Standard Commodities Pty Ltd v Societe Socinter department Centragel [2005] NSWSC 294 | Case summary

5869/04 - STANDARD COMMODITIES PTY LIMITED v SOCIÉTÉ SOCINTER DÉPARTMENT CENTRAGEL JUDGMENT 1 The plaintiff applies under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant. The statutory demand is dated 8 October 2004 and refers to a total debt of $113,998.40 which is said to be the equivalent in Australian currency of a sum in Euros allegedly awarded in favour of the defendant and against the plaintiff by a French court (Tribunal de Commerce de Paris) by judgment pronounced on 7 May 2003, plus interest and costs. 2 The plaintiff's claim for an order setting aside the statutory demand is put on two bases: first, on the ground made available by s.459J; and, second, on the "genuine dispute" ground made available by s.459H(1)(a). 3 Two matters are put forward as relevant for the purposes of s.459J. The first is that the affidavit which accompanied the statutory demand (see s.459E(3)) is defective. That affidavit was sworn by Mr Luxford, a Sydney solicitor, who, as the affidavit itself makes clear, deposed to all relevant matters on information and belief obtained by him from the defendant's French lawyers. The second ground of attack under s.459J is that the demand does not relate to a debt payable in Australia and gives no address for payment in Australia. 4 The argument based on the form and content of the s.459E affidavit sworn by Mr Luxford has regard to s.459E(3)(b) which says that the affidavit called for by s.459E(3) must comply with "the rules" which, in the context and having regard to the s.9 definition of "rules", means the rules of this court. Relevant provisions of "the rules" are rules 5.2 and 2.5 of the Supreme Court (Corporations) Rules 1999. Those rules are as follows: " 5.2 Affidavit accompanying statutory demand (Corporations Act s 459E (3)) - Form 7 For the purposes of subsection 459E (3) of the Corporations Act, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must: (a) be in accordance with Form 7 and state the matters mentioned in that Form, and (b) be made by the creditor or by a person with the authority of the creditor or creditors, and (c) not state a proceeding number, or refer to a Court proceeding, in any heading or title to the affidavit." " 2.5 Affidavits made by creditors Subject to rule 5.4, an affidavit that is to be made by a creditor may be made: (a) if the creditor is a corporation - by a director, secretary, or other principal officer of the corporation, or by a person employed by the corporation who is authorised to make the affidavit on its behalf, or (b) if the creditor is a company to which a liquidator, provisional liquidator, receiver, administrator or controller has been appointed - by that person, or (c) in any other case - by the creditor or a person authorised by the creditor to make the affidavit on behalf of the creditor." 5 I have previously expressed a view, in a similar factual context, that rule 5.2 operates to the exclusion of rule 2.5 in cases of this kind: see Roberts v South East Asia Communications Pty Ltd [2003] NSWSC 800 at [3]. I adhere to that view. Rule 5.2 deals expressly with an affidavit called for by s.459E(3). It imposes positive requirements in relation to such an affidavit (the operative word is "must"). Rule 2.5, by contrast, deals generally with "an affidavit that is to be made by a creditor"- that is to say, any affidavit to be made by a creditor. There is an inconsistency between the two. Rule 5.2 requires a s.549E(3) affidavit to be made "by the creditor or by a person with the authority of the creditor or creditors" in all circumstances (and regardless of the nature of the creditor), whereas rule 2.5 allows an affidavit that is to be made by a creditor to be made by "a person authorised by the creditor to make the affidavit on behalf of the creditor" only where the creditor is neither a corporation nor a company to which a liquidator, provisional liquidator, receiver, administrator or controller has been appointed. This is the effect of the words "in any other case" in rule 2.5(c). In either of the particular circumstances referred to in rules 2.5(a) and 2.5(b), the affidavit is to be made by the nominated officer or representative regardless of whether he or she is shown to be a person authorised by the corporation or company to make the affidavit. 6 The specific and mandatory rule dealing with affidavits under s.459E(3) must, in my opinion, operate, in a case such as the present, to the exclusion of the general rule with respect to all affidavits of creditors. I do not think that the two can somehow co-exist and apply together in a s.459E(3) case. In this respect, I regret to say that I do not accept the approach taken by Master McLaughlin in First Sydney Properties Pty Ltd v Double Bay Project Pty Ltd [2004] NSWSC 1137 which involves a requirement to comply with both rule 2.5 and rule 5.2 in relation to a s.459E(3) affidavit. Nor do I think that anything relevant to the choice between rule 2.5 and rule 5.2 (or the possibility that it may be necessary to comply with both) is to be gathered from the decisions of McLelland CJ in Eq in B & M Quality Constructions Pty Ltd (1994) 15 ACSR 433 and L M & W J Taylor Pty Ltd v Armour Timber & Trading Pty Ltd (1996) 19 ACSR 231. The requirements under the single (and now superseded) rule there under discussion as to making of a s.459E affidavit corresponded with the requirements under the present rule 2.5. There was no general rule as to "an affidavit that is to be made by a creditor". 7 In the affidavit under discussion, Mr Luxford, after stating that he has been retained by the defendant's French lawyers, says: "I am authorised to issue the Statutory Demand and to make this Affidavit on behalf of the Creditor."

