In A’la Carte Homes Pty Ltd v AAPD CO P/L [2019] VSC 108 the Supreme Court, per Randall AsJ, set aside a statutory demand. The key issue was the failure of the assignment of a debt being described in the statutory demand or accompanying affidavit.

FACTS

The application was made under ss 459G, 459H and 459J of the Corporations Act 2001 (Cth). The orders sought were that the ‘creditor’s statutory demand undated with affidavit accompanying statutory demand sworn 29 October 2018 be set aside’.

The initial affidavit in support of the application to set aside a statutory demand set out grounds that:

(a) there is a bona fide offsetting claim; and

(b) the statutory demand ought to be set aside for ‘some other reason’ [4].

The affidavits in support stated:

• • in support of an offsetting claim under s 459H that as a result of the defective plumbing works the plaintiff incurred additional costs in rectifying the breaches of the contract by the defendant which exceeded the sum claimed [6]

• • on 18 November 2018 the plaintiff’s solicitors wrote to the solicitors for the plaintiffs and inviting withdrawal of the Statutory Demand [7] & [8]

• The two invoices relied upon by the defendant were 6 that of a partnership of A Bey & S El- Houli and that the two invoices which were referred in the statutory demand and attached to the correspondence were of a partnership and not the defendant [9] – [11].

The Defendant stated by way of affidavit:

• • confirmed service of a notice of assignment of debt both dated 29 October 2018 were exhibited to the affidavit [13] – [14].

• that having received and taken advice, that the debt ought to be assigned for the purposes of the statutory demand, the assignment was executed [15].

The court noted regarding the statutory demand that:

•  it stated that the plaintiff owed the defendant (‘the creditor’), [19]:

…the amount of $6,800 as to AAPD Co Pty Ltd … and being the total of the amounts of the debt described in the Schedule.

• • the schedule to the statutory demand set out each of invoices no. 619 and 620, both dated 17 January 2018 and the quantum claimed [20].

• the affidavit made no reference to the assignment by a partnership
• the “natural inference” from the reference to goods and/or services supplied by the creditor to the debtor, was that the defendant had supplied the goods or services directly and the debt arose out of the relationship of creditor and debtor between the plaintiff and the defendant [22]

• the deponent was an employee of the solicitor for the Creditor in relation to a debt of $15,768.50 owed by the Debtor company. [26].

DECISION

The court reviewed the authorities regarding the proper notice of assignment stating:

• the NSW Supreme Court in Condor Asset Management Ltd v Excelsior Eastern Ltd stated that:
  • • a statutory demand, of itself, could provide the necessary notice of assignment [25].
    • where the existence of the debt depends on matters of which the company has no knowledge and cannot reasonably be expected to receive knowledge in the ordinary course of events, such as assignment it iss incumbent upon the assignee-creditor to show the missing particulars on which its claim depends.
  • • in the case of assignment it is necessary to include material from which the plaintiff could satisfy itself that there had been a legal or equitable assignment.
  • a failure to include information  produced a ‘defect’ in the demand that would produce ‘substantial injustice’ within the meaning of CA s 459J(1)(a)

• the requirements under s 459E(2), will not be satisfied unless it can be seen that circumstances warranting such an order. The content requirements of s 459E(2) will not be met unless the statutory demand is framed enables 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 [28].

The court found that in the circumstances of this statutory demand a copy of the assignment ought to have been included so as to enable the plaintiff to satisfy itself that there had been a legal or equitable assignment which could be relied upon by the creditor. The failure to provide sufficient particulars of the assignment constituted a defect in the demand which produced ‘substantial injustice’  under s 459J(1)(a) [29].

The court rejected the defendant’s submission that the assignment point was precluded under the ‘Graywinter principle’ [30]  because it was open to conclude that upon a reading of the 21 day affidavit that the plaintiff did not appreciate that the debts had been assigned [31].

In its analysis of the Graywinter principle the court stated that:

• •  the Western Australian Court of Appeal in Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd (No 3)  found that the supporting affidavit must “disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient”.

• • an affidavit by the plaintiff’s solicitor which simply said that the plaintiff disputed that it was indebted to the defendant, was insufficient to satisfy the statute [36].

• In Hansmar Investments Pty Ltd v Perpetual Trustee Company Ltd, the court stated that the grounds for applying to set aside a statutory demand must be raised in the supporting affidavit whether it is raised expressly, by necessary inference, or by a reasonably available inference [38].
• the Victorian Court of Appeal requires that the 21 day affidavit:

(a) must convey ‘a clear delineation of the area of controversy’;

(b) must disclose ‘the general nature of the case being advanced’; and

(c) must ‘fairly alert’ the respondent to the nature of the case made in support of the application and ‘must fairly notify the respondent of the evidentiary basis for a submission … on the particular ground upon which the applicant seeks to rely’.

• • in NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd, the 21 day affidavit which exhibited the contractual document relied upon which was not sufficient to constitute an argument with respect to construction of a clause [47] because it did not inform the creditor ofthe construction to be relied upon.

• in In the matter of Spartan Sporting Goods Pty Ltd the ‘Graywinter principle’ was found to apply to facts unknown at the time of the  459G application, being the knowledge of the existence of a parallel proceeding filed by the creditor seeking to agitate the same debt claimed in the statutory demand [54].

The court found that  the assignment issue was not delineated in the affidavit itself, nor was it a necessary inference from the affidavit [53].  In reviewing the authorities on genuine dispute and offsetting claims  generally hearsay and opinion evidence will be admissible to bear upon the question of whether there is a genuine dispute or a genuine offsetting claim and that the usual strictures placed upon such evidence in interlocutory applications such as this will not be so strictly applied [63].

ISSUE

While the Plaintiff was ultimately successful in setting aside the demand the key point, regarding the notice of assignment, was slow in coming.  It was a critical point.  It is critically important to canvass relevant issues in the 21 Day affidavit and statutory demand.  The affidavit does not have to be all encompassing but must cover the issues to be relied upon.  It defines the scope of argument.