Polstar Pty Ltd v Agnew

Supreme Court of NSW|2007-02-22|Before: Barrett J

Introduction 1 By originating process filed on 8 November 2006, the plaintiff makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant. 2 The debt (or alleged debt) to which the statutory demand relates is described as follows: "Commissions payable for the sales of property, listed and sold in the sum of $14,485.00 from October 2005 until April 2006 a copy of the particulars are attached and marked with the letter 'A'." 3 The annexure "A" is a document containing detailed calculations in respect of the period mentioned. 4 It is common ground that the defendant was employed as a salesperson by the plaintiff which carries on a real estate agency business at Mt Annan. There was a written employment contract which contained provisions for the calculation and payment of commissions as part of the defendant's remuneration. It is also common ground that there is a genuine dispute as to the amount owing, due and payable by the plaintiff to the defendant for commissions. The defendant maintains that the debt is in the sum mentioned in the statutory demand, that is, $14,485.00. The plaintiff's position is that a debt of only $2,735.42 became owing, due and payable for commissions. A cheque for the latter amount was drawn by the plaintiff and delivered to the defendant in November 2006. 5 In circumstances such as this, where there is an acknowledged situation of genuine dispute in which the "substantiated amount", as determined by the formula in s.459H(2), is $2,735.42 and therefore more than the statutory minimum ($2,000.00), one might have thought that the simple course would be for the court to make an order under s.459H(4)(b) varying the demand so as to refer to $2,735.42 instead of $14,485 and a declaration under s.459H(4)(b) that the demand is to be taken to have had effect in its varied form from the time of service. Then, with the sum of $2,735.42 having been paid, the controversy would be seen to have been quelled. 6 But neither party seeks an order and declaration of this kind (at least in the first instance). Rather, the plaintiff presses two contentions: first, that no statutory demand was ever served and, second (and in the alternative), that there exists "some other reason why the demand should be set aside", as referred to in s.459J(1)(b). The defendant, for her part, contends that the statutory demand was served but that service took place at such a time as to make the plaintiff's s.459G application invalid and of no effect, having regard to the strict 21 day time limit embodied in that section: David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265. 7 The contentions advanced by the parties make it necessary to decide

(a) whether the statutory demand was served on the plaintiff;

(b) if so, whether the day on which the statutory demand was served on the plaintiff was such as to warrant the conclusion that the plaintiff's application for an order setting it aside was made "within 21 days after" the demand was served; and

