V & M Davidovic Pty Limited v Professional Services Group t/as Rosier Partners Lawyers

Judgment 1In this matter, the Plaintiff, V & M Davidovic Pty Limited ("VMD") applies to set aside a statutory demand dated 1 July 2011 ("the Demand") served by Professional Services Group Pty Limited trading as Rosier Partners Lawyers ("Rosier Partners"). The Demand claimed the amount of $68,027.35 which was identified as a judgment debt. That amount reflects the amount of a certificate issued by a costs assessor on 1 July 2011. Whether the Court has jurisdiction to set aside the Demand 2A preliminary question arises as to whether the Court has jurisdiction to set aside the Demand under s 459G of the Corporations Act 2001 (Cth). That section provides that an application to set aside a statutory demand may only be made within 21 days after the demand is served, and an application is made in accordance with the section only if, within those 21 days, an affidavit supporting the application is filed with the Court and a copy of the application and supporting affidavit are served on the person who served the demand on the company. The time limit imposed by s 459G is an essential condition of the right to apply for an order setting aside a statutory demand, and the Court has no jurisdiction to order the demand be set aside if the things which are required to happen within that specified period do not happen: David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265; Pearlburst Pty Ltd v Summers Resort Group Pty Ltd [2007] NSWSC 1126 per Barrett J at [6]. 3Rosier Partners contends, first, that service of the Demand was effected by facsimile on 1 July 2011 such that the 21 day period specified in Corporations Act s 459G expired on 22 July 2011. Mr Rosier's evidence is that, on 1 July 2011, he sent a covering letter and the Demand to a facsimile number to which he had frequently sent letters and other material the receipt of which had been acknowledged by VMD. That letter, Demand and the facsimile confirmation were in evidence. Mr Miroslav Davidovic ("Mr Davidovic") who is a director and shareholder of VMD, gave evidence in response to Mr Rosier's affidavit, but did not specifically address whether or when VMD had received the facsimile which Mr Rosier claimed to have sent on 1 July enclosing the Demand. I consider that I may properly infer that that facsimile was received by VMD on the date it was transmitted, where the evidence establishes its transmission and Mr Davidovic has not specifically sought to controvert its receipt by his evidence in the proceedings: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389; Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361; 85 ALJR 533 at [64]. 4Service of a statutory demand is effective if the company actually receives notice of that demand, including by facsimile, although facsimile service is not one of the methods of service set out in s 109X of the Corporations Act : Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542; Ketrim Pty Ltd v AS&L Pty Ltd [2004] NSWSC 1046; (2004) 52 ACSR 252 at [16]-[17]; Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2003] QSC 98; [2004] 1 Qd R 140. 5On the basis that the Demand was served on 1 July 2011, and excluding the day of service in accordance with the decision in Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463, an application to set aside the Demand and supporting affidavit would have had to be filed and served by VMD on or before 22 July 2011 in order to satisfy the 21 day period specified in Corporations Act s 459G(3). That did not occur, since that application and affidavit was not filed until 25 July 2011. That is sufficient to establish that the Court does not have jurisdiction to entertain the application to set aside the Demand. 6There is also evidence that the Demand was sent by ordinary pre-paid post to VMD's registered address on 1 July 2011 and Mr Davidovic admits receipt of the Demand presumably in that form, by 7 July 2011. On the basis that service of the Demand was effected on that date, then the application to set aside the Demand and supporting affidavit would need to be filed and served on or before 28 July 2011 in order to satisfy the 21 day period specified in Corporations Act s 459G(3). 7As noted above, the application to set aside the Demand was filed on 25 July 2011. VMD tendered evidence that the Demand and supporting affidavit were sent by registered post on 27 July 2011 and were still awaiting collection by Rosier Partners from the post office on 28 July 2011. This evidence does not establish that the application to set aside the Demand and supporting affidavit were served within the 21 period specified in Corporations Act s 459G(3), even if the Demand had not been served until 7 July 2011. There is strong evidence to the contrary, since an email sent by Mr Davidovic to Mr Rosier on 18 August 2011 stated that the documents relating to the application to set aside the Demand were posted by registered mail on 27 July 2011 but " this mail was recently returned to us " and requested Mr Rosier's advice as to whether he would accept service of the documents if they were posted by ordinary post. Mr Rosier's evidence is that he did not in fact become aware of the existence of the application to set aside the Demand until 18 August 2011. 