Realty World Pty Limited) v Rovera Constructions Pty Limited [1998] ACTSC 203 (30 April 1998)

  
  
  
  

  
   

   IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

   HIGGINS J

   CORPORATIONS LAW - Statutory
demand - Application to set aside - Whether
genuine dispute or offsetting claim in relation to debts claimed - Arrears of
rent plus
interest thereon claimed under sublease for 10 years in registrable
form but never registered - Whether rent claimed due and payable
- Whether
term of sublease relating to interest payable on arrears of rent enforceable -
Whether misrepresentations made and relied
on as between directors of same
group of companies - Effect of termination of sublease by landlord by re-entry
of premises - Whether
sublease unenforceable because allegedly would further
common unlawful purpose, namely breach of purpose clause of Crown lease -
Content of purpose clause known to all parties - Whether unconscionability -
Whether sublease frustrated or breached through other
means - Claim for
arrears of rent and interest thereon to date that landlord re-entered could
validly be made.

   CORPORATIONS LAW
- Statutory demand - Application to set aside - Whether
demand notice defectively supported by accompanying affidavit - Overstatement
of amount due - Deponent and his solicitor genuinely unaware that rent claimed
after landlord re-entered could only sound in damages
not debt - Whether this
defect affects validity of demand - Whether substantial injustice if demand
not set aside.

   CORPORATIONS
LAW - Statutory demand - Application to set aside - Whether
application defectively supported by accompanying affidavits - Whether
any
grounds for disputing demand made out - Misrepresentations alleged as between
directors of same group of companies - Affidavits
silent as to common
directorship of companies - Whether deponents had genuine belief in existence
of material facts and validity
of grounds relied on - No material facts or
grounds disclosed in accompanying affidavits capable of supporting setting
aside of demand
- Further grounds for alleging "genuine dispute" could only be
relied on at hearing if affidavits accompanying application not defective.

   The Corporations Law , ss.9, 459C, 459E, 459G, 459H, 459J, 459S

   Land (Planning and Environment) Act 1991 (ACT), s 175(1)

   Land Titles Act  1925 (ACT), sub-s.57(1), 85(1) and s.89

   Supreme Court Rules (ACT), O 75B r 36A, 36B

   Barry v Heider [1914] HCA 79;  (1914) 19 CLR 197; referred to

   Butler v Fairclough [1917] HCA 9;  (1917) 23 CLR 78; referred to

   Papadopoulos v Goodwin [1983] 2 NSWLR 113; referred to

   Williams v Coleman (1936) 31 TasLR
1; referred to

   Chan v Cresdon Pty Ltd [1989] HCA 63;  (1989) 168 CLR 242; applied

   S & E Promotions v Tobin Bros [1994] FCA 1109;  (1994) 122 ALR 637; distinguished

   Kingston Manuka Holdings Pty Ltd v Stipancic & Pavic t/as Colour Our
World [1998] SCACT 21,
Miles CJ; followed

   Leda Commercial Properties Pty Ltd v DHK Retailers Pty Ltd [1992] ACTSC 113;  (1992) 111 FLR
81; followed

   Pearce v Brooks (1866) LR 1 Ex.213; discussed

   Barac v Farnell (1994) 53FLR 193; discussed

   Westpac Banking Corporation v Suzanne Bower (Supreme Court of the ACT,
Master Connolly, 4 April 1996, unreported); referred to

   Secured Income Real Estate (Australia) Ltd .v St Martins Investments Pty
Ltd  [1979] HCA 51; (1979) 144 CLR 596; considered

   B & M Quality Constructions v Buyrite Steel Supplies (1995) 13 ACLC 88;
considered

   First
Line Distribution Pty Ltd v Whiley (1995) 13 ACLC 1216; referred to

   LM & WJ Taylor Pty Ltd v Armour Timber & Trading
Pty Ltd (1996) 14
ACLC 449; referred to

   Portrait Express (Sales) Pty Ltd v Kodak (A\asia) Pty Ltd (1996) 14 ACLC
1095; considered

   Delta Beta Pty Ltd v Everhard Vissers (1996) 14 ACLC 941; referred to

   Spencer Constructions Pty Ltd v G & M Aldridge
Pty Limited [1997] FCA 681;  (1997) 147
ALR 444; followed

   Shevill v The Builders Licensing Board [1982] HCA 47;  (1982) 149 CLR 620; applied

   Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1998) 16 ACLC 12; followed

   NT Resorts Pty Ltd
v Deputy Commissioner of Taxation (Federal Court of
Australia, 20 March 1998, Finkelstein J, unreported); considered

   Graywinter
Properties Pty Ltd v Gas and Fuel Corporation Superannuation
Fund (1996) 21 ACSR 581; followed

