New South Wales Supreme Court CITATION : Mitchell-Paterson Investments v State BankPower Distribution v State Bank [1999] NSWSC 1270 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 2947/99; 2948/99 HEARING DATE(S) : 17/12/99 JUDGMENT DATE : 17 December 1999 PARTIES : Mitchell-Paterson Investments Pty Ltd v State Bank of NSW Power Distribution (Aust) Pty Ltd JUDGMENT OF : Master Macready at 1 COUNSEL : Mr Lucarelli for defendant SOLICITORS : Mr Philip J. Beazley for plaintiff Minter Ellison for defendant CATCHWORDS : Corporations Law. Applications to set aside statutory demands. No genuine dispute established. DECISION : Paragraph 36 - 1- THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY FRIDAY 17 DECEMBER 1999 2947/99 - MITCHELL-PATERSON INVESTMENTS PTY LTD -v- STATE BANK OF NEW SOUTH WALES LIMITED 2948/99 - POWER DISTRIBUTION (AUSTRALIA) -v- STATE BANK OF NEW SOUTH WALES PTY LTD JUDGMENT --- 1 MASTER: This is the hearing of two applications to set aside statutory demands. 2 The applications have been heard together and I have ordered that the evidence in one application be evidence in the other although it will be necessary to deal with them separately. 3 The first one I will deal with is matter No. 2948/99 which concerns the plaintiff Power Distribution (Australia) Pty Ltd versus the State Bank of New South Wales Limited. The demand in that matter was dated 4 June 1999, and sought recovery of $922,939.64, relating to outstanding lease payments on vehicles subject to various lease agreements. There is also apart from the vehicles some other equipment the subject of demand. 4 The affidavit in support of the application is sworn on 30 June 1999 and set out in paragraphs 4 through to 6 the basis of which was said to be the genuine dispute, Those paragraphs are in the following terms: "4. In respect of any claim which relates to lease agreement numbered 18533430, 18533431, 18533432, 18533433, 18533434, 1854435, 20471830 and 22049430 I say that the Plaintiff company has been and continues to be in a scheme of repayment with the lessor. "5. I say further that the motor vehicles registration Nos QOK-953, UDJ 549 and AEU 19H have been recovered by the lessor and have been on-sold by the lessor at a sacrificial price. "6. The debt and the quantum of the claim for amounts owing pursuant to the leases are disputed as the Plaintiff has made payment in reduction of the amounts payable under each lease and further the lessor, by virtue of the sacrifice of the motor vehicles has incurred its own losses." 5 It was suggested in submissions that the affidavit in question did not meet the minimum requirement in order to give the Court jurisdiction to set aside the demand. The law in that regard is conveniently set out in the judgment of Sunberg J in Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund, 21 ACSR, 581. At 587.8 his Honour had the following to say: "Is a complying affidavit a condition of jurisdiction? "It seems to me that s 459(3) makes plain that the Court can entertain an application to set aside only if within the prescribed period an affidavit supporting the application is filed and copies of the application and affidavit are served. The High Court in Grant said that compliance with the subsection is a limitation or a condition upon the authority of the Court to set aside a demand; it is a condition of the jurisdiction that subs (3) be observed; if the condition is not observed there is no application before the Court. I am thus unable to agree with the Senior Master that the failure of an affidavit to satisfy the minimum requirements for an affidavit to be a 'supporting affidavit' is not a jurisdictional impediment. "The minimum requirements in a genuine dispute case. "In order to be a 'supporting affidavit', an affidavit must say something that promotes the company's case. An affidavit which merely says 'I am a director of the company but am too busy at present to make a full affidavit, and I will do so later' would not support the application. It would in no way advance, further or assist the company's cause, which is to have the notice set aside. At the other extreme, the affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute: John Holland. That evidence must be available at the hearing of the application to set aside, because that application is for final and not interlocutory relief: 71 Paisley Street. "In a s 459H1(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is there a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading. "An affidavit which exhibits an exchange of correspondence between the parties or between their solicitors from which it appears that a claim is made and rejected for reasons given can qualify as a supporting affidavit. And an affidavit verifying the pleadings in an action may qualify. "I am thus unable to accept the respondent's submission that the affidavit must contain sufficient material to make out a case under s 459H. In reply, that submission was somewhat retreated from. It was said that the affidavit must, as a minimum, contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute - it might read more like a pleading than a story. That accords with what I consider to be the minimum requirement. "A multitude of affidavits? "In several cases, it has been held that an applicant is not restricted on the hearing to the affidavit that is served with the application. See Scanhill at 467 and Mibor Investments Pty Limited v Commonwealth Bank of Australia (1993) 11 ACSR 362 at 368. An applicant whose initial affidavit has satisfied the threshold test must be able to supplement the material, because while the 'supporting' affidavit does not have to deploy the evidence, on the hearing only admissible evidence can be relied on. In Louisbridge, Ryan J said that 'provided that an affidavit is filed and served within the 21 day period which supports the application by providing grounds for concluding that there is a genuine dispute ... Or that the company has an offsetting claim', supporting affidavits may be filed once the period has expired. Apart from Hire Works, the cases do not support the proposition for which the applicant contended, namely that an affidavit that does not satisfy the threshold test can be supplemented later on. That issue did not arise in Scanhill or Mibor. It did arise in Hire Works, but for the reasons I have given, I am respectfully unable to agree that the Court can entertain as an application under s 459G a case in which an affidavit containing the minimum requirements has not been served within time." 6 Given the fact the affidavit does not need to be in strictly admissible form, I think it is appropriate to consider the whole of the affidavit, not just the part that was admitted into evidence on the hearing before me. 7 Reference was also made in passing again to Sackron Constructions Pty Ltd v Concrete Quarries 5 August 1997. There, his Honour Emmett J also found that an affidavit did not qualify. However, the affidavit in this case takes the matter a little further than the affidavit in Graywinter. Also as far as this case is concerned I would prefer to deal with the matter on the merits rather than strike it out on this basis. 