Mr Luxford, upon his oath, thereby asserted the authorised status made necessary by rule 5.2(b) and, in the absence of evidence to the contrary (that is, evidence calling in question his authority from the defendant to make the affidavit), I accept that the affidavit complies with rule 5.2(b). 8 The plaintiff says that there is another way in which the affidavit fails to comply with rule 5.2 (and therefore with s.459E(3)(b)). It points to the requirement in rule 5.2(a) that the affidavit "be in accordance with Form 7 and state the matters in that Form". Form 7 contains directions. One of them specifies matters to be stated in paragraph 3 of the affidavit: "State the source of the deponent's knowledge of the matters stated in the affidavit in relation to the debt or each of the debts, eg 'I am the person who, on behalf of the creditor(s), had the dealings with the debtor company that gave rise to the debt', 'I have inspected the business records of the creditor in relation to the company's account with the creditor'." 9 Form 7 also requires that the affidavit contain the following statements: "4. The debt/The total of the amounts of the debts mentioned in paragraph 1 of this affidavit is due and payable by the debtor company. 5. I believe that there is no genuine dispute about the existence or amount of the debt/any of the debts." 10 The purported compliance, in Mr Luxford's affidavit, with the direction that the source of the deponent's knowledge be stated involves no more than annexing of the French judgment and a certified translation of it into English. That, coupled with, first, Mr Luxford's statements that he is retained by the defendant's French lawyers (Dizier & Bourayne) and is authorised to make the affidavit on behalf of the creditor and, second, the fact that the judgment shows those French lawyers to have acted for the defendant in the French proceedings, is, in my opinion, sufficient to satisfy the requirement that the source of the deponent's knowledge be stated. The position is the same as that in Asa's Organics Steak Hut Pty Ltd v Floor Level Australia Pty Ltd [2001] QSC 509. 11 Purported compliance with paragraphs 4 and 5 of Form 7 takes the form of paragraphs 6 and 7 of Mr Luxford's affidavit: "6. I am instructed by Dizier & Bourayne and believe that the debt mentioned in the statutory demand is due and payable by the debtor company. 7. I am instructed by Dizier & Bourayne and believe that there is no genuine dispute about the existence or amount of the debt." 12 In B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (above), McLelland CJ in Eq referred to the requirements that are now imposed by a combination of rule 5.2(a) and paragraphs 4 and 5 of Form 7 but previously derived direct from the rules. After referring to the specifications as to persons by whom affidavits for s.459E(3) purposes may be made, his Honour said: "It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute if there is one makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability. I therefore do not regard what has occurred in the present case as a merely technical breach of the rules." 13 McLelland CJ in Eq regarded the hearsay nature of the statements in the affidavit as constituting "some other reason" for setting aside the statutory demand under s.459J(1)(b). His Honour expressed a like opinion in L M & W J Taylor Pty Ltd v Armour Timber & Trading Pty Ltd (above). In Hamilhall Pty Ltd v A J Phillips Pty Ltd (1994) 15 ACSR 247, Branson J referred to the need for the s.459E(3) affidavit to be made by someone who could depose to the relevant matters from his or her own knowledge. In Delta Beta Pty Ltd v Vissers (1996) 20 ACSR 583, Nicholson J said, in relation to an accompanying affidavit made by a solicitor, that "the hearsay assertions of the deponent bring to the statutory demand a verisimilitude to which it is not entitled". His Honour regarded this as a sufficient "other reason" to set aside the demand under s.459J(1)(b). 14 In the present case, the deponent of the s.459E(3) affidavit made it clear in paragraphs 6 and 7 that his expressed beliefs as to the debt being due and payable and as to the absence of genuine dispute were based solely on what he had been told by the French lawyers. While he said that he was authorised by the defendant to make the affidavit, he clearly did not identify the defendant as the source of the information reflected in paragraphs 6 and 7. While it may be inferred that the French lawyers (having acted in the French proceedings) had direct knowledge of the obtaining of the judgment and its effect and consequences, there is nothing to show that they may be regarded as a reliable source of information on, for example, non-payment by the plaintiff direct to the defendant after judgment or communication by the plaintiff direct to the defendant of a dispute about the existence of the debt said to be represented by or embodied in the French judgment. In that way, the purported compliance with the requirements derived from paragraphs 4 and 5 of Form 7 may be seen to involve hearsay, uncertainty and potential unreliability severely calling in question the quality of the information given. 