JJ Armstrong Pty Ltd v Hamptee Pty Ltd [2017] VSC 427 (26 July 2017): application to set aside statutory demand, sections 459 G adn 459J of the Corporations Act, genuine dispute and offsetting claim, notice of assignment of debt

August 27, 2017 |

Associate Justice Gardiner considered an application to set aside a statutory demand in  JJ Armstrong Pty Ltd v Hamptee Pty Ltd [2017] VSC 427.  The key issue was whether there had been a proper assignment of a debt.


On 3 January 2017, the defendant (‘Hamptee’) served a statutory demand under s 459E of the Corporations Act 2001 (Cth) (‘the Act’) on the plaintiff (‘JJ Armstrong’) (‘the demand’) [1].

The demand claims that JJ Armstrong owed Hamptee $76,000. The schedule to the demand provides:

Description of Debt


Monies owed pursuant to Invoice 1566 dated 21 September 2016

$46,200 (inclusive of GST)

Monies owed pursuant to Invoice 1572 dated 26 October 2016

$29,800 (inclusive of GST)


$76,000 (inclusive of GST)

The demand was accompanied by an affidavit of the director of Hamptee, Fatima Sakhai (“Sakhai”) [8].

JJ Armstrong filed an originating process on 17 January 2017, applying to set aside the demand pursuant to ss 459G and 459J [2].  JJ Armstrong, a building and construction company involved in constructing 14 apartments in Altona North (‘Altona project’), and at the St George Jacobite Syrian Orthodox Church at Heatherton (‘Syrian Church project’) [9].

Mr Sakhayi (“Sakhayi”) operates a painting business under the name Hi 5 Painting (‘Hi 5’). He provided quotations on Hi 5’s letterhead for painting work on:

  • 19 July 2016 at the Altona project for $66,000, including GST. JJ Armstrong accepted the quote [10].
  • 5 September 2016 at the Syrian Church project for $38,500, including GST. JJ Armstrong accepted the quote [11].
  • 30 September 2016 at the Syrian Church project for $7,700, including GST.  JJ Armstrong accepted the quotation [12].

Hi 5 performed some of the work and then issued six invoices on its letterhead stating, at [13]:

Invoice No
Syrian Church
Syrian Church
Syrian Church

JJ Armstrong paid:

  •   Invoice No 1561 on 20 September 2016  [15].
  • $12,000 on 1 December 2016 [16]

Hi 5 ceased work at the Syrian Church project in early October 2016. JJ Armstrong contends there was a dispute as to whether Hi 5  completed the works at the time it stopped work on the Syrian Church project [15]. On 9 December 2016, Hi 5 was removed from the Altona project with JJ Armstrong contending there was a dispute as to the circumstances surrounding Hi 5’s removal and the amount of work it completed [16].


Each of the invoices, at [18] & [19], relied upon were headed , in prominent letters, ‘Hi 5 Painting’, with an accompanying logo. On the right-hand side of the invoices were  Hi 5’s address, a mobile telephone number and website. At the foot of the invoice were the following details:

All rights applicable under Building and Construction Industry Security of Payment Act 2002Account details:

Account name: Hamptee Pty Ltd

BSB: 083 186

Account No.: 579153

Thank you for your business with us. ABN: 29 776 835 591 hifivepainting@yahoo.com.au


JJ Armstrong’s position, at [4], was that the demand should be set aside because:

(a) it contains a defect causing substantial injustice;

(b) there is a genuine dispute as to:

(i) whether JJ Armstrong owes anything to Hamptee at all given that it had no dealings with that company;

(ii) whether JJ Armstrong is required to pay anything in connection with the invoices referred to in the demand in light of the quality and amount of the work performed; and

(c) JJ Armstrong has an offsetting claim arising from rectification works that were necessary to be carried out.

The affidavit in support of JJ Armstrong:

  • exhibited an extract of the ASIC business register regarding ‘Hi 5 Painting ABN 44 885234 896’. which stated that the proprietor was ‘The Trustee for the Sakhayi Family Trust.’ Sakhayi stated he was the owner of the business [20].
  • agreed that  engaged  Hi 5 but had no dealings whatsoever with Hamptee [21].
  • stated that to the extent that any money is owed under the invoices that are attached to the statutory demand, which is disputed, that money is owed to Hi 5 [21].

The court identified the first issue  is whether  at the date of service of the demand, JJ Armstrong was indebted to Hamptee.  This required a determination of whether there has been an effective assignment of the debts owed by Hi 5 to Hamptee [24].

The Court stated, at [25], that an assignee of a debt may serve a demand under s 459E provided there has been compliance with Section 134 of the Property Law Act 1958 which requires  three conditions:

(a) the assignment must be in writing and signed by the assignor;

(b) the assignment must be absolute; and

(c) express notice in writing must be given to the debtor.

Hamptee’s evidence was that:

  • Sakhayi owned the painting business trading as Hi 5;
  • late in 2016, Sakhayi transferred the business to Hamptee;
  • Hamptee’s sole director and shareholder was Sakhayi’s wife;
  • nothing has changed in the day to day running of the business and Sakhayi remained the point of contact between customers and the business;
  • as part of the transfer Sakhayi ‘assigned the debts then owing to himself to Hamptee, including any debts owed by JJ Armstrong’ [27]

The Court noted that:

  • Sakhayi did not:
    • state whether the assignment of debt was evidenced in writing,
    • the date upon which the assignment is said to have occurred or
    • whether Sakhayi gave notice to JJ Armstrong of the assignment [27].
  • The demand and the accompanying affidavit made no mention of any assignment by Hi 5 to Hamptee with the only reference to Hamptee in the demand, at the foot of the invoices, is a direction that the invoices be paid into an account in the name of Hamptee [29].
  • the direction on the invoice did not constitute notice of the assignment of the debts, rather was a direction  as to the account into which payments should be made [29].

