New South Wales Supreme Court CITATION : Dventures Pty Ltd v Wily [2001] NSWSC 641 FILE NUMBER(S) : SC 5045/00 HEARING DATE(S) : 19 July 2001 JUDGMENT DATE : 27 July 2001 PARTIES : Dventures Pty Limited (Plaintiff) Andrew Hugh Jenner Wily - In his capacity as Deed Administrator of Brac Retail Pty Limited (Defendant) JUDGMENT OF : Master McLaughlin COUNSEL : J. K. Chippindall (Plaintiff) P.T. Russell (Defendant) SOLICITORS : M.D. Nikolaidis & Co. (Plaintiff) Jones King Lawyers (Defendant) CATCHWORDS : Corporations - Statutory Demand - Application to set aside - Whether there is a debt - Status of Defendant to serve demand - Whether Defendant is a creditor - Whether demand is defective - Authority of partner of Defendant to sign demand - Matter of evidence - Affidavit accompanying demand - Whether affidavit complies with the rules - Requirement that affidavit verifies that the debt is due and payable - Debt asserted to arise upon a dishonoured cheque - Whether there was valuable consideration for the cheque - Antecedent debt - Relationship between receipt of cheque and antecedent debt - Bearer cheque - Status of Defendant as bearer of cheque - Status of Defendant as holder of cheque - Whether there is a genuine dispute as to the existence of the debt - Whether demand should be set aside for "some other reason". Partnership Act 1892 (NSW) LEGISLATION CITED : Cheques Act 1986 (Cth) Bills of Exchange Act 1882 (United Kingdom) Azed Developments Pty Limited v Frederick & Co. Limited (1994) 14 ACSR 54 Daewoo Australia Pty Limited v Suncorp-Metway Limited (2000) 33 ACSR 481 DCT (Vic) v Players Entertainment Network Pty Limited (1988) 13 ACLR 541 Dennis Hanger Pty Limited v Kanambra Pty Limited (1992) 6 ACSR 687 CASES CITED : Kezarne Pty Limited v Sydney Asbestos Removal Services Pty Limited (1998) 29 ACSR 11 Oliver v Davis [1949] 2 KB Portrait Express (Sales) Pty Limited v Kodak (Australasia) Pty Limited (1996) 20 ACSR 746 Rothwells Limited v Nommack (No. 100) Pty Limited (1998) 13 ACLR 421 Spencer Constructions Pty Limited v G & M Aldridge Pty Limited (1997) 76 FCR 452 Walsh v Hoag-Bosch Limited [1977] VR 178 DECISION : See paragraph 90 SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER McLAUGHLIN Friday, 27 July 2001 5045/00 DVENTURES PTY LIMITED -V- ANDREW HUGH JENNER WILY IN HIS CAPACITY AS DEED ADMINISTRATOR OF BRAC RETAIL PTY LIMITED JUDGMENT 1 MASTER: By originating process filed on 15 December 2000 the Plaintiff, Dventures Pty Limited, seeks an order that a statutory demand served upon it by the Defendant, Andrew Hugh Jenner Wily, be set aside. 2 That statutory demand is dated 28 November 2000. It is addressed to the Plaintiff. Paragraph 1 thereof is as follows: The Debtor owes Andrew Hugh Jenner Wily, in his capacity of Deed Administrator of Brac Retail Pty Limited (subject to a Deed of Company Arrangement) of Level 6, 50 Margaret Street Sydney (the " Creditor ") the amount of $186,750.00 , being the total of the amounts described in the schedule. 3 The schedule to the demand is as follows, Description of Debt Amount ($) 1. The amount of cheque number 001100 drawn on the account of Dventures Pty Ltd held at the Newport Beach branch of the ANZ bank dated 12 May 2000 given by Dventures Pty Ltd and payment of which was refused by Dventures Pty Ltd bank upon presentation for payment. $186,750.00 Total $186,750.00 4 The demand is signed by one Alan Tropp, after whose name appears the following: "Capacity: Partner, Armstrong Wily & Co". 5 The demand was accompanied by an affidavit of Alan Tropp sworn 28 November 2000. 6 I shall later in this judgment refer in greater detail to various aspects of the form of the demand and the form of the affidavit which were the subject of submissions at the hearing before me. 7 The cheque referred to in the statutory demand was in evidence. The payee named in that cheque is "Armstrong Wily & Co (Trust Account)". The drawer of the cheque is the Plaintiff. It was not in dispute that after the cheque had been drawn and after it had been given to Armstrong Wily & Co, the bank, at the direction of the Plaintiff, stopped payment upon the cheque. 8 In order to understand the circumstances which have given rise to the present proceedings and which, in particular, brought about the giving of that cheque to Armstrong Wily and Co and the subsequent dishonour of that cheque, it is necessary that I should set forth certain facts which are not in dispute between the parties. 9 These proceedings have their origin in a Deed of Company Arrangement dated 11 December 1999, in respect of a company, Brac Retail Pty Limited ("Brac"). 