Modena Imports Pty Ltd v Leveraged Capital Pty Ltd [2009] NSWSC 20 | Case summary

1 By its originating process filed on 21 November 2008, the plaintiff, a creditor by assignment, seeks to advance an application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 7 November 2008 served on it by the defendant. 2 Filed with the originating process was an affidavit of Peter Trad of 14 November 2008 the full content of which is as follows: "1. I am the Director of the Plaintiff. 2. I am authorised by the Plaintiff Company to make this affidavit on its behalf. 3. The Defendant has made a claim of indebtedness against the Plaintiff based upon the sale by the Plaintiff of three motor vehicles - about which the Plaintiff is in a genuine dispute with the Defendant. 4. The Plaintiff and the Defendant are currently involved in a series of commercial disputes. 5. The Defendant owes money to the Plaintiff in the amount of $275,000 which has not been paid. 6. The Plaintiff claims by way of set-off in this matter, the monies owed to it by the Defendant." 3 The defendant maintains that there is not in truth before the court any application under s 459G because the plaintiff failed to comply with s 459G(3) which is in these terms: "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." 4 The defendant's contention is that Mr Trad's affidavit is not, in terms of s 459G(3)(a), "an affidavit supporting" the s 459G application. The defendant says that Mr Trad's affidavit is so deficient in content that it cannot properly be described as "an affidavit supporting" the application. 5 There are really two parts to Mr Trad's affidavit. First, he says that the plaintiff is "in a genuine dispute" with the defendant about the claimed indebtedness and that the two companies "are currently involved in a series of commercial disputes". 6 Second, he says that the defendant owes money to the plaintiff in the amount of $275,000 which has not been paid, and that this is claimed by way of set-off. 7 There is thus, in a very general way, an indication of intention to rely on both the genuine dispute ground in s 459H(1)(a) and the offsetting claim ground in s 459H(1)(b); but the content of Mr Trad's affidavit is such that it does nothing beyond making a bald assertion as to each matter. 8 In Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Sundberg J said: "In order to be a 'supporting affidavit', an affidavit must say something that promotes the company's case." 9 In relation to a case within s 459H(1)(a), his Honour said: "In a s 459H(1)(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading." 10 So far as genuine dispute or the possibility of it goes, Mr Trad's affidavit of 14 November 2008 does not go beyond the kind of mere assertion or bare claim which Sundberg J held to be insufficient to show the existence of a genuine dispute. It does not refer in any way to any facts showing that there is a dispute. 11 The same is true in relation to the part of the affidavit that addresses the possibility of offsetting claim. What the affidavit must show in order to be a supporting affidavit is that there is a claim within the definition of "offsetting claim" in s 459H(5), that is, "a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand". 12 Palmer J said in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 that a genuine claim for these purposes is one on a cause of action advanced in good faith for an amount claimed in good faith so that the claim can be seen to be arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. 13 In order to be "an affidavit supporting" an application based on offsetting claim, the affidavit must go beyond mere assertion or bare claim and show some basis for the allegation that there is a counterclaim set-off or cross-demand, that it has some explained substance and that it is in a particular amount. This last aspect is important because of the role that the amount of the offsetting claim plays under s 459H. 14 Mr Trad's affidavit of 14 November 2008 does not satisfy the threshold test in respect of either genuine dispute or offsetting claim. It suffers from precisely the shortcoming recently described by Austin J in Pacific Islands Express Pty Ltd v Empire Building Development Pty Ltd [2008] NSWSC 576 at [7]: "In my view Mr Dagher's affidavit is not an affidavit "supporting the application", for the purposes of s 459G(3)(a), because it amounts to nothing more than a mere assertion that the debt claimed by the defendant is disputed and that the plaintiff has an unspecified claim for damages against the defendant. The affidavit fails to alert the defendant to the nature of the case the company seeks to make in resisting the statutory demand." 15 Mr Beazley submitted on behalf of the plaintiff that there is a third matter relevant to the s 459G jurisdiction, namely, a "defect" in the statutory demand within s 459J. The alleged defect comes from the fact that the defendant claims to be a creditor by assignment and that, while the statutory demand refers to assignment of debt to the defendant in October 2008, there is no evidence that there was any such assignment or that notice of it had been given so as to complete it as a legal assignment. 16 Mr Trad's affidavit makes no complaint on this score. There is nothing in the affidavit challenging the proposition that the defendant is a creditor of the plaintiff by assignment. Had the lack of assignment or some doubt or difficulty about the assignment been something on which it was sought to rely in challenging the statutory demand, then it should have been brought to the fore by the affidavit filed within the 21 day period. 17 As things stand, there is no reason to think that there was not an assignment validly and properly made effective both at law and in equity. This further ground based on s 459J is not available to be argued because of its absence from the affidavit; added to which it cannot be said in any sense to be a ground that appears on the face of the statutory demand itself. 18 Because there has been no compliance with s 459G(3)(a), the court is in a position where it has no option but to dismiss the originating process. 19 The order therefore is that the originating process be dismissed.

[SUBMISSIONS ON COSTS] 20 It is submitted on behalf of the defendant not only that it should have an order for costs but also that costs should be assessed on the indemnity basis. The short proposition is that the s 459G application was hopeless because of the obvious deficiencies in Mr Trad's affidavit leading inexorably to the conclusion that it was not an affidavit supporting the application. 21 There is merit in that submission. The fact that the affidavit was prepared without legal assistance is beside the point. Legal assistance was ultimately obtained yet the application was pressed despite the obvious hopelessness of it. 22 I therefore order that the plaintiff pay the defendant's costs of the originating process, such costs to be assessed on the indemnity basis. **********

Modena Imports Pty Ltd v Leveraged Capital Pty Ltd

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