(c) if so, whether there is, within s.459J(1)(b), "some other reason why the demand should be set aside". Was the statutory demand served? 8 The evidence shows that the statutory demand was sent by post in an envelope addressed "Ms Sandra Ursino Dougmal Polstar Pty Limited t/as Dougmal Real Estate PO Box 1244 Green Valley NSW 2168" 9 Mr Dlakic, a solicitor employed by the defendant's solicitors, gave evidence that the defendant gave him this post office box address. The envelope containing the statutory demand, together with a covering letter, was prepared in the office of the defendant's solicitors. It was the solicitors who caused the envelope to be placed in the post addressed to the post office box at Green Valley. According to Mr Dlakic's evidence, the envelope was "sent" on 4 October 2006. Ms Sandra Ursino is (and has been since 14 September 2003) the sole director of the plaintiff. She gave evidence that she collected the envelope from the post office box at the Green Valley post office on 19 October 2006, whereupon she became aware of its contents. 10 If service occurred, it was service by post, as distinct from any form of personal service. It is therefore necessary to have regard, in the first instance, to relevant provisions contemplating service by post. 11 Two statutory provisions are relevant when it comes to the interpretation of a provision of the Corporations Act contemplating that a document may be "served" on a company. One is s.109X of the Corporations Act itself. The other is s.28A of the Acts Interpretation Act 1901 (Cth), as in force on 1 November 2000 and made applicable, for the purposes of the Corporations Act, by that Act's own s.5C. 12 Section 109X of the Corporations Act, dealing with the possibility that a document may be served on a company by post (being the only means potentially employed here), says: "For the purposes of any law, a document may be served on a company by: (a) … posting it to, the company's registered office …" 13 Section 28A of the Acts Interpretation Act, as in force at the relevant time, provided: "For the purposes of any Act that requires or permits a document to be served on a person, whether the expression 'serve', 'give' or 'send' or any other expression is used, then, unless the contrary intention appears, the document may be served: … (b) on a body corporate - by … sending it by prepaid post to, the head office, a registered office or a principal office of the body corporate." 14 The co-existence of these provisions raises questions as to their interaction. A "company" registered as such under the Corporations Act is a "body corporate": see s.119. Can it be said that s.109X, because it deals specifically with service on such a "company", excludes the operation of s.28A in relation to service on that species of "body corporate" that such a company is? 15 I am of the opinion that s.109X does not impliedly exclude the operation of s.28A in such a case. Section 109X is not a code regarding service on a company. By providing for specific methods of service on a company, it is facultative, not mandatory. I refer, in that connection, to the decision of Young J (as he then was) in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542. Section 109X is thus a provision of the same kind as the provision of Commonwealth taxation legislation considered by McDougall J in Deputy Commissioner of Taxation v Keck (2006) 63 ATR 310. That provision used the words "the Commissioner may give the person a notice under section 222AOE by …". His Honour held that this provision was merely facultative and did not prevent the Commissioner giving a notice of the relevant kind in some manner other than that specified in the provision; also that s.28A of the Acts Interpretation Act made available to the Commissioner some such other manner of giving the notice. In Deputy Commissioner of Taxation v Nercessian [2006] ATC 4693, Santow JA (with whom Mason P and McColl JA agreed) expressed a "provisional view" corresponding with that taken by McDougall J. 16 The case before me warrants the same reasoning. Section 109X makes available (but does not make exclusive or mandatory) a particular mode of service by post upon the type of "body corporate" that is a "company" as defined by the Corporations Act. It does so, moreover, "[f]or the purposes of any law", not just for the purposes of the Corporations Act. Section 28A, in the form made applicable to the interpretation of the Corporations Act by its own s.5C, makes available (but does not make exclusive or mandatory) a particular mode of service by post upon bodies corporate generally, including those of them that are "companies" as defined by the Corporations Act. It follows, in my view, that when a question of the sufficiency or effectiveness of service for the purposes of s.459G of the Corporations Act arises and that question relates to purported service by post on a "body corporate" that is a "company", service must be held to be sufficient and effective if made in a way contemplated by either of the provisions. 17 The Corporations Act provision contemplates posting to "the company's registered office". The Acts Interpretation Act provision also refers to "a registered office", as well as "the head office" and "a principal office". The common theme is "office". Provisions of the Corporations Act imposing requirements with respect to a company's "registered office" elucidate the meaning of "office" in the expression "registered office". Those provisions make it clear that such an office may only be at a location capable of being "open to the public": see s.145(1). It must also be a location at which it is possible to display prominently the company's name (s.144(1)) and the words "Registered Office" (s.144(2)). Furthermore, it is contemplated that there will be "premises at the address of" the registered office (see s.143(1)) and that "premises" will be used "as the address of the company's registered office" (s.143(2)(a)). 18 In short, the Corporations Act's concept of "office", in the references to "registered office", is one centred on a physical location in the nature of premises (that is, a building or a room in or section of a building) to which persons may go and which can be identified by prominent display as a company's registered office. I am of the opinion that the Acts Interpretation Act reflects a similar concept of "office" in its references to "registered office", "head office" and "principal office". 