New South Wales Supreme Court CITATION : Bell Construction Services P/L v Form-Kwip Building Services P/L [2001] NSWSC 73 revised - 28/02/2001 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4606/00 HEARING DATE(S) : 19/02/01 JUDGMENT DATE : 19 February 2001 In the matter of Bell Construction Services Pty Limited (ACN 070 106 955) PARTIES : Bell Construction Services Pty Limited (Plaintiff) Form-Kwip Building Services Pty Limited (Defendant) JUDGMENT OF : Santow J COUNSEL : P Walsh (Plaintiff) J T Johnson (Defendant) SOLICITORS : Kacir Safi & Halligan (Plaintiff) Sally Nash & Co (Defendant) CATCHWORDS : CORPORATIONS — Application to set aside a statutory demand — Compliance with s459G of the Corporations Law — Unintended omissions from affidavit supporting application to set aside but no discrepancy between affidavit filed and affidavit served — Affidavit in support of application conforms to s459G(3) — Genuine dispute established. Corporations Law s459G LEGISLATION CITED : Corporations Law Rules rule 2.4(2) Supreme Court Rules of Western Australia O37 r2(8) Callite Pty Ltd v Peter John Adams & 3 Ors [2001] NSWSC 52 (Santow J, 16 February 2001, unreported) CASES CITED : David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACSR 785 Robowash Pty Ltd v Robowash Finance Pty Ltd [2000] WASCA 409, (19 December 2000, unreported) DECISION : Application to set aside statutory demand succeeds. REVISED — 28 February, 2001 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY SANTOW J No. 4606/00 In the matter of BELL CONSTRUCTION SERVICES PTY LIMITED (ACN 070 106 955) BELL CONSTRUCTION SERVICES PTY LIMITED Plaintiff FORM-KWIP BUILDING SERVICES PTY LIMITED Defendant JUDGMENT — ex tempore 19 February 2001 INTRODUCTION 1 This is an application to set aside a statutory demand. The relevant facts are largely set out in a Statement of Agreed Facts below. 2 The Defendant company on 30 October 2000 issued a statutory demand against the Plaintiff company. It is to recover a claimed debt of $50,000 said by the description in the creditor's statutory demand to be for "monies had and received by the creditor to the company on 28 July 1999 …". The affidavit from Mr Wilson, a director of the Defendant, which accompanies the statutory demand simply states two things. That the debt "is due and payable by the Debtor company" (para 4) and the deponent's belief "that there is no genuine dispute about the existence or amount of the debt". After the s459G period expired, on 29 January 2001, Mr Wilson in a second affidavit elaborates on the basis for claiming the $50,000 as a debt from the Plaintiff company. 3 The Plaintiff applies to set aside that statutory demand, purportedly pursuant to s459G of the Corporations Law, contending that there is a genuine dispute about the debt. The gravamen of the Plaintiff's case is that the relevant monies were paid to Mr Scott Bell personally in circumstances he explains and not advanced by way of loan to the Plaintiff company of which he is a principal; see affidavit of Mr Bell dated 14 November 2000, paras 3, 4 (and annexure C) and 5 (annexing an earlier affidavit of 16 August 2000 in other proceedings before the statutory demand). AGREED FACTS 4 What follows are the agreed facts which provide the factual context. (1) On 28 July 1999 David Wilson handed a cheque drawn that day to Scott Bell. The cheque was : (a) for the sum of $50,000; (b) drawn on the account of Form-Kwip Building Services Pty Limited; (c) signed by David Wilson and Scott Bell; (d) made payable to Bell Construction Services Pty Limited; and (e) paid into the account of Bell Construction Services Pty Limited. (2) On 29 May 2000 Form Quip Scaffold issued an invoice number 4805 to Bell Construction Services for $50,000. (3) By letter dated 23 June 2000 Mr Bell's solicitors queried the invoice. (4) By letter dated 16 August 2000 Mr Bell's solicitors informed Mr Wilson of the grounds on which Mr Bell disputed that the $50,000 was repayable. (5) By affidavit sworn 16 August 2000 in other proceedings, Mr Bell recounted the circumstances in which he asserts he received the cheque for $50,000. (6) On 30 October 2000 the defendant served a statutory demand on the plaintiff for the $50,000. (7) On 15 November 2000 the plaintiff filed and served on the defendant the present application and the affidavit of Scott Bell sworn 14 November 2000. (8) The affidavit of Scott Bell sworn 14 November 2000: (a) does not have annexed to it a company search of the plaintiff; (b) annexes Mr Bell's affidavit of 16 August 2000 as annexure "2" but omits page 3 of the company search which is annexure "C" to that earlier affidavit. LEGAL QUESTIONS 5 The Defendant starts with a threshold attack on the Plaintiff's purported application pursuant to s459G of the Corporations Law. It relies upon two omissions from Mr Scott