New South Wales Supreme Court CITATION : Kraljero v Dark Red Frames [2001] NSWSC 171 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3818/2000 HEARING DATE(S) : 26/02/01 JUDGMENT DATE : 27 February 2001 PARTIES : Kraljero Building Construction Co Pty Limited v Dark Red Frames and Trusses Pty Limited JUDGMENT OF : Master Macready at 1 COUNSEL : Mr P.A. Fury for plaintiff Mr M. Tyson & Mr J. Stoljar for defendant SOLICITORS : City First Solicitors for plaintiff Greg Wilkinson, Oberon for defendant CATCHWORDS : Corporations Law. Application to set aside statutory demand. Demand varied. No matter of principle. B & M Quality Constructions Pty Limited v. Buyrite Steel Supplies 15 ACSR 433 CASES CITED : Portrait Express v. Kodak 20 ACSR 746. Eyota Pty Limited v Hanave Pty Limited DECISION : Para 23 - 1- THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY Tuesday 27 February 2001 3818/00 - KRALJERO BUILDING CONSTRUCTION CO PTY LIMITED -V- DARK RED FRAMES AND TRUSSES PTY LIMITED JUDGMENT 1 MASTER: This is an application to set aside a statutory demand. The demand was dated 10 August 2000 and claimed an amount of $4045. In the demand the amount was split up between three invoices, invoice 3232 in the sum of $11,976, invoice 3249 was in the amount of $15,438 and invoice 3285 was in the sum of $19,631. The claim in the demand relates to the supply of roof trusses and related matters which were used by the plaintiff company in building houses. 2 The plaintiff company has admitted that $22,979 was due and it has made a payment of that amount after the proceedings were commenced. The balance of $24,066 in the demand was in issue. The first point that was raised was the sufficiency of the affidavit in support. 3 Under the Corporations Law and under r 5.2 the affidavit accompanying the statutory demand must be in accordance with form 7 and state the matters mentioned in that form. 4 When one turns to form 7 one finds in par 3: "The source of the deponent's knowledge of the matter stated in the affidavit in relation to the debt or each of the debts, e.g. 'I am the person who on behalf of the creditors had the dealings with the debtor company that gave rise to the debt'. I have inspected the business records of the creditor in relation to the debtor's company's account." 5 Accordingly when one sees the form in the examples one sees they are nothing more than examples. The requirement is to state the source of the deponent's knowledge of the matters. The relevant paragraphs of the affidavit are in the following terms: "1.I am a Director of the company known as Dark Red Frames & Trusses Pty Ltd ACN 068 763 413. 2. As a Director of Dark Red Frames & Trusses Pty Limited (the 'Plaintiff Company') I have authority to depose to this Affidavit on the Plaintiff Company's behalf and have full knowledge of all of the matters contained herein. 3. I believe that the amount of $47,045.00 being the debt specified in the Creditor's Statutory Demand for Payment of Debt to be simultaneously served on the Defendant Company (together with this Affidavit) is due and payable by the Defendant Company to the Plaintiff Company. The Defendant Company is Kraljero Building Constructions Company Pty Ltd ACN 003 200 351. 4. I have access to the records of the Plaintiff Company in respect of the Defendant Company herein and can say that Plaintiff Company Products were delivered to the Defendant Company and that the details of such deliveries are as specified in the Schedule below." 6 The plaintiff relied upon the decision in B & M Quality Constructions Pty Limited v. Buyrite Steel Supplies 15 ACSR 433 and Portrait Express v. Kodak 20 ACSR 746. In the earlier of those cases it was in fact a process server who had sworn the affidavit in support which was the subject of criticism by his Honour. The paragraph where his Honour deals with the importance of compliance which appears at page 435 is in the following terms: "In my opinion the departure from the relevant rule in respect of the affidavit accompanying the statutory demand is a matter of substance. The requirement of that rule, as to the identity of the person making the affidavit accompanying the statutory declaration, is designed to serve the public interest as well as to protect the company against unwarranted demands, by endeavouring to ensure, within practical limits, that the person who must put his or her oath or solemn affirmation to the relevant matters (and thereby risk a conviction for perjury if a knowingly false statement is made) is the person associated with the creditor who is most likely to have direct knowledge of those matters. It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute if there is one makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability. I therefore do not regard what has occurred in the present case as a merely technical breach of the rules. It goes to the heart of what Pt 80A r 15 was intended to achieve." 7 Here one has a deponent who is a director and has sworn that he has full knowledge of the matters contained in the affidavit. These obviously relate to the amount of the debt that is due, that there is no dispute and other matters referred to in the affidavit. In addition he says he has access to the records of the plaintiff's company. In the circumstances it seems to me that there is a sufficient compliance with the rule and I will not set aside the demand on this ground. 