19 On this basis, a post office box cannot be a company's "office" - any more than it can be a place at which documents may be left by way of service (Sarikaya v Victorian Workcover Authority (1997) 80 FCR 262; Croker v Ewen [2000] NSWCA 186) or an address for service (Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2002) 168 FLR 213). 20 The possibility nevertheless remains that despatch by post to a post office box may in substance amount to despatch by post to a company's office. Such a possibility was recognised by the Court of Appeal in Macrae v St Margaret's Hospital (1999) 19 NSWCCR 1 where despatch to a post office box was held to satisfy a provision to the effect that a document might be served by being "sent by post to … any place of business of the person". Davies AJA (with whom Priestley JA agreed) said (at [20]): "In my opinion, the sending of a document by post to a business person's post office box is an appropriate and possibly the most appropriate way of sending the document by post to that person's place of business." 21 A significant fact in Macrae's case was that the letterhead of the hospital upon which service was to be effected carried a request that all correspondence be addressed to the nominated post office box. It may be inferred that the person attempting service in that case was aware of the request on the letterhead and had acted upon it. 22 In the present case, by contrast, there is no evidence either that the plaintiff requested (either specifically or generally) that correspondence be sent to the Green Valley post office box. Indeed, a letter in evidence on what appears to be the plaintiff's letterhead carries a reference to a post office box at Narellan post office. Nor, importantly, is there evidence that the particular post office box at Green Valley is or was a post office box of the plaintiff. The most the evidence shows is that the defendant herself gave details of the Green Valley post office box address to her solicitors, that the solicitors sent the statutory demand to that post office box in an envelope addressed to the sole director of the plaintiff (also naming the plaintiff itself on the envelope) and that the sole director of the plaintiff received the envelope and its content when she took the envelope from the Green Valley post office box. No connection is shown between the post office box and the plaintiff such as might warrant a finding that the box was (or was held out to be) a means of access to that company's registered office, head office or principal office. All that can be seen is that the person who is (and was) the company's sole director took from the Green Valley post office box an envelope addressed to her at that box, which envelope had reached that destination as a result of posting by the defendant's solicitors. 23 The conclusion therefore must be that the content of the envelope despatched by post by the defendant's solicitors to the Green Valley post office box was not posted to or sent by prepaid post to any "office" of the plaintiff, whether a registered office, a head office or a principal office. There was accordingly no service of that content on the plaintiff in accordance with either s.109X of the Corporations Act or s.28A of the Acts Interpretation Act. It follows that s.29 of the latter Act does not apply to determine any time or date of service based on service by post: cf Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) (2002) 167 FLR 175; Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2002) 168 FLR 213. 24 These conclusions do not mean that the statutory demand was never served. The evidence shows that, as a result of the posting effected by the defendant's solicitors, the statutory demand came into the actual possession of Ms Ursino who, since 14 September 2003, had been the sole director of the plaintiff. Despatch of the document by post to the Green Valley post office box by the defendant's solicitors thus caused the statutory demand to come into the possession of the person who was, at the time, the guiding mind and will of the plaintiff company. Furthermore, that person caused that company to take action in relation to the statutory demand consistent with an acceptance of its having been served. The plaintiff made an application for an order setting aside the statutory demand. Such an application is available, in terms of s.459G(1) only in relation to "a statutory demand served on the company". Where a company contends that a statutory demand cannot form the basis for a presumption of insolvency because it was not served, the appropriate course is to seek declaratory relief, not an order setting the demand aside: Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305. 25 The factual matters referred to in the immediately preceding paragraph mean that there was "informal service" on the plaintiff company. This is because the document actually reached the sole director of the plaintiff and she dealt with it on the footing that it was a statutory demand duly served on the plaintiff. The relevant principles, as they emerge from a number of cases, are discussed in the judgment of Basten JA in Italiano v Carbone [2005] NSWCA 177 at [58] to [61]: "58 A similar issue was addressed by McInerney J in the Supreme Court of Victoria in Pino v Prosser [1967] VR 835. The case involved service of a writ, requiring personal service on the husband, by handing a copy to his wife, who handed it to him on the same evening. When, two days later, the process server returned to the house to recover the writ so as to effect personal service on the husband, he was told by the wife that her husband was not at home and had taken the writ to his solicitor. McInerney J noted authority for the proposition that 'service on the wife, or a known agent of the defendant is not good service': Ibid at 837 (30). His Honour continued: 'If that passage correctly states the law, the conclusion is, on the facts of this case, remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ on 28 March from his wife and instructed his solicitors on 10 April, should be held not to have been served.

