Supreme Court Rejects Company's Attempt to Set Aside Statutory Demand

The Court dismissed the claimant's application to set aside a statutory demand for a debt, finding no genuine dispute existed. The Court relied on the Corporations Act 2001 (Cth) ss 459H(1)(a), 459H(1)(b).

Supreme Court New South Wales

Medium Neutral Citation: In the matter of [COMPANY] [2013] NSWSC 122 Hearing dates: 5 February 2013 Decision date: 05 February 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Originating Process dismissed. Plaintiff to pay the defendants costs. Catchwords: CORPORATIONS - Debts - Statutory demand - Whether reliance on s 459H(1)(a) Corporations Act 2001 (Cth) to set aside statutory demand - Whether genuine dispute. Legislation Cited: Corporations Act 2001 (Cth) ss 459H(1)(a), 459H(1)(b) Cases Cited: - [COMPANY] v [NAME] Management Pty Ltd [2011] NSWSC 512 - [COMPANY] v Lite-on Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 - [COMPANY] v [COMPANY] (1994) 12 ACSR 785 - [COMPANY] v Commonwealth Bank of Australia (1994) 2 VR 290; (1993) 11 ACSR 362 Category: Principal judgment Parties: [COMPANY] (Plaintiff) [NAME] (Defendant) Representation: Counsel: [redacted] Solicitors: [redacted] File Number(s): 2012/255877

Judgment - EX TEMPORE 1By originating process dated 16 August 2012, the Plaintiff, [COMPANY] ("Company") seeks to set aside a statutory demand ("Demand"), served on it by the Defendants, [NAME] and [NAME]. 2The originating process does not identify the basis on which the application is brought, which could include at least a contention that there is a genuine demand as to the debt claimed for the purposes of s 459H(1)(a) of the Corporations Act 2001 (Cth) or an offsetting claim under s 459H(1)(b) of the Corporations Act. There was no appearance for the Company when the matter was called for hearing today. While the company had filed an affidavit of a director, [NAME], in support of its application to set aside the Demand, that affidavit was not read. 3The Defendants relied on an affidavit of [NAME] dated 28 September 2012 and also tendered the Demand and contemporaneous documents in respect of the dealings between the Company and the Defendants. The Demand claimed an amount of $103,420 as set out in a schedule made up of hiring fees of $54,925 pursuant to a hiring agreement dated 14 September 2009 and unpaid rent of $48,495 pursuant to a lease also dated 14 September 2009. 4The Demand was supported, as required, by an affidavit of [NAME] dated 28 July 2012. A copy of the hiring agreement and lease agreement were attached to that affidavit. [NAME] deposed in that affidavit that the Company had made only partial payments of the hiring fee and rental due under the lease since September 2011 and that she believed there was no genuine dispute about the existence or amount of the debt. 5Ms [NAME]'s affidavit dated 28 September 2012, read in the proceedings, referred to a receipt book for rent collection from the Company which recorded the running balance due and the Defendants relied on that record to contend that the last payment made by the Company was made on 11 May 2012. Importantly, the receipts which were tendered in evidence by the Defendants recorded not only when payments were received but also occasions on which payments were due but not made and indicated a running balance on the occasions on which payments were due but not made. The running balance as at 16 July 2012 reconciles to the amount claimed in the Demand. These documents together with the absence of evidence of the Company to support the contention that there is a genuine dispute as to the amount claimed in the Demand, provides strong support for the view that there is no such genuine dispute. 6That conclusion is reinforced by screen shots of text messages exchanged between [NAME] and [NAME] which, variously, request payment with [NAME] responding "I am working hard to try to pay back your account"; refer to underpayment of amounts due, to which [NAME] responds, not by denying such under payment or contending that the amounts had been paid but instead that "I have haven't fixed the money required"; requesting payments to which [NAME] responds "I will find money to pay you back"; and claiming to have been let down repeatedly and requesting payment, to which [NAME] responds that he had been endeavouring to pay and identifying various difficulties in doing so. The Defendants also rely on a text message dated 22 June 2012 demanding payment, to which [NAME] responds "Sorry about that, when can we make new arrangement". It is striking that, throughout the course of these exchanges, there is no contention by [NAME] that the Company has paid the amounts due and no challenge to the clear statements made by [NAME] that amounts were outstanding. 7In the absence of evidence by the Company to support its application to set aside the Demand, and having regard to [NAME]'s evidence to which I have referred, it is not necessary to review the authorities as to when a genuine dispute as to a debt is established at any length. However, I should nonetheless say something as to that question. On the assumption that the Company relied on s 459H(1)(a) of the Corporations Act to set aside the Demand on the basis that there was a genuine dispute as to the existence or amount of the debt, the Court would need to be satisfied that the relevant dispute was not "plainly vexatious or frivolous" or "may have some substance" or "involved a plausible contention requiring investigation", and the applicable test is similar to that which would apply in an application for an interlocutory injunction or summary judgment: [COMPANY] v Commonwealth Bank of Australia (1994) 2 VR 290; (1993) 11 ACSR 362, [COMPANY] v [COMPANY] (1994) 12 ACSR 785-787; [COMPANY] v Lite-on Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 at [28]. That test was recently summarised by Ward J in [COMPANY] v [NAME] Management Pty Ltd [2011] NSWSC 512 at [70] as follows: "A genuine dispute is therefore one which is bona fide and truly exists in fact and is not spurious, hypothetical, illusory or misconceived. It is exists where there is a plausible contention which places the debt in dispute and requires further investigation." If the Court is satisfied that a genuine dispute exists, it must either calculate the substantiated amount of the debt by deducting any disputed amounts, or set aside the Demand if the substantiated amount is less than the statutory minimum. 8In the present case, there is no evidence before me that suggests that there is a genuine dispute as to the Debt or that there is any plausible contention which places the debt in dispute. The Company has not sought to support the application to set aside the Demand today. The evidence before me in [NAME]'s affidavit supporting the [NAME]'s affidavit in these proceedings is consistent with the existence of the debt. 9It may be that the Demand was sought to be set aside by reference to an offsetting claim under s 459H(1)(b) of the Corporations Act. However, no evidence was led before me to identify the basis of any such offsetting claim, and in the absence of such evidence, no such claim is established. 10Accordingly, I order that:

1. The originating process filed on 16 August 2012 be dismissed.

2. The plaintiff pay the defendants' costs of the proceedings, as agreed or as assessed.

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