A recent decision of the New South Wales Supreme Court, Greenhills Securities Pty Ltd v Loire Consultants Pty Ltd [2015] NSWSC 13, identifies issues which may arise when statutory demands are issued without a clear description of the debt owed, to whom it is owed and in what capacity. It also considers when an application to set aside a statutory demand may include more than one statutory demand. Senior Associate, Sarah Drinkwater, discusses the case.

Background

Three statutory demands were issued by Loire Consultants Pty Ltd (Loire) and David William Dixon (Dixon) to Greenhills Securities Pty Ltd (Greenhills).

This application was brought by Greenhills, to dismiss all three statutory demands, on the basis that there was a genuine dispute in relation to each.

Loire sought to have the application set aside for the following reasons:

  • A single application should be brought for each statutory demand.
  • There were formal defects in the Application.
  • The Defendants were not properly served with one of the Affidavits in support of the Application.

The second and third issue raised by the Defendants were considered to have no merits by the Court and as such are not covered further in this article.

Grounds to set aside the application - single application regarding separate statutory demands

There was opposing case law provided by each of the Defendant and the Plaintiff in regards to this issue.

The Defendants argued that a single application for three statutory demands was against the intention of s 459G of the Corporations Act 2001 (Cth) (The Act) and relied on case authorities such as Help Desk Institute Pty Ltd v Adams [1998] NSWSC 586 (Help Desk) which held that as the section does not provide the option of a combined application, then it is not permitted, or else it would have stated so.

The Plaintiffs relied on authorities such as Remo Constructions Pty Ltd v Dualcorp Pty Ltd [2008] NSWSC 1172 (Remo) where Justice Barrett held that separate applications should be permitted, as s 458G of the Act does not require separate applications; and the Uniform Civil Procedure Rules 2005 (NSW) (as applicable in each state) apply and guide the court as to joinder of claims.

In this case, His Honour preferred the approach adopted by Justice Barret in Remo over the decision of Help Desk. The reasoning was that in some cases it may be appropriate for an application to deal with more than one statutory demand. His Honour held:

“Although Div 3 imposes a strict regime, I do not read it as intending to displace the general approach to the law of procedure that the court should look to the substance of what has happened rather than its form. If in substance an alleged debtor has made an application to set aside a statutory demand within the timeframe specified in s 469G and that application is supported by an affidavit that has been filed and served in accordance with the section, that it seems to be should be sufficient.”

As this matter involved three separate statutory demands, one of which had a different named Creditor, His Honour applied provided retrospective leave under rule 6.19(1) of the UCPR (joinder in an originating process). Although it was held that the statutory demands did not arise out of the same transactions, leave was granted to join Loire and Dixon as defendants, as it was more efficient to deal with the statutory demands in the one application, given the complexity of to whom the debts were owed.

Grounds to have second statutory demand set aside

There were two issues regarding the second statutory demand, namely:

  • Who was the debt was owed to?
  • Were the funds “disbursed in accordance with directions given by Mr Dixon either as a director of Loire or in his capacity as trustee of the LRUT”?

Who was the debt owed to?

Evidence was provided to the Court demonstrating that there had been changes in trustees of the Lovedale Road Unit Trust (LRUT).

Loire as trustee of the LRUT acquired a property. Loire and LRUT did not have a bank account so they used an account operated by Greenhills for the operation of LRUT. Dixon then replaced Loire as trustee of LRUT; however, there was discrepancy as to what date this occurred. Due to the uncertainty of who was trustee at the time of the transaction the subject of the second statutory demand, His Honour held that there was a genuine dispute and set the second statutory demand aside.

Were the funds disbursed in accordance with directors of Dixon as director or trustee?

The Plaintiff also tried to raise an argument that they disbursed funds in accordance with directions received from Dixon. The Court held that this was an issue that was not adequately raised in the affidavit filed and served in accordance with s 459G(3) and therefore couldn’t be raised at the hearing.

Grounds to have third statutory demand set aside

Section 459J(1)(b) of the Act

Dixon conceded during the course of the hearing that the evidence demonstrates that the sum, of $120,000 was never paid to Greenhills and that consequently he was not entitled to claim $120,000 from Greenhills pursuant to the statutory demand as that amount was not owed.

Arguments were raised that the balance of the demand, could still be pursued.

His Honour held that the statutory demand and affidavit in support were defective and caused “substantial injustice” as it did not clearly identify who the advance was made by, whether it was by Dixon or Loire as an assignment to Dixon.

The third statutory demand was for two amounts, $120,000 and $141,535. Dixon admitted that Greenhills did not owe $120,000. As to the amount of $141,535, it was held that there was a genuine dispute because Greenhills provided facts showing it had an offsetting claim. His Honour stated that “I would not be prepared in this case to vary the demand… the evidence from Greenhills and the defendants is confused and makes it difficult to reach a reliable conclusion about the amount, if any, owing to Greenhills.

The third statutory demand was also set aside.

Orders made

The First statutory demand was also set aside through a concession by the Defendants that it ought to be set aside.

Accordingly, all three statutory demands were set aside, and the Creditors were ordered to pay the Debtors costs of the Application.

Points to take away

When issuing a statutory demand, be sure to clearly identify:-

  • to whom the debt is owed to, and in what capacity (if any e.g. as trustee for a trust)
  • the amount of the debt owing
  • the facts as to why the debt is owed / how the debt was incurred
  • all documents are sworn by a person authorised to execute the documents.

If you are filing an application to set aside a statutory demand:

  • If you have received and are disputing more than one statutory demand from the same or related Creditors, consider whether only one application may need to be filed.
  • File and serve the application within the specified time (21 days from the date of service).
  • Clearly state the facts as to why the statutory demand should be set aside.
  • Ensure the Application and supporting affidavits are sworn by an authorised person.