Supreme Court New South Wales Medium Neutral Citation: In the matter of Dr Green Sustainable Energy Pty Limited ACN 142867525 [2014] NSWSC 985 Hearing dates: 18 July 2014 Decision date: 18 July 2014 Jurisdiction: Equity Division - Corporations List Before: Bergin CJ in Eq Decision: Statutory Demand set aside with costs Catchwords: [CORPORATIONS] - Statutory demand - where genuine dispute - whether the Court has jurisdiction to entertain an application to set aside statutory demand if Originating Process does not identify section under which it is sought to set aside the statutory demand - where Originating Process includes express reference to section 459G of the Corporations Act 2001 (Cth). Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Calquid Pty Ltd v A & DR Illes Pty Ltd (2000) 34 ACSR 523 Fresh Express Australia Pty Ltd v Gillebri Cotton Company Pty Ltd [2011] NSWSC 21 Golden Plantation Pty Limited v TQM Design and Construct Pty Limited [2010] NSWSC 1279 Graywinter Properties Pty Limited v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581 Microjet Imaging Pty Ltd v Charara [2010] VSC 446 Radiancy (Sales) Pty Limited v Bimat Pty Limited (2007) 25 ACLC 1216; [2007] NSWSC 962 Category: Principal judgment Parties: Dr Green Sustainable Energy Pty Ltd (Plaintiff) Green Imports Pty Ltd (Defendant) Representation: Counsel: J Choy (as authorised agent) (Plaintiff) AD Justice (Defendant) Solicitors: PV Lawyers (Defendant) File Number(s): 2014/24398 Publication restriction: Nil Judgment - EX TEMPORE 1This is an application brought by way of Originating Process filed on 24 January 2014 for an order setting aside a statutory demand served by the defendant, Green Imports Pty Ltd, on the plaintiff, Dr Green Sustainable Energy Pty Ltd on 7 January 2014 (the statutory demand). One of the orders sought by the plaintiff was to set aside a statutory demand dated 20 December 2013 and served on that date (the earlier statutory demand). 2The procedural history has involved a number of appearances before the Court. On the first return date on 4 February 2014 Mr J Choy, solicitor, appeared for the plaintiff, and Mr B Kramer, solicitor, appeared for the defendant. The Registrar ordered that the defendant's affidavits be filed by 18 February 2014 and that the plaintiff file affidavits in reply by 4 March 2014. Although not apparent at the outset of this hearing, it became clear there was another set of proceedings between the same parties (2014/1897) that was commenced in January 2014 and concluded on 4 February 2014. Those proceedings related to the earlier statutory demand. 3I should identify the statutory demands to which reference has been made. The earlier statutory demand was directed to the plaintiff and contained a claim that it owed the defendant the amount of $26,865.23, "being the amount of the debt described in the Schedule". Paragraph 2 of the statutory demand was in the following terms: Attached is the affidavit of James Brodie Stocker dated 20 December 2013, verifying that the amount is due and payable by the company. 4The Schedule to the statutory demand was in the following terms: SCHEDULE Description of the debt Amount of the debt Debt owed as per executed deed for work performed: $28,265.23 Less amount paid: $1400.00 TOTAL: $26,865.23 Dated: 20 December 2013 5The affidavit accompanying the statutory demand was in the following terms. I, James Brodie Stocker of 25 Botany Street, Bondi Junction NSW 2022, solemnly and sincerely affirm and declare: 1. I am a director of the creditor named in the statutory demand, which this affidavit accompanies, relating to the debt owed by Dr Green Sustainable Energy Pty Limited. 2 I am the person who, on behalf of the creditor, had the dealings with the debtor company that gave rise to the debt'. 3 The debt of $26,865.23 mentioned in the statutory demand is due and payable by the debtor company. 4 I believe that there is no genuine dispute about the existence or amount of the debt. Affirmed by James Brodie Stocker on 19/12/2013 at: Sydney in the presence of Benjamin Kramer: 6Paragraph 6 of the statutory demand was in the following terms: 6. The address of the creditor for service of copies of any application and affidavit is (insert the address for service of the documents in the State or Territory in which the demand is served on the company, being, if solicitors are acting for the creditor, the address of the solicitors). 7As can be seen from paragraph 6 of the statutory demand, there was no address for service of the documents provided. The defendant's solicitor then sought to correct that defect by forwarding a document in identical form to the earlier statutory demand except the numeral "20" before "December" in paragraph 2 was deleted in handwriting and the numeral "19" was handwritten in its place. In addition the words in brackets in paragraph 6 were struck through and the words "Perez Varela Lawyers, 401/177 William St, Darlinghurst NSW 2010" were inserted. When that form was sent to the plaintiff's solicitor, no schedule was attached to it nor was there any affidavit accompanying it. This is said to be the statutory demand. 8On 4 February 2014 the earlier statutory demand was withdrawn in the other proceedings. It was noted on the file in those proceedings that the statutory demand was withdrawn and the application was otherwise dismissed by consent. The defendant was ordered to pay the plaintiff's costs fixed in the amount of $6,000. 