10 Under that Deed of Company Arrangement the present Defendant, Andrew Hugh Jenner Wily (described therein as "Andrew Hugh Jenner Wily of Armstrong Wily & Co. Chartered Accountants, Level 6, 50 Margaret Street Sydney in the state of New South Wales ("the administrator")") became the administrator of Brac. By that Deed Timothy Brachmanis, the Director of Brac, assumed certain financial obligations and liabilities. Those liabilities, in the events which have happened, included (by clause 12.1(d) of the Deed) payment by Timothy Brachmanis of the amount of $200,000 by 1 April 2000 to the administrator "for the administrator to deposit into the Fund". (The word "Fund" is defined in clause 1.1 of the Deed.) 11 By 12 May 2000 Timothy Brachmanis had discharged only part of the foregoing liability, and the amount of his indebtedness under that provision of the Deed was in an amount of $186,750. 12 Timothy Brachmanis was at that time and at all relevant times the sole director of Dventures Pty Limited ("Dventures"), which company is the Plaintiff in the present proceedings. Mr Brachmanis authorised a cheque to be drawn upon the bank account of Dventures in the amount which he was obligated to pay to Mr Wily. That was the cheque referred to in the statutory demand. That cheque was enclosed with a letter dated 12 May 2000 from M D Nikolaidis & Co., Solicitors for Mr Brachmanis, addressed to "Messrs Armstrong Wily & Co.", and was received on 12 May 2000 by Alan Topp, a partner of the Defendant (who, it will be recalled, signed the statutory demand and swore the affidavit in support). 13 Mr Timothy Brachmanis in return received a receipt headed "Armstrong Wily & Co. Trust Account". Upon that receipt appear, after the printed words "Details/Instructions", the words "M D Nikolaidis & Co. - money regarding Deed for Brac Retail Pty Limited." I would here interpolate that M D Nikolaidis & Co. are the solicitors acting for the Plaintiff in the present proceedings. 14 That cheque was deposited in the account conducted by Armstrong Wily & Co. with the ANZ bank on 12 May 2000 (that being the date when the cheque was received). 15 Subsequently, either on 12 May 2000, or very shortly thereafter, payment on the cheque was stopped - that is, the cheque was dishonoured upon presentation. (Notice of that dishonour was communicated by letter from the bank dated 15 May 2000.) 16 After the institution of the present proceedings, by the originating process to which I have already referred, the Court (by orders made by consent on 5 March 2001) ordered that the Plaintiff file and serve points of claim and that the Defendant file and serve points of defence. In consequence, the various factual matters which were in issue between the parties were thereby identified and delimited. 17 It emerged from the filing of the points of claim and points of defence and from the various affidavits which have been filed on behalf of the respective parties that Timothy Brachmanis, although the only director of the Plaintiff company, was not a shareholder of that company; the only shareholder of the Plaintiff was, at all relevant times, a company Hobbes Holdings Pty Limited, of which one Edgar Brachmanis (variously described as the father and the step-father of Timothy Brachmanis) was the sole shareholder. 18 The present proceedings are brought by the Plaintiff pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Law. The Plaintiff at the outset has challenged the effectiveness of the statutory demand, submitting that, for various reasons, it was defective in form. 19 Further, the Plaintiff submits that there is a genuine dispute between the Plaintiff and the Defendant about the existence of the debt asserted in the demand. 20 Further, the Plaintiff submits that the amount claimed in the demand is not a debt. 21 In challenging the form of the statutory demand the Plaintiff points to the fact that it was signed not by the Defendant, Mr Wily, but by Alan Topp, describing himself as partner, not of Mr Wily, but in the firm Armstrong Wily & Co. 22 Provision is made in Division 2 of Part 5.4 of the Corporations Law for the service of a statutory demand on a company, and the consequences when a company fails to comply with a statutory demand. The contents of the demand are set forth in section 459 E (2). That subsection requires, inter alia, that the demand must be signed by or on behalf of the creditor (paragraph (f)). It is the submission of the Plaintiff that in the instant case the demand was not signed by or on behalf of the creditor. 