Statutory demand, genuine dispute, service; Re LPD Corporation Pty Ltd [2010] VSC 313 (15 July 2010), Freestyle Energy Limited v Renewtek Pty Ltd [2010] VSC 244 (8 June 2010) & Renegade Rigging Pty Ltd v Hanlon Nominees Py Ltd [2010] VSC 385 (31 August 2010)

September 15, 2010 |

In two recent decisions the Victorian Supreme Court considered the issue of what is meant by genuine dispute for the purposes of setting aside a statutory demand under section 459G(1) of the Corporations Act with the Court in  Freestyle Energy Limited v Renewtek Pty Ltd finding there was a genuine dispute while in  Re LPD Corporation Pty Ltd the Court refused to set aside a statutory demand.  In the third decision, Renegade Rigging Pty Ltd v Hanlon Nominees Py Ltd, the Court considered the service of statutory demands.  These decisions which will be of use to practitioners who practice insolvency law.

LPD Corporation

In determining whether there was a genuine dispute Davies J set out the relevant principles:

  1. any dispute must be a genuine dispute [3] and one which is bona fide and the grounds supporting the evidence of the dispute must be real and not spurious;
  2. the level of proof required to demonstrate there is a genuine dispute is, using the influential decision of Dodds – Streeton JA in TR Administration Pty Ltd v Marchetti, is something between mere assertion and the standard of proof required by a court of law [4].
  3. while the standard of proof is not high the  material should “.be of sufficient probative value that the Court is satisfied there is a real dispute.” [5] The application is akin to one for interlocutory injunction [6];
  4. the same principles apply in any claim made by the Plaintiff for an offsetting claim [13];
  5. the court will not accept uncritically equivocal statements lacking in precision, assertions which lack prima facie plausibility (relying on Eyota Pty v Hanave Pty Ltd (1994) 12 ASCR 785).

This decision is very instructive in highlighting the material that should (and should not) be included in affidavit material. Davies J analysed the evidence at [11] and [18][20].   The applicant’s evidence could be best summarised as generalised commentary of events and intentions intermingled with submissions.

Freestyle Energy Limited

The key question in this application was determining if there was an agreement between the parties as part of the process of determining whether there was a genuine dispute about the existence of a debt.

Genuine dispute

Ferguson J considered the relevant principles at [28] [32]. In this case Ferguson highlighted Justice Finkelstein’s decision in JSW Parts Pty Ltd v Daraco Pty Ltd where there was no dispute about the fee but rather lack of clarity about the scope of the work..  In that context the fact that payments were made by a party does not constitute evidence of an agreement per se. Ferguson J extracted, at [33], Finkelstein’s reasoning on his point:

… making payments apparently in pursuance of a contractual obligation and without complaint does not always amount to an admission that those payments were lawfully due or, so far as this case is concerned, that the work required to be performed by Daraco had been performed adequately. There may be other explanations. Here we are dealing with relatively small sums of money. A contracting party may be willing to pay a small sum in order to avoid more significant costs that would arise if a dispute arose and litigation followed….

Ferguson J found there was sufficient doubt attendant upon the existence of an agreement to constitute a genuine dispute.  Her reasoning, in particular at [37], is a useful guide when dealing with a matter where there is an issue as to the existence of an agreement where she states, inter alia:

..A party may give reasons for why the debt is disputed. For example, it may be because the party says that goods said to have been supplied have not been received. Here what is said, is that there is a dispute about the debt because there is no binding contract that has been entered into by the parties. Mr Donaghey has sworn that no agreement was reached. There are no contemporaneous documents that clearly evidence that there was an oral agreement, such as to suggest that Freestyle’s argument is spurious. …the Court’s task is to identify the genuine level of a claim not the likely result of it and it is not helpful to perceive that one party is more likely to succeed than the other. Whether there was an oral agreement or not, is a matter that merits further investigation and it is not for me to inquire as to the credit of Mr Donaghey on this appeal.

Renegade Rigging Pty Ltd

The issue for Ferguson J to consider was the date of service of the statutory demand and the date of the application.  It is a very useful decision in that her Honour undertook a thorough analysis of the service provisions and requirements, drawing together the relevant authorities.

Service of Statutory demand

The preliminary question was when the statutory demand was served ([8] [30]).  Her Honour undertook a very thorough consideration of the service provisions of the Corporations Act, the Evidence Act (as to presumption of delivery of postal articles, see  [15][21] – in particular section 160 of the Evidence Act (Cth)) the requisite proof of posting in the affidavit, being, at [22], that the envelope containing the statutory demand:

(a) bore the correct name and address;

(b) contained the relevant document to be served;

(c) bore the correct cost of postage; and

(d) was placed in the post.

Consideration of this issue was complicated slightly by the fact that there was a postal strike  during the relevant period which, it was contended, delayed delivery.  On this issue evidence was taken from a postal manager at the branch in which the letter was processed.

Date of application

Section 459G(2) of the Corporations Act requires an application to set aside a statutory demand.  Ferguson J considered at length the status of applications sent by facsimile ([41][50]).  Ultimately her Honour found that service by facsimile was acceptable.  In that context Ferguson J:

  • cited Chernov J in Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd that how a document came to be served at the address for service was irrelevant and that it would be absurd if somebody who admitted to having received a document was not held to have been served with it [42];
  • extracted the principles governing service in Woodgate v Garard Pty Ltd, a New South Wales Supreme Court decision of May this year, including that the question of whether email or facsimile is effective is determined by whether that mode of service actually brought the document to the attention of responsible officer [47];
  • noted that provided the facsimile number was included within the statutory demand and the facsimile was transmitted within 21 days to the address for service the application was served for the purposes of section 459G [48].

Ferguson J acknowledges there i contrary authority on the question of service by facsimile. In my view her analysis is thorough and convincing.

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