15 If a person claiming to be a creditor of a company is to obtain, through Part 5.4, the benefit of a presumption of insolvency under s.459C, it is necessary that that person provide to the company all the information that must be provided in and with a statutory demand. The company receiving the demand is entitled to know that the information given both comes from and is attested to by the person claiming to be a creditor. Where, as here, important elements of the information are represented as no more than a belief of a third party based wholly on representations of a second party and without any indication at all that the second party has obtained the information from the person claiming to be a creditor, that entitlement is denied. In the present case, the affidavit cannot be regarded as containing any statement by (or sourced from) the defendant as to the matters referred to in paragraphs 4 and 5 of Form 7. In line with the cases mentioned at paragraphs [12] and [13] above, that, in my opinion, represents a reason under s.459J(1)(b) for setting aside the statutory demand. 16 I nevertheless proceed to consider briefly the plaintiff's argument based on the fact that the statutory demand does not relate to a debt payable in Australia and gives no address for payment in Australia. It is submitted on behalf of the plaintiff that this constitutes a defect in the demand within s.459J(1)(a). Reference was made to the decision of the Full Federal Court in Re Luckins; Ex parte Columbia Pictures Inc (1996) 67 FCR 549 in that connection. 17 Nothing in Part 5.4 of the Act confines its operation of that part to debts payable in Australia. Nor is there any requirement in Part 5.4 or the prescribed form of statutory demand (Form 509H) for the specification of a place in Australia at which payment of the demanded debt may be or is to be made made. Re Luckins (above) was a case concerning a bankruptcy notice. Such a notice must, of course, be based on a judgment debt. The decision there as to the need for a foreign creditor to specify a place for payment in Australia was a reflection of the effect of the underlying judgment. The decision does not support the view that some such requirement is to be implied in relation to statutory demands. Failure to specify in the demand a place for payment in Australia is not a defect for the purposes of s.459J(1)(a). 18 For the sake of completeness, I also consider briefly the plaintiff's attack on the statutory demand on the "genuine dispute" ground in s.459H(1)(a). The plaintiff relies, in that respect, on s.10 of the Foreign Judgments Act 1991 (Cth) - an Act which, by regulations made in 1993, applies to a judgment of the Tribune de Commerce de Paris. Section 10 is as follows: " Registrable judgments not to be otherwise enforceable (1) No proceedings for the recovery of an amount payable under a judgment to which this Part applies, other than proceedings by way of registration of the judgment, are to be entertained by a court having jurisdiction in Australia. (2) Nothing in this section affects the enforcement, under the International Arbitration Act 1974 , of an award." 19 It is common ground that the French judgment obtained by the defendant against the plaintiff has not been so registered. 20 Section 10 of the Foreign Judgments Act does not preclude reliance upon a foreign judgment as a basis for the service of a statutory demand. In a very general sense, such a demand might be regarded as a "proceeding". It was so regarded, for the purposes of principles about abuse of process, by Austin J in James Estate Wines Pty Ltd v Widelink (Australia) Pty Ltd (2003) 47 ACSR 72. But by no stretch of the imagination can service of a statutory demand based on a judgment debt be seen as "proceedings for the recovery of an amount payable under a judgment". By serving a statutory demand, a creditor does not attempt to recover the relevant debt. Culmination of the legal process set in train by such service can never be receipt by the creditor of money in satisfaction of that debt, even though this might be, in some cases, a practical by-product of such service. At best, the creditor will achieve by that legal process the benefit of a presumption of insolvency under s.459C and, so armed, may ask the court to make a winding up order which, if made, will cause the creditor to be denied the right to recover the debt as such and to obtain instead a right to participate in a distribution in the winding up: Motor Terms Co Pty Ltd v Liberty Insurance Ltd (1967) 116 CLR 177. Non-registration of the French judgment therefore does not represent any basis for a contention that there exists a genuine dispute as to the existence of the debt the judgment recognises or creates. 21 There is an additional suggestion of genuine dispute within s.459H(1)(a). The plaintiff says that the French judgment was not served as required by French law. The defendant replies by pointing to evidence of service through the Consul-General for France in Sydney at the address at Double Bay which was the address given by the plaintiff for the purposes of the French proceedings. By that time, the plaintiff had moved to another address and the documents directed to the Double Bay address were returned unclaimed. I am satisfied, having regard to the affidavit evidence of the French lawyer, Mr Bourayne, that the French requirement as to service was satisfied by the steps taken. This matter therefore does not represent any basis for a finding of "genuine dispute" within s.459H(1)(a). 22 In the result, therefore, the plaintiff's contentions fail, with one exception. The exception relates to the s.459E(3) affidavit which, for reasons I have stated, is, in its paragraphs 6 and 7 irregular and defective in such a way as to require that the statutory demand be set aside by reference to s.459J(1)(b). 23 I therefore order that the statutory demand dated 8 October 2004 be set aside. I also order that the defendant pay the plaintiff's costs. **********

Standard Commodities Pty Ltd v Societe Socinter department Centragel

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