23 In the instant case the creditor is identified in the demand as "Andrew Hugh Jenner Wily, in his capacity of Deed Administrator of Brac Retail Pty Limited (subject to a Deed of Company Arrangement) of Level 6, 50 Margaret Street, Sydney (the "creditor")" (paragraph 1 of the demand). It is signed by Alan Topp, purporting to do so in his capacity as "Partner, Armstrong Wily & Co.". 24 Not only does subsection (3) of section 459 E require that, in the circumstances of the instant case, the demand be accompanied by an affidavit of the nature described in that subsection, but the demand itself contains under the heading "Notes" a reference to such an affidavit (note 3). Such an affidavit must (in the circumstances of the instant case) comply with the Corporations Act Rules (see the definition of "rules" in section 9 of the Corporations Law). Rule 2.5 provides (subject to a provision not here relevant) that an affidavit that is to be made by a creditor may, in the circumstances of the instant case, be made "by the creditor or a person authorised by the creditor to make the affidavit on behalf of the creditor" (paragraph (c)). 25 In the instant case the evidence discloses that Mr Topp was at all material times a partner in the firm Armstrong Wily & Co. and that at all material times the other partners in that firm included Andrew Hugh Jenner Wily, the present Defendant. 26 The Defendant in response to the foregoing submissions, relied firstly upon the authority of one partner to act on behalf of the other partners of a partnership (see, for example, Partnership Act 1892 (NSW), section 5; Lindley & Banks on Partnership, 17ed. (1995), Chapter 12, pages 299f). 27 Further, the question whether the demand has been "signed by or on behalf of the creditor" is a question of fact, the existence of which can be established on the balance of probabilities by the ordinary rules of evidence and proof (see Dennis Hanger Pty Limited v Kanambra Pty Limited (1992) 6 ACSR 687 at 689-690; DCT (Vic) v Players Entertainment Network Pty Limited (1988) 13 ACLR 541). 28 The foregoing statutory provisions (of the Partnership Act) and the legal principles relating to the authority of partners, as well as the statement in the affidavit of Alan Godfrey Topp, sworn 27 June 2001 concerning the constitution at the relevant times of the firm Armstrong Wily & Co., and the fact that at relevant times each of Mr Topp and Mr Wily was a partner of that firm, satisfy me upon the balance of probabilities that the statutory demand signed by Mr Topp was signed "on behalf of Mr Wily". 29 The next ground upon which it is submitted on behalf of the Plaintiff that the statutory demand is defective is that Mr Wily himself is not the creditor. The basis for this submission is that, so it is submitted, there existed no debt payable to Mr Wily. That is, that any debt which was owed by Mr Timothy Brachmanis (or by any other person) in consequence of the dishonour of the cheque drawn by the Plaintiff in payment of that indebtedness of Mr Brachmanis was a debt payable, not to Mr Wily, but to the company Brac Retail Pty Limited, of which Mr Wily was the deed administrator. 30 Not only does the Plaintiff by the foregoing submission challenge the form, and thus to the effectiveness, of the statutory demand, but that submission is also relied upon by the Plaintiff in support of an asserted genuine dispute of the nature recognised by section 459H(1), the existence of which requires that the Court must set aside the statutory demand. 31 It was the submission of the Plaintiff that any cheque drawn in satisfaction of the indebtedness of Mr Brachmanis should have been drawn in favour of Brac Retail Pty Limited (Administrator Appointed). It was a concomitant of this submission that the entity to which Mr Brachmanis was indebted, and is respect of which indebtedness the cheque was paid, was not Mr Wily, but the company, and that, in consequence, only the company, and not Mr Wily (irrespective of how he was otherwise described), could serve the statutory demand. The Plaintiff submitted that a statutory demand by which Mr Wily (irrespective of the capacity by which he was described) was named as the creditor was ineffective to claim a debt asserted to be owing to Brac Retail Pty Limited. 32 Such a submission totally disregards the factual context in which Mr Timothy Brachmanis, through his solicitor, in the course of and as a culmination of extensive and protracted negotiations between himself (through his solicitor) and Mr Wily as administrator of the company (through Mr Wily's partner, Mr Topp) sought to discharge the indebtedness of Mr Brachmanis to the company. 