Bell's affidavit with its annexures to support its contention that the affidavit does not meet an essential requirement of s459G(3), namely "an affidavit supporting the application". I shall deal first with that threshold attack, based as it is upon a reading of David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 and then, depending on the answer to that question, on whether there is a genuine dispute as to the claimed debt. 6 There are thus two legal questions Question 1: Compliance with s459G Does the affidavit filed by the Plaintiff in support of its application purportedly under s459G of the Corporations Law conform to s459G(3) of the Corporations Law so as to meet its description of "an affidavit supporting the application"? Question 2: Genuine Dispute If the answer to question 1 is yes, is there a genuine dispute in relation to the claimed debt the subject of the statutory demand? Question 1: Compliance with s459G 7 The Defendant relies upon two deficiencies in the Plaintiff's affidavit of 14 November 2000. The first relates to the fact that that affidavit does not comply with the newly introduced rule 2.4(2) of the harmonised Corporations Law Rules, which has no counterpart in the preceding rules. That is to say the affidavit does not annex or exhibit a record of an ASIC search in relation to the company that is the subject of the application to which the Originating Process relates, namely a search of Bell Construction Services Pty Limited, the Plaintiff. 8 I dealt with the significance of the equivalent omission in a recent unreported judgment in Callite Pty Ltd v Peter John Adams & 3 Ors [2001] NSWSC 52 (Santow J, 16 February 2001, unreported) at paras 5 and 6 which for convenience I quote below: "5 The first of these grounds of attack can be quickly dismissed. It is that the affidavit failed, as indeed it did, to contain the annexed company search as now required by the Corporations Law Rules cl 2.4(2). It is clear that while non-compliance with the Corporations Law Rules is a matter for the Court to consider in determining whether or not to grant any dispensation, that question is quite distinct from whether the affidavit meets the description in s459G(3); that is to say, is it "an affidavit supporting the application" in the sense usefully explained in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 per Sundberg J at 459. That exposition described the degree of particularity required in terms that it might read like a pleading, in which only the ultimate facts are required, not the evidentiary facts to establish those ultimate facts. That pleading need not itself be a model of precision so long as those ultimate facts sufficiently appear expressly or, it may be by necessary implication. Nor, I would add, are propositions of law required to be pleaded. 6 To omit such a company search is in that sense hardly to fail to provide, in a form that might read like a pleading, the basis for there being a genuine dispute." 9 The Defendant presses upon me that this judgment fails to take into account the judgment of the full Western Australian Supreme Court in Robowash Pty Ltd v Robowash Finance Pty Ltd [2000] WASCA 409, (19 December 2000, unreported), the principal judgment being of Kennedy J, concurred in by Wallwork and Anderson JJ.. 10 That judgment does not to my mind require me to take a different view than the view I took in Callite Pty Ltd (supra). The facts of Robowash (supra) were to the effect that the affidavit filed in purported compliance with the requirements of s459G of the Corporations Law failed to include four pages of a document intended to be annexed to the original affidavit. Importantly, those four pages were actually annexed in the version of the affidavit that was filed but they were omitted from the form of that affidavit served. 11 The judgment carefully delineates the nature of an annexure and the practice of exhibiting documents, explaining that an annexure forms part of the affidavit unaffected by O37 r2(8) of the Supreme Court Rules of Western Australia. At [23] Kennedy J concludes: "In my opinion, the respondent was required to serve, within the time limited, a copy of the affidavit, including the annexures to it. This view is in accord with the decision of Young J in the Supreme Court of New South Wales in Hassle v Commissioner of Patents (1987) 9 IPR 565, in which his Honour said, at 566-567: 'Pt38 r4 provides that a document to be used in conjunction with an affidavit shall where convenient be annexed to the affidavit. If it is annexed to the affidavit then it must form part of the affidavit, which pursuant to r7 is to be served on the opponent not later than a reasonable time before the occasion for using it arises. If the affidavit is served then the recipient may in the normal course of events photocopy it.'" At [28] he states the consequences of this: "There is no suggestion that substantial compliance with the requirement for service of a copy of the affidavit and its annexures is sufficient. Accordingly, in these circumstances, it is necessary to resolve the factual issue as to whether copies of four pages in the documents annexed to the original affidavit were omitted from the papers which were served upon the appellant by the respondent on 28 May 1999. If they were, then, in my opinion, it follows that the requirements of s459G(2) were not complied with." 12 There were however two distinguishing, connected elements in Robowash not present here. The first is that the deponent actually intended to annex the omitted item. The second, demonstrating that failure of intention, is that this was an omission only in the affidavit served, not in the affidavit filed. Thus the person on whom service was effected (the issuer of the statutory demand) was not informed as to the affidavit filed, insofar as the omitted material was only in the document filed. Here however there is no suggestion that the deponent intended to annex the ASIC search. Nor is there any discrepancy established with regard to that omission between the document filed and the document served. Both omitted it. 13 Clearly enough s459G(3) in subparagraph (a) makes mandatory that the affidavit supporting the application, which by definition includes its annexures, be filed with the court. Equally clearly s459G(3)(b) requires inter alia that "a copy of" the supporting affidavit be served on the person who served the demand on the company. Section 459G thus mandates identity between the affidavit filed and the affidavit served. Here, there is no lack of identity established between the affidavit filed and the affidavit served, unlike Robowash. 14 Otherwise, as I said in Callite, what s459G makes mandatory in this context is that there be "an affidavit supporting the application". That means establishing the case for the application, being usually that there is a genuine dispute. The company search required by the Rules is irrelevant to that matter. It cannot be said that a requirement in the Rules, here only recently introduced, thereby ipso facto acquires the status of a mandatory requirement for s459G purposes. That would not be congruent with the fact that the requirements of the Rules remain dispensable by the court. Section 459G of the Corporations Law does not interfere with that. To suppose otherwise would carry the absurd implication that whatever requirements may from time to time be introduced by the Rules, non-compliance with such Rules coupled with a failure to obtain dispensation within the twenty-one days allowed by s459G of the Corporations Law would be fatal. This is more especially as dispensation can always be obtained afterwards in a proper case. (I should interpolate that I do now give that dispensation, on terms that the omitted search be filed with an affidavit within seven days.) Section 459G of the Corporations Law in its mandatory requirements demands an affidavit meeting the description of an "affidavit supporting the application", not an affidavit in all respects conforming to the Supreme Court Rules from time to time. 15 That leads me to the second discrepancy. It is even more artificial than the first. When one's common sense resiles from a proposition it should be tested with particular care. The proposition put by the Defendant is that because the affidavit purportedly supporting the application pursuant to s459G itself annexes a second affidavit and because that second affidavit omits one page of an annexure to it, namely part of a company search of the Defendant, that omission causes the affidavit to fail to meet the description in s459G of "an affidavit supporting the application" or otherwise offends a mandatory requirement of s459G. 16 Here it is true that it might be said that the deponent Mr Bell intended to include the missing page 3. However, there is again no evidence before me to indicate that there was a discrepancy between the affidavit filed and the affidavit served as regards the missing page 3. I consider it more likely than not that the document served in these proceedings contained exactly the same omission. No-one suggested to the contrary. 17 It follows then that neither omission from the affidavit renders the affidavit one which does not conform to s459G of the Corporations Law. Accordingly this strand in the Defendant's attack must fail. I shall leave for another day, the case of the omission which reflects only the first element, a failure to include what was intended to be included, but where the affidavit filed is identical with that served. Question 2: Genuine Dispute 18 Essentially what the Plaintiff advances in terms of the now well-settled test of a genuine dispute is that the $50,000 the subject of the statutory demand was not lent to the Plaintiff company but paid to it for Mr Bell. The test for a genuine dispute which I conveniently adopt is that formulated by McLelland CJ in Eq in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACSR 785 at 787; a plausible contention requiring further investigation. 