New South Wales Supreme Court CITATION : Ocerog Pty Ltd v PR Finance Group Ltd [2009] NSWSC 405 HEARING DATE(S) : 5 May 2009 JUDGMENT DATE : 5 May 2009 JURISDICTION : Equity Division JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 5 May 2009 DECISION : Application dismissed. CATCHWORDS : STATUTORY DEMAND – Affidavit in support of application to set aside Statutory Demand so lacking in particularity as to fail to demonstrate genuine dispute as to debt. LEGISLATION CITED : Corporations Act 2001 (Cth) – s 459G, s 459H CATEGORY : Principal judgment CASES CITED : Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 PARTIES : Ocerog Pty Ltd (Plaintiff) PR Finance Group Ltd (Defendant) FILE NUMBER(S) : SC 5906/08 COUNSEL : A.R. Davis, G. Dillworth (Plaintiff) M.J. Cohen (Defendant) SOLICITORS : WPS Law (Plaintiff) McCabe Terrill Lawyers (Defendant) 5906/08 Ocerog Pty Ltd v PR Finance Group Limited JUDGMENT – Ex tempore on application to set aside statutory demand 5 May, 2009 1 This is an application by the Plaintiff to set aside a statutory demand served upon it by the Defendant. The application is under s 459G and s 459H of the Corporations Act 2001 (Cth). The statutory demand is dated 24 October 2008 and was served on the Plaintiff on 7 November 2008. The statutory demand claims a debt of $82,690 said to be owing pursuant to a Deed of Indemnity dated 2 January 2008 between the Plaintiff and the Defendant. 2 The Originating Process was filed and served on 28 November 2008, being the last day of the twenty-one day period for the commencing of these proceedings. In support of the application there was filed an affidavit of John Edward Atkinson sworn 28 November 2008. 3 The basis upon which the application is made is that there is a genuine dispute as to whether the Plaintiff owes the debt claimed in the statutory demand. 4 Mr M.J. Cohen of Counsel, who appears for the Defendant, asserts that the affidavit of Mr Atkinson filed in support of the application does not contain with sufficient particularity any facts or circumstances to support the existence of a genuine dispute so that, according to the principles in Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452, at 459, the application must be dismissed outright. In my submission, Mr Cohen is clearly correct in this regard. 5 Mr Davis of Counsel, who appears with Mr Dillworth for the Plaintiff, concedes that if Mr Atkinson's affidavit of 28 November 2008 is not sufficient to demonstrate a genuine dispute, then in accordance with Graywinter , he is not able to rely upon further affidavits which were filed in support of the Plaintiff's application after the expiry of the twenty-one day period limited by the section, and this application must be dismissed. 6 The Plaintiff relies upon a number of alleged grounds as showing a dispute as to the existence of the debt, as appears from Mr Atkinson's affidavit. However, all but one of them have been abandoned, and rightly abandoned if I may say so, with respect. The ground which is put forward as demonstrating a genuine dispute is said to be misrepresentations made by the Defendant to the Plaintiff which induced the Plaintiff to enter into the Deed of Indemnity between the parties, pursuant to which the debt is claimed. 7 In very brief summary, the circumstances are as follows. The Defendant was minded to sell to the Plaintiff an interest in a business. The Plaintiff was concerned to ascertain the true financial state of affairs of that business. A due diligence investigation into the affairs of the business was to be commissioned from investigating accountants, Ernst & Young. The report was to be commissioned by the Defendant directly from Ernst & Young, pursuant to a contract between the Defendant and Ernst & Young. 8 Primarily, therefore, the Defendant was to be liable for the fees to be charged by Ernst & Young for the preparation of that report. The Plaintiff and the Defendant entered into a Deed of Indemnity dated 7 January 2008 whereby the Plaintiff agreed to indemnify the Defendant in respect of the fees to be charged to the Defendant by Ernst & Young. 9 The due diligence report was produced by Ernst & Young. The Plaintiff, upon the basis of the material disclosed in that report, decided that it did not wish to proceed with the acquisition. The Defendant then sought reimbursement from the Plaintiff of the fees which the Defendant had paid to Ernst & Young on 30 January 2008. 10 The Defendant served a copy of the invoice from Ernst & Young on the Plaintiff on 4 February 2008 and requested reimbursement of that sum within seven days, pursuant to the Deed of Indemnity. No payment was made and the Defendant sent a further reminder requesting repayment on 18 February 2008. On the same day the Plaintiff responded by e-mail, in effect acknowledging its liability for the reimbursement pursuant to the Deed of Indemnity. 11 Nothing further happened, apparently, until 29 December 2008 when the Defendant's solicitor made further demand upon the Plaintiff for payment of the debt. On 24 October 2008 the Defendant executed the Statutory Demand and on 7 November 2008 the demand was served upon the Plaintiff, giving rise to these proceedings. 