His Honour referred to a comment by the Lord Chancellor in Hope v Hope (1854) 4 De G.M. and G. 328 at 342 to the following effect: The object of all service is of course only to give notice to the party to whom it is made, so that he may be aware of and may be able to resist that which is sought against him; and when that has been substantially done, so that the court may feel perfectly confident that service has reached him, every has been done that is required."

Following that, and other authority, his Honour was satisfied that, the writ having come into the possession of the defendant on the day on which it was given to his wife, there had been good personal service.

59 In Guss v Magistrate's Court at Victoria [2003] VSC 365, Osborn J considered a challenge to the valid service of a summons to answer a charge. The summons had not, as required by s.34 of the Magistrate's Court Act 1989 (Vic) been delivered to the defendant personally, nor had a true copy been left at the 'most usual place of residence or of business' with a person apparently not less than 16 years of age. The business address at which the summons had in fact been left was the address of a corporation of which the plaintiff was not a director and which did not satisfy the statutory description. Nevertheless, he agreed in cross-examination that he had been notified of receipt of the copy of the summons and had received a copy some days later. In following Pino , his Honour noted at [14]: 'It is perhaps a tribute to the plaintiff's determination to avoid a hearing on the merits that it appears that no court has previously been faced with the argument that despite sworn evidence that a person in fact received delivery of a summons left for him nevertheless such summons was not served in accordance with the Act and its predecessors.'

60 A similar conclusion was accepted by Young J in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542. The defendants had sought a declaration that a summons had not been duly served on them in circumstances where, although they had received it, the mechanism by which it had come to their attention was by lodgement in a document exchange box. His Honour held (at 544B): 'The ordinary meaning of "service" is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope … Pino v Prosser .'