9When these proceedings returned to Court on 10 March 2014 there were further interlocutory steps ordered, including that the plaintiff was to file and serve any expert evidence by 30 April 2014. Although there is no detailed evidence of this, but having regard to the content of the record of the Court in respect of the other proceedings, the only real issue upon which expert evidence would be relevant would be from a handwriting expert in respect of the signatures on the Deed. 10The parties then returned to Court on 19 May 2014. The defendant was ordered to serve its evidence by 2 June 2014 and the plaintiff was ordered to serve its evidence, effectively in reply, by 16 June 2014. The proceedings were stood over to 23 June 2014. On that day it came before the Corporations List Judge who fixed the matter for hearing today. 11The parties filed written submissions. Today leave was granted to Mr Choy, who acted previously as the solicitor for the plaintiff, to act as an authorised agent for the plaintiff. I allowed that to occur notwithstanding objection by Mr AD Justice, of counsel, who appears for the defendant. 12The affidavits read on behalf of the plaintiff are those of Ahmed Ismail, sworn 25 January 2014, 6 March 2014, 20 June 2014 and 17 July 2014; Majed Kabbara, sworn 21 February 2014; Kenan Muhammed Yilmaz, sworn 6 March 2014; and Ahmed Raad, sworn 13 March 2014. 13Mr Justice objected to the reading of the additional affidavits on the basis that they were in breach of the principle referred to by Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581. Mr Justice submitted that the plaintiff's affidavit in support of the Originating Process did not call into question the Deed and accordingly the evidence later referred to should not be allowed. I delivered short reasons in respect of that objection and concluded that the plaintiff was entitled to supplement its affidavit in support and the affidavits were allowed. Once that occurred Mr Justice conceded that there was a genuine dispute established on the evidence and it would be appropriate to set aside the statutory demand but for an argument he raised in respect of the power of the Court to entertain the application. 14The contention is that the jurisdiction of the Court has not been engaged, because the plaintiff has failed to identify within the Originating Process the section under which the plaintiff seeks relief. The defendant's written submissions included the following: The originating process fails to comply with rule 2.2(3)(b) of the Corporations Rules in that it fails to comply with the requirement to specify what statutory basis the plaintiff relies on to set aside the statutory demand. Given no indication of what statutory relief is being sought, the affidavit of Mr Ismail purportedly dated 25 January cannot be in support of the Originating Process and therefore the Court does not have jurisdiction to hear this matter under section 459G of the Act. 15The rule to which Mr Justice referred is as follows: 3. An originating process must (a) be in accordance with Form 2; and (b) state: (i) each section of the Corporations Act or the ASIC Act, or each regulation of the Corporations Regulations, under which the proceeding is brought; and (ii) the relief sought. 16The party filing the Originating Process must refer to the section of the Corporations Act 2001 (Cth) (the Act) under which the proceedings are brought. Section 459G(1) of the Act provides relevantly that, "A company may apply to the Court for an order setting aside a statutory demand served on the company." It is that section under which the proceedings are brought. The plaintiff complied with that requirement and its Originating Process recorded: "This application is made under Section 459G of the Corporations Act 2001". It also complied with the Rule by stating the relief sought - an order that the statutory demand be set aside and such other orders as the Court sees fit. 17Although Mr Justice also relied on Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund in support of this contention there is nothing within that judgment that supports the proposition that a party must insert in the Originating Process the section upon which the party seeks relief. 18The other judgment relied upon in support of the proposition that the Originating Process did not comply with the Act, was that of Barrett J in Golden Plantation Pty Limited v TQM Design and Construct Pty Limited [2010] NSWSC 1279. There is nothing within that decision that suggests that a court does not have jurisdiction to hear a matter if the section that the plaintiff proceeds for relief under is not specified in the Originating Process. The order to set aside a statutory demand in this instance was supported by the affidavit of Mr Ismail and as I have already said, it is conceded there is a genuine dispute. 19I should say that originally there was a point raised as to whether the Originating Process could deal with two statutory demands. When filed, the Originating Process referred to both the earlier statutory demand and the statutory demand. The authority relied upon in respect of this point dealt with two statutory demands that were for different debts, a matter very distinguishable from the circumstances of this case: Calquid Pty Ltd v A & DR Illes Pty Ltd (2000) 34 ACSR 523. In any event this point fell away by reason of the fact that the earlier statutory demand was withdrawn in other proceedings on 4 February 2014. 20I should also record that there were further submissions today in relation to the validity of the statutory demand. There are a number of problems with the statutory demand. First, it does not have a Schedule attached to it; secondly, it did not have an affidavit accompanying it. Accordingly, it did not comply with section 459E(3) which provides that the demand "must be accompanied by an affidavit" that verifies the debt and complies with the rules. 