8 There are then three other claims which are classified in argument as: (a) A genuine dispute as to the quotation which is the foundation of the claim for the goods which were delivered. In respect of invoice 3232 the difference was $3251. In respect of invoice 3249, $2571, a total of $5822. (b)An off-setting claim in respect of defective goods and a failure to certify. In respect of invoice 3232 the amount was $2585; in respect of invoice 3439 the amount was $3515 and in respect of invoice number 3285 the amount was $3221, a total of $9321. (c) An off-setting claim in respect of defective goods delivered for other jobs not related to the three invoices in the notice of demand. These were lot 28 Mawbana Avenue, Hoxton Park $3914 and lot 1 Chapman Avenue, Hoxton Park $4500 to $5000, a total of $8414 or $8914 depending on what is accepted. 9 These amounts total $23,557 or $24,057 which are under the balance of $24,066 in issue. 10 I turn to the first of these three matters namely the correct quotation. Mr Radovic for the plaintiff contends that two quotes were accepted, they were issued on 24 November 1999, numbered G1885 and G1886, in respect of lot 100 Myall and Box Roads, Casula. 11 Mr Zamparini for the defendant says that these were not accepted and that in February 2000 he was asked to quote again. He issued two quotes being G2011 and G2010 being for lots 91 Myall and Box Roads and 92 Myall and Box Roads. There was evidence that these were lots in which lot 100 was subdivided. It was these quotes which formed the basis of the two invoices issued. 12 The earlier and later quotations differ in that although they were prepared for the same two sites, the number of trusses vary between the earlier and later quotes. Mr Radovic's explanation in reply was that Mr Zamparini was mistaken, but that does not adequately explain the matter. 13 Clearly two quotes were issued at different times and in order to decide the question further evidence would normally be necessary. This could include: (a) Accurate affidavits giving precise conversations, giving what was said when the quotes were accepted. But this is not available on this application. (b) Other documentation such as delivery slips etc. which might identify the relevant goods delivered. (c) Evidence as to the actual trusses used in the two houses which were constructed. (d) Any documentation relating to changes of plan. 14 Absent this evidence one cannot conclude that there is no genuine dispute. The deponents have sworn to two opposite positions. I have had the benefit of a number of submissions in respect of the principles to be applied and probably the most useful summation is that given by McLelland CJ in Eyota Pty Limited v. Hanave Pty Limited (1994) 12 ACLC 669. At p 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 considerations 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 Young v. Letchumanan (1980) AC 331 at 341), or '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 si 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; ASCR 366-7) Hayes 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 he 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 ACLR 919 at 92; (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 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." 15 Having regard to the sworn position of the parties and the matters I have mentioned above, I am satisfied that there is a genuine dispute in respect of the invoice difference. 16 In respect of claims (b) and (c) there is adequate evidence of the amount claimed for rectification of defective workmanship and lack of certification. The defendant did not address this evidence and in respect of Chapman Avenue, given the lack of detail I would accept it at $4500 and not $5000. The parties are at issue on the failure to certify and it seems that there is a dispute between them. 17 The defendant suggests that the dispute is not genuine as: (a) There was evidence of some 70 to 80 calls and several months chasing payment with no claim of defective workmanship being recorded. (b) There was no response to a letter of demand before action on 1 August 2000. (c) A payment on account was made without qualification on 20 June 2000." 18 The latter I would not have thought is not significant. The first two are normally quite significant in matters of this nature, however in paragraph 12 of Mr Radovic's affidavit of 8 November he set out or made reference to the conversation which he had about back charges and he annexed a document which bears date 12 June 2000, which lists all the back charges which he proposed to claim. 19 Paragraph 13 shows that it got to the stage by 31 August, which was after the demand was served, of reducing that to typewritten form for the purpose of preparing for these proceedings. 20 Those conversations where he said that he talked to Mr Zamparini are denied by Mr Zamparini but I cannot on an application of this nature simply on this basis reject Mr Radovic's sworn evidence. 21 There was of course as is usual in these matters no cross-examination and no suggestion that the preparation which was done on 12 June was a forgery. It is also apparent that there is quite a substantial amount of detail in that document. In the circumstances although there may be some substance in the allegation of avoiding claims for payment, I do not think it means that there is no genuine off-setting claim. They simply did not get around to dealing with it in any substantial way. 22 Therefore I am satisfied there are genuine off-setting claims and on this basis the substantiated amount is $23,557. 23 Accordingly I order the demand served by the defendant on the plaintiff be reduced to $23,488 to have effect as so varied as from the time the demand was served on the plaintiff company. (A short discussion ensued as to when the matter of costs would be argued.) 24 I stand the matter over to Thursday 1 March at 10 a.m. for submissions on costs. Last Modified: 03/27/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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