   David Grant & Co Pty Ltd (rec
apptd) v Westpac Banking Corporation
 [1995] HCA 43; (1995) 184 CLR 265; followed

  

  

   CANBERRA, 25 March 1998 (hearing), 30 April 1998 (decision)

   #DATE 30:04:1998

   Appearances

   Counsel for the Plaintiff: Mr Thomson

   Instructing Solicitors: Colquhoun Murphy

   Counsel for the Defendant: Mr R Arthur

   Instructing Solicitors: Capon & Hubert

  

  

   Order:

  

  

   HIGGINS J

  

  

   1. This is an application, pursuant
to sub-s.459G(1) of the Corporations
Law (the Law), to set aside a statutory demand.

  

  

  

   2. Statutory demands are referred
to in s.459E of the Law. That section
authorises a demand for payment of a debt or debts due to the person making
the demand for
sums which, in the aggregate, exceed the "statutory minimum".
That is $2,000.

  

  

  

   3. Under sub-s.459E(2), the demand
(relevantly):

  

   (b) if it relates to 2 or more debts - must specify the total of the
amounts of the debts; and

   (c) must
require the company to pay the amount of the debt, or the total of
the amounts of the debts, or to secure or compound for that amount
or total to
the creditor's reasonable satisfaction, within 21 days after the demand is
served on the company; and

   (d) must be
in writing; and

   (e) must be in the prescribed form (if any); and

   (f) must be signed by or on behalf of the creditor.

  

  

   4. Subsection 459E(3) requires that the demand be accompanied by an
affidavit that:

  

   (a) verifies that the debt, or
the total of the amounts of the debts, is
due and payable by the company; and

   (b) complies with the rules.

  

  

   5.

 


  

  

   6. e s""

  

  

  

   7. The Court has a discretion, following the grant or refusal of an
application to set aside
a statutory demand, to extend the time for compliance
with the statutory demand. Otherwise it is extended for 7 days after the
application is determined.

  

  

  

   8. Whilst the Court must set aside the statutory demand or vary it
downwards to accommodate
a genuine dispute or offsetting claim, it may set it
aside, per sub-s.459J(1), if:

  

   (a) because of a defect in the demand,
substantial injustice will be caused
unless the demand is set aside; or

   (b) there is some other reason why the demand should
be set aside.

  

  

   9. However, sub-s.459J(2) provides that,

  

   Except as provided in subsection (1), the Court must not
set aside a
statutory demand merely because of a defect.

  "The Factual Background"

  

  

   10. It is not the function of the
Court on an application of this nature to
resolve disputed matters of fact. However, in this case, much of the factual
background
is not in dispute. There are inferences from facts not themselves
in issue which the parties do not agree upon. However, the question
there is
whether, if that inference is important, it is seriously open to argument that
it can be drawn.

  

   11. Further, it
must be remembered that a respondent, recognising the
limited role of the Court in relation to facts alleged by the applicant, may
not wish to adduce contradictory evidence which it may later rely upon in
contested final proceedings.

  

  

  

   12. Thus the
factual findings concerning the debt which follow are made
with those qualifications in mind and for the purpose of this application
only.

  

  

  

   13. The dispute has its genesis in the purchase by Land and National
Development Corporation Limited (LAND)
of the Crown Lease of Block 21 Section
25 Phillip in the Australian Capital Territory on 10 April 1992 (the
Crown Lease).


 

  

  

   14. The Crown Lease contained a covenant on the part of the lessee
(C1.3(c)):

  

   "To use the premises only for
the purpose of the storage sale and
maintenance of computers and other office machines and electronic equipment
and in respect of
the upper floor of the premises for the purpose of offices"
(the purpose clause).

  

  

   15. e LAND Grou 

  

  

  

   16.

  

  

  

   17. The principal activity of LAND was investment, land development and
resale. That of Realty World was real
estate agency.

  

  

  

   18. The terms of the sublease required Realty World to use the demised
premises in accordance with
the purpose clause of the Crown Lease.

  

  

  

   19. It is apparent, and was apparent to Mr Brinkmeyer at the time as
later appears, that the purpose clause of the Crown Lease was inappropriate to
permit the usual activities of Realty World, so far
as the ground floor was
concerned.

  

  

  

   20. ers.

  

  

  

   21. te

  

  

  

   22. On 28 April 1992, Ms
Nolan sought to find out what had happened to
that application. She is recorded as advising a departmental officer of the
relevant
Territory department (Department of Planning &amp ; Land Management -
PALM):

  

   "They settled on 10 April and are anxious
to move into the premises -
without being in breach of the lease".

  

  

   23. L'

  

  

  

   24. o say "... the iss"

 


  

  

   25. ed sell""""

  

  

  

   26. ilabl""

  

  

  

   27. By 27 March 1994, 33 Altree Court had been
recognised by the
Agents Board as the principal place of business of Realty World.

