Greenhills Securities Pty Ltd v Loire Consultants Pty Ltd

1. [1]

   By an amended originating process filed in court on 15 December 2014, the plaintiff, Greenhills, seeks orders setting aside three statutory demands served on it. Separate orders are sought in respect of each statutory demand. The first demand, dated 2 September 2014, was served by the first defendant, Loire, claiming an amount of $207,594.27. The defendants concede that that statutory demand should be set aside, and nothing further needs to be said about it. The second demand, dated 3 September 2014 and served on 4 September 2014, was made by Loire in respect of the same debt as the first demand. That demand was signed by Mr Mahommed, now the sole director of Loire. The supporting affidavit was also sworn by Mr Mahommed. The debt was described in the following terms in the schedule to the demand:

2. [2]

   The third demand, dated 19 September 2014, was served by the second defendant, Mr Dixon on 23 September 2014. It was signed by Mr Smits purportedly on behalf of Mr Dixon. Mr Smits also swore the supporting affidavit. He says that he was authorised to do so as the attorney of Mr Dixon. The third demand claims a total amount of $261,535.00. The debt was described in the following terms in the schedule to the demand:

3. [3]

   The proceedings raise a number of issues.

4. [4]

   First, Greenhills seeks to set aside the two statutory demands on the ground that there is a genuine dispute between Greenhills and the relevant defendant concerning the existence of the debts to which the demands relate: see Corporations Act 2001 (Cth) (the Act), s 459H.

5. [5]

   In the case of the debt said to be owing to Loire, Greenhills submits that there is a genuine dispute in relation to that debt for two reasons. First, it says the debt was incurred by Loire as trustee of the Lovedale Road Unit Trust (LRUT), that Mr Dixon replaced Loire as trustee of that trust on or about 21 September 2010 and that as a consequence the debt, if any, is owed to Mr Dixon and not to Loire, or at least there is a reasonable argument to that effect. Second, Greenhills claims that the sum of $207,594.27 was paid out by it in accordance with instructions given by Mr Dixon, who, at the time, was the sole director of Loire.

6. [6]

   In the case of the debt of $120,000.00 said to be owing to Mr Dixon, Greenhills contends that it did not receive the amount of $120,000.00 and that that amount was paid to another entity on instructions given by or on behalf of Mr Dixon. In relation to the debt of $141,535.00 said to be owing to Mr Dixon, Greenhills contends that there is an issue whether the amount paid was by way of loan to Greenhills. In any event, it contends that it has paid the sum of $204,719.58 to the benefit of the LRUT and has thereby discharged any debt it owed.

7. [7]

   In support of the ground that there is a genuine dispute concerning each debt, Greenhills relies on four affidavits made by Michael Charles Unicomb, a director of Greenhills. The first affidavit was made on 25 September 2014, the second on 14 October 2014, the third on 29 October 2014 and the fourth on 27 November 2014. The first affidavit is said to be an affidavit meeting the requirements of s 459G(3) of the Act in relation to the application to set aside each statutory demand. Section 459G provides:

8. [8]

   The second affidavit is said to meet the requirements of s 459G(3) insofar as the application is made to set aside the third statutory demand. Greenhills accepts that the affidavit was not filed and served within 21 days of service of the second statutory demand and consequently does not meet the requirements of s 459G(3) insofar as the application concerns that statutory demand.

9. [9]

   The third and fourth affidavits are said to expand on the grounds raised by the first and second affidavits and are said therefore to be admissible in accordance with the principles stated by Austin J in SMEC International Pty Ltd v CEMS Engineering Inc (2001) 38 ACSR 595 at [20]. There, Austin J said:

10. [10]

    It is apparent that the first two affidavits have not been drafted by a lawyer. They give a confused account of what Greenhills says happened. Substantial parts of them were inadmissible and not read. One question in these proceedings is whether they sufficiently raise the grounds on which it is said there is a genuine dispute about the existence of the debts and whether, to the extent that Greenhills seeks to fill in the gaps in that evidence in the third and fourth affidavits, the affidavits merely expand on grounds that are properly identified by the earlier affidavits.