21Mr Justice contended that the earlier statutory demand could be taken as read into the statutory demand to the extent that the affidavit to the earlier statutory demand could be read as the affidavit to the statutory demand. Even if that were possible it would create this situation: the statutory demand would have been dated 20 December 2013 and the affidavit would have been dated 19 December 2013, the day before the statutory demand. In any event it seems to me that it would be inappropriate to have a statutory regime where one could pluck some parts from a previous statutory demand to insert into a second statutory demand to make it comply with the Act. 22In Fresh Express Australia Pty Ltd v Gillebri Cotton Company Pty Ltd [2011] NSWSC 21 Barrett J said: [10] ... The requirement under s 459E(3) is that the statutory demand be "accompanied by" the verifying affidavit. An affidavit served two days or more after the service of the demand obviously does not accompany the demand. Also, an affidavit sworn or affirmed on 24 November and stating, as the section requires, that the debt specified in the demand "is" due and payable says nothing about the matter crucial to the efficacy of the demand, that is, that it relate to a debt which is, at the date of the demand (not some earlier or late date) due and payable. [11] The defendant did not comply with s 459E(3) and, in that respect, denied the plaintiff one of the essential elements of the process leading to creation of a presumption of insolvency by reason of failure to comply with a statutory demand. 23Mr Justice submitted that these observations appear to be at odds with what White J said in Radiancy (Sales) Pty Limited v Bimat Pty Limited [2007] NSWSC 962; (2007) 25 ACLC 1216; at [46]: It might be arguable that a statutory demand not accompanied by an affidavit required by s 459E(3) has not been served as required by s 459E so that non-compliance with the demand does not support a presumption of insolvency (Hamilhall Pty Ltd (in liq) v AT Phillips Pty Ltd (1994) 54 FCR 173 at 175). The better view is that this would not prevent the demand from having come into effect; so that s 459F applies, the company is taken to have failed to comply with the demand, and s 459S also applies (Dolvelle Pty Ltd v Australian Macfarms Pty Ltd (1998) 43 NSWLR 717 at 727; Victorian Workcover Authority v Kay's Pty Ltd (2001) 39 ACSR 281 at 284-286). 24The observations made by White J were some years before Barrett J's judgment and in the circumstances of this case the observations made by Barrett J in paragraphs [10] and [11] above are applicable. In Microjet Imaging Pty Ltd v Charara [2010] VSC 446 Habersberger J concluded (at [13]) that the failure to serve an affidavit with the statutory demand constituted "some other reason why the demand should be set aside" under s 459J of the Act. 25I do not have to decide this issue today. However if it had been necessary I am satisfied that the defendant's claim under the statutory demand would be fatally flawed. The submissions put by Mr Justice that one can take part of a previous demand and latch it on to a second demand to seek to make it valid cannot be accepted. 26The real and only remaining point preventing the statutory demand from being set aside immediately is Mr Justice's contention that the Court does not have jurisdiction because the section of the Act under which the Court may set aside the statutory demand where there is a genuine dispute (s 459H) has not been identified in the Originating Process. Mr Justice sought some time to try and find a case to support that proposition. It seems to me that this case has had an enormous amount of energy poured into it in circumstances where the earlier statutory demand was also the subject of proceedings, and on balance, I refuse to allow any further adjournments of the matter or further submissions. I regard it as appropriate to finalise the proceedings today. 27I am satisfied that there is jurisdiction to entertain the application, notwithstanding that the specific section under which the Court may set aside the statutory demand was not identified in the Originating Process. 28I am satisfied, there being a genuine dispute, that the statutory demand should be set aside. I make the following order: I set aside the statutory demand served by the defendant on the plaintiff on 7 January 2014. 29The defendant submits that costs should be limited up to the date on which Mr Choy ceased to act as the solicitor for the plaintiff. That submission seems to me to be misconceived. The plaintiff, whether represented or otherwise, has been put to the expense and costs follow the event. Whether the costs be costs incurred by the plaintiff without legal representation or costs with legal representation, the event, that is the setting aside of the statutory demand, is the matter which the costs should follow. Of course, it would not be possible for the plaintiff to seek any costs of a solicitor, having regard to the fact that the solicitor did not act for the plaintiff on the application. Rather Mr Choy acted as agent. However, I am satisfied that the appropriate order is that the defendant should pay the plaintiff's costs of these proceedings. I order that the defendant pay the plaintiff's costs of these proceedings. ********** 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: 24 July 2014