Reported Decision : (2000) 18 ACLC 457 New South Wales Supreme Court CITATION : Sajepe v Lawler Sajepe v Storm [2000] NSWSC 262 revised - 23/05/2000 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1245/2000; 1246/2000 HEARING DATE(S) : 17/03/2000 JUDGMENT DATE : 17 March 2000 PARTIES : Sajepe Pty Limited v Matthew Lawler & Anor Sajepe Pty Limited v Rick Storm & Anor JUDGMENT OF : Master Macready at 1 COUNSEL : SOLICITORS : Salmon & Co (P) Bryetts Solicitor (D) CATCHWORDS : Corporations Law. Application to set aside statutory demand relying upon a judgment debt. Question of whether judgment is likely to be set aside. If set aside no debt to found statutory demand. Demand set aside. Barclays v Mike Gaffkin Marine Pty Ltd 21 ACSR 235 at 236. Rothwells v Nommack (100) 6 ACLC 1199 at 1200. CASES CITED : First Line Distribution v Paul Whaley (1995) 13 ACLC 1218. Griffiths Cooperative v Calibria McLelland CJ in Eq 26/11/96 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669 at 671. Morris Catering (Aust) Pty Ltd (1993) 11 ACLC at 922 DECISION : Para 17 - 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY FRIDAY 17 MARCH 2000 1245/00 - SAJEPE PTY LIMITED v MATTHEW LAWLER & ANOR 1246/00 - SAJEPE PTY LIMITED v RICK STORM & ANOR JUDGMENT 1 MASTER: This is an application to set aside a statutory demand. The application has been brought within time. There has been no complaint about some affidavits because they have been sworn recently and relied upon in the hearing. I will deal briefly with a summary of the chronology in the matter. The underlying matter commenced in April 1996 when there were sales to the defendant of a cottage in Salamander Bay, Port Stephens. On 25 June 1999 the defendant commenced proceedings against the plaintiffs in these proceedings by statement of claim in the Local Court. There were then various requests for particulars during July and November. By 2 December the time for filing defences had expired apparently without a defence. There was then an application for default judgment on 23 December and that application was granted. 2 Following that there were statutory demands in this and the other two matters which are identical to the present matter which are being heard together and at the same time. It was on 2 February that the summons seeking to set aside the demand was served. The statutory demand of course was based upon the default judgment that had been obtained in the Local Court. 3 On 21 January there was filed by the plaintiff a notice of motion in the Local Court to set aside the default judgment. At the same time an ex parte stay in respect of the judgment was granted. On 25 February the plaintiff's notice of motion to set aside a judgment was heard by the Local Court Registrar who dismissed the motion for lack of a defence on the merits with an order for costs against the plaintiff. 4 On 1 March the plaintiff filed further notice of motion seeking a review of the Registrar's decision. There has been a further stay of proceedings granted until that motion is heard on 31 March 2000. As there has been a stay it is possible for there to be a dispute in respect of the judgment debt. In the normal course where there is a judgment debt the fact of an appeal is not sufficient ground to give rise to a genuine dispute under the Corporations Law. See Barclays v Mike Gaffkin Marine Pty Limited, 21 ACSR 235 at 236. 5 One accordingly has at the moment a claim for a judgment debt and the genuine dispute is said to arise out of the fact that the judgment is disputed and it should be set aside. 6 If the judgment is set aside there will in fact be no debt due by the plaintiff to the defendant. That is because of the nature of the claim which is made in the Local Court. The claim is one which refers to a sale of lot 38 in the neighbourhood plan which contains a provision providing for the contract to be furnished in a certain way at completion. 7 The statement of claim alleges that the plaintiff represented to the defendant in these proceedings that it did not have the funds to complete the cottage but that if completion took place he would have funds to complete the cottage and presumably would do so. 8 That in effect is a claim for unliquidated damages and cannot found a claim for a debt under a statutory demand. In this regard see Rothwells v Nommack (No 100)Pty Ltd (1988)6 ACLC 1199 at 1200, First Line Distribution v Paul Whaley (1995) 13 ACLC 1218 and the unreported decision of his Honour McLelland CJ in Eq in Griffiths Co-operative v Calibria on 28 November 1996. 9 The question of whether there is a dispute about the judgment probably concerns whether it is likely to be set aside. The provisions for setting aside judgments under the Local Court Act are contained in Part 33 Rule 9 of the Local Courts (Civil Claims) Rules which provides:- Where the Registrar gives a direction or makes an order or does any other act in any proceedings, the court may, on application by any party, review the direction, order or act, and may make such order by way of confirmation, variation, discharge or otherwise as the Court thinks fit." 10 It is suggested that the type of hearing is not one de novo and would not be restricted to evidence before the Registrar. That proposition is not necessarily correct. There are a number of decisions on similar sections and it may not be accurately characterised as an appeal de novo. Be that as it may there is at least some argument based upon similar provisions of the Supreme Court Act that there may be power to have additional evidence. 11 I will, however, deal with it on the basis of what the existing evidence is because any other evidence should have been put on before me. The relevant thing is whether there is a defence on the merits. In the affidavits before the Registrar the only reference - which is that of 21 January 2000 - the only evidence of a defence on the merits was that in Mr Barnes' affidavit of 21 January, in which he said that the allegations of a secondary contract and misleading statements, were denied and the plaintiff had suffered no damage. That has been expanded slightly by a further affidavit of 29 February 2000 and no doubt it would be relied upon at the hearing before the Magistrate. That once again contains a clear denial of the misleading statements alleged and also refers to a suggestion that the plaintiffs may not be able to prove their damage as someone has supplied or provided them with furniture and effects. 12 If one looks at the claim that is made in the statement of claim in the Local Court, one would immediately assume that absent any representations the claim of this nature would merge on completion and would not be available. The only way it might possibly be available is if there were some fraudulent misrepresentation. These have not actually been alleged as fraudulent misrepresentations. One could imagine that ultimately when the case comes on the right issues may be before the Court. Those misrepresentations would be at the heart of whether or not there might be a defence and really that is the basic matter that the case is about. 13 The fact of the matter is that there is a clear denial of misrepresentation which is at the heart of the case. There is another allegation that the defendants may not be able to prove damage. They have had the use of some other furniture and effects and that I think cannot seriously be contended as a point. They were not supplied with what they were supposed to get, and presumably they will be able to prove some damage due to the lack of those items. 14 The question is whether or not there is a genuine dispute. I have not had the benefit of submissions on the meaning of that expression but I think probably the most useful submission is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669 at p.671: 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 at (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.'" 15 In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 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 simply - 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." 16 Here, and one has, as I have said, a denial of the very representation which is at the heart of the claim upon which the judgment is based. I would have thought that on any view of the matter that would have to be a genuine dispute if the fact of the very misrepresentation is in issue. 17 For these reasons I am satisfied there is a genuine dispute. Accordingly in each matter I set aside the demands and order the defendant to pay the plaintiff's costs. oOo Last Modified: 09/25/2000 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.