CONSIDERATION AND ANALYSIS
24 The combined effect of ss 459G(1) and (2) of the Act is that a company can only apply to the Court for an order setting aside a statutory demand served on the company if the application is made within 21 days after the demand is so served. There is no dispute that the four applications in the present case satisfy that requirement. The applications in NSD 2023/2013 and 2024/2013 were filed on 27 September 2013, within 21 days after the demands were served namely, 12 September 2013; and the applications in NSD 2051/2013 and 2052/2013 were filed on 3 October 2013, within 21 days after the demands were served namely, 19 September 2013.
25 The combined effect of ss 459G(1), (2) and (3) of the Act is that an application will only be in accordance with s 459G if, within those 21 days:
(1) An affidavit supporting the application is filed with the Court; and
(2) a copy of the application, and a copy of the supporting affidavit are served on the person who served the demand on the applicant company.
It is common ground that if the affidavits sworn by Mr Champion on 26 September 2013 are "affidavit[s] supporting the application[s]" in NSD 2023/2013 and 2024/2013, and if the affidavits sworn by Mr Champion on 2 October 2013 are "affidavit[s] supporting the application[s]" in NSD 2051/2013 and 2052/2013, all the applications will be in accordance with s 459G. This flows from the undisputed facts that Mr Champion's affidavits were filed with the Court on the same date as the respective applications they purport to support and copies of both were served on the defendant company within the respective 21 day periods.
26 So the first issue which emerges from this largely common ground is whether Mr Champion's affidavits sworn 26 September 2013 are "affidavit[s] supporting the application[s]" in NSD 2023/2013 and 2024/2013; and whether Mr Champion's affidavits sworn 2 October 2013 are "affidavit[s] supporting the application[s]" in NSD 2051/2013 and 2052/2013.
27 Each of the four applications is grounded in s 459J(1)(b) of the Act, namely, "there is some other reason why the demand should be set aside" which, construed in context, means some reason other than because of a defect in the demand. In other words, paras (a) and (b) of s 459J(1) are mutually exclusive: see, Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 51 FCR 446 at 450E per Hill J, and Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 459D-461B per the Court.
28 So construed, are Mr Champion's affidavits supportive of the respective applications? If these were applications grounded in s 459H(1)(a) of the Act, then the first sentence of para 5 of each affidavit, namely: "I say that there is a genuine dispute as to the debt", would not be enough: Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 at 459F. In Graywinter, Sundberg J said at 459D that: "In order to be a 'supporting affidavit', an affidavit must say something that promotes the company's case."
29 In Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45 at [22], Barrett J said:
The real point is that the application and affidavit filed and served within the 21 day period must fairly alert the claimant to the nature of the case the company will seek to make in resisting the statutory demand. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by ss.459H and 459J. That process of delineation may not be extended after the end of the 21 day period, although it is open to the plaintiff to supplement the initial affidavit by way of additional evidence relevant to the area of controversy identified within the period.
30 In Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321, White J said:
[29] In POS Media Online Ltd v B Family Pty Ltd (2003) 21 ACLC 533; [2003] NSWSC 147, Austin J observed that the observations of Barrett J in Process Machinery at [21] and [22] arguably took the observations of Sundberg J in Graywinter further than they were taken by the Court of Appeal of the Supreme Court of Western Australia in Energy Equity Corporation v Sinedie Pty Ltd (2001) 166 FLR 179; [2001] WASCA 419, and might be inconsistent with Callite Pty Ltd v Adams [2001] NSWSC 52.
…
[32] Having regard to the diversity of reasoning in these cases as to the precision with which a ground of challenge must be delineated in the supporting affidavit, I do not consider that comity requires me to follow the observations in Process Machinery at [21]-[22] that a supporting affidavit must clearly delineate the grounds of challenge to a statutory demand expressly or by necessary implication.
[33] If I was wrong in my conclusion expressed during argument that the grounds of challenge were raised by necessary inference, I am nonetheless of the view that the grounds of challenge were available to the plaintiff. They arise from the terms of the supporting affidavit and documents annexed to it. In my respectful opinion, it is not necessary for the applicant to expressly articulate the grounds in the affidavit, or to do so by necessary inference, as distinct from available inference. In my respectful view, all that can be implied from the requirement in s 459G that there be an affidavit filed and served within 21 days supporting the application is that the grounds of challenge must be raised in that affidavit. As Parker J said in Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (2002) 26 WAR 306; 167 FLR 106; 20 ACLC 1287; [2002] WASCA 51 (at [34]):
[34] … The statutory yardstick remains that the affidavit should support the application. The precise nature of the application may well influence what this requires.
31 In the present case, there could be no genuine dispute between the plaintiffs and the defendant about the existence or amount of the debts to which the demands related. The debts were judgment debts for fixed amounts. So much was conceded by counsel for the plaintiffs. Section 459H(1)(a) was therefore irrelevant.
32 Section 459H(1)(b) - "the company has an offsetting claim" - was not relied on, although it was relied on in the proposed amended originating process which the plaintiffs sought leave to file in each proceeding on the morning of the hearing. As I refused leave (see [7] above), it can be put to one side.
