(2006) 24 ACLRC 154[2005] FCA 1424
Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374[1995] HCA 43
Edge Technology Pty Ltd v Lite-On Technology Corporation (2000) 34 ACSR 301[2009] NSWSC 264
Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454(1998) 16 ACLC 1440
Eumina, Midas Management Pty Ltd v Equator Communications Pty Ltd (2007) 25 ACLC 1038[2007] NSWSC 759Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785(1994) 12 ACLC 669
First State Computing Pty Ltd v KylingEquuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 296(1997) 26 ACSR
Fitness First Australia Pty Ltd v Dubow (2011) 84 ACSR 296(1996) ACSR 581
Hansmar Investments Pty Ltd v Perpetual Trustee Ltd (2007) 61 ACSR 321
(1994) 13 ACSR 787
Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743
Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229
[2005] NSWCA 24
Moutere Pty Ltd v Deputy Commissioner of Taxation (2000) 34 ACSR 533
[2007] NSWSC 114
Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45
Prowse v McIntyre (1961) 111 CLR 264
[2007] NSWSC 1143
Scope Data Systems Pty Ltd v BDO Nelson Parkhill (2003) 199 ALR 56
[2003] NSWSC 137
Sheraz Pty Ltd v Rumsley [2019] FCA 493
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
[1997] FCA 681
Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 294
(2005) 54 ACSR 489
[2005] NSWSC 294
Tatlers.com.au Pty Ltd v Davis (2006) 203 FCR 473
[2006] NSWSC 1055
Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) (2004) 185 FLR 130
Judgment (13 paragraphs)
[1]
Background
As noted above, the parties to the present proceedings are also parties to proceedings in the Local Court (the Local Court proceedings). The Local Court proceedings were commenced by Verimark on 25 July 2017. In those proceedings, Verimark claims an amount of $41,250 for alleged breach of an agreement. A copy of the statement of claim filed in those proceedings was admitted, subject to relevance, on the present application.
Mr Amler has deposed (and I do not understand it here to be disputed) that in the Local Court proceedings there was an interlocutory application (by Passiontree) for security for costs, which application was heard on 1 February 2018 and determined on 10 April 2018, in favour of Passiontree (see [11] of Mr Amler's 14 March 2019 affidavit). There was also a separate application by Passiontree for the setting aside of a subpoena or notice to produce issued in the proceedings, which application was withdrawn by consent.
Verimark was ordered to pay Passiontree's costs of the two notices of motion: the notice of motion filed 19 September 2017 (in relation to security for costs) and the notice of motion filed 15 November 2017 (in relation to the subpoena/notice to produce). The orders, as entered in the Local Court, were as follows:
Notice of Motion 19/9/17
…
4. Plaintiff to pay the Defendant[']s costs of the Motion (19.9.17) on 11/10/17, 9/11/17, 22/11/17 and 1/2/18 on the usual basis. Costs are to be assessed as agreed. To be assessed forthwith.
…
Notice of Motion filed 15/11/17
2. Plaintiff to pay the Defendant[']s costs of Motion as agreed or assessed.
Passiontree then proceeded to have the costs the subject of the said costs orders assessed (and Verimark does not dispute that it was entitled to do so). Three certificates of determination totalling the sum of $25,468.39 were issued on 7 October 2018 in favour of Passiontree:
1. a certificate in the amount of $22,243.00 (which related to the costs of the security for costs motion filed on 19 September 2017);
2. a certificate in the amount of $1,631.77 (which related to the motion filed on 15 November 2017 seeking to set aside the subpoena/notice to produce); and
3. a certificate in the amount of $1,593.62 (being the costs assessor's costs).
Passiontree lodged the costs certificates in the Local Court and judgment was entered in that total sum, plus the Court filing fee, on 20 February 2019.
Passiontree then issued a statutory demand claiming the amount of the judgment debt obtained on the filing of those certificates in the Local Court.
The statutory demand was served by the solicitor for Passiontree at 1:30 pm on 21 February 2019 when it was delivered to Verimark's registered office under cover of a letter of that date. The statutory demand was verified and accompanied by an affidavit sworn 20 February 2019 by Mr Joshua Kim, the sole director of Passiontree.
The originating process seeking an order setting aside the statutory demand was filed in this Court at 3:50 pm on 14 March 2019, and Passiontree accepts that it was delivered (with the accompanying affidavit in support) at the address for service nominated in the statutory demand at approximately 4:00 pm on 14 March 2019 (see Passiontree's submissions at [13]).
