Need for Comprehensive Affidavit in Setting Aside Corporations Act Statutory Demand
In BRC Group Pty Ltd v Watagan Park Pty Ltd [2025] VSCA 36 (14 March 2025), the Court of Appeal of Victoria upheld a Trial Division decision refusing to set aside a statutory demand. The respondent Watagan served a statutory demand for a debt alleged to be owing under a loan agreement entered into with the applicant BRC. Upon BRC’s application to set aside such statutory demand, the ‘21 day affidavit’ it filed disputed the existence of a concluded loan agreement but on the hearing sought to raise, in the alternative, a dispute on the footing that the loan debt was not due having regard to certain terms of the alleged agreement. The court below, and on appeal, concluded that the latter dispute transcended the content of the 21 day affidavit, and thereby could not be relied upon to set aside the statutory demand. The Appellate Court wrote:
Consideration
Legal framework
[31] Section 459G of the [Corporations Act 2001 (Cth)] provides:
Company may apply
(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2) An application may only be made within the statutory period after the demand is so served.
(3) An application is made in accordance with this section only if, within that period:
(a) an affidavit supporting the application is filed with the Court; and
(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
[32] Section 459H of the Act relevantly provides:
Determination of application where there is a dispute or offsetting claim
(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.
[33] The key question in this case is whether the 21 day affidavit constitutes an affidavit ‘supporting the application’ in respect of the additional dispute for the purposes of s 459G(3)(a).
[34] In answering this question, the recent decision of this Court in Sceam Construction Pty Ltd v Clyne (‘Sceam’) helpfully summarises the relevant principles.15 Sceam was a builder engaged by the owners of a home to carry out renovation works on their property under a contract administered by an architect. The owners served a statutory demand on Sceam demanding a debt on the basis of a certificate provided by the architect as to amounts payable in respect of building defects. Sceam applied to set that demand aside and filed an affidavit within the relevant statutory time period. In that affidavit, it alleged design flaws in the architectural drawings and disagreed with the defects identified by the architect. However, Sceam subsequently sought to set the demand aside on the basis that the amount claimed was not a debt because there had not been compliance with the terms of the contract relating to the issue of various notices.
[35] The primary judge dismissed Sceam’s application on the basis that the arguments it sought to raise about non-compliance with the contractual terms had not been raised in the initial affidavit filed within the requisite time period.
[36] In seeking leave to appeal the judge’s decision, Sceam contended, inter alia, that the judge had wrongly applied a ‘fair notice’ requirement. It submitted that the Victorian authorities had diverged from more recent New South Wales authorities, in applying such a requirement. Further, that the New South Wales authorities were to be preferred.
[37] As a result of the matters raised, this Court had cause to examine the case law in some detail, including two previous decisions of this court in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) (‘Malec’)16 and GoConnect Ltd v Sino Strategic International Ltd (in liq) (‘GoConnect’),17 as well as a decision of the NSW Court of Appeal in NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (‘NA Investments’).18
[38] In Malec, Scotts Agencies supplied fuel to Malec, which operated a transport company. Scotts Agencies served a statutory demand on Malec for unpaid fuel and Malec applied to set the demand aside. In the affidavit filed within the statutory time period, Mr Malec deposed that he had been charged for fuel where there was no evidence that the fuel had in fact been delivered. As a result, he alleged that there was an offsetting claim in a specific amount. The basis for the alleged overcharging was hence a claim that on specified days Scotts Agencies had charged for fuel in excess of the capacity of Malec’s tankards. However, in a subsequent affidavit filed outside the statutory period, Mr Malec exhibited reports that showed what fuel had been used and compared it with what had been charged. He claimed that the whole of the demand should be set aside as the amount charged was far in excess of the quantity of the fuel Malec had used.
[39] In the result, the Court refused to set aside the statutory demand. The Court held that the initial affidavit raised the issue of overcharging on the ground that Scotts Agencies charged for fuel which it could not have delivered on specific days, whereas the later affidavit raised a separate issue of overcharging on the basis of fuel used by Malec.
[40] Although both disputes were concerned with overcharging, the decision of Malec suggests that where the affidavit filed within the statutory period identifies a ground with some specificity, such as to exclude other alternatives, this may exclude another different ground.