  

  

  

   28. ess, o 

  

  

  

   29. The effect of the Deed was that Rovera would not increase the rental of
$100,000 per annum throughout the remainder of the
term of the sublease. The
sale was, accordingly, completed on or about 28 June 1996.

  

  

  

   30. ence in

  

   31.
Clearly, none of the parties to the Deed of Variation of the sublease
could arguably claim that they were unaware of the terms of
the purpose
clause. Nor is there any suggestion that any of them were unaware that the
Crown Lease did not permit the conduct of
a real estate agency from the
demised area.

  

   32. urt, Phillip"'

  

  

  

   33. Clause 2.2(b) of the sublease forbad assignment
by Realty World without
prior consent of the sublessor. That consent was not to be unreasonably
withheld, provided that:

  

  
* The sublessee was not in default

   * The proposed transferee would duly perform the terms of the sublease and
had apparent capacity
to do so

   * The sublessee agreed to release the sublessor from any claims under the
sublease.

  

  

   34. Nothing in the sublease
would have required the sublessor to obtain a
change of the purpose clause.

  

  

  

   35. Rovera's solicitors responded on
19 June 1997. They made some
stipulations for consent. Of note are only paragraphs 1 and 6:

  

   "1. Payment of all arrears
on [sic] payment of rent plus rates and
outgoings being the [sic] all of the lessors expenses for Block 21 of Section
25 Phillip
as per item 9 of the schedule.

   6. Payment of any betterment tax and costs of any variation by the
assignor."

  

  

 
 36. It is not suggested, nor is it open to suggestion, that any of these
proposed conditions were unreasonable.

  

  

  

  
37. m Rovera but

  

  

  

   38. Realty World'

  

  

  

   39. On 14 October 1997, PALM advised that the change of purpose
clause
sought was approved on an "indicative" basis. The betterment tax was assessed,
on that basis, at $18,750.

  

   40. It appears
that Bannigan had attempted to carry on business from the
demised area but was told by the Agents Board he could not do so until
the
purpose clause was altered to permit that. This was, apparently, the first
time that the Agents Board appeared to notice that
the certificate from PALM
referred only to the upper floor of 33 Altree Court.

  

   41. ised premis

  

  

  

   42. That was
confirmed by an employee of Realty World, Ms Newton. She
told Mr Milicevic that Realty World had vacated the premises.

  

  

  

   43. On 20 October, Mr Milicevic, following Ms Newton's
advice, again attended the premises. The demised
area was still vacant. He
immediately secured the premises, changed the locks and commissioned agents to
re-let them.

  

  

 


   44. On 27 October 1997, Rovera's solicitors wrote to Realty World's
solicitors. They complained of the arrears of rent
and outgoings and
continued:

  

   "Our client has instructed us that the property has been vacated and
accordingly our client
has an obligation under the lease to mitigate his [sic]
damages and to relet the property. In all the circumstances we will be taking
action to recover the moneys payable and note that there is a continuing
breach of the lease which is causing our client damage at
present in the sum
of $8,333.33 per month and continuing".

  

  

   45.

  

  

  

   46.  October 1997 but n 

 


  

  

   47. However, the solicitors for Realty World did point out by letter dated
10 December 1997, that the statutory
demand notice had not been signed or
dated.

  

  

  

   48. The solicitors for Rovera forthwith accepted that the defect in
question
was fatal. I am not asked to rule on the correctness or otherwise of
that concession.

  

  

  

   49. However, in that same letter
Realty World's solicitors did take the
opportunity to address the substantive question as to whether the debt claimed
was disputed
in the following terms:

  

   "We suggest that the proper method of proceeding in this matter is for your
client to commence proceedings
in the Magistrates Court, as the debt is in any
event contested, on substantial grounds.

   For your information we enclose a copy
of a letter of 28 May [1997 -
PALM to Realty World] advising that the lease purpose clause for the premises
will not permit
a real estate agency to operate from the [demised] premises.

   Furthermore, your client is aware that Mr Brian Bannigan had
taken
possession of the premises for the purposes of operating a real estate agency,
but has been denied permission to operate there
because of the purpose clause
... [letter enclosed]

   Finally, our client denies that there is any valid lease in existence. We
note that the alleged lease annexed to the Affidavit of Robert Milicevic has
not been registered, and purports to be for a term of
10 years. Our
client alleges that it was obtained as the result of misrepresentations by
Land and National Development Corporation
Limited, and that it is not bound by
any alleged agreement to lease.

   Furthermore, any claims against our client, can only be
adjudicated in
proceedings between itself and Land and National Development Corporation
Limited".