[2]
Jurisdictional issue
It is convenient at the outset to deal with the jurisdictional issue raised by Passiontree in resisting the application to set aside the statutory demand. As adverted to above, Passiontree's position, stated simply, is that there is no jurisdiction to grant the relief claimed in the originating process filed in these proceedings because the originating process was not filed within the 21 day period required by s 459G of the Act.
Passiontree submits that, by reference to s 105 of the Act, the date of service of the statutory demand (i.e., 21 February 2019) "being the day of the first mentioned event" under that section, is to be counted as the day on which the 21 day period referred to in s 459G of the Act commences.
Section 105 of the Act provides:
Calculation of time
Without limiting subsection 36(1) of the Acts Interpretation Act 1901, in calculating how many days a particular day, act or event is before or after another day, act or event, the first-mentioned day, or the day of the first-mentioned act or event, is to be counted but not the other day, or the day of the other act or event.
Reference is made by Passiontree to the methodology in respect of the calculation of the passage of the 21 day period which is to be found in Autumn Solar Installations Pty Limited v Solar Magic Australia Pty Limited [2010] NSWSC 463 at [9], [10] and [11] (Barrett J, as his Honour then was) (Autumn Solar). There, relevantly, his Honour referred (at [9]) to the point made by Kitto J in Prowse v McIntyre (1961) 111 CLR 264 at 274; [1961] HCA 790 that "[t]he beginning of a day is nothing but the end of the day before, and the end of the day is nothing but the beginning of the next", and said (at [10]):
Thus all beginnings of days and all ends of days fall precisely at the point of midnight, not an instant before or an instant after. As Euclid recognised in mathematics, a point has no magnitude.
Pausing here, in the present case there was no issue taken as to whether parts of days were to be counted. Thus, the rejection by Barrett J of the submission that had there been put for the plaintiff (namely, that the relevant period began an instant after the midnight that divided 16 March 2010 - that being the date on which the statutory demand was served - from 17 March 2010; and hence that one day did not elapse "after" 16 March 2010 until an instant after the midnight dividing 17 March 2010 from 18 March 2010) does not address the issue raised by Passiontree in the present case.
[3]
Determination
The decision of Barrett J in Autumn Solar is quite clear on this issue and I am not persuaded that it is incorrect. Moreover, as a matter of comity (and noting that it is desirable to have a consistent interpretation of the Act across the country), unless his Honour's reasoning were shown to be plainly wrong it should in my opinion be followed. Consequently, I reject the submission made by Passiontree that I should depart from his Honour's methodology.
The decision of Barrett J in Autumn Solar has also been adopted in subsequent cases. In V & M Davidovic Pty Ltd v Professional Services Group Pty [2012] NSWSC 134, Black J said (at [5]):
On 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).
In Sheraz Pty Ltd v Rumsley [2019] FCA 493 at [10] and [15]-[16], Banks-Smith J said "the last day of the 21 day period under s 459G(3)(b)" for an application to set aside a statutory demand served 24 January 2019 was 14 February 2019. Similarly, the authors of Austin & Black's Annotations to the Corporations Act state, in their annotation to s 459G, that:
The day of service of the [statutory demand] is not counted in determining whether an application to set aside the demand was made within 21 days after service of the demand.
Section 459G(2), in its terms, provides that "[a]n application may only be made within 21 days after the demand is so served". The particular event, for the purposes of s 105, is the making of an application (to set aside a statutory demand). The relevant question is as to whether that event (the "first-mentioned event" for the purposes of s 105) is after another event, namely the service of the statutory demand. Thus the "first-mentioned" event (service of the application) is to be counted but not the other day, or the day of the other act or event (namely, service of the statutory demand), even though chronologically the latter is the first in time. Such a construction gives meaning to "first-mentioned" and is the construction that has been adopted in the authorities.
[4]
Substantive Application
Turning then to the two bases on which Verimark seeks to set aside the statutory demand.
[5]
Relevant Principles
A genuine dispute as to the existence of a debt claimed in a statutory demand is one which is bona fide and truly exists in fact and is not spurious, hypothetical, illusory or misconceived. It exists where there is a plausible contention which places the debt in dispute and which requires further investigation. The debt in dispute must be in existence at the time at which the statutory demand is served on the debtor (Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; [1997] FCA 681 at 464 (the Court); Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; (1994) 12 ACLC 669 at 787 (McLelland CJ in Eq); Rohalo Pharmaceutical Pty Ltd v RP Scherer SpA (1994) 15 ACSR 347 at 353 (Lindgren J)).