33 Further, the distinction drawn by the Plaintiff in the foregoing submission, being the distinction between a debt owed to Mr Wily in his capacity as deed administrator of the company and a debt owed to the company, totally disregards a number of specific provisions of the Deed of Company Arrangement. For example, the obligations of Mr Brachmanis under clause 12.1 included an obligation at the date of executing the Deed, to "pay the amount of $25,000 to the Administrator for the Administrator to deposit into the Fund". Clause 1.1 of the Deed defines Administrator as meaning, relevantly, Andrew Hugh Jenner Wily as either Voluntary Administrator or Deed Administrator... 34 The same clause defines "Fund" as meaning, a consolidated bank account conducted by the Administrator and styled "Brac Retail Pty Ltd Deed Fund" into which will be paid moneys to pay the Entitlements of Admitted Creditors and the costs and expenses of the Arrangement. 35 Further, paragraph (d) of Clause 12.1 creates (as has already been observed) an obligation and liability upon Mr Brachmanis, in the circumstances which have arisen, to pay the amount of $200,000 by 1 April 2000 "to the Administrator for the Administrator to deposit into the Fund". 36 I am satisfied that the foregoing provisions of the Deed have the effect that the only entity to whom money is owed under those provisions and the only entity which can receive money from Mr Brachmanis in discharge of his liability thereunder is Mr Wily in his capacity as either Deed Administrator of Brac Retail Pty Limited or as Voluntary Administrator of Brac Retail Pty Limited. 37 Indeed, it could well be argued that an attempt by Mr Brachmanis to make a payment directly to the company (for example, by bypassing Mr Wily and effecting a deposit into any existing bank account of the company) would not constitute a discharge of the indebtedness of Mr Brachmanis to the company. 38 In my conclusion, the indebtedness of Mr Brachmanis under the Deed is an indebtedness to Mr Wily in his capacity as "the Administrator" as defined in Clause 1.1 of the Deed. In consequence, I am satisfied that Mr Wily in the capacity described in the statutory demand is appropriately the creditor in respect to the alleged indebtedness. I do not accept that in so identifying the creditor there is any defect in the statutory demand or that there is disclosed any genuine dispute as to the existence of the debt. 39 As well as submitting that, for the foregoing reasons, the form of the demand itself is defective, the Plaintiff also submits that the form of the affidavit in support of the demand is defective, and that, in consequence, the service of the demand on the Plaintiff is ineffective. 40 I have already observed that section 459E(3) requires that the demand must be accompanied by an affidavit. That subsection requires that the affidavit (a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (b) complies with the rules. 41 The Corporations Law Rules provide, in Rule 5.2, as follows, For the purposes of subsection 459E(3) of the Law, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must: (a) be in accordance with Form 7 and state the matters mentioned in that Form; and (b) be made by the creditor or by a person with the authority of the creditor or creditors; and (c) not state a proceeding number, or refer to a Court proceeding, in any heading or title to the affidavit. 42 I have already expressed my conclusion that the affidavit which accompanied the statutory demand, being the affidavit of Alan Topp, sworn 28 November 2000, is an affidavit made "by a person with the authority of the creditor". 43 It has, however, been submitted that that affidavit is not in accordance with Form 7 and does not state the matters mentioned in that form. 44 As I understand it, the complaint of the Plaintiff concerning the affidavit not complying with Form 7 and not stating the matters mentioned in that form is that the affidavit does not contain a statement to the effect, "I am authorised by the creditor to make this affidavit on his behalf", such a statement being set forth as an example of the requirement of Form 7 that where the deponent is not the creditor, the facts entitling the deponent to make the affidavit should be stated. 45 I am satisfied that the statement contained in paragraph 1 of Mr Topp's affidavit (that he is a partner of Mr Wily, the Deed Administrator of Brac) and the facts stated in paragraph 2 (that he is a person who has had dealings with the debtor company that gave rise to the debt and has knowledge of this debt so far as it is known to the Deed Administrator) constitute compliance with the requirement that the facts entitling the deponent to make the affidavit be stated in the affidavit. 