[41] The decision of this Court in GoConnect is to similar effect. In that case, Sino served a statutory demand in respect of a loan debt and GoConnect sought to set the demand aside. The affidavit filed in support of GoConnect’s application stated that there was a genuine dispute because the loan was only payable when GoConnect chose to pay it. However, supplementary affidavits filed outside the statutory period alleged that the loan agreement contained oral terms, was ambiguous, and that Sino was estopped from demanding repayment.
[42] The Court held that the affidavit filed within the statutory period did not notify Sino of any contention other than that the loan was only repayable when it chose to pay it.19 It also rejected a submission that some further correspondence exhibited to the initial affidavit contained the additional contentions sought to be advanced. Even if this was wrong, the correspondence needed to be read in the context of the whole of the initial affidavit which confined the basis of the dispute to the terms of the loan facility agreement.20
[43] In the NSW Court of Appeal decision in NA Investments, the relevant facility agreement was exhibited to the initial affidavit filed within the statutory period. The debtor later sought to rely on a construction argument notwithstanding that the nature of that argument had not been outlined in the initial affidavit. Despite the fact that the affidavit was said to put the creditor ‘off the scent’, the Court found that the affidavit was still properly characterised as a ‘supporting affidavit’ where the only issue sought to be raised was one of construction and the document in question had been put into evidence.21 However, given that evidence outside the document was necessary so as to consider the construction issue, the Court ultimately found that the judge was correct not to set aside the statutory demand.22
[44] After summarising, inter alia, the above three cases, the Court in Sceam concluded:
[T]he affidavit must support the application by providing the basis for establishing that there is a genuine dispute. Establishing the genuineness of the dispute requires material showing, or from which it can be inferred, that there is a real dispute. Most commonly this will be done by the deponent describing the dispute. That description will delineate the scope of the dispute which may be relied upon to set the demand aside. Where the dispute is based purely on the construction of a written agreement between the parties, the support requirement may be satisfied by exhibiting the agreement without more. But, for example and without being prescriptive, if something beyond the written terms is to be relied upon, then it is highly likely that this will need to be raised in the affidavit and more than mere assertion will be necessary. Ultimately, what is required to satisfy the support requirement must be assessed in the context of the particular application that is made.23
[45] In relation to the suggestion that the Victorian authorities had wrongly applied the concept of ‘fair notice’, the Court stated:
In our opinion, while various forms of language are used in the authorities, their effect is the same. Whether the terms ‘fair notice’ or ‘fairly alert’ are used or whether it is said that the ground must be raised ‘expressly, by necessary inference or by a reasonably available inference’, the outcome turns on whether the affidavit supports the application. In their context, we do not understand the Victorian authorities referred to above to have used the terms ‘fair notice’ and ‘fairly alert’ in a procedural fairness sense. Rather, in substance and properly understood, those phrases have been used as a shorthand for the lengthier phrase ‘ expressly, by necessary inference or reasonably available inference’. That phrase requires that the grounds for resisting the statutory demand appear in the affidavit. … The language of ‘fair notice’ or ‘fairly alerts’ has been directed towards the need for the affidavit to show that there is a real dispute, so as to properly be regarded as an affidavit that supports the application to set aside the statutory demand.24
[46] The Court went on to refer to an earlier decision of Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund25 and considered that the affidavit in that case did not state any material facts to show there was a genuine dispute, but contained ‘mere assertions’ and thus was not an affidavit ‘in support’ of the application.26 The Court contrasted this position with other cases where a supporting affidavit did identify a genuine dispute on a particular basis, but later sought to rely on a different genuine dispute. The Court stated:
It is clear from the authorities that an affidavit filed within time that does not identify the dispute later sought to be relied upon is not a ‘supporting affidavit’ in so far as the different genuine dispute is concerned …27
[47] The decision in Sceam provides extensive guidance as to the requisite content of an affidavit ‘supporting’ an application for the purposes of s 459G(3)(a). We consider that the following principles have particular relevance to this case:
(a) The affidavit must ‘support’ the application by providing the basis for establishing that there is a genuine dispute about the existence or amount of the debt.
(b) Most commonly this will be done by the deponent describing the dispute. That description will delineate the scope of the dispute.
(c) The ground for resisting the demand must be raised expressly, by necessary inference, or reasonably available inference.