11. [11]

    The second basis on which Greenhills seeks to set aside the third demand is that the affidavit accompanying that demand was defective for two reasons. First, it was not made by Mr Dixon, but by someone who was purporting to act as his attorney. Second, it did not adequately describe the debts in respect of which the demand was made. It is also said that the third demand insofar as it claims the sum of $141,535.00 is defective because it does not sufficiently describe the debt in respect of which the demand is made.

12. [12]

    The remaining issues in the proceedings are raised by the defendants. They claim that the application to set aside the statutory demands is defective because it seeks impermissibly to combine applications in respect of different demands in the one proceeding. In addition, they claim that the application was not served on Mr Dixon within time. Lastly, they claim that there were formal defects with the application which meant that it did not comply with s 459G. In particular, it contained inappropriate prayers for relief and it was directed only to Loire and not to Mr Dixon and, when amended to include Mr Dixon, specified the wrong address for service.

13. [13]

    It is convenient to deal with the issues going to the validity of Greenhills’ application first.

Single application in respect of multiple demands

1. [14]

   The defendants submit that it is now settled law that, where statutory demands are issued by separate creditors in respect of separate debts, it is necessary for the plaintiff to file separate originating processes in respect of each demand. In support of that proposition, the defendants rely in particular on the decisions in Help Desk Institute Pty Ltd v Adams [1998] NSWSC 586; (1998) 17 ACLC 18 and Indigo Financial Money Pty Limited v Moustrides [2010] SASC 235, which it is said have been followed in Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd [2010] NSWSC 1279; Catarina V DCT [2011] NSWSC 449 and Ambassador at Redcliffe P/L & Anor v Emerald Constructions Aust P/L & Ors [2006] QSC 247. To those may be added others, including the decision of Santow J in Calquid Pty Ltd v A & DR Illes Pty Ltd [2000] NSWSC 558; 34 ACSR 523.

2. [15]

   Various reasons have been advanced for the principle identified by the defendants. In Help Desk Institute, Young J thought that, if the legislature intended that there could be one application in respect of more than one demand, then s 459G(2) would have expressly dealt with that situation and said “… after the demand is so served, or if more than one demand is served, by 21 days after the first of such demands is so served”. Ultimately, however, Young J dismissed the application on the ground that roughly only three paragraphs of the affidavit filed in support dealt with the statutory demand and the affidavit dealt with “a whole lot of extraneous matters” so that it could not be said to be an affidavit for the purposes of s 459G(3). Santow J in Calquid adopted the reason given by Young J (that s 459G(2) would have expressly dealt with the position if the application related to more than one demand if an application of that type was permitted). So did Douglas J in Ambassador at Redcliffe (at [16]-[17]). In Calquid, Santow J also pointed out that there were difficulties in applying the 21 day time limit specified in s 459G if multiple demands were served on different days. Moreover, in his view, the purpose underlying the provisions of Pt 5.4 of the Act (dealing with statutory demands) – which was to deal with disputes in relation to the existence or amount of a debt quickly – would be undermined if the court had to deal with the complexities that may arise if a supporting affidavit had to deal with multiple demands: see id at [43]-[45].

3. [16]

   However, in Remo Constructions Pty Ltd v Dualcorp Pty Ltd [2008] NSWSC 1172; 222 FLR 375, Barrett J held that s 459G of the Act did not require in all circumstances that separate applications had to be brought in respect of separate statutory demands. In reaching that conclusion, Barrett J either distinguished or did not follow earlier cases to the contrary including Help Desk and Calquid. Barrett J gave two reasons for his conclusion. First, there was nothing in s 459G of the Act that required separate applications to be made in respect of each statutory demand. Second, applying Gordon v Tolcher (2006) 231 CLR 334, Barrett J held that in proceedings under the Act the rules of procedure applying to the court hearing the proceedings apply. In the case of proceedings before this Court, Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 6.18 sets out the circumstances in which a plaintiff may claim relief against a defendant in the same proceedings in respect of more than one cause of action.