8 The question arising of course is whether the matters set out in the paragraphs I quoted give rise to a genuine dispute. I have had a number of submissions in respect of the principles to be applied. Probably the most useful summation is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments in respect of the expression 'Genuine dispute': "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of consideration as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). "But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.' "In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: "'There is little doubt that Division 3 ... Prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim".' "It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. "The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).' "I respectfully agree with those statements." 9 The substantive matter arising is firstly the suggestion in paragraph 4 that there is a scheme of repayment. Precisely what that is does not appear in the evidence. It is denied that there is any and there are no details of what effect such a scheme might have. 10 It seems to me that, given the lack of evidence, there could be no suggestion a genuine dispute exists. If for instance there had been a compromise of the debt it may be one thing but to say there was a scheme of repayment without saying what the scheme was is insufficient and I am not satisfied there is genuine dispute in that area. 11 Paragraph 5 refers to vehicles recovered having been on sold by the lessor at a sacrificial price. The only evidence filed shows the vehicles were repossessed, valued and then sold. The evidence before me indicates the vehicle were sold either equal to or greater than the valuation. There was no attempt to impugn the valuation. Accordingly it seems to me there is no genuine dispute in this area. 12 The last matter is that there is alleged to be repayments in reduction of the amount payable under each lease. Clearly there would have been payments payable or in reduction of each lease, however, no information is given as to whether there are particular payments that have not been taken into account. Some mention was made in submissions of a payment of $14,000, which I will come to in due course. There has been no attempt to identify any details at all and accordingly I am not satisfied there is a genuine dispute. 13 It was suggested there should be no dismissal because it would lead to a liquidation which might prevent the company utilising some other assets. I do not think that is a relevant consideration and would no doubt be a matter for the liquidator if and when the company is wound up. In the circumstances I dismiss the summons and order the defendant to pay costs. 14 The second matter in which the plaintiff is Mitchell- Paterson Investments Pty Ltd, is one which is more difficult and has caused me more concern and that is the reason why I have the reserved for a short time to consider the matter. 15 The plaintiff company is the guarantor of leases to which I have previously referred which give rise to the principal debt against the other company, Power Distribution (Australia) Pty Ltd. The statutory demand is dated 4 June 1999, and claims an amount due under a lease agreement in respect of the sum of $549,000.51. 16 The plaintiff company owned a substantial piece of real estate. The defendant apparently has registered a caveat against the title based on a charge which the defendant had over the company's assets. There was an agreement to release the charge and withdraw the caveat upon payment, according to the plaintiff, of the sum of $14,000. This was part of the process of refinancing through a new mortgagee who was to come in and pay out the existing mortgage. Apparently there was some arrangement for the other mortgagees to accept less than they claimed they were owed and this refinancing allowed some further equity to be introduced. This equity probably came from private funds advanced by Mr Mitchell-Paterson's parents. 17 The ultimate aim of the exercise was to free up some funds so that the funds could be made available to pay out certain other creditors who were pressing Mr Mitchell-Paterson. 18 During the hearing evidence was admitted provisionally as to the bank officer's belief that Mr Mitchell-Paterson was engaged in various fraudulent activities. Having considered the matters, I think it is not appropriate to consider that evidence and I will not take that into account. 19 The actual basis of a genuine dispute is set out at paragraphs 5 and 6 of Mr Mitchell-Paterson's affidavit in this matter which is sworn 30 June 1999: " 5. I say further that it is my current belief that the Plaintiff was a guarantor of a lease numbered 22040430 and I say as to that matter that the guarantee was secured by way of a charge over the assets of the Plaintiff. On 5 March 1999 the Plaintiff was in the process of refinancing its assets and negotiated with the ANZ Bank Limited a settlement agreement. The settlement agreement required the agreement of the State Bank of New South Wales Limited (ACN 003 963 228) to release the security over the company and to release the Plaintiff as a guarantor of lease No 22049430. "6. The state Bank of New South Wales Limited (ACN 003 963 228) by its officer Bruce Stimpson said words to the effect in a telephone conversation to me on or about 26 February 1999 the following: "Stimpson 'Obviously if ANZ aren't going to release the caveat we'll have to go along and release the company from its charge and guarantee.' "Mitchell-Paterson 'On that basis I will attend the settlement on Friday 5 March 1999 and pay ANZ.'" 20 There was no objection to the terms of paragraph 5, no doubt for good reason. However, the matter has to be considered bearing in mind what is alleged and the conversation at paragraph 6. It is denied as far as it goes. On this application I will accept the conversation as set out at paragraph 6. To do otherwise would be to rule on credit in respect of Mr Mitchell-Paterson, an activity not permitted in these applications. 