As to the existence of a genuine offsetting claim, in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, Palmer J said (at [18]) that a genuine offsetting claim means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. An amount will be claimed in good faith, his Honour said, if it is arguable on the basis of facts asserted with sufficient particularity such that the Court is able to determine that the claim is not "fanciful". Further, Palmer J said (at [16]) that:
… Where the case involves a claim for a liquidated sum the application of the section is relatively easy, the court simply determines whether the cause of action is a genuine one and if that proves to be the case, the amount of the offsetting claim is the amount of liquidated sum, the subject of that claim. The position is by no means as easy where the claim is a claim for unliquidated damages and the damages are said to be economic loss suffered by the plaintiff.
In Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896, Barrett J, as his Honour then was, noted (at [18]) that the task faced by a company challenging a statutory demand on genuine dispute grounds is by no means a difficult or demanding one; a company will fail in its task only if the contentions upon which it seeks to rely in mounting the challenge are so devoid of substance that no further investigation is warranted. The Court does not engage in any form of a balancing exercise between the strengths of competing contentions; and if there is any factor that on reasonable grounds indicates an arguable case it must find a genuine dispute exists even where the case available to be argued against the company seems stronger.
[6]
Genuine dispute as to the existence of the debt
Verimark maintains that the judgment debt is not due and payable (as required in order to ground a creditor's statutory demand - see s 459E of the Act) and says that its argument that this is the case cannot be dismissed as untenable or spurious. Verimark's argument on this issue turns on the operation of r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which provides, relevantly, that:
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.
It is not disputed that the costs the subject of the relevant costs orders relate to an interlocutory application. Verimark says (though Passiontree, by reference to the transcript of proceedings in the Local Court, to which I refer below, disputes) that the Local Court did not make an "otherwise" order; and, therefore, says that those costs are not payable until the conclusion of the Local Court proceedings. Hence, Verimark says that r 42.7(2) applies, such that (despite lodgement of the costs certificates and the ensuing costs judgment in the Local Court) there is not a debt that is presently due and payable.
Passiontree argues against this, first, on the basis that there has been an "otherwise" costs order in the sense required under the UCPR referring to the transcript (a copy of which was annexed to the affidavit sworn 22 March 2019 of its solicitor (Mr Keith Kwon)), which it says makes clear that the reference to the costs being assessable forthwith should be read as, in effect, payable forthwith.
In particular, it is noted that at T 31.10 on 1 February 2018, in the context of submissions on costs, Counsel for Passiontree sought an additional order, if an order for costs were to be made in its favour, "that those costs can be assessed forthwith", going on to correct that to say "… the formality of the order is as agreed or assessed, assessment permitted forthwith or some such term". After further submissions, in which Magistrate Grogin indicated that costs would not be ordered to be paid on an indemnity basis in relation to the motions, the transcript records the following exchange:
HIS HONOUR: … IN RELATION THEREFORE TO THE HEARING ON 11 OCTOBER 2017 I DIRECT THAT THE PLAINTIFF PAY THE DEFENDANT'S COSTS OF THE MOTIONS ON 11 OCTOBER 2017, 9 NOVEMBER 2017, 22 NOVEMBER 2017 AND 1 FEBRUARY 2018 ON THE USUAL BASIS. COSTS ARE TO BE AGREED OR ASSESSED.
DUPREE: With liberty to proceed. And leave is granted to assess those costs forthwith in accordance with the rules.
HIS HONOUR: There should not be any reason for them not to be should there?
DUPREE: No reason why we should be held out of our money.
HIS HONOUR: No that is right.
DUPREE: But you have to, the rules require that costs don't become assessable and payable until the end of a matter unless you grant that -
HIS HONOUR: Forthwith.
DUPREE: Forthwith.
HIS HONOUR: THE ORDER I MAKE IS THE PLAINTIFF IS TO PAY THE DEFENDANT'S COSTS OF THE MOTION ON 11 OCTOBER, THE 9TH AND 22 NOVEMBER AND 1 FEBRUARY ON THE USUAL BASIS AND COSTS ARE TO BE AGREED OR ASSESSED FORTHWITH.
[7]
Determination
There is no dispute that under Div 11 of Pt 3.2 of the Legal Profession Act 2004 (NSW) and/or s 71 of the Legal Profession Uniform Law Application Act 2014 (NSW) (Legal Profession Uniform Law), and by operation of Part 36 r 10 of the UCPR, the cost assessment certificates will, from the date of filing, be taken to be a judgment of the court for the total amount of costs specified in the certificates.