8The interaction between s 109X of the Corporations Act , s 29(1) of the Acts Interpretation Act 1901 (Cth) and s 160 of the Evidence Act (NSW) was considered by White J in Scope Data Systems Pty Ltd v Goman as representative of the Partnership BDO Nelson Parkhill [2007] NSWSC 278; (2007) 70 NSWLR 176, and that analysis has been followed in other decisions including Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd [2010] FCA 1223 and Steel Building Systems Pty Ltd v Beks Constructions (NSW) Pty Ltd [2010] NSWSC 1405; (2010) 245 FLR 212. However, the complexities of that interaction do not arise in the present case, given the evidence that the Demand was not in fact delivered within the 21 day period but was in fact returned to VMD. The presumptions as to when delivery occurred have no room for operation when the evidence establishes, as a matter of fact, that delivery has not occurred within the relevant period. 9For these reasons, the Court lacks jurisdiction to make an order setting aside the Demand under Corporations Act s 459G and the application to set aside the Demand must be dismissed. Whether a genuine dispute is established 10I should nonetheless briefly address the other bases on which VMD seeks to rely to set aside the Demand. The basis of the application to set aside the Demand was set out in an affidavit sworn on or about 25 July 2011 by Mr Davidovic ("Mr Davidovic's 25 July affidavit"). 11The first basis on which VMD seeks to set aside the statutory demand under s 459H(1)(a) of the Corporations Act is that it has a genuine dispute as to the amount of the demand. VHD relies in that regard in proceedings which it has brought in the Supreme Court of New South Wales which seek, inter alia, an order that the judgment derived from the costs assessment be set aside (although the basis of that order is not identified) and also advance a claim for negligence against Rosier Partners. 12If the Court is satisfied that (1) there is a genuine dispute as to the existence or amount of a debt to which a statutory demand relates (s 459H(1)(a)) or (2) the company has an offsetting claim (s 459H(1)(b)), then the Court is required to calculate the "substantiated amount" of the demand by deducting any disputed amounts and any offsetting claim from the admitted amount of the debt: s 459H(2). The onus is on VMD, as the recipient of the Demand, to establish a genuine dispute: Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 at [15]. 13The test for a "genuine dispute" used in s 459H of the Corporations Act has been variously formulated as that the dispute is not "plainly vexatious or frivolous" or "may have some substance" or involves "a plausible contention requiring investigation" and is similar to that which would apply in an application for an interlocutory injunction or a summary judgment: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787. In Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39, Lockhart J observed that: "The notion of a 'genuine dispute' ... suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance. On the other hand the court must be careful, because if all an applicant has to do is to assert both a claim and some basis for it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect. Plainly that is not what the legislature intended by introducing this new regime." 14In Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [17], Barrett J noted that the test for a genuine dispute involved a "plausible contention requiring investigation", "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)". His Honour also noted that the tests for a genuine dispute, applied in the context of a summary procedure where it is not expected that the Court will embark on any extended enquiry, mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one, and that the company will fail in that test only if it is found, upon the hearing of its application, that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. His Honour noted that, once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow; and the Court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger. 15In Central City Pty Ltd v Montevento Holdings Pty Ltd above at [9], Murphy JA (with whom Buss JA agreed) observed that: "The expression 'genuine dispute'" within the meaning of s 459H(1)(a) of the [Corporations] Act, connotes a plausible contention requiring investigation: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 at [44]. The demand will be set aside if there is a bona fide disputed issue of fact or law, which is not based on spurious, hypothetical, illusory or misconceived grounds: Createc v Design Signs ; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59 at [35]. Once such a dispute is raised, it is not necessary for a company to satisfy the court as to where the merits of the dispute lie: Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 at [30]. The court will not attempt to weigh or examine the merits of any dispute: Createc v Design Signs; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 295." The decision of the Court of Appeal of the Supreme Court of Western Australia in Central City Pty Ltd v Montevento Holdings Pty Ltd was in turn followed by Barrett J in Beauty Health Group Ltd v Sholl [2011] NSWSC 77 at [4]. 