Keith Soames Real Estate (Thornleigh) v Grabovsky

CATCHWORDS : CORPORATIONS - statutory demand - application to set aside a statutory demand - demand for unliquidated damages not yet suffered for no articulated cause of action - no debt nor any other amount due and payable - statutory demand set aside - indemnity costs awarded

LEGISLATION CITED : Corporations Act 2001 (Cth) Residential Tenancies Act 1987 (NSW)

Alexander v Ajax Insurance Co Ltd [1956] VLR 436 CASES CITED : Box Valley Pty Ltd v Kidd [2006] NSWCA 26; (2006) 24 ACLC 471 Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529

TEXTS CITED : Farid Assaf, Statutory Demands: Law and Practice, (2008)

Keith Soames Real Estate (Thornleigh) Pty Ltd PARTIES : v Inna Grabovsky

COUNSEL : Plaintiff: H Woods Defendant: Mr I Grabovsky

SOLICITORS : Plaintiff: Michael Flaherty Solicitor Defendant: n/a

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

3198/09 Keith Soames Real Estate (Thornleigh) Pty Ltd v Inna Grabovsky JUDGMENT 1 HIS HONOUR: This is an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand. The statutory demand was served on the plaintiff on 28 May 2009. It was accompanied by an affidavit of the defendant in the prescribed form. 2 The defendant deposed that the plaintiff owes her the sum of $15,920, being an amount of what she described as a debt set out in the schedule to the demand. That sum was made up as follows: 1. Difference between the current rental payment of A$270-00 per week and the new rental payment of A$450-00 per week for the period of 52 weeks. A$9,360-00 Amount due and payable in full. 2. Relocation expenses A$2,000-00 Amount due and payable in full. A$1,800-00 3. Rental bond Amount due and payable in full. 4. Expenses associated with change of address A$500-00 Amount due and payable in full. 5. Storage expenses (3 months) A$1,200-00 Amount due and payable in full. 6. Travel expenses (52 weeks) A$1,060-00 Amount due and payable in full. TOTAL DUE AND PAYABLE NOW A$15,920-00

3 At the time of service of the demand and accompanying affidavit, the plaintiff was also served with a further affidavit of the defendant, sworn on 27 May 2009. That affidavit disclosed the basis upon which the defendant claims to be entitled to the sum of $15,920 from the plaintiff. 4 The plaintiff is a real estate agent. The defendant is the lessee of a home unit. The plaintiff has acted as the real estate agent for the landlord in connection with the tenancy. 5 The defendant complains that in August 2008, the plaintiff and she reached agreement on an increase in the rent for the unit, but the plaintiff failed to document the terms of that agreement and failed to provide a proper notice specifying the amount of the agreed increased rent. The defendant contended that s 45 of the Residential Tenancies Act 1987 (NSW) had not been complied with, such that the increased rent had not become payable. The defendant also contended that an employee of the plaintiff had made an improper demand, or demands, for access to the leased property. The defendant did not accede to the demand for access to the leased property and, in subsequent proceedings in the Consumer Trader and Tenancy Tribunal, the tribunal held that she properly resisted giving access because no proper information was conveyed to her as to the purpose for which access was sought. 6 On 23 January 2009, the plaintiff served a notice of termination of the lease after 60 days. The original fixed term of the tenancy had expired. That notice was served in purported reliance on section 58(2) of the Residential Tenancies Act. 7 The defendant complained that the plaintiff, through its employee, had behaved arrogantly and unlawfully and that, as a result of the plaintiff's behaviour and unwillingness to respond appropriately to the defendant's complaints, was forcing the defendant to move to another property. She said that moving to another property would result in the incurring of expenses, including possible increases in rent, costs of relocation, possible travel costs, storage costs and would also create difficulties in finding a property within walking distance of the defendant's place of work. 8 The defendant was represented at the hearing by her husband. I infer that neither of them has legal expertise. 9 I was not able to obtain any clear articulation of the cause of action the defendant might contend that she has against the plaintiff. It would seem to me that, at best, any cause of action would be a cause of action in tort for damages being, possibly, for the tort of inducing breach of contract or, possibly, for an innominate tort. 10 None of the expenses claimed in the statutory demand had been incurred at the time the statutory demand was served. The defendant, through her husband, says that they were in prospect and that she was justified in serving a statutory demand for those payments because she did not herself have the funds with which to meet the expenses which would be incurred upon being required to vacate the premises. 11 The plaintiff took proceedings in the Consumer Trader and Tenancy Tribunal for possession. That application was unsuccessful. The tribunal was satisfied that the notice of termination of the lease was given in retaliation for the defendant seeking to secure her rights as a tenant and refused the order pursuant to s 65(2)(a)(ii) of the Residential Tenancies Act. Thus, the expenses sought in the statutory demand have still not been incurred. 12 Section 459E permits service of a statutory demand on a company by a person who is owed a debt by the company that is due and payable. A claim for unliquidated damages is not a claim for a debt within the meaning of s 459E. Even had the expenses claimed in the notice been incurred, it is clear that the statutory demand would be a demand for damages and not debt. The amounts claimed required assessment. See Alexander v Ajax Insurance Co Ltd [1956] VLR 436 at 440, 441, 445; and Box Valley Pty Ltd v Kidd [2006] NSWCA 26; (2006) 24 ACLC 471 at 477. 13 Nor was any sum, whether by way of debt or damages payable at the time the statutory demand was served. Assuming that the defendant would have a good cause of action for such damages, as I have said, the expenses have not been incurred. 14 Where an application is made to set aside a statutory demand under s 459G, the demand will be set aside if there is a genuine dispute between the company and the respondent about the existence, or amount of the debt to which the demand relates. Not only was there no debt payable by the plaintiff to the defendant; not only was there no amount then due and payable, whether debt or damages; but there is a genuine dispute as to the liability of the plaintiff to pay any sum to the defendant. 15 As I have said, the defendant, through her husband, was not able to articulate any specific cause of action which would entitle her to recover the expenses claimed from the plaintiff. The expenses would arise if the defendant is forced to vacate the premises. 16 Prima facie, the landlord would be entitled to terminate the lease on 60 days' notice and obtain an order for possession of the premises if none of the grounds in s 65(2) was made out. In that event, it is difficult to see how the amounts sought in the demand could be said to have been occasioned by the conduct of the employees of the plaintiff, about which the defendant complains. 17 For these reasons, I order that the statutory demand dated 27 May 2009 served on the plaintiff be set aside.