  

  

   50. The contentions
supporting the view that there was a genuine dispute
about the debt for rent may be inferred from the above to have been:

  

 
 * That the grant of the sublease by LAND to Realty World was procured by a
misrepresentation so fundamental as to entitle Realty
World to set it aside as
it remained unregistered.

   * That notwithstanding the transfer of the Crown Lease and sublease to
Rovera
the right of rescission arising from the misrepresentation continued to
affect Rovera's rights.

   * That Rovera's right to rent
depended on there being proceedings between
LAND and Realty World, presumably to determine the effect of the
misrepresentation alleged
on the enforceability of the sublease.

  

  

   51.

  

  

  

   52. As to lack of registration, it was not contended before
me that this
circumstance rendered the sublease unenforceable. That is not surprising.

  

  

  

   53. The memorandum of sublease,
being for a period in excess of
3 years, was ineffectual to pass any interest in land under the Land
Titles Act 1925 (ACT) (LTA) until registration, see sub-s.57(1),
sub-s.85(1) and s.89LTA.

  

  

  

   54. It has long been recognised that an
unregistered instrument, though
affected by a provision such as sub-s.57(1) (supra), may confer an equitable
estate or interest,
see Barry v Heider [1914] HCA 79;  (1914) 19 CLR 197, Butler v Fairclough [1917] HCA 9; 
(1917) 23 CLR 78.

  

   55. There are disadvantages created by lack of registration. A bona fide
purchaser without notice might
be free of that equity, see Papadopoulos v
Goodwin [1983] 2 NSWLR 113. As between parties affected by the instrument it
is valid
as a contract - see Williams v Coleman (1936) 31 TasLR 1. That leaves
such a contract open to challenge on the basis, inter alia,
of
misrepresentation.

  

   56. However, none of the parties to the sublease or the Deed of Variation
is entitled to claim to be
free from the equitable estate or interest held by
any other of them in relation to the land without some equitable defence being
at least arguable.

  

  

  

   57. al est

  

  

  

   58. However, at 248, Mason CJ, Brennan J, Deane and McHugh JJ noted:

  

   "... the existence of the unregistered lease operated to bring into
existence or evidence an equitable lease, and occupation
and payment of rent
under the unregistered lease created an implied tenancy at common law."

  

  

   59. Whilst I note that nothing
has thus far appeared to give rise to any
ground for refusal of specific performance of the agreement for lease in
accordance with
the terms of the Memorandum of sublease and the Deed of
Variation, such a matter might be raised in the event of a claim by Rovera
against Realty World for damages for breach of covenant. For present purposes
it suffices that, whether at law by way of a periodic
tenancy or in equity by
way of an equitable lease, there was an obligation on Realty World to pay rent
in the sum agreed. Until abandonment
of the tenancy, an abandonment accepted
by Rovera, there was a debt created which Rovera would have been entitled at
law to recover.

  

   60. There is an argument that, if some ground exists to refuse specific
performance of an equitable lease, the tenancy at
law which otherwise would
arise would not carry the benefit of the covenant to pay interest on arrears
of rent.

  

  

  

   61.
For present purposes, no reasonable ground for supporting such an
argument appears.

  

   62. It may be noted that, in S &
E Promotions v Tobin Bros [1994] FCA 1109;  (1994) 122
ALR 637, applying Chan v Cresdon Pty Ltd (supra), the Full Federal Court found
that a term in an unregistered sublease
providing for an option to renew the
term of the lease was binding in equity.
   63. It is true that the term referred to in S &
E Promotions did not
give rise to an action for debt. However, it is clear that in this case both
parties regarded the interest clause
as applicable to the agreement for lease
that was in place pursuant to which Realty World remained in occupation. It,
therefore,
does not seem to me that the argument as to interest payable on
arrears of rental is affected by whether the term actually enjoyed
was a term
at law by way of a periodic tenancy on the terms of the agreement for lease so
far as applicable or on terms of the agreement
per se recognised as passing an
equitable estate.

  

   64. No doubt the difference will be of importance in the claim for damages
but it does not affect the portion of the debt for rent and interest accrued
up until 20 October 1997.

  

  

  

   65. cted

  

  

  

   66. both LAND a

  

  

  

   67. A fresh demand notice, adding arrears of rent due on 1 December
1997, was
served with a supporting affidavit. Each of those documents, at
least on their face, conforms to the requirements of susb-s.459E(2)
and (3)
respectively.

  

  

  

   68. On 23 December 1997, Realty World applied to have the statutory
demand set aside pursuant
to s459J(sic) of the Corporations Law.

  

  

  

   69. The reference to s.459J was at the hearing amended to refer to s.459G.
Nothing, however, turns on that error.

  

  

  

   70. The application and affidavit in support, on their face, comply with
s.459G
both as to f orm and as to service within time.

