agreement, as a matter which he submits supports the desirability of the resolution of disputes by arbitration. I accept that arbitration does preserve the confidentiality of a dispute, and likely also preserves the confidentiality of information disclosed in that dispute, although I note that little in this matter appeared to involve any element of commercial confidentiality. Having said that, it seems to me that there is a fundamental difficulty with PPPL's submission in this respect. At the time the Demand was served, and at any point until these proceedings were commenced and Mr Warren's affidavit dated 12 August 2022 was served, there is no evidence of any known dispute in respect of the amount claimed by Corroventa against PPPL. I invited Mr Chan to identify any correspondence between the parties identifying any such dispute and he was not able to do so. The first indication of such a dispute, so far as the evidence goes, is Mr Warren's affidavit dated 12 August 2022, and the assertion in paragraph 13 of that affidavit, not supported by the transactions identified in the previous paragraphs, that the balance outstanding from 19 January 2022 was EUR56,397.76, not the sum of EUR65,352.81.
Turning now to the applicable case law, Mr Chan rightly draws attention to the observation in Arris Investments Pty Limited v Fahd [2010] NSWSC 309 at [20] that, if a dispute is fairly and squarely within the purview of a compulsory arbitration clause, the Court should not lightly permit one party to ignore the clause and precipitate legal proceedings by the issue of a creditor's statutory demand and "should not encourage parties to breach their contracts". Plainly, however, that observation assumes the existence of a dispute, at the time the Demand was issued, and I have noted above that there is no evidence that such a dispute was known, when the Demand was here issued. Mr Chan also draws attention to my observations in Re Vivo International Corporation Pty Ltd [2013] NSWSC 1462 at [30], by reference to authority, that a question of compliance with a dispute resolution procedure is unlikely to arise in isolation of a question whether there is a genuine dispute so that the relevant creditor's statutory demand should be set aside. I also there observed that: "it is unlikely to be necessary to have regard to that ground, where the existence of a genuine dispute so as to enliven the obligation to mediate would already have provided a basis to set aside the Demand under the less 459H(1) of the Act."
It seems to me that, here, the suggested non-compliance with the arbitration procedure is of little weight, where there was no identified dispute, so far as it emerges from the evidence, at the time the Demand was served, and the evidence which is now led still does not establish, in any admissible way, the existence of such a dispute or the amount that is in issue in it. So far as a question arises under s 459J(1)(b) of the Act, I am comfortably satisfied that any non-compliance with the arbitration regime does not have the consequence of undermining the statutory regime, so as to support setting aside the Demand for the purposes of s 459J(1)(b) of the Act.

Determination

For these reasons, the Amended Originating Process filed by PPPL on 20 September 2022 is dismissed with costs.

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: 07 December 2022

(Cth), the Oaths Act 1900(NSW)

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