46 Paragraph 2 in Mr Topp's affidavit (the content whereof I have just set forth) is in my view adequate compliance with the requirement of Form 7 that the deponent should state the source of the deponent's knowledge of the matters stated in the affidavit in relation to the debt. 47 I consider that the affidavit of Mr Topp accompanying the statutory demand fully complies with the requirements of CLR 5.2. If, however (and contrary to the conclusion which I have just expressed), the affidavit were to be regarded as not being in the form required by CLR 5.2, then I consider that the provisions of CLR 1.7 could properly be relied upon in relation to the form of that affidavit. Subrule (1) of that rule provides, It is sufficient compliance with these Rules in relation to a document that is required to be in accordance with a form in Schedule 1 if the document is substantially in accordance with the form required or has only such variations as the nature of the case requires. 48 I am satisfied that even if (contrary to the conclusion which I have just expressed) the affidavit of Mr Topp does not constitute strict compliance with the requirement of CLR 5.2, then that affidavit is substantially in accordance with Form 7. 49 Thus I am satisfied that neither the form nor the content of the affidavit of Mr Topp sworn 28 November 2000 is defective. Thus that affidavit does not have the consequence (which the Plaintiff submits it has) of rendering ineffective the service of the statutory demand. 50 The next ground upon which the Plaintiff submits that the statutory demand should be set aside it that there is a genuine dispute as to the indebtedness of the Plaintiff to the Defendant. 51 It will be appreciated that the Plaintiff company, Dventures Pty Limited, is a totally different entity from the company which is the subject of the Deed of Company Arrangement, Brac Retail Pty Limited. The indebtedness of Mr Brachmanis to the Defendant arose out of the liability of Mr Brachmanis to that latter company, Brac, not out of any liability which Mr Brachmanis might have had in relation to Dventures Pty Limited. 52 Nevertheless, Mr Brachmanis was the sole director of the Plaintiff company. It is not in dispute that Mr Brachmanis authorised the drawing of the cheque (and, indeed, I would observe that the cheque appears to have been actually signed by Mr Brachmanis himself). 53 During the course of the hearing Counsel for the Plaintiff raised the question of the authority of Mr Brachmanis to draw the cheque. However, Counsel conceded that, prima facie, a sole director of a company had authority to draw a cheque upon that company. 54 But even if the Plaintiff did not acknowledge the authority of Mr Brachmanis to draw the cheque, the matter is placed beyond doubt by the provisions of section 198B of the Corporations Law, subsection (1) whereof provides, Any 2 directors of a company that has 2 or more directors, or the director of a proprietary company that has only 1 director, may sign, draw, accept, endorse or otherwise execute a negotiable instrument. 55 Further, the constitution of the Plaintiff (which was in evidence, as Exhibit 2) makes express provision for the signing and drawing of cheques by the sole director of that company. 56 The next ground upon which it was submitted by the Plaintiff that there was no indebtedness in the Plaintiff which would entitle the Defendant to sue in respect of the dishonoured cheque was that there existed no consideration for that cheque. However, Counsel for the Plaintiff did not, in his own words, "argue strenuously" against the deferral of the winding up of a company as constituting such consideration. It will be appreciated that, in the instant case, the payment by Mr Brachmanis of the indebtedness recognised by Clause 12.1(d) of the Deed of Company Arrangement would have the effect of deferring a winding up of Brac. 57 As has already been observed, the cheque was drawn, not by Brac, but by the Plaintiff, a legal entity quite separate from Brac. In this regard, however, the provisions of section 35 of the Cheques Act have application. Subsection (1) of that section provides, Valuable consideration for a cheque may be constituted by: (a) any consideration sufficient to support a simple contract; or (b) an antecedent debt or liability. 