JJ Armstrong’s evidence was that it has not received  any assignment of debt from Hi 5 to Hamptee [28].  It also submitted, at [26], that:

  • if the statutory demand itself was to constitute notice of assignment, the assignee must describe the debt in such a way as to enable the company receiving the demand to satisfy itself that there had been a valid assignment; and
  • a failure to properly describe the assignment  was a defect productive of ‘substantial injustice’ within the meaning of s 459J(1)(a)

The court referred to  Bennell v Netlink Australia Pty Ltd   which held:

  • that notice of assignment can be given in the statutory demand itself [29].
  • reference to an assignment in the statutory demand itself was sufficient notice as the demand simultaneously completed the assignment at law and constituted a demand for payment by the true creditor, the assignee [30].

The Court cited with approval  Condor Asset Management Ltd v Excelsior Eastern Ltd which, at [34], found that:

  •  in the absence of full legal assignment under s 12 of the Conveyancing Act, the assignee cannot maintain a debt action in a court of common law in his own name;
  • in the context of a statutory demand issued by an assignee of a debt the requirements under s 459E(2) will not be satisfied unless it can be seen when the demand is served, that circumstances warranting such an order of a court of equity exists in relation to a debt upon which the person serving the demand relies as a creditor by assignment.
  • a self-professing assignee doesn’t satisfy the content requirements of s 459E(2) unless the statutory demand is framed in terms enabling the company to see the matters that would cause a court to order that the assignor’s name be used in a debt recovery action brought by the equitable assignee;
  • if the statutory demand was to operate as notice the demand needs to contain information sufficient to show the status of the issuer as an assignee;
  • where the company upon which the statutory demand is served already knows of the assignment the content of a statutory demand will be measured against the “substantial injustice” criterion in s 459J(1)(a)

  • a statutory demand which contains no more than a bald assertion of an assignment of  debts leaving the plaintiff with no means whatsoever of satisfying itself of the validity of the assertion constitutes a “defect” in the demand productive of “substantial injustice” under s 459J(1)(a).

Having regard to Condor, the Court stated, at [35], that:

  • unless the company receiving the demand is privy to information which is sufficient to show the status of the issuer as an assignee; and
  • where the demand represents the first time that the company is said to be made aware of the assignment,

such detail must be included.

The court found that:

  1. the assignment is not mentioned on the face of the demand or the accompanying affidavit [32].
  2. there was no evidence at all of the assignment being in writing, what date it occurred, whether it was absolute or not, and that it did not purport to be by way of charge only [32].
  3. there was no evidence to establish that there had even been an assignment in equity which could be perfected by express notice in writing being provided to JJ Armstrong [32].
  4. Hamptee could not point to any knowledge on JJ Armstrong’s part of the assignment [35].
  5. JJ Armstrong did not become aware of the alleged assignment until after the service of the demand [35]
  6. there was not even a bald assertion that the debts had been assigned to Hamptee [35].
  7. JJ Armstrong was left in a position where it could not see whether it could safely comply with the demand by paying the creditor identified in the demand [35].

The Court rejected, at [31], Hamptee’s submission  that the appearance of Hamptee’s details at the foot of the invoices put Armstrong on notice that it should have sought out Sakhayi to ascertain the position in regard to the assignment of the debts because:

  • a company receiving a statutory demand has a limited time in which to react to it and apply to set it aside;
  • there was no obligation for JJ Armstrong to make enquiries of Sakhayi and the director of Hamptee, Mr Sakhayi’s wife, as to what the legal position regarding the debts.

The Court there was a defect of ‘substantial injustice’ as referred to in s 459J(1)(a) and set the demand aside [36].  As a result it was not  necessary to consider the other grounds on which JJ Armstrong relied [37].


Assignments of debts are not uncommon and provided there is compliance with section of the Property Law Act should not cause significant issues for a creditor if it seeks to serve a statutory demand relying on that debt.  The safest means of ensuring notice is good is to send a letter advising of the assignment.

There is scope to notify the debtor of an assignment within a statutory demand as the authorities make clear however that notice must go beyond assertion.  There must be sufficient information to allow the debtor to make enquiries and safely comply with the demand and pay the correct creditor.

In this case the affidavit material in support was so inadequate that at hearing the Defendant’s submissions were reduced to arguments about assumptions and and extrapolation.

One Response to “JJ Armstrong Pty Ltd v Hamptee Pty Ltd [2017] VSC 427 (26 July 2017): application to set aside statutory demand, sections 459 G adn 459J of the Corporations Act, genuine dispute and offsetting claim, notice of assignment of debt”

  1. JJ Armstrong Pty Ltd v Hamptee Pty Ltd [2017] VSC 427 (26 July 2017): application to set aside statutory demand, sections 459 G adn 459J of the Corporations Act, genuine dispute and offsetting claim, notice of assignment of debt | Australian Law Blogs

    […] JJ Armstrong Pty Ltd v Hamptee Pty Ltd [2017] VSC 427 (26 July 2017): application to set aside statu… […]

Leave a Reply

Verified by MonsterInsights