TECHNITRADE PTY LTD v COMPUCON COMPUTERS

JUDGE BURLEY. The plaintiff has applied for an order that the creditor's statutory demand for payment of debt dated 21 May 2002 be set aside. The application has been made pursuant to Section 459G of the Corporations Act (the Act). The plaintiff contends that there is a genuine dispute between the plaintiff and the defendant about the existence of the debt (Section 459H of the Act). The plaintiff also contends that there are a number of defects in the demand and that substantial injustice will be caused unless the demand is set aside (Section 459J of the Act).

Before setting out the relevant facts, it is convenient to deal with one of the submissions made by the plaintiff relating to service of the statutory demand. It is common ground that the statutory demand was delivered on 30 May 2002 to 133 Railway Terrace, Ascot Park, which, according to Exhibit ELH1, was the principal place of business of the plaintiff. It is common ground that at the relevant time the registered office of the plaintiff was 77 Palmer Place, North Adelaide. It was submitted by Mr Ryder, counsel for the plaintiff, that service at the Railway Terrace address was not effective service. He characterised this as a defect in the notice but I consider that this is an incorrect characterisation. The alleged failure to serve a statutory demand does not constitute a defect in the written demand itself. Rather, it would constitute a failure to comply with the provisions of Section 459E of the Act which requires a creditor to "serve" the demand before it becomes effective. Be that as it may, it is necessary for me to determine whether or not the demand has been effectively served.

Mr Ryder submitted that service of documents upon a company is provided for in Section 109X of the Act. He submitted that unless service was effected in accordance with the provisions of that section, there could be no effective service. He relied upon the decision of Cohen J in Vicbar Pty Ltd and Anor v Development Constructions (Newcastle) Pty Ltd (1995) 13 ACLC 1220. In that case the applicant, who applied to the Court to set aside a statutory demand, served the proceedings at an address which was not the registered office of the creditor company and which was not the address for service referred to in the statutory demand. There was no evidence that the address to which the proceedings were sent was ever the registered office of the defendant. Cohen J formed the view that the proceedings consisting of the application to set aside the statutory demand were not served within the relevant 21 day period and he dismissed the application.

His Honour did not deal with the question of whether or not the means of service referred to in Section 109X of the Act were the only means by which the company might be served. This point was dealt with by Young J in Howship Holdings Pty Ltd v Leslie and Anor (1996) 41 NSWLR at 542. In that case Young J held that the manner of service of documents on a company is not confined to the methods referred to in Section 109X of the Act. His Honour said, however, that if an alternative means of service, such as in that case the use of a DX box, is adopted, the party requiring to serve the document must establish if and when the document came to the attention of a person in authority within the company. That seems to me to be the approach which should be taken in this case.

The demand was delivered to the principal place of business of the plaintiff and, within the 21 day period, this application to set aside the statutory demand was issued and served. A combination of those circumstances indicates to me that some time between 30 May and 17 June this year, the demand came to the attention of someone in authority in the company with the result that these proceedings were commenced. In those circumstances I consider that the statutory demand was effectively served some time between those two dates. Such a finding is sufficient for the purposes of this case because no argument has been advanced by the defendant that these proceedings were commenced and served after the relevant 21 day period. The situation might be different if, for example, it was suggested, in circumstances similar to this case, that the proceedings had not been served until after the 21 day period. In that case it would be necessary for the Court to make a more precise finding as to when service actually took place, in the sense that the documents came to the attention of somebody in authority within the company.

The plaintiff relied upon additional grounds for the setting aside of the statutory demand. Reliance was placed on Section 459H of the Act because it was submitted by the plaintiff that the debt was genuinely disputed. The plaintiff also placed reliance upon the provisions of Section 459J of the Act because, it was asserted, there were defects in the demand which would cause substantial injustice to the plaintiff unless the demand was set aside.

I shall deal with the matters arising under Section 459J of the Act first.

The plaintiff has complained about the content of the affidavit accompanying the statutory demand. That was sworn by Mr Steve Yip on 27 May 2002. I do not consider that any defect in such an affidavit comes within the terms of Section 459J(1)(a) of the Act. That section deals with the demand itself as opposed to the affidavit in support of the demand. Such a distinction is made in Section 459E(3) of the Act which provides that the demand must be accompanied by an affidavit. Moreover, a defect in relation to a statutory demand is defined in Section 9 of the Act as including:

(c) a misdescription of a debt or other matter; and

There is no reference in the definition to the affidavit accompanying the demand.

In addition, in B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433, the Court dealt with defects in the accompanying affidavit by reference to Section 459J(1)(b) of the Act.