61 This approach was recently followed by Barrett J in Ketrim Pty Ltd v AS&L Pty Ltd (2004) 52 ACSR 252 at [16]-[18]. His Honour noted that a similar approach had been adopted in relation to service by facsimile transmission in Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 Qd R 140 and Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305. The latter case, a decision of Mandie J in the Supreme Court of Victoria, was, in a sense, the reverse of the present case in that proof of service upon a director was found to be proof of service on the company. At [28] his Honour noted: 'Of course, proof of service of a document upon one director will not necessarily constitute proof that the document has actually come to the attention of the company of which he or she is a director. But in the present case Mr Cook is the sole director and secretary (and indeed shareholder) of the plaintiff company, and thus he is that company's directing mind and will. Not only did service of the document upon Mr Cook of necessity bring the document to the actual attention of the plaintiff company, but the evidence here is that Mr Cook expressly accepted service of the statutory demand on behalf of the plaintiff.'" 26 The last passage quoted in this extract, being a passage in the judgment of Mandie J in Emhill Pty Ltd v Bonsoc Pty Ltd (above), applies with particular force to the present case. 27 I am satisfied, on this basis, that the statutory demand was "served" on the plaintiff. When did service occur? 28 It is next necessary to determine the date of service of the statutory demand. 29 I have already mentioned s.29 of the Acts Interpretation Act. I need only add that, in a case of informal service such as the present (where the crucial factor is receipt of the document and acting upon it), there is no scope for the application of that section, even though the post is the means by which the document has reached the person served. In such a case, it is not the posting that constitutes service; it is the receipt, acceptance and dealing with the document. Where receipt, acceptance and dealing are proved, there is no basis for applying a provision stating that, in the absence of proof to the contrary, service will be taken to be effected when the document would have been delivered in the ordinary course of post: see Ketrim Pty Ltd v AS&L Pty Ltd (2004) 214 ALR 206; Deputy Commissioner of Taxation v Ikin (2006) 61 ATR 706; Wesfarmers Kleenheat Gas Pty Ltd v Elgammal [2006] NSWSC 1248. 30 In the circumstances of this case, the only available conclusion is that the statutory demand was served on the day on which it came into Ms Ursino's possession when she took the envelope containing it from the Green Valley post office box. I hold, therefore, that service of the statutory demand occurred on 19 October 2006. The plaintiff's s.459J(1)(b) case 31 The finding that the statutory demand was served on 19 October 2006 means that the s.459G application (which the parties agree was filed and served, with the supporting affidavit, on 8 November 2006) was "made" within the period of 21 days referred to in s.459G. I must therefore proceed to determine the plaintiff's claim for an order setting aside the demand. 32 That claim, as I have said, is advanced by reference to s.459J(1)(b) and the proposition that there is some reason why the demand should be set aside, being a reason other than a reason of the kind contemplated by s.459J(1)(a). Excluded from consideration, therefore, is the reason that there is a "defect in the demand" and that, in the absence of an order setting it aside, "substantial injustice will be caused": Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at p.459. 33 It is clear that s.459J(1)(b) confers a remedial jurisdiction. The Court of Appeal of the Australian Capital Territory (Crispin P, Gray and Marshall JJ) said this of the provision in Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 ACTR 22 at [27]: "What is contemplated by s 459J(1)(b) is a discretion of broad compass which extends to conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice: Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 at 317 to 318." 34 In that case, the creditor had agreed to withdraw the statutory demand but later reneged on its agreement. Those circumstances were seen as coming within the relevant concept of unconscionability. 35 The criterion based on whether the person serving the statutory demand had engaged in conduct that "was unconscionable, was an abuse of process or had given rise to substantial injustice" (these being the words of Black CJ, Einfeld and Sackville JJ in Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 at pp.317-318) had earlier been applied by the Queensland Court of Appeal in KW & KM Quinn Investments Pty Ltd v Deputy Commissioner of Taxation [2004] QCA 91. 36 In Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229, the New South Wales Court of Appeal observed that substantial injustice has been confirmed by case law as a criterion for setting aside a statutory demand. It was emphasised, however, that "injustice" must be judged by reference to the purposes Part 5.4 is intended to serve. Thus, Santow JA observed (at p.235): "There being no defect in the demand, reliance was placed upon whether there be 'some other reason' as would satisfy s 459J(1)(b). The claimants contend that such reason cannot be based simply on some need to bring to the relationship between the parties some broad form of perceived fairness or reasonableness. Rather there must be 'sound or positive ground or good reason' to set aside the statutory demand for 'some other reason', which was consistent with the legislative intent of Pt 5.4 of the Act: Portrait Express (Sales) Pty Ltd v Kodak (A'asia) Pty Ltd , above, at 757 per Bryson J; Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd ( 1998) 29 ACSR 11 at 18 per Austin J." 37 Also particularly pertinent are the observations of Young CJ in Eq (at p.240): "[57] I agree with Santow JA and with his reasons. I merely wish to add one or two observations.

[58] Although the wording of s 459J(1)(b) of the Corporations Act appears wide, its context and history requires reading it down to encompass in general terms only cases where the court is satisfied that injustice will be caused unless the demand is set aside because of a defect relating to, but not in, the demand: see Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11 at 17.

[59] In Portrait Express (Sales) Pty Ltd v Kodak (A'asia) Pty Ltd (1996) 20 ACSR 746 at 757, Bryson J truly said that the discretionary power under s 459J(1)(b) should not be activated 'unless the decision to do so is supported by some sound or positive ground or good reason which is relevant to the purposes for which the power exists'.

[60] It is not possible to set out fully the cases that might fall within s 459J(1)(b) nor if it were possible would it be wise to do so. The sort of case that will be covered will include gross defects in supporting affidavits and documentation and where the alleged creditor has made statements or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor's position.