4. [17]

   Remo concerned a case where two statutory demands were served by the same creditor. However, in Indigo Financial Money Pty Ltd v Moustrides [2010] SASC 355; 81 ACSR 249, White J followed the approach adopted by Barrett J in a case where the one application relating to statutory demands was served by different defendants. In doing so, he referred to the following statement of Gummow J in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 275-6 (citation omitted):

5. [18]

   Some more recent cases have still followed the approach of Young J in Help Desk. That has occurred most often where there is only one claim for relief covering all the statutory demands. That was the position, for example, in Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd [2010] NSWSC 1279, where Barrett J dismissed an application to set aside two statutory demands. In dismissing the application, Barrett J observed that “[t]he cases allow very little scope indeed for the pursuit of two or more setting aside claims in a single proceeding”: at [16]. In his view, at the very least there had to be separate claims in the originating process in respect of each statutory demand. A conforming application was one in which an order was sought “setting aside a statutory demand served on the company”. An order that sought the setting aside of multiple demands was not such an order.

6. [19]

   In my opinion, the approach taken by Barrett J in Remo Constructions and White J in Indigo Financial is preferable to the approach taken by Young J in Help Desk. The provisions of Div 3 of Pt 5.4 of the Act provide a strict regime for setting aside statutory demands and set out clearly what must be done and when. If the legislature had intended to depart from the rules of procedure concerning the joinder of parties and claims, it is to be expected that it would have said so expressly, rather than leaving that conclusion to be reached by inference based on the purpose of the Division. Moreover, as White J pointed out, it is not obvious that the purpose of achieving a swift disposition of applications to set aside statutory demands will always best be achieved by requiring separate applications to be made in respect of separate demands. Where the demands have a common underlying factual basis, it may be more convenient to deal with the demands together. As is apparent in the present case, there is no difficulty in applying the provisions of s 459G separately to separate relief sought in the one originating process. 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 by s 459G and that application is supported by an affidavit that has been filed and served in accordance with the section, that it seems to me should be sufficient.

7. [20]

   The joinder of more than one party as a plaintiff or defendant is governed by UCPR r 6.19 which provides:

8. [21]

   In relation to UCPR r 6.19(1)(a), Greenhills submits that the common issue of fact which arises in respect of the applications to set aside each of the statutory demands is when Mr Dixon became a trustee of the LRUT and whether what he did was done in his capacity as trustee. The answer to that question was essential to the defence that Loire is no longer the trustee of the trust and consequently is not entitled to recover the debt which is the subject of the second statutory demand. The answer to that question is also relevant to the capacity in which Mr Dixon seeks to recover the sum of $141,535, which forms part of the third demand.

9. [22]

   I accept that submission. As will become apparent, Mr Dixon’s appointment as trustee and the capacity in which he makes the claim he makes is critical to the resolution of the issues concerning both statutory demands.

10. [23]

    On the other hand, I am not satisfied that the claims fall within UCPR r 6.19(1)(b). The question under that rule is whether the claim to set aside the statutory demands arises out of the same transaction or series of transactions. The statutory demands relate to distinct transactions which could not be described as a series. There is no connection between the transactions other than the connection between the parties who are alleged to have entered into them.

11. [24]

    I am, however, prepared to give leave under UCPR r 6.19(1). On the evidence given by Mr Unicomb, Loire and the LRUT were vehicles through which Mr Dixon invested. Mr Dixon and Loire were clients of Greenhills, which itself was a corporate vehicle through which Mr Unicomb provided services to clients, including Mr Dixon. The disputes that gave rise to the statutory demands are best characterised as disputes between Mr Unicomb and entities associated with him and Mr Dixon and entities associated with him. In addition, relevant to understanding the defences raised by Greenhills is the background to the relationship between the parties. Furthermore, as I have said, an important issue in relation to both demands is when Loire and Mr Dixon were trustees of the LRUT. If there had been separate applications, it would have been necessary for the affidavits served in support of each application to deal with those matters. It is more efficient that they are dealt with once. The defendants point to no prejudice that they have suffered as a consequence of the joinder of the two applications. For those reasons, it is appropriate that leave be given. Those reasons existed at the time the originating process was filed. Consequently, the leave should operate retrospectively from that time: see Johnston v Vintage Developments Pty Limited [2006] FCAFC 171.