[Parties addressed on costs.] 18 The plaintiff seeks an order for indemnity costs. 19 The defendant wrote to the plaintiff on 8 May 2009 and enclosed a document called a "Request For Payment", which was relevantly in the same terms as the later statutory demand. She said: "... If you wish to dispute any part of the claim, please stipulate grounds for your disagreement in writing. All correspondence in this respect must reach me on or before 26 May, 2009. Your failure to respond will attract the following action:

(i) The claim will be deemed as a non-judgment debt of the company;

(ii) Statutory Demand will be served on the Company, (Div 2, Sec 459E, Sec 459(3)). "

20 It was not open to the defendant to "deem" the amount claimed to be a debt of the company. It does not appear that the plaintiff responded to that demand by 26 May 2009. However, after service of the statutory demand on 28 May 2009, the plaintiff, through its solicitors, wrote to the defendant, stating, amongst other things, that: " Clearly the demand does not relate to a debt due and payable as required by the Corporations Law. It appears the demand is, at best, misconceived by you and, quite possibly, an intentional abuse of process. "

21 The plaintiff sought confirmation that the demand would be withdrawn by 10 June 2009 and foreshadowed that, if the demand was not withdrawn, the letter would be relied upon for a claim for costs. The demand was not withdrawn. On 22 June 2009, the plaintiff, through its solicitors, made an offer of settlement. It proposed that the demand be set aside and that the defendant pay the plaintiff's costs in the sum of $1,500. It noted that this sum was less than the disbursements paid on the filing of the summons and did not include any amounts for professional costs. 22 There are numerous cases in which indemnity costs orders have been made against persons who have inappropriately served statutory demands, where the alleged creditor knows, or should know, that the demand would be set aside. 23 In Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529, Santow J said that: " Sooner or later, courts will have to consider whether indemnity costs should be awarded against the unsuccessful user of a statutory notice to force payment of a genuinely contested debt, simply because those taking out such statutory demands are disregarding that basic principle. Mini-trials of such disputes simply add to costs, more especially as the relevant tests do not ordinarily permit more than a relatively superficial probing. " See the discussion generally in Farid Assaf, Statutory Demands: Law and Practice , (2008) at [8.10] to [8.14]. 24 In this case, the defendant invoked a procedure which was entirely inappropriate. Even had no offer been made with any element of compromise, I think this would have been an appropriate case for the award of indemnity costs. I do not think that the fact that the defendant was not legally represented is a reason for adopting a different approach to the award of indemnity costs. 25 In any event, there was some element of compromise in the offer of 22 June. Had the plaintiff responded to the letter of 8 May 2009 in the same way as it responded to service of the statutory demand on 3 June 2009, I think that this would be a case for indemnity costs without any qualification. However, the lack of response to that letter might have encouraged the defendant not to withdraw the demand and I think that justice is served by making an award of indemnity costs for the period after 10 June 2009, which was the date by which the plaintiff sought withdrawal of the demand. 26 For these reasons, I order that the defendant pay the plaintiff's costs and that the costs be assessed on the ordinary basis up to and including 10 June 2009 and on the indemnity basis thereafter.

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