In Infact Consulting Pty Ltd v Kyle House Pty Ltd [2007] NSWSC 56, White J, as his Honour then was, referred (at [19]) to Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (2005) 147 FCR 379; (2006) 24 ACLC 154 at [63]; [2005] FCA 1424 (Anderson Formrite) (Siopis J) for the proposition that it is not open to include filing fees in a judgment debt based on costs certificates (and that reliance could be placed on that ground of dispute where the costs certificates had been annexed to the plaintiff's primary affidavit, even though not raised as a ground in the affidavit itself). In Anderson Formrite, Siopis J considered the position where a statutory demand had claimed an amount (by reference to a judgment debt) that was less than the amount of the judgment debt.
In the present case, as noted earlier, the judgment debt relied upon in the statutory demand included the filing fees. On the above authorities, this, of itself, could render the statutory demand a non-compliant demand and constitute "some other reason" why the demand should be set aside under s 459J(1)(b) (see Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (in liq) (1994) 14 ACSR 565 at 567 (Cox J); Re Aluminium Fast Ferries Australia Pty Ltd [2000] 2 Qd R 113 at 114 (Wilson J); Anderson Formrite at [64] (Siopis J) ; those cases relating to defects in the accompanying affidavit; and see also Roberts t/as Deacons v South East Asia Communications [2003] NSWSC 800 at [5] (Barrett J)). Here, however, no such complaint was made as to the statutory demand and there was no argument on this point. I have, therefore, placed no reliance on this issue in reaching the conclusion to which I have come in the present case.
As to the reliance placed by Verimark on the transcript of what occurred when the costs orders were pronounced, in Fitness First Australia Pty Ltd v Dubow [2011] NSWSC; (2011) 84 ACSR 296, albeit in a different context, I had occasion to consider the effect of the pronouncement of orders in court (and whether that gave rise to a judgment debt for the purposes of the statutory demand provisions prior to formal entry of the judgment). It was there submitted that there was a judgment for the payment of costs at the time that the orders were made (the only matter then to be determined being the amount of the costs so payable under the orders). I concluded that the pronouncement of judgment followed by the making of orders on that date gave rise to a liability to pay the costs ordered (as quantified in due course) (having regard to what had been said in Pearl Bay Corp Pty Ltd v Lodur Pty Ltd [2000] WASC 315 at [6]-[9] (Sanderson M) and in Alternative Engine Technologies Pty Limited v Kruger Ventures Pty Limited (No 2) [2010] SASC 60 at [11]-[12] (Lunn J); see also McPherson's Law of Company Liquidation at [3.550]).
[8]
Offsetting claim
Verimark submits that if, contrary to the position for which it contends, the judgment debt is due and payable, then it has available to it an offsetting claim of an amount which exceeds the subject judgment debt; that offsetting claim being the claim the subject of the Local Court proceedings commenced by it in 2017 (a copy of the sealed statement of claim in those proceedings being annexed to the affidavit accompanying the statutory demand).
Verimark again points to the relatively low threshold required to demonstrate an offsetting claim for the purposes of s 459H of the Act; and submits that the Local Court proceedings, and the claim which grounds those proceedings, are bona fide and not frivolous or vexatious (referring to W & P Reedy Pty v Macadams Baking Systems (Pty) Ltd [2007] NSWCA 146 at [5] (Beazley JA, as her Honour then was, Santow and Campbell JJA)).
Passiontree, on the other hand, submits that there is no credible evidence that Verimark bona fide has an offsetting claim, on the basis that there is no affidavit swearing to: the nature of any such claim as to the claim for damages for breach; the methodology of the calculation of quantum or liability for such damages; or the nature and extent of any alleged breach that would attract the basis of a money claim.
Passiontree complains that the initial affidavit could not later be supplemented to provide evidence of the claim (referring to the principles articulated in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; (1996) ACSR 581 (Graywinter); those principles having been applied in various cases: see Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45 at [22] (Barrett J) (Process Machinery); Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) (2004) 185 FLR 130 at [56]; [2004] NSWSC 527 (White J); and Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 at [7] (Barrett J) (Elm Financial Services)).