33 This leaves s 459J(1)(b) and the question remains, whether Mr Champion's affidavits sworn 26 September and 2 October 32013 are "affidavit[s] supporting the application[s]" grounded on that section. In my view they are. In each case, the second and third sentences of para 5 read:
Annexed to this affidavit and marked "D" is a copy of the Amended Cross Summons in proceedings no. 2011/365912, filed 6 May 2013, and the Amended Statement of [Cross] Claim in those proceedings, filed 6 May 2013. The sums claimed in those proceedings are in excess of the debt the subject of the Creditor's Statutory Demand …
34 The Amended Cross-Summons and the Amended Statement of Cross-Claim in proceedings No 2011/365912 contain sufficient information and material to "fairly alert" the defendant "to the nature of the case" the plaintiffs "will seek to make in resisting the statutory demand": Process Machinery at [22], whether one adopts the "clear delineation" test of Barrett J in Process Machinery at [22], or the more elastic test of White J in Hansmar Investments at [32] and [33].
35 It follows, in my view, that Mr Champion's affidavits sworn 26 September 2013 and 2 October 2013 are "affidavit[s] supporting the application[s]" in all proceedings, ground as they all are on s 459J(1)(b) of the Act and that, in consequence, all applications are in accordance with s 459G.
36 The remaining issue which emerges is whether the existence of the cross-claim, arising as it does out of the same subject matter or circumstances upon which the judgment debts are constituted, is a reason why the demands should be set aside under s 459J(1)(b)?
37 It is to be observed that s 459H(6) provides that s 459H has effect subject to s 459J. In Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1995) 16 ACSR 213, Olney J expressed the view at 219 that: "It is not altogether clear what the effect of s 459H(6) is …" and went on to say that:
The "other reason" cannot be a defect causing substantial injustice nor can it be a mere defect (s 459J(2)), and it could hardly have been intended to refer to a genuine dispute between the company and the person making the demand about the existence or amount of the debt.
38 In the Full Court (1996) 62 FCR 302, the Court at 317 said:
Whatever view is taken of the relationship between s 459J(1)(a) and (b), the Court has a discretion in a case which does not involve a defect in the demand to set aside the demand, if some appropriate reason is shown. The discretion may be exercised in favour of a company, even without a showing that substantial injustice would otherwise be caused: [Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562 at 577].
It would be unwise to attempt to mark out the limits of the discretion conferred by s 459J(1)(b)…
39 And in the subsequent case of Spencer Constructions, a differently constituted Full Court confirmed that the only fetter on the Court's discretion under s 459J(1)(b) is whether the reason is the existence of a defect in the demand: at 460F-G and the cases there referred to.
40 It follows, in my view, that in the present case, the Court's discretion is not in any way fettered if there is "some other reason why the demand(s) should be set aside".
41 Counsel for the plaintiffs submitted that I should exercise my discretion under s 459J(1)(b) to set the demand(s) aside for the following reasons.
(1) The Amended Statement of Cross-Claim (Annexure D to the 26 September and 2 October 2013 affidavits) sets out the relief sought by the plaintiffs. Order 2 seeks:
An order that the legal costs and disbursements claimed by the first cross defendant and any other monies claimed under Costs Assessment no 2011/360984 and Cost Assessment no 2012/3059 be set aside.
(2) The Amended Statement of Cross-Claim was filed on 6 May 2013, well before the defendant sought to enter the judgments that found the demands. The causes of action giving rise to the relief sought in the Cross-Claim include misleading and deceptive conduct, breach of retainer, negligence and breaches of the Legal Profession Act 2004 (NSW).
(3) These are plausible contentions, placing the debt in dispute and requiring further investigation (through a hearing in the Supreme Court). The dispute truly exists in fact by virtue of the commencement of proceedings in the Supreme Court.
(4) Notwithstanding that judgments have been entered, this particular claim to relief is not an off-setting claim: it is a claim that there is no liability to pay the monies claimed under the costs assessments.
(5) If there were any doubt about that position, on 26 November 2013, the Supreme Court of NSW stayed the enforcement of both the judgment debts that are the subject of the demands, pending the determination of the cross-claim.
(6) The stay was granted following the undertaking of the plaintiffs to pay a sum of $72,000 into court in instalments .
42 There is no evidence of the matters referred to in [41(5)] and [41(6)] because I refused leave to file and read Mr Champion's further affidavit sworn 26 November 2013. However, these matters were conceded by counsel for the defendant (T 27/39-28/16).
43 I agree that I should exercise my discretion under s 459J(1)(b) to set aside the demands. There is undoubtedly a genuine dispute between the defendant and the plaintiffs, not about the existence or amounts of the judgment debts upon which the demands are founded, but about the costs assessments which constitute the basis upon which the judgment debts were entered and whether those assessments are "infected" by the cause of action raised in the cross-claim such that there is no liability to pay the moneys claimed under those costs assessments.
44 The plaintiffs should have their costs of the applications.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.