  

  

  

   71. That application was heard by me on 25 March 1998.

  

  

  

   72. e clause""'

  

   "At the commencement of Realty World's Lease Ms Helen Nolan discussed the
issue of the purpose
clause with ACT Department of Urban Services and received
no objection to the occupation".

  

  

   73. It was only in May 1997,
Mr Brinkmeyer deposed, that Realty World
"learned that the representation was untrue".

  

  

  

   74. ad, s

  

  

  

  
75. He

  

  

  

   76. d to believe

  

  

  

   77. for there t""  

  

  

  

   78. It is clear, therefore,
that neither the letter of 10 December
1997 nor the affidavits supporting this application referred to any arguable
contention
capable of disputing the claim for rent.

  

  "Submissions of Realty World"

  

  

   79. Realty World, however, raised on the
hearing a number of other
contentions.

  

  "* Contention 1: That following resumption of possession and control of the
demised
premises after Realty World abandoned them, Rovera had terminated the
sublease converting its claim to ongoing rent into a claim
for damages for
loss of the remainder of the term."

  

  

   80. for

  

  

  

   81. Nevertheless, this contention does not
raise an arguable dispute
concerning Realty World's indebtedness for rent and interest due prior to that
time.

  

  "* Contention
2: That there was "no privity of contract" between Rovera and
Realty World - illegality etc."

  

  

   82. ecific

  

   83.
So far as the relationship of landlord and tenant is concerned, of
course, legislation aside, a head lessor, such as the Commonwealth,
could,
tacitly or expressly, permit Rovera to use the land contrary to the purpose
clause. Similarly, Rovera, without the permission
of its head lessor, could
take the risk that the head lessor might object to a breach of the purpose
clause and permit its subtenant
to do so.

  

   84. However, in this Territory the enforceability of Crown Lease purpose
clauses is supported by legislation. Subsection
175(1) of the Land (Planning
and Environment) Act 1991 provides,

  

   "Territory Land in respect of which a lease has been granted, whether
before or after the commencement of this
Part, shall not be used for any
purpose other than a purpose authorised by the lease, subject to this
section".

  

  

   85. There
are a number of answers to Realty World's contention so far as it
relies on illegality. The first is that the sublease, on its face,
does not
require the tenant to use the demised premises contrary to the purpose clause.

  

   86. The high point of illegality
where parties know that goods or, perhaps,
premises, will be used unlawfully is Pearce v Brooks (1866) LR 1 Ex.213
(carriage hired
to a prostitute likely to use same to aid her in soliciting).
However, that decision depends on an underlying public policy which
has
undoubtedly changed. The more recent decision of the Full Court of the Federal
Court in Barac v Farnell [1994] FCA 1389;  (1994) 53 FCR 193 more appropriately reflects the
modern approach. In that case, a contract of employment was held not to be
void
for illegality though it was for employment as a receptionist in an
illegal brothel.
   87. It was not an issue in that case as to
whether the brothel owner was
obliged to pay rent to a complicit landlord. But Master Connolly in Westpac
Banking Corporation v Suzanne
Bower (Supreme Court of the ACT, 29 March 1996,
unreported) had no difficulty rejecting a defence to a claim for monies due
under
a mortgage of premises that were, to the knowledge of the lender, used
for prostitution. That purpose had been unlawful at the time
that the mortgage
was entered into, though it became lawful in 1992.
   88. To my mind it is not seriously arguable that sub-s.175(1)
is intended
to render unlawful and void any sublease of premises where the parties believe
that a purpose clause will be contravened.
If the administration wishes to
prevent an unauthorised use of premises it may threaten termination of the
Crown Lease. It might
approve a variation and receive a betterment fee.
   89. The argument then advanced beyond illegality per se. It was contended
that
it would be unconscionable to enforce the sublease where the use
contemplated would contravene the purpose clause. That contention
cannot be
supported either. Each party was aware of all relevant facts and took a risk
that the use of the premises by Realty World
or its proposed assignee might
attract objection from PALM or the Agents Board.
   90. Realty World, in particular, took the risk
that, having avoided PALM
attention and having gained a licence from the Agents Board which appeared to
license use of the entire
premises for a real estate agency, either PALM or
the Agents Board might notice that only the upper floor should have been so
licensed.
A further risk was, of course, that a proposal to assign the
sublease to another real estate agent might itself attract such attention.

  

   91. Realty World could not seriously argue that it could resist enforcement
of the sublease on the equitable ground of unconscionability.

  

  

  

   92. However, it advanced another proposition. That was that the sublease
was frustrated because Realty World could
not transfer it to another real
estate agency.

  

  

  

   93. n it

  

  

  

   94. Nor is it arguable, in my view, that
any promise can be inferred on the
part of the sublessor that it would pay the betterment tax assessed upon
variation of the purpose
clause of the Crown Lease.

