Infact Consulting Pty Ltd v Kyle House Pty Ltd

LEGISLATION CITED : Corporations Act 2001 (Cth) Legal Profession Act 2004 (NSW)

Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 132 FLR 300; 20 ACSR 746 Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Energy Equity Corporation Ltd v Sinedie Pty Ltd (2001) 166 FLR 179 Process Machinery Australia Pty Ltd v ACN 057 260 590 Pty Ltd [2002] NSWSC 45 Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 CASES CITED : Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (2005) 147 FLR 379; (2006) 24 ACLC 154 David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 Tuta Healthcare v Nipro Asia Pty Ltd [2005] NSWSC 664 Condor Asset Management Ltd v Excelsior Eastern Ltd (2005) 56 ACSR 223 Callite Pty Ltd v Peter John Adams & 3 Ors [2001] NSWSC 52 Michael Davies Associates Pty Ltd v Wollacott Hale Corlett & Jumikis Consulting Engineers Pty Ltd [2002] NSWSC 472

Infact Consulting Pty Ltd PARTIES : v Kyle House Pty Ltd

COUNSEL : Plaintiff: D Knaggs (solr) Defendant: R Parsons

SOLICITORS : Plaintiff: Douglas Knaggs Lawyers Defendant: Norbert Lipton & Co

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

4887/06 Infact Consulting Pty Ltd v Kyle House Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand of 28 August 2006.

2 The statutory demand claimed $25,134.79. This sum was described as the total amount of the debts described in the schedule to the demand. The schedule was in the following terms: " Amount payable pursuant to judgment entered on 25 August 2006 on filing of Certificate of Determination of Costs issued 11 May 2006 $24,460.50

Amount payable pursuant to judgment entered on 25 August 2006 on filing of Certificate of Determination of Costs issued 11 May 2006 $ 674.29 $25,134.79 "

3 The statutory demand was not accompanied by an affidavit verifying the amount due. Section 459E(3) of the Corporations Act requires the demand to be accompanied by an affidavit unless each of the debts to which the demand relates is a judgment debt. The statutory demand described the debts as judgment debts.

4 The affidavit filed in support of the originating process stated that the whole of the amount of the statutory demand was disputed on the following grounds: " 3. The plaintiff disputes the whole of the amount of the statutory demand, $25,134.79, on the ground that the order of the common law division awarding to the defendant the costs which are the subject of the judgment certificate dated 11 May 2006 is an order ultra vires the Court, which held without jurisdiction that the appeal to the common law division was incompetent - a finding prohibited by s 51 Supreme Court Act.

5. The plaintiff has a cross-claim against the defendant namely $13,743 being for outgoings improperly collected from the plaintiff by the defendant as lessor to the plaintiff of premises 27/31 Macquarie Place, Kyle House, Sydney NSW. " 5 The certificates of determination of costs of 11 May 2006 were issued on an assessment of costs payable by the plaintiff to the defendant pursuant to an order for costs made by Barrett J on 24 October 2005 in proceedings no. 2836/05. On 3 August 2006, the Court of Appeal refused leave to appeal from his Honour's judgment. Barrett J had dismissed as incompetent a purported appeal from a judgment of Macready AsJ in relation to an earlier statutory demand served by the defendant on the plaintiff. On 13 November 2006, I dismissed the plaintiff's application to set aside the judgment. 6 Macready AsJ had rejected the availability of the alleged cross-claim of $13,743 for improperly collected outgoings. His Honour held that that claim had been compromised in the course of Local Court proceedings between the parties. Understandably, Mr Knaggs, solicitor, who appeared for the plaintiff, did not seek to advance the same argument in relation to the new demand. 7 No argument was advanced by the plaintiff in support of the ground in either paragraph 3 or paragraph 5 of the supporting affidavit.

8 Instead, Mr Knaggs submitted that the statutory demand failed to comply with s 459E of the Corporations Act in that it claimed a debt which was not a judgment debt and was not accompanied by an affidavit as required by s 459E(3).

9 The first of the debts claimed in the statutory demand was for $24,460.50. This was made up of $24,326.50, being the amount of costs for which a certificate of costs had been issued pursuant to s 368(1) of the Legal Profession Act 2004 (NSW), and $134 for a fee charged on the filing of the certificate with the Local Court. 10 Subsection 368(5) of the Legal Profession Act provides: " 368 Certificate as to determination … (5) In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed. "

11 On 21 August 2006, the defendant's solicitors lodged with the Local Court the certificate of determination of costs together with an application. The form used was entitled "Application to register judgment or order". The form provided for an amount to be filled out as being the "total amount of judgment or order" and a further amount to be described as "balance of judgment or order at date of registration (include registration fee)". The defendant completed this part of the form in the amount of $24,460.50. This included a purported filing fee of $134.