In Graywinter (at 459-460) Sundberg J held that the failure of an affidavit to satisfy the minimum requirements for an affidavit to be a "supporting affidavit" is a jurisdictional impediment to an application under s 459C of the Act. In David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; [1995] HCA 43, the High Court confirmed that the Court cannot entertain, as an application under s 459G of the then Corporations Law, a case in which an affidavit containing the minimum requirements has not been served within time. Although an applicant may supplement an initial affidavit (or affidavits) by leading further evidence relevant to matters raised by the initial application, it cannot rely on any ground not raised in the affidavit filed within the 21 day limit (see the discussion and cases noted in Austin & Black's Annotations to the Corporations Act (s 459G)).
[9]
Determination
What is required, by way of a supporting affidavit in this regard, is that the affidavit and application alert the party to the nature of the case sought to be made on the application to set aside the statutory demand, identifying the "area of controversy" so that it is identifiable with one or more on the grounds available under ss 459H and 459J (see Process Machinery and Elm Financial Services). In Graywinter, it was held that it is not sufficient merely to assert the existence of a dispute or offsetting claim (but that it was not necessary for the affidavit to contain, in admissible form, all the evidence supporting the claim that there is a dispute/offsetting claim).
In Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (2007) 25 ACLC 1392; [2007] NSWSC 1143, Barrett J concluded that it was sufficient that the ground of challenge was discernible on the face of a document annexed to the affidavit in support accompanying the statutory demand (or as, in Callite Pty Ltd v Adams [2001] NSWSC 52, in the invoices for the solicitor's fees in question) even though attention had not been drawn in the affidavit to the point sought to be raised thereby (see also Hansmar Investments Pty Ltd v Perpetual Trustee Ltd [2007] NSWSC 103; (2007) 61 ACSR 321; NA Investment Holdings Pty Limited v Perpetual Nominees Limited [2010] NSWCA 210).
The affidavit accompanying the application to set aside the statutory demand in the present case clearly indicated two grounds on which Verimark sought to set aside the demand (a genuine dispute as to the existence of the debt in question - see [30]ff of the affidavit; and the existence of a genuine off-setting claim in the Local Court proceedings in the amount of $41,250 - see [36]ff). The deponent deposed to his belief as to those two matters. Exhibited to the affidavit was a copy of the statement of claim. It made clear that the claim was for damages for an alleged breach of agreement by reference to the failure to pay certain identified invoices. The damages claimed are clearly referable to the unpaid invoices (see [12] of the statement of claim) and the amount claimed in that regard is identified in prayer 1 of the relief claimed.
There was, in my view, sufficient identification in the supporting affidavit of the basis on which those grounds were raised by reference to the pleading (albeit that the pleading was not verified). The pleading included a certification by Verimark's solicitor under cl 4 of Schedule 2 to the Legal Profession Uniform Law that there are reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the claim for damages in the proceedings has reasonable prospects of success. Copies of the invoices the subject of the claim were also exhibited to the affidavit. Complaint was made, in effect, that the invoices merely contain a description of "Tenant Representation Renewal" of "Tenant Representation Deal Completion" and bear the stamp "Overdue". However, what is clear from the affidavit and its exhibits is that Verimark is asserting that there is an amount owing in the sums stated in the exhibited invoices and is claiming this amount in the Local Court proceedings as damages for alleged breach of an agreement with Passiontree.
[10]
Other bases
As to the application that for "some other reason" the demand should be set aside, none was separately raised in submissions.
Passiontree, for its part, submits that there is no defect in the statutory demand or, in the alternative, no defect that will cause substantial injustice unless the statutory demand is set aside (on the basis that Verimark has not sworn to facts and circumstances that support any such allegations).
[11]
Determination
It has been recognised that it is an abuse of the statutory demand procedure to use it as a debt-collection mechanism (First State Computing Pty Ltd v Kyling; Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 296; (1997) 26 ACSR) and that a statutory demand is not to be used as some kind of commercial lever to extract favourable settlement of disputed debts (Buddies Liquor Pty Ltd v Wah Lai Investment (Aust) Pty Ltd; (2001) 19 ACLC 855; [2001] NSWSC 337). In Polstar Pty Ltd v Agnew (2007) 25 ACLC 293; [2007] NSWSC 114;, Barrett J at [33] noted that s 459J(1)(b) of the Act confers a remedial jurisdiction. What is a sufficient "other reason" is to be determined by the legislative purpose of the provisions.
The question whether there is some "other reason" why the demand should be set aside must be determined in the circumstances obtaining when the court comes to consider the s 459G application (Tatlers.com.au Pty Ltd v Davis (2006) 203 FCR 473; [2006] NSWSC 1055 at [11] and [29] (Barrett J)).