16As noted above, the Demand reflects the amount of a costs assessment, which had been filed with the Supreme Court of New South Wales. Section 368 of the Legal Profession Act 2004 (NSW) provides for the issue of a certificate setting out a costs assessor's determination. Section 369 provides that, on the filing of the certificate in the registry of a Court having jurisdiction to order the payment of that amount of money, that certificate is taken to be a judgment of that Court for the amount of unpaid costs. The only matter raised in the Statement of Claim which potentially impeaches the claim for costs arising from the costs assessment is a conclusory pleading that " [t]he plaintiff disputes the defendant's entitlement to any fees and in the circumstances disputes the validity and basis of the application to assess fees ". This is not, in my view, sufficient to establish a genuine dispute as to the amount of the costs certificate. Accordingly, I do not consider the claim for a genuine dispute under s 459H(1)(a) is established. Whether an offsetting claim was established 17VMD also seeks to set aside the Demand on the basis that it has an offsetting claim under s 459H(1)(b) of the Corporations Act . An "offsetting claim" for the purposes of s 459H(1)(b) of the Corporations Act is the amount of a claim, or claims, that the company has against the person who served the statutory demand by way of counter claim, set-off or cross demand, whether or not that amount arises out of the same transaction or circumstances as the debt to which the demand relates: s 459H(5). A company can establish an "offsetting claim" if there is a "serious question to be tried" or "an issue deserving of a hearing" as to whether the company has such a claim against the creditor and that claim is made in good faith and is arguable and not frivolous or vexatious: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 at 356-7. 18Mr Davidovic's 25 July affidavit referred to VMD's engagement of Rosier Partners in respect of the entry by a third party, Cookson Plibrico Pty Limited ("Cookson") into a Deed of Option to Lease over a property at Unanderra ("Doyle Avenue property") and a subsequent proposal that Cookson lease an alternative property at Unanderra ("Sylvester Avenue property"). Mr Davidovic identified a claim that Rosier Partners had failed to attend to the execution of a Deed of Surrender of Lease to the Doyle Avenue property in July 2008 and contended that, but for that failure, Cookson would not have had any cause of action for release of a security deposit or claim for damages as it alleges in proceedings between Cookson and VMD in the Supreme Court of New South Wales ("Cookson proceedings"). Mr Davidovic also identified a claim that, had Rosier Partners attended to taking the necessary steps in respect of finalisation of the agreement to lease documents sent by Cookson's lawyers in respect of the Sylvester Avenue property, Cookson would have been bound to proceed with leasing that property. 19Mr Davidovic's 25 July affidavit also annexed a Statement of Claim which had been filed by VMD in the Supreme Court seeking relief including declaratory relief and several orders which were contingent on the outcome of the Cookson proceedings. Those proceedings also included an allegation in respect of the hearing of a motion in the Cookson proceedings although that matter was not referred to in Mr Davidovic's 25 July affidavit. 20Rosier Partners has in turn led evidence, which is supported by contemporaneous documents placed in evidence before me, that it was not retained by VMD in respect of the relevant matters until mid-December 2008 and another firm was acting for VMD in respect of the leases in July 2008. However, it seems to be preferable that I do not comment further as to that matter, since it is the subject of separate proceedings in another Division of the Court, and is not necessary to a determination of these proceedings, both because of the findings which I have made as to the timing of service of the application to set aside the Demand above and because of the findings which I will make in respect of the quantification of this claim below. 21I consider that the material filed in respect of the application does not establish a genuine offsetting claim for another reason, namely that there is not sufficient evidence before me to establish the quantum of the damages claimed even to the relatively undemanding standard required to establish an offsetting claim. In Royal Premier Pty Ltd v Talesk i [2001] WASCA 48 at [57], Ipp J observed, in respect of whether an offsetting claim had been established, that: "There is another supervening and fundamental problem with the appellant's contentions, namely, there is no evidence of any damages that the appellant might have suffered in consequence of the alleged negligence or misleading or deceptive conduct on the part of the respondent. Of course, at this stage, it is not necessary for evidence as to damages to be given in meticulous detail. But there must be at least some material upon which the court can conclude that some damage has been sustained and which will enable the court to make a reasonable assessment as to the amount thereof. In this case, however, there is simply no way of determining whether damage was suffered by the appellant in consequence of the alleged negligence or misleading or deceptive conduct, and there is no evidentiary material from which damage suffered by the appellant can be calculated. This absence of evidence as to damage is itself fatal to the appellant's arguments." 22In Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, Palmer J observed at [18]: "In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s 459H(1) and s 459H(2)." The decisions in Grass Manufacturers Pty Ltd v Sraennik Pty Ltd [2003] NSWSC 95 and Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 indicate that the material required to quantify an offsetting claim may not need to be substantial, but do not suggest that such evidence is not required. 