12 A certificate issued under s 368 may not include the costs of the costs assessment (s 368(3)). The costs assessor is required to issue a separate certificate setting out the costs of the costs assessment. 13 The second debt referred to in the statutory demand related to a certificate of determination of costs made pursuant to s 369 of the Legal Profession Act, being the costs of the costs assessment. The costs of the costs assessment were determined to be $540.29. Subsection 369(7) provides that the certificate is, on its being filed in the office or registry of a Court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of the Court for the amount of the unpaid costs. Pursuant to subs 369(8), the costs of the costs assessor are to be paid to the Manager, Costs Assessment. However, no point was taken by the plaintiff that the amount of the second costs assessment is not a judgment debt payable to the defendant. 14 This certificate was also lodged with the Local Court on 21 August 2006 with an application for it to be registered as a judgment. The same form was used. It provided for the filing fee of $134 to be included in the judgment.

15 The plaintiff initially submitted that the evidence did not establish that the certificates had been filed, as distinct from having been lodged, with the Local Court. The defendant's solicitor did not receive a sealed copy of the application for judgment or a certificate of judgment from the Local Court. However, I gave leave to the defendant to reopen to tender copies of the application which showed that the applications were filed on 25 August 2006 and the filing fees paid. The plaintiff did not press this ground. Instead, the plaintiff submitted that there was no rule permitting or requiring the filing fee on the costs certificate to be included as part of the judgment debt. This point was conceded by the defendant. I am satisfied that the concession was correctly made.

16 The plaintiff therefore submitted that as the filing fees could not be part of the judgment debts, the demand was not for judgment debts but for greater amounts. Therefore, it was said, the demand had to be accompanied by an affidavit that verified the total of the debts was due and payable by the company (s 459E(3)). The plaintiff submitted that in the absence of such an affidavit the demand should be set aside under s 459J(1)(b). Reference was made to the judgment of Bryson J (as his Honour then was) in Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 132 FLR 300; 20 ACSR 746.

17 Initially, the defendant took the position that the plaintiff could rely upon s 459J of the Corporations Act as a basis for setting aside a statutory demand even if the ground relied upon was not raised by the affidavit filed in support of the originating process. However, the defendant withdrew that concession and submitted that it was not open to the plaintiff to rely upon this ground for the setting aside of the statutory demand because that ground was not clearly delineated in the plaintiff's supporting affidavit (Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; Energy Equity Corporation Ltd v Sinedie Pty Ltd (2001) 166 FLR 179; Process Machinery Australia Pty Ltd v ACN 057 260 590 Pty Ltd [2002] NSWSC 45; Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560). 18 The defendant also submitted that the inclusion of amounts totalling $268 was a "mere defect" which occasioned no substantial injustice and which was not a sufficient reason for the demand to be set aside (s 459J(2)). A misstatement of the amount of the judgment debt or debts to which the plaintiff was entitled is within the definition of "defect" in s 9.

19 In Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (2005) 147 FLR 379; (2006) 24 ACLC 154, Siopis J said (at [63]) that the exemption in s 459E(3) from the requirement to verify a debt claimed in a statutory demand by affidavit is confined to demands for the very amount in respect of which judgment was obtained, and not for any different amount. His Honour said that the failure to accompany a statutory demand with a complying affidavit was a serious omission (at [64]). The defendant submitted that this decision was distinguishable or, if not, ought not to be followed.

20 The defendant is correct in its first submission. That is, the plaintiff is precluded from relying upon the ground that the debt claimed in the statutory demand was in excess of the amount for which the defendant had judgment because that ground is not contained in, and cannot be inferred from, the plaintiff's supporting affidavit. Accordingly, it is unnecessary to determine whether the defendant's second submission is also correct.

21 Section 459G of the Corporations Act provides: " 459G Company may apply (1) A company may apply to the Court for an order setting aside a statutory demand served on the company. (2) An application may only be made within 21 days after the demand is so served. (3) An application is made in accordance with this section only if, within those 21 days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company. " 22 The prescriptive requirements of this section are mandatory. The time limits cannot be extended (David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265).

23 It has been held in a long series of cases that the corollary of the mandatory requirement that an affidavit supporting the application be filed and served within 21 days is that the grounds to be relied upon to set aside a statutory demand must be raised in that affidavit (see the list of authorities referred to in Tuta Healthcare v Nipro Asia Pty Ltd [2005] NSWSC 664 at [12]; and see also Condor Asset Management Ltd v Excelsior Eastern Ltd (2005) 56 ACSR 223 at [50]). This principle, known as the Graywinter principle (Graywinter Properties v Gas & Fuel Corporation Superannuation Fund) has been considered and affirmed at appellate level. In Energy Equity Corporation v Sinedie Pty Ltd, the Court of Appeal of the Supreme Court of Western Australia was invited not to follow Graywinter Properties v Gas & Fuel Corporation Superannuation Fund. However, the Court of Appeal declined that invitation. The High Court refused special leave to appeal.