  

   95. It is true that Rovera would benefit if the purpose clause was
broadened. However, it was
not obliged to have that benefit imposed upon it
nor to pay for it. The fact that Realty World was asked to pay for it was, in
the
circumstances, not such as to render it unconscionable for the sublease to
be enforced as to rent. It follows that this contention
has no arguable force."* Contention 3: That Rovera breached the terms of the sublease by refusal to
forward an executed application
to change purpose save on conditions as to
payment of arrears of rent."

  

  

   96. This contention is related to some extent
to the previous one. In
essence, Realty World contends that Rovera was not entitled to insist on
rental arrears being brought up
to date as a condition for processing the
development application documentation.
   97. It may be that Realty World could argue that
it had an agreement with
LAND that, if required, LAND would process such an application at its own
expense. However, that was not
a term of the sublease. It is not alleged to
have been a term of agreement for the transfer of sublease from LAND to
Rovera. It is
not a term of the Deed of Variation. There is no basis for an
argument that Rovera had any agreement of that nature with Realty World.

  

   98. Even if it be contended that to deny Realty World the opportunity to
transfer to Bannigan by refusing to facilitate a
change of purpose clause was
arguably unreasonable, it appears that Rovera did not do so.

  

  

  

   99.

  

  

  

   100.
Rovera's solicitors declined to forward the signed development
application till arrears of rent were paid.

  

   101. The development
application could, of course, have been processed
independently of consent to an assignment of the sublease from Realty World to
Bannigan. However, that proposal was not put to Rovera. In any event, Realty
World was in breach at that time at least for non-payment
of rent. It had no
right of assignment unless it was not in breach.
   102. I acknowledge the force of the rule of construction referred
to by
Mason J (as he then was) in Secured Income Real Estate (Australia) Ltd v St
Martins Investments Pty Ltd [1979] HCA 51;  (1979) 144 CLR 596, at 607-8. His Honour,
referring to a duty on a contracting party to co-operate in enabling the other
party
to have the benefit of a contract, said, "It is easy to imply a duty to
co-operate in the doing of acts which are necessary to the
performance by the
parties or by one of the parties of fundamental obligations under the
contract. It is not quite so easy to make
the implication when the acts in
question are necessary to entitle the other contracting party to a benefit
under the contract but
are not essential to the performance of that party's
obligations and are not fundamental to the contract. Then the question arises
whether the contract imposes a duty to co-operate on the first party or
whether it leaves him at liberty to decide for himself whether
the acts shall
be done, even if the consequence of his decision is to disentitle the other
party to a benefit. In such a case, the
correct interpretation of the contract
depends, as it seems to me, not so much on the application of the general rule
of construction
as on the intention of the parties as manifested by the
contract itself."

  

  

   103.

  

  

  

   104. However, it does
not seem to me to be seriously arguable that it was
unreasonable or a breach of such a duty for Rovera to insist that arrears of
rent be made good before it would proceed to facilitate the development
application.

  

  

  

   105. It follows that I am not
persuaded that this contention provides any
seriously arguable challenge to a claim for debt for rent before Rovera's
re-entry.

  

   106. There were two further contentions, the first was that the demand
notice was defectively supported by the affidavit accompanying
it. The second
was that, as a matter of discretion, the demand notice should be set aside
because it substantially overstated the
amount claimed to be due. I will
proceed to deal with these contentions."* Contention 4: That the affidavit supporting the demand
notice was defective"

  

  

   107. That affidavit was alleged to be defective in that its deponent,
Mr Robert Milicevic,
Rovera's principal director, had no positive belief
that there was "no genuine dispute" as to the debt for rent and interest
claimed.

  

   108. It may be noted that there is no requirement under sub-s.459E(2) that
the creditor depose that there is no genuine dispute
about the debt or any
off-setting claim. The requirement under the law is that the deponent verify
that the debt is due and payable.
However, the affidavit is also required,
pursuant to para.459E(3)(b), to comply with the rules.
   109. The relevant rule is Order 75B
Rule 36A. The prescribed form
of the affidavit is Form 93B. The Rule and the Form each require the
deponent to state that
"there is no genuine dispute about the existence or
amount of the debt or debts to which the demand relates" (Rule 36A(1)(e)). It
is not necessary to disavow the existence of an off-setting claim.

  

   109. ch the demand rela"

  

  

  

  

  

   110.
ere "substantial gr"'

  

  

  

   111. mselves

  

  

  

   112. law a

  

  

  

   113. Does that defect affect the validity
of the statutory demand?

  

  

  

   114. non-""

  

   "(at 90) The requirement of that rule, as to the identity of the person
making the affidavit accompanying the statutory declaration [sic - demand], is
designed to serve the public interest as well as to
protect the company
against unwarranted demands, by endeavouring to ensure, within practical
limits, that the person who must put
his or her oath or solemn affirmation to
the relevant matters ... is the person associated with the creditor who is
most likely to
have direct knowledge of those matters. It is important in this
regard to bear in mind that the relevant matters include not only
a belief as
to the existence and amount of the debt, but also a belief as to the absence
of any genuine dispute about the existence
or amount [emphasis added] of the
debt."