(d) Where the dispute about the existence or amount of the debt is based purely on the construction of a document, the requirement may be satisfied by exhibiting the document.
(e) Mere assertion that the debt is disputed is insufficient.
(f) An affidavit filed within time that does not identify the dispute later sought to be relied upon is not a ‘supporting affidavit’ insofar as the different genuine dispute is concerned. The question of sufficient identification will be considered in context, having regard to the degree of specificity with which the initial dispute is defined.
Analysis
[48] The gravamen of the applicant’s submissions was that the 21 day affidavit sufficiently disclosed the additional dispute. The applicant particularly focused on the reference to the ‘equity right agreement’ (in paragraph 14); the statement that it was ‘intended’ that the maturity dates of the loan agreement and the consultancy agreement be ‘aligned’ (in paragraph 15); the 25 September email; and the statements to the effect that the alleged debt was ‘not payable’.
[49] The applicant’s submission must be rejected for a number of reasons.
[50] First, the passing reference to the equity right agreement in paragraph 14 is insufficient in circumstances where the equity right agreement is not exhibited. Nor were its terms identified, or even described in a summary way. The statement that it was ‘intended’ that the dates be ‘aligned’ is also unhelpful and ambiguous. It is insufficient to raise the additional dispute expressly, or by inference. This is particularly so given the relatively complex operation of the equity right agreement as already described.
[51] Second, we reject the submission that the 21 day affidavit indicated that some different agreement — not the agreement reflected by the 1 January document — was actually reached. The statements at paragraphs 16 and 17 are inconsistent with any such suggestion. The emails contained in MD-1 are also clearly intended to support the proposition that the parties were ‘still engaging in negotiations’. If — as is now suggested — a different agreement had been agreed, one would expect a simple statement to that effect to have been included.
[52] Third, there is no suggestion anywhere that the repayment date was contrary to that specified in the 1 January document and/or that it had not yet been reached. Nor is there any suggestion that it was somehow tied to a separate mechanism contained in the equity right agreement. The statements to the effect that the debt was ‘not payable’ do not delineate any such dispute. Paragraph 24 simply states that the repayment date was ‘not ultimately agreed’, not that some different date was agreed. The documents annexed at MD-1 also include the unsigned 1 January document, which expressly provides for a repayment date of 23 December 2023, and contains no clauses connecting the repayment of the loan with the equity application process. The 25 September email also cites the date of December 2023 as the repayment date.
[53] Finally, the 21 day affidavit clearly intends to identify a very different basis for dispute, namely, that there was no final agreement reached at all as to the terms of the loan. This is apparent from the clear, and specific, statements made in paragraphs 16, 17, and 24 to the effect that the agreement was never finalised, or agreed. In these circumstances, the judge was correct to consider that these statements identified a specific dispute which was inconsistent with the additional dispute.
[54] When considered overall, then, the 21 day affidavit did not identify the additional dispute. More particularly, it did not provide any basis for establishing that the repayment date was to be tied to a different agreement which was neither annexed, nor described. The associate judge was therefore correct to find that it was not a ‘supporting affidavit’ insofar as the additional dispute was concerned.
…
(emphasis added)
A link to the full decision is here.
15 (2021) 64 VR 404; [2021] VSCA 270 (‘Sceam’).
16 [2015] VSCA 330.
17 [2016] VSCA 315.
18 [2010] NSWCA 210. We have been greatly assisted by the summaries of these three cases contained in Sceam (2021) 64 VR 404, 410–12 [20]–[29] , 413–14 [33] (Ferguson CJ, Sifris and Walker JJA).
19 GoConnect [2016] VSCA 315 , [41] (Santamaria and Kyrou JJA, Elliott AJA).
20 Ibid [43].
21 NA Investments [2010] NSWCA 210 , [85]– [86] (Lindgren AJA, Beazley JA agreeing at [1], Handley AJA agreeing at [2]).
22 Ibid [91].
23 Sceam (2021) 64 VR 404, 415 [38] (Ferguson CJ, Sifris and Walker JJA).
24 Ibid 415–16 [39].
25 (1996) 70 FCR 452.
26 Sceam (2021) 64 VR 404 , 417 [43] (Ferguson CJ, Sifris and Walker JJA).
27 Ibid.
