An application to set aside a creditor’s statutory demand is not validly made for the purposes of s 459G of the Corporations Act 2001 (Cth) unless there is a supporting affidavit filed and served within 21 days after the statutory demand is served (see s 459G(3)(a)). Numerous cases have addressed the minimum requirements for an affidavit to qualify as a supporting affidavit. A recent case dealing with the issue is the decision of the New South Wales Court of Appeal in Drama Unit Pty Ltd v Fearndale Holdings Pty Ltd (Administrator Appointed) [2020] NSWCA 1 which found that an affidavit which asserted an offsetting claim that exceeded the amount claimed in the statutory demand was not a sufficient supporting affidavit because it did not provide evidentiary support for the asserted offsetting claim.
The affidavit in question had been sworn by a solicitor acting on behalf of the company seeking to set aside the statutory demand. The solicitor had deposed that he had been “advised which I verily believe to be true” that the company would be filing a Statement of Claim in the Supreme Court of NSW, a draft of which was annexed to the affidavit, and that the amount claimed in the Statement of Claim “will offset and exceed” the amount claimed in the statutory demand. The draft Statement of Claim annexed to the affidavit was unsigned, undated and unverified. The affidavit was the only relevant affidavit filed and served within the 21 day time period.
At first instance, after reviewing the authorities, the trial judge said that, although the affidavit contained a “conclusory statement” of sorts that the amount of the claim exceeded the amount of the demand, the solicitor had not squarely asserted, on information and belief or at all, that the company was entitled to the amounts that would be claimed in the proceedings, nor on what basis. The trial judge further said that the fact that the annexed Statement of Claim was in a draft form and was unsigned and unverified by a director of the company might not have been fatal if the solicitor had, in the body of his affidavit, set out the material facts on which the company intended to advance the claim, on information and belief or at all. However, the solicitor had not deposed, for example, that he had been informed by an identified person (ideally a director of the company with first-hand knowledge) that the facts in the draft Statement of Claim were correct. The trial judge found that the draft Statement of Claim was merely “a series of draft assertions rather than anything concrete” and that the affidavit did not raise the grounds nor state the material facts supporting the alleged offsetting claim (at [22]-[23]). Accordingly, the trial judge dismissed the s 459G application.
The company then applied to the Court of Appeal seeking leave to appeal against the dismissal. In refusing leave to appeal, Gleeson JA (with whom Macfarlan and Payne JJA agreed) made the following relevant points (at [30]-[34]).
- The word “affidavit” in s 459G(3)(a) connotes evidence, and the affidavit must be one that supports the s 459G application. The requirements of a supporting affidavit will depend on the precise nature of the application, that is, whether the company asserts a genuine dispute or an offsetting claim (s 459H(1)), or a defect in the demand or some other reason why the demand should be set aside (s 459J).
- In the present case, the company relied upon an offsetting claim, and the question before the trial judge was whether the affidavit was an affidavit supporting the s 459G application on the ground that the company had an offsetting claim. The proposed appeal sought to challenge the trial judge’s factual finding that the affidavit did not answer that description, a finding which involved an evaluative judgment as to whether the affidavit provided evidentiary support for the asserted offsetting claim.
- The affidavit in question did not verify any of the material facts asserted in the draft Statement of Claim. The affidavit said no more than that the company would be filing a Statement of Claim and that the amount claimed would “offset and exceed” the judgment debts. But the mere foreshadowing of an intention to make a claim did not give those allegations in the draft Statement of Claim any evidentiary value.