  

  

   115. The requirements of the rules were viewed by his Honour as "a
significant
mechanism for filtering out cases where there is in fact such a
dispute" (at 90).

  

  

  

   116. l" 

  

  

  

   117. or pointe

  

  

  

   118.

  

  

  

   119. "

  

  

  

   120. Bryson J pointed out that an affidavit referred
to in sub-s.459E(3)
must not only set out what that section requires, it must also be true. That
not only means that the deponent
believes it to be true but also that it is
relevantly accurate.

  

  

  

   121. That requirement, in his Honour's view should
not be lightly
overlooked:

  

   "(at 1105) In my view the dominant consideration is the need to ensure the
purity of the manner
in which creditors follow statutory procedures which are
preliminary to litigation and for which verification is required by law.
I do
not find it possible to see deficiencies of the kinds which exist in these
affidavits as something which can be disregarded.
It is not enough that a
responsible officer should support a Statutory Demand by oath or affirmation;
the exercise must be carried
out in a responsible way, and regard must be
paid, with a strictness appropriate for verification, to the need to review
the available
information and observe whether what is being verified conforms
to the information in the creditor's own hands."

  

  

   122.
His Honour decided that the affidavits should not, therefore, be
regarded as sufficient to support the Statutory Demand.

  

  

  

   123. accur 

  

  

  

   124. The overstatement of the sum due is also a defect in the demand notice
itself - see
Spencer Constructions Pty Ltd v G & M Aldridge Pty Limited [1997] FCA 681; 
(1997) 147 ALR 444 per Northrop, Merkel & Goldberg JJ.

  

  

  

   125. "

  

  

  

   126. was

  

  

  

 
 127. "Defect", in relation to a Statutory Demand, is defined in s.9 so as
to include,

  

   "(a) an irregularity; and

   (b) a misstatement of an amount or total; and

   (c) a misdescription of
a debt or other matter; and

   (d) a misdescription of a person or entity."

  

  

   128. The term is wide enough to embrace
not only a variance between that
which a party intended to state but also a variance between what is stated and
the truth of the
matter.

  

  

  

   129. Insofar as the sum stated in the demand notice to be due is
overstated, the question at issue is whether
it would cause "substantial
injustice" to the debtor if the demand is not set aside.

  

   130. In Equuscorp Pty Ltd v Perpetual
Trustees WA Ltd (1998) 16 ACLC 12 the
debtor had an off-setting claim of about $4 million. That left the
substantiated amount of
the demand at $934,000 (approx). Heerey J varied the
demand accordingly and extended time for compliance with it.

  

   131. Before
the enactment of the Law there had been a difference of view as
to whether mere overstatement of a debt due should invalidate a demand.

  

   132. The Full Court in Equuscorp (French, Kiefel and Sundberg JJ) accepted
that overstatement of the debt due was a defect.
However they were also of the
view that it should lead to the setting aside of the demand only if
substantial injustice would otherwise
be caused. Injustice could be avoided by
varying the amount of the demand and extending time for compliance.

  

   133. Referring
to the discretion to set aside or not an excessive demand,
their Honours said,

  

   "(at 32) The discretion to set aside a notice
of demand is not to be
exercised as a punitive response to a discrepancy between the amount claimed
in the notice and the amount
found to be owing on an application to set aside
the notice. ...If a notice of demand has been drawn with a view to damaging
the
alleged debtor by wilfully claiming an amount substantially higher than
that known to be due or recklessly demanding such a sum then
that would be
tantamount to a fraudulent or abusive use of the process and would ordinarily
require the notice be set aside in the
public interest to maintain confidence
in the law and the administration of justice. There may be other cases in
which a demand is
made so far in excess of any admitted sum and for such
collateral purposes or with such carelessness as to be frivolous or vexatious
or an abuse of process. These could all constitute "some other reason" for
setting aside the notice...".

  

  

   134. "

  

  

  

   135. If, as in this case, it is apparent that part of the demand is in
respect of a sum not presently due and payable,
then in that case, the demand
is defective and must be dealt with under s.459J.

  

  

  

   136. """ """"

  

  "* Defect
in the supporting affidavit of the applicant"

  

  

   137. By way of a counter argument to the criticisms made of the demand
and
of the affidavit supporting it, the respondent contended that the affidavit
supporting this application was defective.