23Neither Mr Davidovic's affidavit nor the Statement of Claim provides any basis upon which the quantum of damages which might be recovered by VMD, if it is otherwise successful in the proceedings, could be assessed. Indeed, each of orders 5-8 sought in the Statement of Claim seek damages which are contingent on the outcome of the Cookson proceedings, so that damages are claimed, broadly, if VMD is unsuccessful in the Cookson proceedings or does not recover the full loss and damage it incurred in those proceedings and does not recover the security deposit which VMD contends was required to be paid under contractual arrangements between Cookson and VMD. There is no evidence before me which would allow me to assess the likelihood that VMD will in fact succeed in the Cookson proceedings against Cookson and recover the entirety of the loss of claims in those proceedings. It follows from the structure of the relief claimed in the Statement of Claim that, if it does so, then it seems it has no claim for damages against Rosier Partners. No evidence has been led before me which would allow any assessment of the likelihood of that result. 24In order to establish an offsetting claim, VMD also sought to rely upon certain concreting work which it contended it had undertaken at Mr Rosier's home. This ground of opposition to the Demand was not identified in Mr Davidovic's 25 July affidavit and I rejected evidence of this matter on the basis that it was not relevant to the application, having regard to the principle in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; 21 ACSR 581 at 587; 14 ACLC 1703; see also Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; 166 FLR 179; POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533; Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd [2007] NSWSC 103; (2007) 61 ACSR 321; 25 ACLC 282; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1317; King Furniture Australia Pty Ltd v Higgs [2011] NSWSC 234; Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq) [2011] NSWSC 1121; (2011) 85 ASCR 610. 25Order 71 r 36B of the Federal Court Rules, which had been referred to in Graywinter, has been repealed, as was noted in Independent Portable Buildings Pty Ltd v Modular Building Systems Pty Limited [2011] FCA 511. However, I do not understand that rule to have been essential to the decision in Graywinter , which can also be supported by the requirement for service of a "supporting affidavit" under Corporations Act s 459G(3) which in turn suggests the need for that affidavit to identify the grounds on which an application to set aside the statutory demand is based. The decision in Graywinter has of course been followed on many occasions since the Federal Court (Corporations) Rules 2000 and Supreme Court (Corporation) Rules 1999 took effect. Whether some other reason to set aside the Demand was established 26VMD also seeks orders setting aside the Demand on the basis that some other reason to set aside the Demand existed for the purposes of s 459J(1)(b) of the Corporations Act . That section permits the Court to set aside a statutory demand if it is satisfied that, inter alia, there is some other reason that the demand should be set aside. The Court's power under that section exists to maintain the integrity of the process provided under Pt 5.4 of the Corporations Act and is to be used to counter an attempted subversion of the statutory scheme, but is not exercised by reference to subjective notions of fairness: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746; Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229; CP York Holdings Pty Ltd v Food Improvers Pty Ltd [2009] NSWSC 409. A statutory demand may be set aside under that section where it involves conduct which is unconscionable or an abuse of process: Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22. 27The first basis on which VMD seeks to set aside the Demand is that Rosier Partners did not allow VMD 21 days to come to an agreement or pay the debt. Mr Davidovic's 25 July affidavit indicated that communications had taken place with Rosier Partners in order to seek to reach an agreement under which Rosier Partners would withdraw the demand but Rosier Partners had refused offers made to it in that regard. I can see no basis on which a creditor is obliged to afford its debtor a further period for negotiation before issuing a statutory demand, particularly where any payment made under an agreement reached between a creditor with a company which was insolvent or near insolvent might ultimately be set aside as a preference once a winding-up order had been made. 28The second ground on which VMD relies to establish unconscionability is that Rosier Partners entered judgment against VMD on the same day on which the certificate of costs assessment was issued. I do not consider that matter gives rise to unconscionability in the relevant sense, or at all. I can see no reason why Rosier Partners had to allow any particular period between the issue of the certificate of costs assessment and its filing that certificate with the Court so as to give rise to a judgment in accordance with s 369 of the Legal Profession Act . 29The third basis on which VMD seeks to set aside the Demand under s 459J(1)(b) is that the Demand was not accompanied by a verifying affidavit. That ground is not established where the relevant debt is treated as a judgment debt by reason of s 369 of the Legal Profession Act , so an affidavit verifying it was not required. Orders and costs 30In these circumstances, the proper order is that the Plaintiff's application be dismissed. The Plaintiff should pay the Defendant's costs of the proceedings.

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