19 The matters relied upon by the Plaintiff in support of its contention that there is such a genuine dispute are to be found in the affidavit of Mr Bell of 14 November 2000 which deposes as follows: (a) At paragraph 3 Mr Bell says that at no time has the plaintiff entered into any loan agreement or agreement of any kind with the defendant; (b) At paragraph 4 and annexure "C" Mr Bell says the $50,000 was money paid to Mr Bell in the circumstances he explains (part payment for dissolution of a partnership with Mr Wilson) not paid to the plaintiff. Thus paragraph 4 is as follows: "In relation to the $50,000.00, this amount was part payment under agreement to dissolve the partnership I had with David Wilson. David Wilson is a director of the Defendant. I initially instructed my solicitors about this matter in August, 1999, and as a result they issued a letter dated 16 August, 1999 to Mr Wilson. Such letter is annexed hereto and marked "C"." (c) Annexure "C" is a letter dated 16 August 1999 (that is well prior to the statutory demand) from Mr Bell's solicitors to Mr Wilson of the defendant. The second last paragraph on page 2 reads as follows: "On the 26th of July, 1999, an agreement at the offices of the CMFEU was reached between our client and yourself determining the resignation of our client from the business and company on payment of the sum of $100,000.00 Australian Dollars to our client [Mr Bell]. We acknowledge that our client was paid the sum of $50,000.00 on 28 July, 1999. We further acknowledge that our client was to reimburse $13,000.00 for payment of lost wages due to the strike action which pre-empted the agreement." (d) At paragraph 5 Mr Bell annexes an earlier affidavit sworn by him on 16 August 2000 in other proceedings. See in particular paras 13, 14 and 15 (note there are two paragraphs numbered 15) elaborating on the above contentions. This earlier affidavit has some added credibility on the issue of the nature of the $50,000 payment as it was sworn well before the statutory demand was made. 20 In addition, the Plaintiff relies upon the affidavit of David Wilson of 29 January 2001 filed for the Defendant. Annexure "A" to that affidavit is a cheque butt dated 28 July 1999 in respect of a cheque for $50,000 the subject of the statutory demand. The entry on the cheque butt is "Bell Construction Loan to Scott Bell to be repaid" (emphasis added). This indicates a payment to Mr Bell, not to the plaintiff company. 21 As has been said on a number of occasions, the threshold requirement for a genuine dispute is not a very high one. That said it does not require 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 …."; per McLelland CJ in Eq in Eyota at 787. 22 Nonetheless, short of the kind of inquiry which is properly for a hearing at which these matters can be properly contested, I would conclude that the threshold requirement of a genuine dispute has been reached. Indeed in comparison to the fairly bald assertion of Mr Wilson in his affidavit in support of the statutory demand, that there is no genuine dispute, the Plaintiff has gone some distance in attempting to delineate the basis for that dispute and its genuineness. 23 The Defendant attempted to argue that the circumstances whereby the cheque was paid presuppose a breach of fiduciary duty on the part of those involved which meant that the Plaintiff's contention was without plausibility. But it does not follow that there may not be innocent reason, such as was contended, for the steps that took place. Thus Mr Bell in brief cross-examination gave evidence to the effect that he did not have a bank account at the relevant time to which the money could be paid so the money was paid for him to the company, as is borne out by the cheque butt; see 19(d) above. All of this is for testing if and when the matter proceeds further and I express no view beyond the conclusion I have earlier reached that there is a genuine dispute. COSTS AND ORDERS 24 (1) The Plaintiff's application pursuant to s459G of the Corporations Law is granted. (2) Costs of that application other than reserved costs applicable to an earlier motion to strike out are to be paid by the Defendant, such to be agreed or assessed forthwith. (3) Any application with respect to reserved costs shall go before the Registrar. ********** Last Modified: 03/02/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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. 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