Associate Justice Gardiner recently considered applications to set aside statutory demands in Business Structures Pty Ltd v D’Amico (t/a D’Amico Steel Works) [2012] VSC 146 and Alda Constructions Pty Ltd v Car Parking Solutions Pty Ltd [2012] VSC 145.

Business Structures Pty Ltd v D’Amico (t/a D’Amico Steel Works)

Facts

The sum in the demand comprised a judgment plus interest on the judgment.  The demand was not accompanied by an affidavit verifying it pursuant to section 459E(3) of the Corporations Act 2001.  A VCAT order, filed in the Magistrates’ Court pursuant to section 121 of the Victorian Civil and Administrative Tribunal Act 1998, is enforceable as a monetary order.  There was  no genuine dispute that the sum the subject of the demand is due and payable [5].

The demand claimed interest from the day after VCAT made the order until the day that the statutory demand was issued.

Decision

Had the demand been for a sum equivalent to that of the order, and that amount alone, there would have been no need to verify it by an accompanying affidavit.

Because the demand claimed additional interest, and therefore made a demand for amounts in excess of the judgment, the absence of an affidavit made the demand fatally defective. The court referred to Anderson Formrite Pty Ltd v CASC Hire Pty Ltd where Siopis J held a statutory demand to be invalid on the basis that the exemption from the requirement to accompany a statutory demand with a verifying affidavit was limited to circumstances where the statutory demand made an identical demand to the amount of the judgment debt [9].

In the circumstances the Court set aside the demand, at [11], stating:

The statutory demand here clearly makes a demand for a sum in excess of the judgment filed in the Magistrates’ Court and it was not verified by an affidavit as required by s 459E(3). In such circumstances, I consider that the statutory demand ….should be set aside.

Issue

The requirement of a verifying affidavit is almost ubiquitous with statutory demands. In this circumstance the fact that the demand was partly composed of a sum of interest, a small sum compared to the judgment sum, made the need for a verifying affidavit mandatory.

Alda Constructions Pty Ltd v Car Parking Solutions Pty Ltd

Facts

Car Parking Solutions Pty Ltd (“Car Parking”) served a statutory demand for $49,720 pursuant to a contract for the supply and installation of a car stacker system [2].  Alda Constructions Pty Ltd (“Alda”) is a builder involved in the development of apartments [11].  The developer, Bay Road Pty Ltd (the “developer”), is under administration. Alda brought the application under section 459G claiming there was a genuine dispute between the parties in respect of the debt the subject of the demand [3]

Alda argued that the developer negotiated and was party to the contractual arrangements for the supply of the equipment and that Car Parking was aware that Alda was not involved in ordering equipment [13]. The overall purchase price was $248,600, payable in three instalments [14]. The demand related to the payment of the final instalment, $49,720.  Alda alleged that it became the subject of the demand only when the developer began to have financial difficulties. It claimed to have signed the order for the equipment at the request of the developer [15]. The other key document, a funding agreement, was executed by an officer of Alda and included as an attachment a copy of a letter of offer signed by an Alda director. Alda claimed that the Car Parking was aware that the developer was and would be responsible for the costs associated with the order.  It also claimed that payment of the second instalment was made directly to Car Parking without Alda’s involvement and that the Car Parking had undertaken all negotiations with the developer regarding the third instalment [21].

Alda sought to rely on an affidavit by the developer to the effect that it was liable for the debt. No reason for such a acceptance was given and there was no financial records exhibited to the affidavit. Car Parking alleged that the developer advised that the nominated builder was Alda and it subsequently received all of the invoices [24].

Decision

Hs Honour undertook a review of the legal principles ( at [6] – [20]) including:

• a genuine disputes connotes a plausible contention requiring investigation involving much the same considerations as the “serious question to be tried” but not accepting uncritically every statement however equivocal, lacking a position, or inherently improbable [6].
• for a genuine dispute to exist there must be bona fide and truly existing facts supporting the grounds for alleging its existence and it must not be spurious, hypothetical or misconceived [8]
• the plaintiff bears the onus of establishing a genuine dispute or offsetting claim [7]
• the task of the court is to decide whether there was a dispute or offsetting claim such as would warrant subsequent adjudication [9] but not to express an opinion which may embarrass any other court subsequently considering the matter [10]

The court was critical of Alda relying upon an affidavit by the developer which did not provide a report as to the statement of affairs in the administration [22]. That document would have revealed either that the developer considered itself indebted to Car Parking or that it was indebted to Alda.  That would have been cogent evidence, certainly more useful than a mere assertion that the developer regarded itself liable for the debt. The court rejected the submissions that these issues should be considered at trial [25].

Gardiner AsJ considered funding agreement in detail (see [16] – [20], [25] and [32] – [33]) and the order form/building agreement ([27]).  On their face the documents identified Alda as the party to whom Car Parking was contracting.  Alda had the onus of establishing a genuine dispute, [29], but did not provide evidence to support a claim that Car Parking was aware that the principal contracting party was the developer and that the court should look beyond the documentation. The affidavit material in support of the application did not go beyond assertion when claiming that the developer was the party responsible for the debt.  That was not sufficient to establish a genuine dispute.  The court found, at [35]:

…Alda, which bears the onus of establishing the existence of a genuine dispute, has not, on the evidence, established that there is a plausible contention requiring further investigation such as to warrant the demand being set aside. My view in that regard is influenced by the contemporaneous documentation, in particular the Letter of Offer signed by Mr Webberley and the tax invoices generated pursuant to it without complaint. It is also supported by the recitals and the terms of the deed which are referred to above.

The court criticised Alda in failing to explain, in responding affidavit, how it was that it received invoices for the work done by Car Parking without demur. The fact that the first two payments under the letter of offer were funded by the developer was not relevant in identifying  the contracting parties and who was ultimately liable to make payments [34].

Issue

This decision is significant is showing that it is not sufficient to assert that the relationship evidenced in key documents did not represent the legal relationship or the obligations of the debtor.  The court found that the documents clearly identified the debtor as the contracting party and the terms of the documents established the liability.  The applicant’s affidavit assertion that the documents did not reflect the correct position without providing substantive evidence to support that contention failed to meet the relatively low threshold for establishing a genuine dispute.  The developer’s affidavit may have been decisive if its financial records had revealed a liability for the sum in question.  That record would have been prepared by an administrator who had no interest in the proceedings.  In those circumstances the weight accorded to such a document may have been significant.  His Honour certainly made it clear that it would have had strong probative value.