New South Wales Supreme Court CITATION : Meraklis Pty Ltd v Bank of Western Australia Ltd [2010] NSWSC 53 HEARING DATE(S) : 4 February 2010 JUDGMENT DATE : 4 February 2010 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 4 February 2010 DECISION : Application dismissed. CATCHWORDS : CORPORATIONS – STATUTORY DEMAND – Application to set aside a statutory demand – whether evidence that does not provide sufficient particularity of economic loss can qualify as a genuine offsetting claim – no genuine dispute as to existence of or amount of the debt. LEGISLATION CITED : Corporations Act 2001 (Cth) - s.459G, s.459H, s.459J Trade Practices Act 1974 (Cth) CATEGORY : Principal judgment - Builder and Construction Group International Pty Ltd v Datalec Services Pty Ltd [2009] NSWSC 1136 CASES CITED : - Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 21 ACSR 581 - Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 PARTIES : Meraklis Pty Ltd (Plaintiff) Bank of Western Australia Ltd (Defendant) FILE NUMBER(S) : SC 4508/09 COUNSEL : C. Carter (Plaintiff) P. Dowdy (Defendant) SOLICITORS : McKells Solicitors (Plaintiff) Henry Davis York (Defendant) 4508/09 Meraklis Pty Ltd v Bank of Western Australia Ltd JUDGMENT – Ex tempore 4 February, 2010 1 This is an application under s.459G, s.459H and s.459J of the Corporations Act 2001 (Cth) to set aside a statutory demand served on the Plaintiff. The demand claims payment of a sum in excess of $2.3M owing pursuant to a finance facility provided by the Defendant to the Plaintiff. There is no dispute that the Plaintiff executed such a facility and received the principal of the loan. There is no dispute either that there has been a default in the repayment terms of the facility. 2 The Originating Process was filed within the time required. The affidavit in support is that of Con Chartofillis of 10 September 2009. 3 Very briefly, the circumstances alleged in that affidavit are as follows. Mr Chartofillis is the sole director of the Plaintiff company. He says that he was minded to refinance an existing facility and had discussions with an officer of the Defendant in that regard in 2007. He says that in the course of those discussions, he made it plain to the officer of the Defendant, a Mr Moll, that he wished to proceed with a facility with the Defendant only if the Defendant would guarantee that it would give the Plaintiff a loan to discharge the existing debt to another lender and would also provide additional funds for the construction of a development which the Plaintiff owned. He says that Mr Moll, on behalf of the Defendant, gave assurances that the construction loan, as well as the refinancing loan, would proceed and Mr Chartofillis says that on the basis of those assurances, he entered into the new loan with the Defendant. 4 The construction loan was not made available and the Plaintiff subsequently defaulted in the repayment obligations under the refinancing loan. 5 Mr Chartofillis says that, had it not been for the assurances of Mr Moll that the construction loan would proceed, he would not have entered into the refinancing loan with the Defendant. So far, the affidavit of Mr Chartofillis sets out facts which could found various self evident causes of action, such as for misrepresentation or misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) and other causes of action founded upon misleading and deceptive conduct or false statements or statements made without reasonable belief. That is not the difficulty in this case. 6 The loss which would be claimed by reason of those causes of action is economic loss and that loss, if established, would offset either wholly or partially the admitted debt owing by the Plaintiff to the Defendant. The difficulty is that the affidavit of Mr Chartofillis gives no details whatsoever which would enable those losses to be quantified in any way. All that Mr Chartofillis says about loss is contained in paragraphs 31 to 33 which are as follows: "31. I would not have suffered losses or damages as a result. In the current economic climate property prices have dropped markedly; as has the level or frequency of sales. In the current climate it is very difficult to obtain approval for construction loans. 32. Alternatively, I would not have had the premises vacant for in excess of 12 months. 33. Alternatively, I would have stayed with the ANZ Bank and not have spent significant moneys on obtaining the relevant reports and fees associated with obtaining construction loans." 7 Mr Carter of Counsel, who appears for the Plaintiff, very fairly and frankly concedes that this evidence does not provide sufficient particularity of economic loss to qualify as demonstrating sufficiently a genuine dispute. There is no question but that the law is as established in cases such Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 at [16] to [18], and as in Builder and Construction Group International Pty Ltd v Datalec Services Pty Ltd [2009] NSWSC 1136 at [12]. 8 The affidavit gives no means whatsoever for quantifying the unliquidated damages which might be claimed for economic loss resulting from the various causes of action which might be constructed from the facts deposed in Mr Chartofillis' affidavit. There is no way of ascertaining whether the debt claimed by the Bank is, at least arguably, extinguished or substantially reduced by the set off claimed by the Plaintiff. Therefore, in accordance with established authority, if the affidavit of Mr Chartofillis were the only evidence in support of this application, I would have to dismiss it. 9 However, Mr Carter now seeks to file a further affidavit of Mr Chartofillis in which detailed calculations of economic loss are given. 10 I do not see how I can admit that affidavit into evidence. The law is quite clear that the affidavit in support of the Originating Process to set aside a Statutory Demand must accompany the Originating Process and must, in itself, demonstrate a genuine dispute. The affidavit must be filed within the statutory period allowed and if the affidavit does not sufficiently set up a genuine dispute or genuine offsetting claim, then there is no latitude to allow later, and outside the statutory period, an affidavit which makes good the deficiency; see Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 21 ACSR 581. 11 For that reason, I decline to admit the second affidavit of Mr Chartofillis and for the reasons which I have given, I must dismiss the Originating Process. 12 I do not think that this is a case for indemnity costs. There is something in what Mr Dowdy of Counsel, who appears for the Defendant, says but I think it would have emerged clearly enough from the facts deposed in Mr Chartofillis' first affidavit in support of the Originating Process that what was in reality claimed was an offsetting claim. If proper evidence of loss had been given in the first affidavit, I do not think the application would have failed by reason of the fact that the Originating Process did not explicitly refer to an offset rather than a dispute as to whether or not the debt came into existence in the first place. 13 Be that as it may, I do not think that the deficiency pointed to by Mr Dowdy is sufficient to warrant the imposition of indemnity costs. This seems to be a case in which insufficient attention has been paid in the preparation of the Originating Process to the legal requirement that economic loss must be particularised with sufficient clarity in a supporting affidavit in order to justify an application to set aside the Statutory Demand. 14 Costs will have to follow the event, but they should be on the party/party basis. – 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. 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