24 The principle must now be taken to be well settled.

25 It was submitted for the plaintiff that it is not necessary for the supporting affidavit to raise or identify matters of law. Reference was made to Callite Pty Ltd v Peter John Adams & 3 Ors [2001] NSWSC 52 and Michael Davies Associates Pty Ltd v Wollacott Hale Corlett & Jumikis Consulting Engineers Pty Ltd [2002] NSWSC 472.

26 In Callite Pty Ltd v Adams, Santow J (as his Honour then was) set aside a statutory demand which claimed a debt allegedly due for legal costs. The supporting affidavit annexed the accounts the plaintiff company had received from the defendants. A perusal of the accounts together with an accompanying paragraph in the affidavit identified that the accounts failed to include mandatory information required under the relevant regulations. The statutory demand was set aside pursuant to s 459J(1)(b), for "some other reason", because the winding-up procedures should not have been used to effectively bypass s 192 of the Legal Profession Act 1987 (NSW), which precluded a solicitor from bringing proceedings for the recovery of costs until 30 days after a bill in proper form had been rendered.

27 In Michael Davies Associates v Wollacott Hale Corlett & Jumikis [2002] NSWSC 472, Macready M (as his Honour then was) quoted extensively from the judgment of Barrett J in Process Machinery v ACN 057 260 590, where Barrett J said (at [21]-[22]) that an applicant for an order setting aside a statutory demand was confined to the grounds shown in the application and supporting affidavit filed within the 21-day period, and that such grounds must clearly delineate the area of controversy so that it is identifiable as one or more of the grounds made available by ss 459H and 459G, even if such delineation is made by necessary inference. Macready M said (at [14]): " Having regard to his Honour's reasoning and the cases to which he referred, I think that the better view is as decided by his Honour, namely, that unless the particular dispute is raised in the affidavit filed within time, it cannot be dealt with in later affidavits. This is subject to the qualification, of course, that a genuine dispute arising out of a matter of law which does not require evidence to support it would, of course, always be available to be argued (see Callite v Peter John Adams & Ors [2001] NSWSC 52). "

28 I do not understand Macready M to say that a genuine dispute depending upon a matter of law need not be identified, either expressly or by inference, in the supporting affidavit filed within time. Santow J did not say so in Callite Pty Ltd v Adams. Rather, in Callite Pty Ltd v Adams, the supporting affidavit identified the accounts from which the legal conclusions could be drawn. In other words, the ground of dispute was identified by inference. It was not necessary specifically to refer to the provisions of the legislation from which consequential legal conclusions could be drawn.

29 In any event, the present issue does not depend purely on a question of law. Rather, the plaintiff's submission is based upon the claimed amount of judgment debt being for a greater amount than the certificate of determination of costs. That is a question of fact. In the present case, the fact was established by evidence adduced through witnesses of the defendant at a time the defendant had not relied upon the Graywinter principle. However, the position remains that the ground was not identified either expressly or by inference in the affidavit filed within the 21-day period.

30 Callite Pty Ltd v Adams would be analogous to the present case if, in the present case, the affidavit had disclosed that the certificate of determination of costs was in a lower amount than the claimed amount of the judgment debt. The ground would then have been sufficiently identified without its being necessary to say there was no rule which authorised the inclusion of the filing fee in the amount of the claimed judgment debt. However, the affidavit made no such reference.

31 The plaintiff submitted that whilst the Graywinter principle precluded a plaintiff from raising a new ground for the first time in an affidavit filed and served after 21 days following service of the statutory demand, it did not preclude the plaintiff from relying upon a ground not identified in the affidavit if that ground emerged from the defendant's own evidence or from admissions made by the defendant.

32 The Graywinter principle is based on the idea that the "supporting affidavit" required by s 459G must identify the grounds upon which the applicant relies for an order under that section. Graywinter said that the corollary is that an applicant for an order under s 459G cannot rely upon a ground which is not identified in the supporting affidavit. It is because an applicant cannot rely upon a ground not so identified that a further affidavit which seeks to raise such grounds will not be allowed. This is not merely a rule of evidence relating to a plaintiff's affidavits. It is a rule based upon the implications perceived in s 459G. It is because an applicant is confined to the grounds identified in the supporting affidavit that further affidavits relying on new grounds are not permitted (Tuta Healthcare v Nipro Asia at [11]-[13]).

33 For these reasons, it is not open to the plaintiff to rely upon the disconformity between the amounts claimed as judgment debts in the statutory demand and the amounts in the certificates of costs determination. For the same reasons, it would not be open to the plaintiff to contend (which it did not) that the smaller judgment debt based on the second certificate was not a debt payable to the plaintiff.

34 I order that the originating process be dismissed and that the plaintiff pay the defendant's costs.

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