Service on Mr Dixon

1. [25]

   The evidence in relation to service is that Mr Unicomb gave to Mr Steven Coughlin on 25 September 2014 a thick envelope containing the originating process and the affidavit of Mr Unicomb made on 25 September 2014. Mr Coughlin knows Mr Dixon personally. Mr Coughlin swore an affidavit that he handed the envelope to Mr Dixon at Mr Dixon’s property on 26 September 2014. That evidence is not disputed. It is clear, therefore, that the originating process and supporting affidavit were served on Mr Dixon within 21 days of the service of his statutory demand. There is no merit in the submission that service on him of the originating process and supporting affidavit was not effective.

Defects in the originating process

1. [26]

   The originating process clearly named Mr Dixon as the second defendant and clearly sought an order that the statutory demand served by him on Greenhills be set aside. However, in Part B of the originating process it did not identify Mr Dixon as the second defendant and did not give an address for him. In addition, in Part D, it did not state that it was intended to serve a copy of the originating process on Mr Dixon, although, as I have said, a copy was served on him.

2. [27]

   Section 467A of the Act provides:

3. [28]

   In my opinion, the failure to name Mr Dixon in Part B and Part D of the originating process was a defect or irregularity in connection with the application. Mr Dixon does not point to any injustice he suffered as a consequence of the defect. It is clear that he appreciated that Greenhills was seeking to set aside the statutory demand he had served and he took steps to protect his position by, for example, retaining lawyers and appearing on the return of the originating process. No injustice has been demonstrated. Consequently, the defects identified by Mr Dixon do not provide a ground for dismissing the application.

Was there a genuine dispute in relation to the second demand?

1. [29]

   As I have said, Greenhills submits that there was a genuine dispute in relation to the second demand for two reasons. The first is that there was a genuine dispute concerning to whom the debt is owed. The second is that there is a genuine dispute concerning whether the amount claimed was disbursed in accordance with directions given by Mr Dixon either as a director of Loire or in his capacity as the trustee of the LRUT.

2. [30]

   In the affidavit made on 25 September 2014 in support of the originating process, Mr Unicomb gives evidence that Mr Dixon became one of his clients in or about early 2008. With Mr Unicomb’s assistance, Mr Dixon acquired Loire to act as trustee for the LRUT, a unit trust that Mr Unicomb was involved in establishing for Mr Dixon. Between 23 November 2009 and 31 October 2010, Mr Dixon was the sole director of Loire. In September 2009, Loire, as trustee of the LRUT, acquired an investment property in Lovedale Road, Allandale. According to Mr Unicomb, during the relevant period, the trust did not open its own bank account and consequently Loire and the beneficiaries of the LRUT used an account operated by Greenhills to pay and receive money owing to or by them in respect of the trust. Mr Unicomb also says that the amount claimed by Loire was the net proceeds of a loan advance by Eclipse Prudent Mortgage Corporation Limited. Although it is not clear from his first affidavit, it may be implied from what Mr Unicomb says that the loan was advanced to the trustee of that trust and secured against the property in Lovedale Road. Consequently, it may be inferred that when the $207,594.27 was paid to the Greenhills account it was paid by the trustee of the LRUT. Mr Unicomb also gives evidence that Mr Dixon replaced Loire as the trustee of the LRUT. In his first affidavit, he says that that occurred on 1 February 2011. In a later affidavit, he says it was 21 September 2010. Mr Dixon did not swear an affidavit in response to the affidavits served by Mr Unicomb. However, Mr Mahommed, as the director of Loire, did. He says that based on his review of the books and records of Loire “between 1 September 2009 and 1 September 2010 and as from 1 February 2010, Loire was Trustee of the LRUT”. Somewhat inconsistently, he also says that “between 1 September 2010 and 1 February 2011, Mr Dixon was Trustee of the LRUT”. Mr Mahommed annexes no records which indicate when Loire was the trustee of the LRUT. In my opinion, based on this evidence, there is real uncertainty whether Loire or Mr Dixon is the trustee of the LRUT. If the $207,594.27 was held by Greenhills originally on behalf of the trustee of the LRUT, the likelihood is that the rights to that amount vested in the trustee from time to time, although there may be a question concerning the precise mechanism by which that came about. However, in that case, there is a real question whether any rights in respect of the $207,594.27 belong to Loire or Mr Dixon. If Greenhills were to pay the wrong person, it faces the risk of having to make the same payment twice. For those reasons, in my opinion, there is a genuine dispute in relation to the second demand.