[61] A judge is not at liberty to set aside a demand under s 459J(1)(b) merely because he or she subjectively considers it fair to do so." 38 It is the plaintiff's contention that service of the statutory demand in the present case entailed substantial injuistice of the relevant kind and amounted to an abuse of process - that is, use of the particular statutory procedure for a purpose foreign to that for which the statute intends that it should be used. 39 It is argued on behalf of the plaintiff that when the statutory demand in respect of a sum of $14,485.00 was signed by the defendant and despatched by her solicitors, the defendant well knew that there was a genuine dispute as to the amount of the debt. That contention is consistent with the evidence. Both the defendant and her solicitor, Mr Dlakic, were cross-examined (this being a case outside the guidelines that apply to proceedings based on s.459H). The defendant made it clear that there had been, at all relevant times, a disagreement between the plaintiff and herself as to the basis of calculation of commissions applicable to the defendant's employment. There were two aspects to this. First, the defendant's view of matters was that she was entitled to commissions based on sales performance in a quarter (that is, a period of three months) and that the hurdle to be crossed before an entitlement to commission arose paid attention to quarterly sales. The plaintiff's view of this aspect (and the one that, on the face of things, seems to be borne out by the copy of the contract in evidence) was that a monthly basis applied and the hurdle was a monthly hurdle. 40 The second aspect of the disagreement concerned the point at which a sale was recognised for commission purposes. The defendant's position was that exchange of contracts was the relevant event. The plaintiff's position was that regard was to be had to completions or settlements. The defendant said that Mr Curtin of the plaintiff had paid her according to her understanding for the first three months. She claimed in cross-examination that Mr Curtin, who she thought was the sole director of the company, changed the written terms "on a verbal basis". When Ms Ursino became involved, however, the defendant became aware that the plaintiff's view of the agreement was that commissions were to be based on monthly sales according to settlements. She nevertheless had her solicitors prepare a demand and make a claim asserting the alternative approach, namely, that commissions were based on quarterly sales according to exchanges of contracts - which basis was inconsistent with the written terms and could have been justified only by reference to some oral variation assented to by Mr Curtin - something that Ms Ursino made clear, when she entered the picture, that the plaintiff did not accept. 41 That a dispute existed and was recognised by the defendant before she caused the statutory demand to be served is borne out by contemporary correspondence. A letter of 23 June 2006 from Ms Ursino to the defendant, obviously in reply to a complaint or claim made by the defendant, set out a relevant provision of the employment contract and referred expressly to "your monthly target" and observed that "commission/bonus payable is paid upon settlement as discussed with you at our meeting on 13 June 2006". A monthly (not quarterly) basis of calculation geared to settlements (not exchanges of contract) was thus asserted by the plaintiff. 42 A letter from the defendant's solicitors to Ms Ursino dated 30 June 2006 said that the agreement between the parties was based on exchanges, not settlements, and made a claim reflecting not only that basis but also quarterly calculations rather than monthly calculations. The letter was accompanied by a document in the same form as the annexure "A" to the statutory demand and continued: "We understand it that you have had correspondence with our client since at least 19 June 2006 and you made a reply on 23 June 2006. You pointed out that 6.1b of the letter of appointment, in the 3rd last sentence 'The employer will pay the commission/bonus by the 14th of the month following the period in which the commission is received by the employer'. This was varied at the time that our client was accepted as an employee of the Real Estate Agency. This can be verified by Michael Kurtness/Ian Machuca and evidence and under-evidence is available to us if the matter went to Court. You did pay the quarter before on the varied agreements bases. Unless this money is received within 7 days we intend to take Court action against you without further notice." 43 In these circumstances, the conclusion seems inescapable not only that a genuine dispute as to the amount of the debt existed when the statutory demand was served but also that the defendant was then aware of the dispute. 