12 As I have earlier noted, the sole ground now urged by the Plaintiff as evidencing the existence of a genuine dispute is said to be misrepresentation made by the Defendant to the Plaintiff, inducing the Plaintiff to enter into the Deed of Indemnity. 13 The Plaintiff, through its Counsel, now says that if the true state of affairs of the business of the Defendant had been disclosed by the Defendant to the Plaintiff prior to the entry into the Deed of Indemnity, the Plaintiff would never have proceeded and would never have entered into the Deed of Indemnity. 14 It is often said that the threshold which an applicant seeking to set aside a Statutory Demand has to cross in order to demonstrate a genuine dispute is a low one. The Court does not, for the purpose of such an application, investigate whether the alleged claim of the Plaintiff has a strong prospect of success and often proceeds upon evidence as to the existence of a dispute given in a fairly informal way. 15 However, the Court must be satisfied from the affidavit filed in support of the application to set aside the Statutory Demand that the dispute alleged by the Plaintiff is a genuine one. In order for the Court to be able to form such an opinion or carry out such an assessment, it is necessary for the deponent of the affidavit to give sufficient particularity of the dispute to be meaningful in that assessment. 16 It is not sufficient for the deponent of such an affidavit to simply assert in bold and summary fashion that there is a dispute and to outline in the very broadest terms the various headings under which the grounds of dispute may be classified. To attempt to categorise a dispute as genuine without any sufficient particularity indeed may, in itself, be some evidence that the dispute lacks substance. 17 As I have noted, Mr Davis concedes that if the affidavit of Mr Atkinson of 28 November 2008 fails to give sufficient particularity for the Court to form a conclusion as to the genuineness of the alleged dispute, that is then an end of the matter. I am of the view that the affidavit of Mr Atkinson utterly fails to give sufficient particularity so that, according to the principle enunciated in Graywinter and the many cases which have followed it, the application must be dismissed. 18 An examination of the affidavit shows that although there is an allegation in para 22(j) of the grounds of concern as to the state of the affairs of the Defendant which induced the Plaintiff to decline to proceed with the transaction, nowhere is it said that those matters of concern were in any way the subject of express or even implied representations made by the Defendant to the Plaintiff prior to the entry into the Deed of Indemnity. Nowhere is it said that any representations of any particularity were relied upon by anybody on the part of the Plaintiff in determining to enter into the Deed. All that para 22(j) enunciates is a series of concerns which induced the Plaintiff not to proceed with the transaction, without providing any clue as to whether any of those concerns had been the subject of any representation. 19 Furthermore, many of the grounds for concern set out in para 22(j) are, in themselves, described in such general and vague terms as to be practically meaningless. For example, "Marketability - the business had been 'shopped around'," and again, "potential exposure under warranty" . In short, a reading of the affidavit as a whole suggests that it has been thrown together at the very last moment in an endeavour to defeat the Statutory Demand without any reference to particular representations which are alleged to have been made and relied upon. 20 In those circumstances, I conclude that the affidavit filed in support of this application is inadequate to demonstrate a genuine dispute, so that the application must be dismissed. 21 Mr Cohen has sought a costs order against the Plaintiff on the indemnity basis saying that the Court should make such an order where the jurisdictional basis for the application was not established, as it was not in this case. 22 I do not think that an indemnity costs order is made automatically in every case where a necessary jurisdictional fact is not proved. The Court looks at the whole of the conduct of the case by the party which has failed and makes an overall assessment as to whether or not it is appropriate to make an indemnity costs order on principles which are well understood. 23 In this case, as I say, although the Plaintiff has failed to establish a genuine dispute on the basis of the affidavit filed in support of the application to set aside the Statutory Demand, I cannot say otherwise than its conduct of the case has been such as to merit the imposition of an indemnity costs order. 24 I therefore order that the Plaintiff pay the Defendant's costs of the proceedings on the party/party basis. The application is dismissed. – oOo – 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.