3. [31]

   Greenhills also submits that the $207,594.27 was disbursed in accordance with directions it received from Mr Dixon, either as a director of Loire or in his capacity as trustee of the LRUT. Mr Unicomb does say in his first affidavit that all transactions involving the trust “were made with full knowledge and consultation with Dixon and me”. However, that statement was not specifically addressed to the payment of the $207,594.27 and is expressed at a level of generality that means no weight can be placed on it. No other paragraph of the first affidavit raises the defence that the $207,594.27 was disbursed in accordance with instructions given by Mr Dixon. Consequently, in my opinion that ground was not adequately raised in the affidavit filed and served in accordance with s 459G(3) and therefore cannot be raised now: see Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452.

4. [32]

   Nonetheless, for the reasons I have given, the second demand should be set aside.

Should the third demand be set aside under s459J of the Act?

1. [33]

   Section 459J of the Act provides:

2. [34]

   Mr Dixon conceded during the course of the hearing that the evidence demonstrates that the sum of $120,000.00 was never paid to Greenhills and that consequently he is not entitled to claim that amount. There is a question whether, in those circumstances, Mr Dixon is entitled to pursue the balance of the demand. I return to that question below. However, even assuming he is, there is a question whether there is a defect in the demand in relation to the sum of $141,535.00.

3. [35]

   Greenhills submits that the demand is defective because the demand is so confusing that it is not possible to tell from the demand the nature of the debt that is allegedly owing. The difficulty arises because, leaving aside the last paragraph of the description of the debt, what appears to be asserted is that Mr Dixon borrowed the sum of $1,160,000 from Westpac to enable him to purchase the property at Lovedale Road and that he advanced $141,535.00 of the amount borrowed to Greenhills. However, in the last paragraph, what seems to be suggested is that Loire had some rights in respect of the $141,535.00, which were assigned to Mr Dixon on 19 September 2014. Alternatively, Greenhills submits that the affidavit in support of the demand is defective because it does not adequately set out the nature of the debt the subject of the demand. The defective affidavit is said to provide “some other reason” for why the demand should be set aside under s 459J(1)(b). These two submissions raise substantially the same issue. That issue is whether the debt has been adequately identified.

4. [36]

   In my opinion, the demand is defective in a way which causes substantial injustice. One difficulty with the demand is that it seems to identify the debt as an amount that was paid to Greenhills on or about 7 December 2010 from an amount of $1,160,000 advanced by Westpac in connection with the acquisition of the Lovedale Road property. The difficulty is that it is not clear whether it is asserted that that amount was an advance by Mr Dixon or an advance by Loire, which was assigned to Mr Dixon on 19 September 2014. The first paragraph of the schedule to the demand states that it is the former. The last paragraph suggests that it was the latter. That confusion causes substantial prejudice because the two alternatives raise different issues and Greenhills has no means of knowing which issues it should address. In my opinion, that uncertainty is not consistent with the statutory demand procedure. The procedure is only appropriate where a creditor is in a position to assert clearly the existence of a debt and its essential characteristics. One of the essential characteristics of a debt is the person to whom the debt is originally owed. For those reasons, the demand is defective in a way that causes substantial injustice. Similarly, the affidavit in support of the demand is defective which means that the demand should be set aside on the ground stated in s 459J(1)(b).

5. [37]

   Greenhills also submits that the third demand should be set aside under s 459J(1)(b) because the affidavit in support was not sworn by Mr Dixon but rather by Mr Smits, purportedly as his attorney. It is not easy to follow Greenhills’ submissions on this point. It submits that the identity of the person who swears the affidavit is important because that person must be someone who can swear to the essential characteristics of the debt and that it is due. That much may be accepted. However, as Greenhills acknowledges, the prescribed form of the affidavit specifically contemplates that the affidavit in support of the statutory demand may be sworn by a person authorised by the creditor to make the affidavit on the creditor’s behalf. There is no suggestion that Mr Smits was not appropriately authorised to make the affidavit on Mr Dixon’s behalf. For that reason, I do not accept Greenhills’ submission.