21 The submissions of the bank focussed upon the contemporaneous correspondence and their file notes which they say were inconsistent with there being any agreement to release the guarantor and they suggested that the alleged genuine dispute was merely a spurious claim having no foundation. 22 It is important to record that the actual agreement to release the security and withdraw the caveat was put into effect on 26 March 1999. On that occasion the bank received $14,000, and handed over a withdrawal of the caveat. 23 It is necessary to look at the evidence about the proposals for settlement, to see whether it might be said there was an agreement to release the guarantee. 24 First of all it should be noted the conversation referred to at paragraph 6 was said to be on the 26 February, 1999. On that date there had been a proposed settlement of the matter by provision of payment of some $10,000 to the Colonial State Bank. For some reason the settlement proceedings did not go ahead. A letter from a barrister representing Mr Mitchell-Paterson was sent to the bank, as was correspondence from Mitchell-Paterson Investments Pty Ltd of 10 March. This correspondence raised a number of alternatives, including contacting the State Bank with a view to taking over the loans. The correspondence also referred to the position of Mr Mitchell-Paterson's father and included a number of statements that the second mortgagee would not be aware that the property would be sold or in receivership in the near future. 25 In the reply of 11 March 1999 from the State Bank to the company, there were a number of statements made . On the second page of that letter, there was reference to the fact that it was important for the refinancing to happen quickly and it was understood by the bank they would be required to withdraw the caveat and release it in time for settlement. It then says: "Your stated wishes to preserve some portion of the potential equity in the property for Mr W C Paterson (your father) in recognition of his recent loans to you or your company and to make some restitution to Capital Finance can also be understood. Without commitment at this time, the Bank will consider those wishes once you have provided sufficient verifiable information relating to the entire transaction." 26 The letter went on to ask for various other information and concluded with the words: "In the meantime the bank will not undertake to limit its future activities to recover the monies owed to it." 27 Another discussion took place between Mr Mitchell-Paterson and Mr Stimpson on 19 March. There is a file note, which recorded the discussion which arose because in a letter of 18 March, there was a suggestion the bank should desist from legal arbitration for three months. That file note supports the conversation which is set out by Mr Stimpson in his affidavit in these terms: "There is no agreement that the bank will desist from any action against MPI or the Rozelle property. The discussions regarding eventual sale proceeds were in the context of the Bank remaining as a secured creditior and that isn't going to happen now. The only way that the bank won't move against MPI is if you appoint a voluntary administrator within 14 days. The Bank needs a voluntary administrator to be appointed to ensure that you don't sell the property and use the funds elsewhere." 28 That produced a response from the company referring to the discussion about the appointment of a voluntary liquidator and a suggestion was made about the cost of such course. 29 On 24 March, there was a conversation which is again supported by a file note of the bank officer when Mr Mitchell-Paterson asked: "What is the bank going to do with refinancing?" Mr Stimpson said: "You can appoint a liquidator and wind the company up." 30 Thereafter it was only a few days until the actual release was handed over. There is post release correspondence and discussion referring to the voluntary liquidator but that is not relevant; the question is, what discussions lead up to the release of security and the caveat. 31 The other things to note about the matter when one looks to see whether there is even the starting point of some agreement to release the guarantee is what other evidence might have been filed. There is no evidence in reply to the affidavit of Bruce Stimpson. 32 In that regard, the history of the matter is important. It first came before the court on 24 July 1999, was stood over to 12 August 1999, it was then stood over to 9 December 1999 and then there was no appearance for the plaintiff company. 33 I declined on that day to strike out the matter or dismiss it for want of appearance and instead directed the companies be given notice that the matter would be before me again on 15 December. 34 On 15 December, there was an appearance and the companies were represented by a legal advisor. 35 The application was made for adjournment which I refused on the basis that no proper reason had been advanced for the adjournment. I then fixed the matter for hearing before me today and gave directions for the plaintiff to file evidence in reply by 3pm yesterday. No evidence was put on and clearly, as the relevant matter relates to discussions had between the principal Mr Mitchell-Paterson and the bank officer, I would have thought if there were any further discussions, they could have been dealt with and the evidence prepared. 36 The question really is, where does this leave the evidence? I accept what was said by Mr Mitchell-Paterson for the purpose of this application, however, all that really shows is that there is one statement in the course of a series of discussions leading up to the removal of security. It is not a matter of deciding credit but simply seeing whether there is basic evidence to lead to a conclusion that there is a genuine dispute. In my opinion I am not satisfied that there is a dispute and accordingly I dismiss the summons and order the plaintiff to pay the defendant's costs. oOo Last Modified: 06/26/2000 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.