44 The intention underlying Part 5.4 is that a creditor who genuinely believes that a debt is due and payable and is unaffected by either genuine dispute as to existence or amount or offsetting claim may obtain, for the purposes of a winding up application, the benefit of a statutory presumption of insolvency. Such a creditor may be met, at the threshold, by a claim on the part of the alleged debtor company that a genuine dispute or offsetting claim exists. If the creditor then wishes to persist with his or her attempt to obtain the benefit of the presumption of insolvency, he or she must succeed in defeating the allegation of genuine dispute or offsetting claim. 45 Clearly implicit in this statutory scheme is the proposition that a person claiming to be a creditor will not resort to the statutory demand process where that person is already aware of the existence of a genuine dispute or offsetting claim. Section 459E(3)(a) requires that person to say on oath or affirmation that the relevant amount is due and payable by the company. Via s.459E(3)(a) and the rules of court (Form 7), the person must also say that he or she believes that there is no genuine dispute about the existence or amount of the claimed debt. 46 In the present case, the defendant did not so believe when she caused her solicitors to serve the statutory demand. Those solicitors, in foreshadowing court action in their letter of 30 June 2006, adopted an unexceptionable approach to resolution of an acknowledged and recognised contractual dispute. But resort instead to the statutory demand procedure intended for cases where the creditor must proceed on the clear footing that there is no dispute as to the amount or existence of the debt (and swear an oath or make an affirmation accordingly) was for a purpose quite incompatible with the purpose that procedure is intended to serve. 47 Reference was made by counsel for the plaintiff to First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939 and Equuscorp Pty Ltd v Perpetual Trustee WA Ltd (1997) 80 FCR 296. I am satisfied that the present case is of the type of which Santow J (as he then was) spoke in the former case (at p.951): "It has been said on numerous occasions that the Companies Court is not to be the court which deals with disputed debts. If there is an honest dispute between the parties as to the amount of the debt, they are expected to resolve their dispute through the normal channels such as litigation in the Common Law Division or the District Court, not by the means of winding up proceedings; for example, see John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 12 ACLC 716 at 717 per Young J. Where a statutory demand has been so grossly inflated as almost exclusively to comprise matters which it should have been obvious from the outset were in genuine dispute between the parties at the time the demand was served, then an order under s459J(1)(b) setting aside the demand may well be required to prevent such an abuse of the regime under Pt5.4. This is even if the substantiated amount remained above the statutory minimum. The lack of bona fides on the part of the creditor in serving a demand where substantially the whole claim was obviously in dispute might be relevant to this." 48 On the basis that, for the reasons I have stated, the statutory demand was an abuse of process and that s.459J(1)(b) therefore applies, there will be an order that the statutory demand be set aside and an order that the defendant pay the plaintiff's costs of the proceedings. **********

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.

Magistrate's Court Act 1989(Vic)

CITATION : Polstar Pty Ltd v Agnew [2007] NSWSC 114

Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 ACTR 22 Croker v Ewen [2000] NSWCA 186 David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 Deputy Commissioner of Taxation v Ikin (2006) 61 ATR 706 Deputy Commissioner of Taxation v Keck (2006) 63 ATR 310 Deputy Commissioner of Taxation v Nercessian [2006] ATC 4693 Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305 Equuscorp Pty Ltd v Perpetual Trustee WA Ltd (1997) 80 FCR 296 First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939 Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 CASES CITED : Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 Italiano v Carbone [2005] NSWCA 177 Ketrim Pty Ltd v AS&L Pty Ltd (2004) 214 ALR 206 KW & KM Quinn Investments Pty Ltd v Deputy Commissioner of Taxation [2004] QCA 91 Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) (2002) 167 FLR 175 Macrae v St Margaret's Hospital (1999) 19 NSWCCR 1 Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2002) 168 FLR 213 Sarikaya v Victorian Workcover Authority (1997) 80 FCR 262 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 Wesfarmers Kleenheat Gas Pty Ltd v Elgammal [2006] NSWSC 1248

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