58 The fact that the cheque was drawn by a third party (that is, in the instant case, by a person or entity who was not otherwise indebted to the payee) in payment of a pre-existing debt (that is, in the words of the section, an antecedent debt), does not mean that there is no consideration for the cheque in the event that it be dishonoured upon presentation. In Oliver v Davis [1949] 2 KB the English Court of Appeal had occasion to consider the equivalent provision of the Bills of Exchange Act 1882 (United Kingdom), section 27(1) of which provided, Valuable consideration for a bill may be constituted by (a) Any consideration sufficient to support a simple contract; (b) An antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the bill is payable on demand or at a future time. 59 Lord Evershed MR said, at 735, [I]f the antecedent debt or liability of a third party is to be relied upon as supplying "valuable consideration for a bill", there must at least be some relationship between the receipt of the bill and the antecedent debt or liability. 60 His Lordship later, at 738 said, Certainly in the case with which we are dealing where the antecedent debt or liability is that of a third party the matter is, I think - and I adopt the language of Lord Esher in Crears v Hunter (1887) 19 QBD 341 at 345 - a matter of evidence. 61 The decision of the English Court of Appeal in Oliver v Davis was followed by the Full Court of the Supreme Court of Victoria in Walsh v Hoag-Bosch Pty Limited [1977] VR 178, where Young CJ said, at 183, Where a cheque is given in payment of a pre-existing debt, the debt is capable of constituting consideration for the cheque but it will generally only do so if the cheque is accepted as conditional payment of the debt. At all events, where an antecedent debt of a third party is relied upon there must be either some consideration moving from the payee as, for example, an agreement to give time to the original debtor, or a sufficient relationship between the cheque and the debt. Whether an analysis of the transaction will bring it within paragraph (a) or paragraph (b) of the description of valuable consideration in section 32(1) will generally not be significant. Moreover, as Evershed MR pointed out, where the pre-existing debt of a third party is relied upon, the situation will not often arise that there is a sufficient relationship between the debt and the cheque to enable the conclusion to be drawn that the cheque constitutes consideration for the cheque but insufficient foundation in the evidence for a conclusion that there is consideration in the ordinary sense passing from the payee. The present case, however, is or may be such a case. The question to be answered is whether there has been any consideration for the bill and the answer to that question must be found in evidence: see Oliver v Davis , supra , per Evershed MR at 738, adopting the language of Lord Esher MR in Crears v Hunter , at 345. 62 In the instant case it is abundantly obvious that it was the intention of Dventures Pty Limited, through its sole director, Mr Timothy Brachmanis, to discharge the indebtedness of Mr Brachmanis to the Defendant. 63 I am satisfied of the existence of a relationship between the receipt of the cheque drawn by Mr Brachmanis, and indeed signed by him, and the antecedent debt or liability of Mr Brachmanis to Mr Wily under the Deed of Company Arrangement. In consequence, therefore, I am satisfied that there is sufficient "valuable consideration" of the nature contemplated by paragraph (b) of section 35(1) of the Cheques Act to support the claim against the drawer of the cheque. 64 (In regard to a consideration that has been executed I would, for completeness, refer to the decision of McPherson J in the Supreme Court of Queensland in Rothwells Limited v Nommack (No. 100) Pty Limited (1998) 13 ACLR 421.) 65 The next submission relied upon by the Plaintiff was grounded upon the fact that the payee of the cheque was not Mr Wily but was "Armstrong Wily & Co. (Trust Account)". 66 I have already referred to the evidence concerning the constitution of the partnership Armstrong Wily & Co. 67 Were is necessary for me to do so, I would have little hesitation in concluding that an indebtedness by a debtor in the position of Mr Brachmanis to a partner in a firm carrying on the business of chartered accountants, at least one of the partners of which (Mr Wily) is an official liquidator, would be discharged by a payment to the firm by a cheque naming the trust account of the firm as payee. However, the matter is placed beyond doubt by the fact that the cheque not only names the firm as payee, but that the cheque is drawn in favour of "Armstrong Wily & Co. (Trust Account) or bearer". 