  


 

  

   138. o 

  

  

  

   139. That argument draws support from the decision of Sundberg J in
Graywinter Properties
Pty Ltd v Gas and Fuel Corporation Superannuation Fund
(1996) 21 ACSR 581.

  

  

  

   140. nds upon which"

  

   141. His
Honour in Graywinter Properties accepted the submission that, if
the affidavit in support of the application to set aside does not
comply with
r36B, there will have been no valid application. Following the High Court
decision in David Grant & Co Pty Ltd (rec
apptd) v Westpac Banking Corp
 [1995] HCA 43; (1995) 184 CLR 265, such a conclusion would require the Court to dismiss the
application whatever its merits might in fact be.

  

   142.

  

  

  

   143. An affidavit pointing to a defect in the demand itself may well need
to do no more than that to
satisfy r36B. However, in a "genuine dispute" case
more will be needed. As his Honour in Graywinter Properties stated it at 587,

  

   "In order to be a `supporting affidavit', an affidavit must say something
that promotes the company's case. An affidavit
which merely says `I am a
director of the company but am too busy at present to make a full affidavit,
and I will do so later' would
not support the application. It would in no way
advance, further or assist the company's cause, which is to have the notice
set aside.
At the other extreme, the affidavit need not detail, in admissible
form, all the evidence that supports the contention of a genuine
dispute...
That evidence must be available at the hearing...".

  

  

   144. Of course, it may be that the company's case is supported
by an
exchange of correspondence from which the relevant facts and grounds can be
perceived. Even verification of a pleading might
qualify.

  

  

  

   145. I respectfully agree with his Honour's reasoning.

  

  

  

   146. The problem with Mr Brinkmeyer's
supporting affidavit of
23 December 1997 is not that it does not in form qualify as a supporting
affidavit.

  

  

  

  
147. That it contains irrelevant matter is not of consequence. That Realty
World is or may well be solvent is not relevant for present
purposes.

  

   148. The affidavit purports to rely on alleged misrepresentations made by
LAND to Realty World and Rovera. Rovera
makes no complaint of those alleged
misrepresentations. The case set out is that somehow those misrepresentations
render the agreements
between LAND, Rovera and Realty World void and of no
legal effect.

  

   149. clause in t

  

  

  

   150.

  

  

  

  
151. nkmey

  

  

  

   152. could

  

  "Conclusion"

  

  

   153. It may well be that neither of the solicitors for Realty
World nor
those for Rovera was aware that the re-entry into possession on
20 October 1997 provided an answer to the claim for
rent beyond that
date.

  

  

  

   154. To that extent, the solicitors for Rovera had unfairly deprived Realty
World's solicitors
of the opportunity to refer to the material fact that
re-entry had occurred.

  

   155. Nevertheless, David Grant & Co Pty
Ltd is unequivocal. If no valid
affidavit supporting an application to set aside a demand notice is filed
within the relevant time,
it does not matter why that failure has occurred.
However understandable, however much the fault of the demanding party, if the
demand
is to be validly supported, the other party must disclose grounds and
material facts which are capable of supporting the setting
aside of the
demand.

  

   156. It follows that, r36B having not been satisfied, the application must
be dismissed.

  

  

 


   157. Had the supporting affidavit complied with r36B I would have had to
decide whether, by reason of the overstatement of the
debt, as now appears to
be conceded by Rovera, the demand should be set aside.

  

  

  

   158. It seems to me that, in general,
mere overstatement of a sum due, even
if it is to be dealt with pursuant to para.459J(1)(b) rather than
para.459J(1)(a), should only
lead to a variation of the demand to reflect the
undisputed balance.

  

   159. If there was some other factor present, such as
bad faith on the part
of Rovera, it might be appropriate, notwithstanding only part of the debt is
overstated, to set aside the notice.
That can be done only if, as here,
para.459J(1)(b) rather than para.459J(1)(a) is appropriate.

  

   160. That 

  

  


 

   161. The conduct of Rovera and its solicitors is quite different in quality
from the conduct of Realty World and its solicitors
to which I have referred
above.

  

  

  

   162. No improper purpose has appeared. The overstatement, though
substantial and
prejudicial to Realty World, was not "frivolous, vexatious or
an abuse of process" - see Equuscorp (supra).

  

  

  

   163.
d

  

  

  

   164. If I had jurisdiction to do so, I would have varied the demand to the
sum of $34,168.41 rather than set it
aside entirely.

  

  

  

   165. However, I am precluded from doing so due to the defective affidavit
tendered in support of
the application to set aside the demand.

  

  

  

   166. The application is dismissed. However, having regard to my findings,
I
would expect that the creditor will agree to withdraw the demand if t he
amount not capable of genuine dispute is paid within such
time as may be fixed
to comply with the demand.

  

  

  

   167. I will hear the parties as to the final form of the order extending
time for compliance and as to costs.