It is not suggested that the conduct of Passiontree in invoking the costs assessment process or filing the costs assessment certificates was in any way improper. It is simply said that the judgment debt could not properly be the subject of a statutory demand as it was not then due and payable. In circumstances where that is hotly in dispute, there is no basis for me to conclude that the service of the statutory demand was an abuse of process. In light of the conclusion I have reached above, it is not necessary (nor, in the absence of submissions as to any "other reason" why the statutory demand should be set aside, is it appropriate) for me further to consider this ground.
[12]
Conclusion
I am satisfied, having regard to the low threshold for the test as to whether there is a genuine dispute as to the existence of the debt claimed, that Verimark has established that there is a genuine dispute as to whether the judgment debt that was admittedly obtained on lodgement in the Local Court of the costs assessment certificates is presently due and payable (pending the conclusion of the Local Court proceedings) and that (on the equally low threshold applicable in the off-setting demand context) there is in any event a genuine offsetting demand in an amount that exceeds the amount claimed in the statutory demand. This establishes the basis for the demand to be set aside under s 459H(1)(a) and (b) and I will so order. Costs should follow the event.
For the above reasons, I make the following orders:
1. Set aside the statutory demand served on the plaintiff on 21 February 2019.
2. The defendant to pay the plaintiff's costs of this application.
[13]
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.
Decision last updated: 26 April 2019
Relevantly, however, what Barrett J also made clear in Autumn Solar was his conclusion that, in calculating whether an application was made within the period of 21 days "after" 16 March 2010, one leaves out of account the day of 16 March 2010 itself (that being the "other day" or "the day of the other act or event" in terms of s 105 of the Act) (see at [5]; his Honour there referring to the analysis of s 105 of the Act and s 36(1) of the Acts Interpretation Act 1901 (Cth) (Acts Interpretation Act) he had previously set out in Employers Mutual Indemnity (Workers Compensation) Ltd v Omni Corporation Pty Ltd (2009) 255 ALR 362 at [8]-[10]; [2009] NSWSC 264).
In the written submissions filed for Passiontree on the present application, while it was further submitted that the evidence filed by Verimark did not establish, as required by s 459G(3)(b), that a copy of the application and a copy of the supporting affidavit was served on it either at the address for service nominated in the statutory demand (that being an office suite in Strathfield - see [6] of the statutory demand) or in accordance with s 109X of the Act, reference there being made to the decision of Palmer J in Woodgate v Garard Pty Ltd (2010) 78 ASCR 468; [2010] NSWSC 508 at [44], that complaint ultimately goes nowhere since it was accepted by Passiontree that a sealed copy of the originating process and affidavit were delivered at the nominated address for service on 14 March 2019.
In response to the jurisdictional challenge, Verimark maintains that the originating process was served in time, on the basis that the statutory demand was served on 21 February 2019 and therefore the 21st (and last) day for compliance with the statutory demand was 14 March 2019 (referring not only to s 105 of the Act but also to s 36 of the Acts Interpretation Act 1901 (Cth) (Acts Interpretation Act)).
Section 36 of the Acts Interpretation Act provides, relevantly, that a period of time referred to in an Act that is mentioned in column 1 of an item in the table there set out, is to be calculated according to the rule mentioned in column 2 of that item. Relevantly, item 6 in that table (applicable if the period of time is expressed to begin after a specified day) provides that the period of time does not include that specified day. The example there given in relation to item 6 is that if a decision is made on 2 August and a person has 28 days after the day the decision is made to seek a review of that decision then the 28-day period begins on 3 August.
Section 36(1) of the Acts Interpretation Act 1987 (NSW) states that "[i]f in any Act or instrument a period of time, dating from a given day, act or event, is prescribed or allowed for any purpose, the time shall be reckoned exclusive of that day or of the day of that act or event".
For Verimark, it was submitted that the Acts Interpretations Acts (both Commonwealth and State) in this regard can be read consistently with s 105 of the Act, namely, that where there is a marker point of reference that day is not included.
Passiontree accepts that s 105 in its terms is expressed to be "without limiting" s 36 of the Acts Interpretation Act, but what was urged upon me was that "first mentioned" day or act, for the purpose of s 105, is the day of service of the originating process seeking to set aside the statutory demand and therefore it is that day which counts (and not the day of service of the statutory demand).
There is no dispute as to the proposition that if the 21-day period is to be counted as not including the date of service of the statutory demand (here 21 February 2019), but including the date of service of the originating process (14 March 2019), then the application was made within the requisite 21-day period.
Accordingly, I find that the originating process and affidavit in support were served within the time required by s 459G of the Act and that there is, therefore, jurisdiction here to entertain Verimark's application.