68 The word "bearer" is defined in section 3 of the Cheques Act as meaning "the person in possession of a cheque payable to bearer". The same section defines the word "holder" as meaning, relevantly, "in relation to a cheque payable to bearer - the bearer". 69 By virtue of those definitions, Mr Wily (who, as a member of a partnership a member of which, Mr Topp, was given physical possession of the cheque by the solicitor acting for Mr Brachmanis) was the bearer of the cheque and, in consequence, the holder of the cheque. 70 As such, upon its dishonour upon presentation, Mr Wily is entitled to compensation as provided by section 71 of the Cheques Act. In the instant case the amount of that compensation is, pursuant to section 76(1)(a)(i) of the Act, the sum ordered to be paid by the cheque, being $186,750.00, and that sum, pursuant to section 76(3), is deemed to be liquidated damages. 71 Thus, even if there were to be any doubt (arising from the name of the payee shown on the face of the cheque) as to the status of Mr Wily to serve the statutory demand upon the drawer of the dishonoured cheque (which doubt I do not entertain and which doubt, in my conclusion, does not exist), the effect of the foregoing sections of the Cheques Act is to give to Mr Wily, as holder of the cheque, the status of creditor in the amount of the cheque, and thus to enable him to serve the statutory demand upon the drawer of the dishonoured cheque. 72 In regard to the status of Mr Wily as the appropriate creditor, it must also be recognised that, in my conclusion (as I have already stated earlier in these reasons), there is no ground for any suggestion that the appropriate entity to whom Mr Brachmanis was indebted and in respect of which indebtedness the cheque was paid, was the company Brac Retail Pty Limited. The appropriate entity was Mr Wily. Any argument in this regard could only be an argument based upon the fact that the payee named in the cheque was not Mr Wily, but was the partnership of which he was a member (and the trust account of that partnership). 73 The final ground upon which the Plaintiff submits that the statutory demand should be set aside is that based upon section 459J of the Corporations Law. That section provides, (1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that: (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or (b) there is some other reason why the demand should be set aside. (2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect. 74 I have already considered, and rejected, the submission of the Plaintiff that there is a defect in the statutory demand. Even were I to be satisfied of the existence of such a defect, I certainly would not be satisfied that any injustice, let alone substantial injustice, would be caused unless the demand be set aside. 75 There remains to be considered only the submission of the Plaintiff that there is some other reason why the demand should be set aside (section 459J(1)(b)). 76 The "some other reason" relied upon by the Plaintiff is a defect in the affidavit in support of the demand. In this regard I have been taken to a number of decided authorities, including Portrait Express (Sales) Pty Limited v Kodak (Australasia) Pty Limited (1996) 20 ACSR 746 (a decision of Bryson J); Spencer Constructions Pty Limited v G & M Aldridge Pty Limited (1997) 76 FCR 452 (a decision of the Full Court of the Federal Court of Australia); Kezarne Pty Limited v Sydney Asbestos Removal Services Pty Limited (1998) 29 ACSR 11 (a decision of Austin J in the Supreme Court of New South Wales); and Daewoo Australia Pty Limited v Suncorp-Metway Limited (2000) 33 ACSR 481 (also a decision of Austin J). 77 It is quite clear from the foregoing authorities that a distinction is drawn between a defect in the statutory demand and a defect in the affidavit by which the demand must be accompanied. A defect in the former can be set aside only where substantial injustice will otherwise be caused; a defect in the latter may constitute "some other reason" why the demand should be set aside. If there is such a defect in respect to an affidavit, it is not necessary that the party served with the demand and the affidavit should establish that substantial injustice will be caused if the demand is not set aside. (See Portrait Express (Sales) Pty Limited v Kodak (Australasia) Pty Limited, supra, where Bryson J, at 758, held that the dominant consideration in the exercise of discretion under section 459J(1)(b) is the need to ensure the purity of the manner in which creditors follow statutory procedures which are preliminary to litigation, and for which verification is required by law.) 78 The only complaint of the Plaintiff asserting any alleged defect in the affidavit which would constitute "some other ground" under section 459J(1)(b) is, as I understand it, that the affidavit does not comply with the requirement of section 459E(3) that it "(a) verifies that the debt...is due and payable by the company". 