Was there a genuine dispute in relation to the third demand?

1. [38]

   Having regard to the conclusions I have reached, it is not strictly necessary to determine this question. However, in case I am wrong in my conclusions, I should say something about it.

2. [39]

   As I have said, it is accepted that there is a genuine dispute concerning the sum of $120,000. To that extent, there is a genuine dispute in relation to the third demand.

3. [40]

   Section 459H provides:

4. [41]

   Under this section, the court is required to calculate the “substantiated amount”. That amount is the “Admitted total” less the “Offsetting total”. The “Admitted total” in this case is the “admitted amount of the debt”, which (applying the definition in subs (5)) is so much of the amount claimed as the Court is satisfied is not the subject of a genuine dispute. If the substantiated amount exceeds the statutory minimum ($2,000), then the court may vary the demand and declare that the demand has effect, as varied, as from when the demand was served on the company.

5. [42]

   Three questions therefore arise. The first is whether there is a genuine dispute in relation to the $141,535.00. The second is whether Greenhills has an offsetting claim. The third is whether, even if Greenhills does not have an offsetting claim, the court should vary the third demand so that it becomes a demand for $141,535.00.

6. [43]

   Mr Unicomb in his affidavits made on 25 September 2014 and 14 October 2014 purports to give some explanation of how the $141,535.00 was paid to Greenhills in a way that did not give rise to an obligation on the part of Greenhills to repay that money. However, it is difficult to make any sense of that explanation, and I do not accept that it gives rise to a genuine dispute concerning Greenhills’ obligation to repay that money.

7. [44]

   In the affidavit made on 14 October 2014, Mr Unicomb also asserts that:

8. [45]

   Once again, the evidence is poorly expressed and confused. However, I am satisfied that Greenhills raised in its first and second supporting affidavits that it had an off-setting claim of at least $217,604; and I am satisfied that the evidence taken as a whole establishes that there is a genuine dispute concerning that issue. The evidence suggests that any transactions entered into concerning the Lovedale Road property were entered into by Loire or by Mr Dixon as trustee of the LRUT. There is evidence that Loire did not have its own bank account and that as a consequence money payable by or to it was paid by or to Greenhills on its behalf. It is not disputed that Greenhills received the sum of $141,535.00. However, there is evidence that Greenhills or Mr Unicomb on its behalf paid amounts to the credit of Mr Dixon’s account. Without some detailed accounting, it is not possible from the evidence to say what amount, if any, Greenhills owes the trustee of the LRUT in respect of their dealings and, for the reasons I have given, there is a dispute concerning when Mr Dixon was a trustee of the trust. For those reasons, I am satisfied that there is a genuine dispute concerning what amount, if any, Greenhills owes Mr Dixon.

9. [46]

   Even if I am wrong in that conclusion, I would not be prepared in this case to vary the demand. As I have said, the evidence from Greenhills and the defendants is confused and makes it difficult to reach a reliable conclusion about the amount, if any, owing by Greenhills. It is apparent that Mr Dixon and Mr Unicomb have fallen out and there appear to be a number of disputes between them. Whatever disputes exist do not appear to be readily amenable to resolution through the statutory demand procedure. The fact that Mr Dixon now concedes that the third demand was for an amount greater than the amount that he accepts he was entitled to demand using that procedure supports that view.

10. [47]

    Unless the third demand is varied, it is for an amount that is greater than the amount Mr Dixon now accepts is owing to him. For that reason also, it should be set aside.

Orders

1. [48]

   The orders of the court are:

   1. (1)

      The first defendant’s statutory demand dated 2 September 2014 claiming an amount of $207,594.27 be set aside.

   2. (2)

      The first defendant’s statutory demand dated 3 September 2014 claiming an amount of $207,594.27 be set aside.

   3. (3)

      The second defendant’s statutory demand dated 19 September 2014 claiming an amount of $261,535.00 be set aside.

   4. (4)

      The defendants pay the plaintiff’s costs of the proceedings.