Similarly, in Edge Technology Pty Ltd v Lite-On Technology Corporation (2000) 34 ACSR 301; [2000] NSWSC 471, in relation to claims as to the existence of a genuine offsetting claim, Barrett J said (at [24]) that the Court's task was not to resolve competing claims and that it was not necessary, nor was it appropriate, for the court to consider the merits of the dispute or offsetting claim (citing Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456; Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37).
In Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717; (1994) 13 ACSR 787 Young J, as his Honour then was, said (at 721) that "many claims are ambit claims, and not even the person making them has any real hope of recovering the maximum amount claimed" and that "amount of the claim" means "the amount claimed in good faith, so long as that claim is not fictitious or merely colourable".
Where an application to set aside a statutory demand is made on the basis that there is "some other reason", for the purposes of s 459J(1)(a) or (b), it is not necessary for a company to establish substantial injustice (see Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302; (1996) 135 ALR 677 at 317). The question whether a matter constitutes "some other reason" is to be determined by reference to the legislative intent of Pt 5.4 of the Act (Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229; [2005] NSWCA 24 at [35] (Santow JA), at [58]-[61] (Young CJ in Eq)).
In Scope Data Systems Pty Ltd v BDO Nelson Parkhill (2003) 199 ALR 56 at [25]-[26]; [2003] NSWSC 137, Barrett J considered the nature of the jurisdiction created by s 459J(1)(b) in the context of a statutory demand based upon a debt comprised by a Local Court judgment (and where it was asserted that there was a stay of execution of that order in force by the operation of s 107 of the Justices Act 1902 (NSW)). His Honour considered Moutere Pty Ltd v Deputy Commissioner of Taxation (2000) 34 ACSR 533; [2000] NSWSC 379 (Moutere) and Re Softex Industries Pty Ltd (2001) 187 ALR 448; [2001] QSC 377 as examples of circumstances in which the court may exercise the power given by s 459J(1)(b), and noted the policy underlying s 459H as had been explained in Moutere. In that context, Barrett J considered that the issue of a statutory demand, relying on the mere existence of a judgment debt, would be oppressive if inconsistent with a statutory regime whereby the judgment creditor was not allowed to execute ordinary judgment creditor remedies in relation to that debt (at [26]), though ultimately finding that there was no such stay.
Then, in relation to the withdrawn motion (i.e., the motion to set aside a subpoena or notice to produce), Counsel for Passiontree sought the same order as had been made in relation to the security for costs application, and the Magistrate proceeded to rule as follows:
HIS HONOUR: IN RELATION TO THE WITHDRAWN NOTICE OF MOTION THE PLAINTIFF IS TO PAY THE COSTS.
DUPREE: 15 November you Honour.
HIS HONOUR: OF 15 NOVEMBER, THE PLAINTIFF IS TO PAY THE DEFENDANT'S COSTS OF THE MOTION.
DUPREE: As agreed or assessed forthwith.
HIS HONOUR: AS AGREED OR ASSESSED FORTHWITH.
In response, Verimark says that no application has been made by Passiontree to correct the judgment/orders in relation to costs (say, for example, under the slip rule in r 36.17 of the UCPR) and hence submits that the orders stand as they are.
Pausing here, I note that the orders that are recorded as having been made on 1 February 2018 and entered on 1 March 2018 (see the document issued by the Registrar dated 10 April 2018, a copy of which is annexed to Mr Kwon's 22 March 2019 affidavit), extracted at [10] above, do not include the words "[t]o be assessed forthwith" in relation to the costs of the withdrawn subpoena motion (i.e., the notion filed 15 November 2017). Hence the force of Passiontree's argument is diminished at least in respect of that quantum of the costs judgment that was obtained in relation to those costs.
Passiontree nevertheless submits that there is no genuine dispute between the parties as to the existence or amount of a debt to which the demand relates, given that the Local Court has entered judgment in respect of the debt (which judgment has not been set aside). It is further submitted by Passiontree that, by participating in the assessment process and having had a reasonable opportunity to make written submissions to the costs assessor, Verimark has "waived" all claims as to claim any genuine dispute about the existence or amount of a debt to which the demand relates (reference here being made to the decision of Rothman J in Nunzio Berardi v Salvatore Russo t/as Russo & Partners [2015] NSWSC 1520, where his Honour (at [82]-[83] considered the regime for costs assessment to be a comprehensive regime).