79 Paragraph 5 of the affidavit of Mr Topp sworn 28 November 2000 is in the following terms "The debt of $186,750.00 mentioned in the statutory demand is due and payable by Dventures Pty Ltd." 80 In regard to any complaint by the Plaintiff concerning the adequacy of the foregoing passage in the affidavit as compliance with the requirement of subsection (3)(a) of section 459E, it is necessary to cite merely the decision of Hayne J (in the Supreme Court of Victoria) in Azed Developments Pty Limited v Frederick & Co. Limited (1994) 14 ACSR 54, where his Honour (at 55f) considered the contention of the alleged debtor that what was required by the terms of section 459E(3) was proof by evidence of all elements of the claim leading to the conclusion that the company was indebted to the creditor. His Honour held that the expression "verify" was used in that subsection in the sense of "a formal affirmation" rather than in the sense of "prove or demonstrate by good evidence or otherwise substantiate". 81 I am satisfied that the assertion contained in paragraph 5 in Mr Topp's affidavit constitutes compliance with the requirement in subsection (3) that the affidavit "verifies that the debt...is due and payable by the company". 82 Further, it will be appreciated that in considering the submission of the Plaintiff grounded upon an asserted defect in the demand, I have already earlier in these reasons expressed my conclusion that there is no defect in the affidavit of Mr Topp sworn 28 November 2000 which accompanied the statutory demand. I considered that that affidavit strictly complied with the requirements of CLR 5.2, and followed the form prescribed as Form 7, stating the matters set forth in that form. Further, that even if (contrary to that conclusion) I were to be of the view that there was not strict compliance with the requirement of CLR 5.2, I was satisfied, pursuant to CLR 1.7 that there had been substantial compliance with Form 7. 83 In these circumstances, therefore, I am not satisfied that the Plaintiff has established that there is "some other reason" why the demand should be set aside, which would activate the discretion of the Court contemplated by the introductory words of section 459J(1). 84 I summarise, therefore, my foregoing conclusions as follows. 85 I am not satisfied that there is any defect in the statutory demand or in the affidavit accompanying that demand. 86 I am satisfied that the appropriate entity to whom Mr Brachmanis was indebted was Mr Wily in his capacity as Deed Administrator or as Voluntary Administrator of Brac Retail Pty Limited, and that, as such, Mr Wily has the standing to bring the present proceedings by way of suing upon the dishonoured cheque. I am satisfied that the pre-existing indebtedness of Mr Brachmanis to Mr Wily constituted valuable consideration of the nature contemplated by paragraph (b) of section 35(1) of the Cheques Act, thus entitling an action to be brought against the drawer as a result of the dishonour of the cheque. 87 I am satisfied that Mr Wily, as a partner in the firm which was the payee of the cheque, has the standing to bring the present proceedings against the drawer of the cheque consequent upon its dishonour. Even if (contrary to the conclusion which I have just expressed) Mr Wily in his capacity as a partner of Armstrong Wily & Co. does not have that standing, Mr Wily as the bearer of the cheque, and, in consequence, as the holder of the cheque, has the standing to claim compensation in respect to the dishonoured cheque, pursuant to section 71 of the Cheques Act, and is thus a creditor of the Plaintiff. 88 For the foregoing reasons also, I am satisfied that there is no genuine dispute as to the indebtedness of the Plaintiff to the Defendant. 89 It follows, therefore, that the originating process must be dismissed. 90 I make the following orders: (1). I order that the originating process be dismissed. (2). I order that the Plaintiff pay the costs of the Defendant. ******** Last Modified: 01/18/2002 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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