Corporate Aviation v Ayres [2007] NSWSC 1054

New South Wales Supreme Court

CITATION : Corporate Aviation v Ayres [2007] NSWSC 1054 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 19/09/07

JUDGMENT DATE : 19 September 2007

JURISDICTION : Equity Division

JUDGMENT OF : Associate Justice Macready at 1

EX TEMPORE JUDGMENT DATE : 19 September 2007

CATCHWORDS : Corporations Law. Application to set aside statutory demand under s459G of the Corporations Act. Demand varied. No matter of principle.

PARTIES : Corporate Aviation Services Pty Ltd v Lisbet Anne Ayres

FILE NUMBER(S) : SC 1634 of 2007

COUNSEL : Mr Rod Freemand for plaintiff Mr AP Coleman for defendant

SOLICITORS : PM Lawyers for plaintiff Kemp Strang for defendant

- 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

ASSOCIATE JUSTICE MACREADY

WEDNESDAY 19 SEPTEMBER 2007

001634/07 - CORPORATE AVIATION SERVICES PTY LIMITED v LISBET ANNE AYRES

JUDGMENT

1 HIS HONOUR: This is an application to set aside a statutory demand served by the defendant on the plaintiff dated 6 February 2007 in the sum of $96,063.39. The defendant owned three aircraft which were hangared in a hangar leased by the plaintiff at Bankstown airport. The plaintiff operates a flying school known Sydney Flight Training Centre. The defendant a pilot and qualified instructor who was employed for part of the relevant period by the plaintiff in its flying school. 2 The claim in the demand is for the hire of the defendant's 3 aircraft by the plaintiff. It was to be suggested there was some termination in the hire agreement earlier than the agreement period in the demand in order to set up a genuine dispute in respect of part of that claim. The relevant material respect of the termination was not admitted into evidence. This leaves 2 off-setting claims. One is based upon a charge for hangarage and one is based upon a charge for the use of an office in the hangar. The Court's task in assessing an off-setting claim has been dealt with in a number of cases. For instance, in Edge Technology Pty Limited v Lite-on Technology Corp (2000) 18 ACLC 576. Santow J had the following to say: "It is here again true (as it was in Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456) THAT IT 'is not my task in the present proceedings to seek to resolve the competing claims for the Plaintiff and the Defendant': Per Austin J at 462. Rather, it is to 'resolve whether, for the purposes of s 459(H)(I)(a), there is a genuine dispute between the Plaintiff and the Defendant about the existence or amount of the debt to which the Defendant's statutory demands relates': Austin J at 462. Or alternatively, whether there is a genuine counter-claim, set-off or cross-demand against the Defendant and if so, in what amount. In particular, how should it be quantified; at a nominal $1 or at a large figure and if the latter, how is the quantification to be arrived at? The latter question essentially asks whether the counter-claim or set-off is fictitious or merely colourable; Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Limited (No2) (1994) 12 ACLC 490; 13 ACSR 787. In that context, to come up with a plausible contention to (sic) requiring further investigation which, if later established, would preclude there being an offsetting claim. That would not establish that the counter-claim or set-off was fictitious, or merely colourable. In that sense, the counter-claim or set-off is not the reciprocal of the statutory demand debt. Rather it is a means of offsetting the statutory demand debt with a genuine counter-claim or set-off. I adopt the approach of the Full Federal Court in Spencer Constructions Pty Limited v G & M Aldridge Pty Limited (1997) 15 ACLC 1,001 at 1,011, (1997) 76 FCR 452 at 464; that a genuine dispute requires that 'the dispute be bona fide and truly exist in fact' and that the 'grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived'. The same applies to the counter-claim or set-off. One asks: Is it bona fide, is it real and not spurious?' 3 He later went on to say "For the demand to be set aside on the basis of the demand debt being genuinely disputed, it must be established by the Plaintiff that the dispute concerning its existence is bona fide and not spurious, hypothetical, illusory or misconceived: Spencer's Case (supra). In other words, there must be a plausible contention requiring further investigation which genuinely puts in dispute the debt which grounds the statutory demand. But the merits are not now to be determined beyond the preliminary testing as to whether there is a serious questions to be tried. The alternative basis for the demands to be set aside or reduced by reason of an offsetting claim involves, as I have said, a different test. The question is not whether there is a genuine dispute in the above sense against the offsetting claim. The question is rather whether the 'offsetting claim' can be shown to be 'not frivolous or vexatious'; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37. That places a heavier onus on the party seeking to maintain its statutory demand, than if it merely had to establish the reciprocal of a genuine dispute against the offsetting claim." 4 The plaintiff read 3 affidavits in its case in chief including one in reply. The defendant read no affidavits. There was no application to withdraw the reply affidavit read in chief, no doubt because it contained useful information for the plaintiff's case. This has the effect that there is a dearth of evidence as to the arrangements under which the aircraft were in the hangar and an office was used. Such paragraphs in the plaintiff's affidavit as referred to such arrangements were not in admissible form and were not admitted into evidence. 5 The claim for hangarage was in annexure A to the initial affidavit and totalled $71,225.80. An invoice was issued after the demand was served and is in the following form: "Hangar Rental for PBP for the Period February 2004 to January 2007 Hangar Rental for IND for the Period March 2004 to January 2007 Hangar Rental for MRC for the Period October 2005 to January 2007 - $71,225.80 GST" 6 The use of office space was in annexure B in the sum of $23,725. It also was issued after the demand was served and was in the following form: "Rental of office space and use of SFTC facilities for the private use of Miss Lisbet Anne Ayres for the period from March 2004 to May 2006 - $23,725.00 GST" 7 It was the defendant's submission that the evidence in support of these charges did not meet the threshold test for an off-setting claim. I will deal with the office claim first. 8 There was no evidence of any agreement for the hire of the office and the evidence was that, as a flight instructor, the defendant had no requirement for an office but she had asked for the use of one for her to conduct her own private business and was allowed to do so. Absent any agreement to pay for the space occupied, there can only be some possible claim for use and occupation if there had been a relationship of landlord and tenant which had previously been existence. However, there is no evidence from which I would infer there was a previous relationship of landlord and tenant which might give rise to some claim for use an occupation. In addition, there is no evidence of what might be a reasonable fee for the occupation of such an office and in these circumstances I do not think that the off-setting claim has been shown to be not frivolous or vexatious. There is simply no basis for it in the evidence. 9 The claim in respect of the hangarage is quite different. Although there was a submission that it did not meet the test, the documents tendered established that at the some time hangarage was charged by the plaintiff to the defendant and paid by her. The affidavit evidence of any agreement was either rejected or not read. The invoice issued after the demand was the subject of some evidence as to the problems with the plaintiff's office administration. According to this evidence, this was the reason for the late invoice. On this application I would not conclude that the invoice was a sham simply because of the timing of its issue. 10 The evidence showed that the aircraft were in the hangar for the following period: PBP, February 2004 to January 2007; IND March 2004 to January 2004; MRC October 2005 to January 2007. 11 Exhibit A is an invoice from the plaintiff to the defendant. The invoice was for the sum of $4,440. The item for which it was issued was as follows: "Miscellaneous hangarage for the months of February, March, April, May, June, July, August, September, October and November 2004 paid in advance".