For these reasons I do not consider that Section 459J(1)(a) applies to any defect that might exist in the affidavit supporting the statutory demand.

This leaves for consideration Section 459J(1)(b) of the Act. The complaints made about Mr Yip's affidavit of 27 May 2002 are set out in the written submission handed up by Mr Ryder. They are as follows:

"5.5.1 does not state that Yip is authorised by the creditor to make this affidavit on its behalf;

5.5.2 does not state the source of Yip's knowledge of the matters stated in the First Yip Affidavit (ie access to accounts etc);

5.5.3 does not state that the total amount of the debts is due and payable by the plaintiff;

5.5.4 does not state a belief that there is no genuine dispute about the existence or the amount of the debts."

Mr Ryder contended that the above matters transgress the requirements of Rule 5.2 of the Corporations Law Rules 2000, South Australia (the Rules). That rule requires that the affidavit accompanying the statutory demand must be in the form of Form 7. The matters referred to in sub-paragraph 5.5.1 are absent from Mr Yip's affidavit contrary to the requirements of Rule 5.2. I consider that the complaints made in the first three sub-paragraphs set out above are not matters which could either individually or in combination lead to an order setting aside the statutory demand. They are minor departures from the requirements of the rule which are substantially attended to in an indirect way by the actual content of the affidavit.

As to the requirement that the deponent state a belief that there is no genuine dispute about the existence of the amount of the debt, the omission of such a statement may have more serious consequences. The requirement that there be such a statement in the affidavit ensures that the deponent gives consideration to whether or not the debt might be genuinely disputed. In other words, where dealings between the debtor and the creditor prior to the issue of the statutory demand make it clear to the creditor that the debt is disputed, the deponent to the affidavit accompanying the statutory demand must give consideration to whether or not there exists a genuine dispute between the debtor and the creditor as to the existence of the debt. In my view, this is an important requirement because the service of a statutory demand upon an alleged debtor is the first part of the process which may lead to the alleged debtor being wound up on the ground of deemed insolvency. In addition, if a statutory demand is served without giving proper consideration to the question of whether or not the debt is genuinely disputed, the debtor is then put to the expense of attempting to have the statutory demand set aside.

The equivalent of Rule 5.2 was dealt with by McLelland CJ in B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (supra) at 435 where his Honour said:

"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."

His Honour came to the view that the inadequacies of the affidavits in the circumstances of that case constituted a sufficient "other reason", for the purposes of Section 459J(1)(b), why the demand should be set aside.

That approach applies to this case. There is no evidence that Mr Yip gave consideration to the question of whether or not the debt was genuinely disputed. The dealings between the parties prior to service of the statutory demand raised such a matter.

For these reasons, I consider that the statutory demand should be set aside. The next ground relied upon by the plaintiff for the setting aside of the statutory demand was that the debt was genuinely disputed. I propose briefly to state my conclusions regarding that aspect of the argument. A perusal of the affidavits of the various deponents relating to the dealings between the parties indicates that, from the defendant's point of view, the plaintiff by its agent, Mr Harrison, placed an order for goods supplied to the wholesale trade by the defendant. The plaintiff alleges that Mr Harrison never at any stage had authority to place an order for the goods in the name of the plaintiff and Mr Harrison, in an affidavit filed by him, has confirmed that he purchased the goods in his own right and not on behalf of the plaintiff. It is the defendant's assertion that whatever agreement may have been struck between Mr Harrison and the plaintiff relating to the acquisition of the goods, Mr Harrison at the least had apparent authority to order the same on behalf of the plaintiff and that as far as the defendant was concerned, the plaintiff was the debtor not Mr Harrison.

The defendant also relied upon evidence to the effect that a payment of $8,500.00 was made off the total indebtedness of nearly $70,000.00 by the plaintiff. The plaintiff explains this by saying there was a loan account in existence between the company and Mr Harrison and Mr Harrison asked the company to make the payment of $8,500.00 in part satisfaction of the debt due by the company to him.

Having considered all of the evidence adduced by the parties and the submissions of counsel, I have come to the conclusion that the claim is genuinely disputed by the plaintiff. To use the language from another jurisdiction, there is a serious question to be tried between the parties, namely whether or not Harrison must be regarded as having purchased the goods on behalf of the plaintiff as opposed to a purchase of the goods in his own right in circumstances where the defendant was or should have been aware that he was not acting as the agent of the plaintiff.

For the above reasons, there will be an order that the statutory demand dated 21 May 2002 served by the defendant upon the plaintiff be set aside. I will hear the parties as to costs.