Summary

The Court of Appeal in Imagebuild Group Pty Ltd v Fokust Pty Ltd [2017] VSCA 131 (31 May 2017) has confirmed that affidavits in support of applications to set aside statutory demands cannot merely explain the delay in filing and serving a required affidavit in support within 21 days of the statutory demand being served (pursuant to s 459G(2) and (3) of the Corporations Act 2001).

However an affidavit filed and served within 21 days which explains delay and verifies on the basis of instructions or otherwise the contents of a ‘foreshadowed affidavit’ to be sworn, may be sufficient to constitute a supporting affidavit.

Imagebuild Group Pty Ltd v Fokust Pty Ltd [2017] VSCA 131

In Imagebuild, Whelan JA and Almond AJA refused leave to appeal from a decision of an Associate Justice which had determined that a supporting affidavit had not been filed and served within the specified 21-day period.

The affidavit which was filed by the appellant’s solicitor in support of the originating process was filed within 21 days. But it was fatally deficient insofar as it only explained the delay in the swearing, filing and service of an anticipated supporting affidavit (not yet filed or served).

The ultimately successful submission run by counsel for the respondent was that the affidavit “was not a supporting affidavit and it did not profess to be one.” It merely explained the delay in providing the required affidavit. Even a good explanation for the delay did not have the effect of extending the 21-day deadline or characterising the affidavit as a ‘supporting affidavit’ within the meaning of s459G.

Decision

In its finding, the COA was clear:

[20] The High Court has held that the requirement that a supporting affidavit be filed and served within the specified period defines the jurisdiction of the Court under s 459G: David Grant & Co Pty Limited v Westpac Banking Corporation (1995) 184 CLR 265.

[21] The High Court has also held that there is no power to extend time after the specified 21 day period has elapsed: Aussie Vic Plant Hire v Esanda Finance Corp (2008) 232 CLR 314.

[22] An affidavit filed and served within the specified time which asserts that a supporting affidavit will be sworn, or may be sworn, but not within time, and which explains the delay, is not itself a supporting affidavit. Nothing said in the authorities relied upon by Imagebuild suggests that such an affidavit would comply with s 459G.

A way around the 21-day requirement?

Imagebuild affirms that an affidavit capable of 'supporting' the application to set aside must be filed within 21-days of the demand.

Within 21-days, an affidavit explaining delay might by sufficient to constitute a supporting affidavit. For example, if it verifies on the basis of instructions or otherwise the contents of the affidavit which is proposed to be sworn.

This suggests that the lack of a ‘supporting affidavit’ within the meaning of s459G may be circumvented with ‘another affidavit’ (filed and served within the original 21 days) which puts into evidence, in admissible form, the instructions or contents of the proposed or ‘foreshadowed affidavit’ which will be sworn (potentially outside the original 21 days).

What should the 'another affidavit' do? It should be filed within 21 days of service of the statutory demand. It should not merely address delay. It must put into evidence as much detail as possible the same evidence proposed to be set out in full detail in the ‘foreshadowed affidavit.’

Whether the so-called ‘another affidavit’ would be sufficient to constitute a ‘supporting affidavit’ under s 459G will depend on the evidence in the particular case.

Graywinter principle

The Court will look at the 'bright line' created around the 21-day period by the Graywinter principle where an affidavit in support of an application under s 459G does not state material facts sufficient to show the existence of a genuine dispute or offsetting claim. The court lacks jurisdiction to entertain the application unless the deficiency is repaired within the 21-day period: Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452.

The corollary of Graywinter is that an affidavit may not be filed outside the 21-day period in order to raise a new ground for setting aside the statutory demand: (1996) 70 FCR 452, 460 (Sundberg J); Go Connect [2016] VSCA 315 [40].

Graywinter provides that the minimum requirements for a supporting affidavit are:

the affidavit must state the material facts which show there is a genuine dispute;
the affidavit may read like a pleading and need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute; and
neither a mere assertion that there is a genuine dispute nor a bare claim that the debt is disputed is sufficient (Graywinter at 459 and 460).

Associate Justice Randall summarised Victorian Court of Appeal authorities on the requirements for a supporting affidavit in B.S.B Mining Pty Ltd v Ranger Resources Pty Ltd [2018] VSC 263 at [33].

Where the minimum requirements are met, the material relied upon in the 21-day affidavit may be supplemented by affidavits filed after that period: Graywinter at 460.

However affidavits filed outside the 21-day period which raise a new ground to set aside a statutory demand (as opposed to an affidavit which expands on grounds in an earlier affidavit) cannot be relied upon to set aside a statutory demand: Graywinter, quoting Energy Equity Corporation Ltd v Sinedie Pty Ltd (2001) 166 FLR 179, 183 [18].

The supporting affidavit within 21-days must 'fairly alert' the respondent to the nature of the case made in support of the application to set aside the statutory demand: Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 (Barrett J).

It must fairly notify the respondent of the evidentiary basis for a submission that the statutory demand should be set aside on the particular ground upon which the applicant seeks to rely: Tuta Healthcare v Nipro Asia [2005] NSWSC 664 (Campbell J).

It will be sufficient if the material facts on which the applicant intends to rely to support the genuine dispute are 'discernible from the supporting affidavit and/or the annexures and exhibits thereto': Re Australia Zhongfu Oil Gas Resources Pty Ltd [2012] NSWSC 1208 (Brereton J).

Conclusion

This principles in Imagebuild are consistent with the principles in Graywinter.

Imagebuild may be useful in the circumstances of a particular application to set aside where a conventional supporting affidavit couldn’t be sworn strictly within 21-days of service of the statutory demand.

The idea of an 'another affidavit' within 21-days is an option of last resort, but if it complies with the requirements set out in Graywinter, it may be permissible.

If reliable instructions could be obtained such that an instructor or other party could swear and file ‘another affidavit’ (within the original 21 days) substantially deposing to the contents of a ‘foreshadowed supporting affidavit’ (potentially outside the original 21 days), then paragraphs 23 & 24 of Imagebuild may assist.

It wouldn’t extend the 21-day deadline, but rather the ‘another affidavit’ within 21-days (not the ‘foreshadowed affidavit’) may be sufficient to constitute, or be characterized as, a supporting affidavit under s 459G. The 'another affidavit' must be as similar as possible to the 'foreshadowed affidavit', which should not raise any new grounds. Ideally, exactly the same facts should be deposed to, and the same documents be exhibited.

Given the last-minute nature of many applications to set aside statutory demands, Imagebuild may be a useful authority in circumstances where a supporting affidavit cannot, for whatever reason, be filed and served strictly within the 21-day period.