Supreme Court New South Wales Medium Neutral Citation: Business to All Australia Pty Ltd -v- North East Developments Pty Limited (Receivers and Managers Appointed) [2011] NSWSC 668 Hearing dates: 22 June 2011 Decision date: 22 June 2011 Jurisdiction: Equity Division - Corporations List Before: Hammerschlag J Decision: The statutory demand dated 25 January 2011 from the defendant to the plaintiff be set aside Catchwords: CORPORATIONS - Corporations Act 2001 (Cth) ss 459G(1), 459J(1)(a), 459J(2) - statutory demand - defect in the demand - where description of debt does not identify the basis for the indebtedness - where the claim or part of it cannot on its face and having regard to concessions made be a debt but must be unliquidated damages - demand set aside Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Panel Tech Industries v Australian Skyreach (No 2) [2003] NSWSC 896 Category: Principal judgment Parties: Business to All Australia Pty Ltd - Plaintiff North East Developments Pty Limited (Receivers and Managers Appointed) - Defendant Representation: Counsel: J.A. Jobson with E.A. Weisske - Plaintiff C.R. de Robillard - Defendant Solicitors: Andresakis & Associates - Plaintiff Herbert Geer, Lawyers - Defendant File Number(s): 2011/48589 ex tempore Judgment 1HIS HONOUR: This is an application under s 459G(1) of the Corporations Act 2001 Cth ("the Act") to set aside a statutory demand dated 24 January 2011 which the defendant served on the plaintiff on 25 January 2011 ("the demand"). The demand claims $35,901.55. It provides the following description of the debt. DESCRIPTION OF THE DEBT AMOUNT OF THE DEBT Debt owing by the Company as lessee pursuant to a lease between the Company and the Creditor registered with the Land and Property Management Authority and allocated Registration Number AF 715501 for the period 1 February 2010 to 31 January 2016. $35,901.55 Total Amount $35,901.55 2Section 459J(1)(a) of the Act provides that: On an application under s 459G, the Court may by order set aside the demand if it is satisfied that: (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside 3Section 459J(2) provides: Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect 4The lease referred to in the Description of the Debt in the demand was entered into on 10 March 2010. Under it, the defendant as Landlord leased to the plaintiff as Tenant, a shop in Portico Plaza, Toongabbie, New South Wales for the period 1 February 2010 to 31 January 2016. 5Clause 22.3 of the lease, entitled "Consequences of Termination" is in the following terms: If this lease is terminated under clause 22: (a) the tenant indemnifies the landlord against any liability or loss arising and any cost incurred (whether before or after termination of this lease) in connection with the tenants breach of this lease and the termination of this lease including the landlord's loss of the benefit of the tenant performing its obligations under this lease from the date of that termination until the expiry date; and (b) the landlord must take reasonable steps to mitigate its loss. 6The provision applies where the landlord terminates the lease by giving the tenant notice or by re-entry. 7It is common cause that the lease came to an end on 7 September 2010, on which date the defendant re-entered and retook possession of the premises. 8The circumstances under which the lease came to an end and the rights and wrongs asserted by the parties in relation to those circumstances are in dispute. It is not necessary to intrude upon them. 9Having abandoned a number of untenable propositions, the plaintiff puts that the demand should be set aside for the exclusive reason that there is a defect (or defects) in that a it does not specify the nature of the amount claimed under the lease by identifying any provision which gives rise to the claimed debt or otherwise; b it purports to claim as a debt an amount referable to the entire period of the lease which would (had it not been terminated earlier) have ended on 31 January 2016, some five years away; c given that it is common cause that the lease has ended, the description of the claim as a debt referable to a period of some years after termination is self-evidently defective; and d substantial injustice will be caused unless it is set aside. 10I consider that each of these complaints is well-founded. 11The demand does not provide a clue as to the source of the obligation asserted. 12Even if the defendant has a claim, the lease having come to an end, that part of it referable to the period after termination can only be one for unliquidated damages (subject to the defendant's obligation to mitigate) and not in debt. 13Counsel for the defendant sought to place reliance on a letter from the defendant's instructing solicitors to the plaintiff dated 21 September 2010 asserting that the plaintiff repudiated the lease by vacating the premises and refusing to pay rent, by refusing to trade, by removing items of fit-out fixtures and equipment and by leaving the premises in disarray and failing make good its make good obligations specified in the lease. 14The letter states: We confirm that any deed (the defendant) intends to recover from you rent for the balance of the term of the lease subject to its obligation to mitigate its losses and will also claim damages arising from your repudiation. 15This letter serves to confirm that the amount which the notice seeks to claim may span both rental (which would be a debt) and unliquidated damages (which would not). 16The nature of the defects are such that substantial injustice will be caused unless the demand is set aside. 17Counsel for the defendant put a proposition (based on the decision of Barrett J in Panel Tech Industries v Australian Skyreach (No 2) [2003] NSWSC 896) that the demand should be set aside on condition that if the defendant sues the plaintiff for the amount claimed, the plaintiff must pay it into Court. 18I do not see any warrant for making such an order, given the nature of the defects in the demand and the fact that it is inevitable that if the defendant sues, the claim will be defended. 19In all the circumstances I order that the statutory demand dated 25 January 2011 from the defendant to the plaintiff be set aside. Having heard from the parties on costs, his Honour made no order as to costs. ********** 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. Decision last updated: 30 June 2011