The Supreme Court, per Randall AsJ  set aside a statutory demand in Stellar Projects (Vic) Pty Ltd v Cambridge Plumbing Pty Ltd [2017] VSC 532.  This was a case where the court had to consider conflicting authorities regarding a prematurely sworn affidavit. It ended up being a very bad at the office for the defendant whose statutory demand was set aside.

FACTS

The statutory demand dated 14 July 2017 claimed the sum of $241,889.30 [1]. The description of the debt set out in the schedule was as follows:

The affidavit verifying the creditor’s statutory demand for payment of debt was sworn on 13 July 2017 [6], relevantly stating:

3. Stellar Projects (Vic) Pty Ltd (ACN 600 804 073) (the Company) owes a debt in the sum of $241,889.30 (the Debt) to the Creditor being unpaid invoices for plumbing works which were provided to the Company at two separate development projects at 9-19 Levenswell Road, Moorabbin and 1 Powlett Street, Heidelberg between 31 May 2016 and 20 March 2017 claim, interest and costs in proceeding number SCI 2016 01156 (the project).

The affidavit verified the debt set out in the schedule of the statutory demand by referring to the various invoices after taking into account two payments which were made, leaving a balance due of $241,889.30.

The application was made pursuant to s 459G of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand [1].

In the originating process the plaintiff claimed:

1. An order that the defendant’s statutory demand dated 14 July 2017 be set aside on the basis that:

(a) there is a genuine dispute between the parties as to the existence and amount of the debt claimed in the statutory demand;(b) the plaintiff has a genuine offsetting claim against the defendant.

On the first return date the plaintiff’s counsel raised the date of swearing of the accompanying affidavit as a further ground to set aside the statutory demand pursuant to s 459J(1)(b) [3].

DECISION

The Court identified the relevant provisions for consideration as:

•  Section 459E(3) provides, at  as follows:

(3) Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:(a) verifies that the debt, or the total amount of the debt is due and payable by the company; and

(b) complies with the rules.

• Paragraph 2 of Form 509H, the form of the statutory demand, sets out in the case of a non-judgment debt, at [10], as:

Attached is the affidavit of [insert name of deponent of the affidavit], dated [insert date of affidavit], verifying that the amount is due and payable by the company.

• Rule 5.2 of the Supreme Court (Corporations) Rules 2013 sets out, at [11]:

5.2 For the purposes of s 459E(3) of the Corporations Act, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must –

(a) be in accordance with Form 7 and state the matters mentioned in that Form;

(b) …

At [14] the defendant relied upon Dornay Nominees, McDermott Projects Pty Ltd v Chadwell Pty Ltd  and Dolvelle Pty Ltd v Australian Macfarms Pty Ltd in support of the submission that affidavits sworn prior to the date of the demand were not defective.

The Court noted, at [18], that the decisions in Dornay Nominees, McDermott Projects and Dolvelle found that the exact coincidence of the date for verification of a statutory demand was not essential but rather what was important was the verification of the debt being due rather than reference to the statutory demand.

The plaintiff, at [19], relied upon Wollongong Coal Limited v Gujarat NRE India Pty Ltd which found:

• an accompanying affidavit that predates a demand does not or cannot verify the demand;
• such an affidavit does not satisfy the requirement in s 459E(3);
•  the requirement in s 459E(3) is an important safeguard in the statutory scheme and is therefore mandatory;
• generally non-compliance with s 459E(3) will justify, if not compel, the setting aside of the demand under s 459J(1)(b)  and it is not necessary to point to any substantial injustice. The possible exception is where affidavits sworn between a day and several days prior to the date of the statutory demand.

The Court followed the authority set down in Wildtown Holdings Pty Ltd v Rural Traders Company Ltd  where Templeman J, at [21],  required an affidavit to be filed in conformity with s 459E(3) stating the up-to-date position of the debt.

The decision in Wildtown differed from that of in Dornay. The Court noted, at [24], that Wildtown has been followed in a “plethora of cases” and as it is not wrong, let alone plainly wrong the court would not depart from it [24].

The Court found that an affidavit executed two days before a statutory demand cannot verify that demand.  And the fact that no updating affidavit was filed was another reason why the demand should be set aside pursuant to s 459J(1)(b).

 

The court did not, at [25] grant leave to the defendant to serve a further affidavit pursuant to s 459E as the initial 21 day period had elapsed and noted that in Wollongong Coal, the court stated that that, at a practical level, the problem exposed could be cured by simply serving a new demand.

As a result the demand was set aside pursuant to s 459J(1)(b) of the Act. The defendant pay the plaintiff’s costs on a standard basis.

ISSUE

Statutory demands remain highly technical documents.  Because of the consequences of a statutory demand, that a company is put into liquidation, the expectation is high that the affidavit accompanying the demand be as precise and up to date as possible.  The affidavit should be prepared contemporaneously with the demand and certainly not days beforehand.