In that context, I also had regard to those provisions in the former Legal Profession Act (the position now being dealt with under the Legal Procession Uniform Law) which operate to treat the filing of an application for registration of a costs certificate as a judgment and concluded that they did not operate contrary to the above. Hence, I considered that the date on which the application for registration of the costs certificates was filed in that case (by way of the recording of that application on the Local Court's electronic database or otherwise), even if after the date of the statutory demand, was irrelevant and I accepted that the amounts payable under the costs assessment certificates could be described as judgment debts (even though as a formal matter, enforcement of the debt quantified under the costs certificates would not be possible until the formal entry of the judgment as a result of the filing of the costs certificates)
It has been accepted that where a statutory demand is based on a judgment debt the doctrine of res judicata precludes the contention that there is a genuine dispute as to the existence of that debt (see for example Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454; (1998) 16 ACLC 1440 at 457-458 (Emmett J)). However, that does not preclude a finding in appropriate circumstances that it may be unjust for a statutory demand to stand even though it is the subject of a judgment or order that precludes the contention that there is a genuine dispute or offsetting demand - see Eumina, Midas Management Pty Ltd v Equator Communications Pty Ltd (2007) 25 ACLC 1038; [2007] NSWSC 759 (Hammerschlag J) in the context of an alleged offsetting claim; and White J in ACN 001 891 103 Pty Ltd v Reiby Street Apartments Pty Ltd [2007] NSWSC 1345). Even though the execution of an order may be stayed, the debt to which it gives rise may still be the subject of a valid statutory demand (see Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374; [2007] NSWCA 57 (Australian Beverage)).
In Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 489; [2005] NSWSC 294;, Barrett J considered that the fact that a foreign judgment had not been registered as such and therefore was presently not enforceable under the procedures for enforcement of foreign judgments did not mean that there was a "genuine dispute" as to the existence of the debt comprised by that judgment. His Honour said (at [20]):
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.
In Australian Beverage (at [32]) Beazley JA, as her Honour then was, referred to a distinction between the stay of execution of a judgment and a stay of its operation:
In Alam v Quest Enterprises [2006] NSWSC 752 at [30], White J observed that it had been correctly submitted that "a stay of execution of the judgment, as distinct from a stay of the operation of the judgment, would not prevent the judgment debt from being due and payable".
There seems to me little doubt from the exchanges between bench and bar leading up to the making by the Magistrate of the costs order in relation to the security for costs motion, that the Magistrate had accepted the submission that costs should not only be assessable forthwith, but payable forthwith. It is also tolerably clear that the Magistrate intended the same costs regime to apply in relation to the order for costs of the withdrawn motion. However, the orders as formally entered do not make that clear. It would have been a relatively simple exercise, one would have thought, to obtain clarification of that, and (if Verimark's contention be correct) a variation of the costs orders. However, that has not been done.
If left to construe the orders as entered, they do not in my opinion amount to "otherwise" costs orders. There is at the very least, room for argument on that issue and hence a basis on which it can be said that there is a genuine dispute in this regard; and if that be the case, then the considerations perceived relevant in His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2007] NSWCA 142 provides basis for conclusion that the dispute as to the enforceability of the judgment debt at this stage cannot be said to be untenable. As the Court of Appeal there explained, the usual order for costs in the case of a successful application for an interlocutory injunction is that costs are costs in the cause. The rationale for that rule being that, at the stage of granting an interlocutory injunction, the court is not in a position to determine the ultimate outcome of the proceedings. Such considerations are, in my opinion, relevant in an applications such as the present.
As to the proposition that Verimark (by participating in the costs assessment process) has waived any claim that there is not a presently payable judgment debt, I do not accept this. The conduct of participating in the process is equally consistent with an understanding that the costs orders required there to be an assessment of costs, but that any judgment obtained was not to be enforceable until the end of the proceedings.
I have thus concluded that there is a genuine (and not spurious, ill-conceived, hypothetical or illusory) argument that the (admitted) judgment debt is not presently due and payable. It is not necessary to form a concluded view on that issue. Suffice it to note that it is not unarguable and that, if that were to be the proper operation of the order, then there would be room for the argument that this precluded the issue of the statutory demand.
I consider that the affidavit accompanying the originating process was sufficient to identify that one of the grounds of challenge was a genuine off-setting claim in the amount claimed in the Local Court proceedings. The fact that the statement of claim itself is unverified does not lead me to conclude that Verimark has not established (on the low threshold applicable in this regard) that it has a genuine off-setting claim.
I would therefore also set aside the statutory demand on this ground.