Access Solutions International Pty Ltd v Angelo Gabriel Taglieri
[2015] VSC 494
•11 September 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 06811
IN THE MATTER of ACCESS SOLUTIONS INTERNATIONAL PTY LTD
(ACN 144 796 556)
| ACCESS SOLUTIONS INTERNATIONAL PTY LTD | Plaintiff |
| v | |
| ANGELO GABRIEL TAGLIERI | Defendant |
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JUDGE: | Randall AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 March 2015 |
DATE OF JUDGMENT: | 11 September 2015 |
CASE MAY BE CITED AS: | Access Solutions International Pty Ltd v Angelo Gabriel Taglieri |
MEDIUM NEUTRAL CITATION: | [2015] VSC 494 |
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CORPORATIONS – Section 459G of the Corporations Act 2001 (Cth) – Setting aside statutory demand
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C R Brown | McMahon Fearnley Lawyers Pty Ltd |
| For the Defendant | Mr S Rubenstein | De Marco Lawyers |
HIS HONOUR:
This is an application to set aside a statutory demand pursuant to ss 459G and 459J of the Corporations Act 2001 (Cth) (‘the Act’).
Background
The statutory demand claims three alleged debts owing by the plaintiff to the defendant totalling $18,448.39:
(a) Outstanding employee remuneration in the amount of $10,800;
(b) Outstanding motor vehicle allowance in the amount of $1,688.39; and
(c) Director’s remuneration as set out in 6.8(b) and item 6 of the Unit Holders Agreement dated 8 August 2011 in the amount of $6,000.
The plaintiff seeks orders that the statutory demand be set aside due to the existence of a genuine dispute in relation to the alleged debts, an offsetting claim in relation to the alleged debts and/or an abuse of process by the defendant. The defendant concedes that the debt claimed in the statutory demand should be reduced by $10,800 to reflect the payment of the $5,508 and the acknowledgement by the plaintiff that the balance will be paid to the ATO on behalf of the defendant after the statutory demand was served. This leaves a total amount of $7,688.39 as the substantiated amount. The defendant submits that the application should otherwise be dismissed with costs.
The defendant
The defendant was a director of Thermo Electronics Co Pty Ltd (‘Thermo Electronics’), which operated a business that manufactured and sold commercial gates. In July 2010 the plaintiff bought this business. Since then, the plaintiff has been operating the business as trustee of the Access Solutions Unit Trust (‘Unit Trust’), which is the beneficial owner of the business. The defendant was a director of the plaintiff until his resignation on 20 August 2012, but he remains a unit holder in the Unit Trust. He was appointed as a director of the plaintiff on or about 23 June 2010 ending 20 August 2012 and commenced his role as General Manager on 1 July 2010 pursuant to an agreement with the plaintiff.
The plaintiff previously operated the business from a North Coburg premises (‘the premises’) pursuant to a lease between itself and its landlord, Gamet Pty Ltd (‘the landlord’), of which the defendant is a director and secretary. The defendant finished employment with the plaintiff in May 2014. There is animosity between the parties and they, including Gamet Pty Ltd, are involved in two other court proceedings.
The parties and the landlord have been in dispute over the following issues when the defendant ceased employment with the plaintiff:
a. The payment and quantum of monies allegedly owed by the plaintiff to the defendant in relation to his employment and directorship with the plaintiff;
b. The wrongful removal of a commercial gate from the premises by the defendant in or around October 2014; and
c. The wrongful lockout of the plaintiff from the premises and retention of goods by the landlord in December 2014.
Unit Holders Agreement
On or about 8 August 2011, the unit holders in the Unit Trust entered into a written Unit Holders Agreement. Clause 6.8(b) states, ‘remuneration of each Director is the amount stated in Item 6 of Schedule 1 per annum’. Item 6 of Schedule 1 states, ‘Director’s remuneration (per annum) $6,000 each’. Clause 32 provides:
VARIATION
This Agreement may not be changed or modified in any way after its execution except in writing signed by all the Unitholders.
Disputed employment agreement
In around March 2014, the plaintiff had an organisational restructure. On 31 March 2014, the defendant ceased employment with the plaintiff under the terms of the initial employment agreement. Parties agreed that from 1 April 2014, the defendant would no longer be engaged under his previous employment conditions. The parties now dispute the terms of the subsequent agreement, which will be discussed in more detail below.
Application of relevant law to parties’ submissions
The plaintiff relies on four affidavits of Nickolas Madrid sworn 22 December 2014, 27 February 2015, 11 March 2015 and 12 March 2015. The defendant relies upon two affidavits sworn by him on 4 February 2015 and 6 March 2015.
In an application pursuant to s 459G, s 459H provides:
Determination of application whether it is a dispute or offsetting claim.
(1)This section applies where, on an application under s 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.
The various tests require me to identify whether there is a genuine dispute without resolving the same:
While it is not a very exacting standard, on the other hand mere assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularised will not suffice. The Court must not enter into the merits of the dispute, but it is not crossing the line in relation to its legitimate role in these applications to consider evidence which “bears on whether or not the asserted dispute or off-setting claim is genuine”. Indeed that is its necessary function’.[1]
[1]Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508, [48] (Dodds-Streeton JA).
‘The dispute or off-setting claim should, as has been recognised, have some objective existence’.[2] That is, as the Full Federal Court has held, the dispute or off-setting claim must be ‘bona fide and truly exist in fact’, with ‘real and not spurious, hypothetical, illusory or misconceived’ grounds for claiming its existence.[3]
[2]Ibid [49].
[3]Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 (‘Spencer Constructions’), 464.
Further, applicable principles have been set out by this Court in Troutfarms Australia Pty Ltd v Perpetual Nominees Ltd.[4] In Rescom Asia Pacific Pty Ltd v Reapfield Property Consultants Pty Ltd,[5] Almond AJA identified the applicable principles with respect to setting aside statutory demands. Almond AJA referred to the judgment of Osborne JA (Ashley JA concurring) in Troutfarms Australia, which emphasised that ‘[t]he phrase “a genuine dispute” uses ordinary English words and its meaning in any particular set of circumstances must be a question of fact’.[6]
[4][2013] VSCA 176 (‘Troutfarms Australia’).
[5][2014] VSCA 92.
[6]At [5] (Osborn JA).
In Troutfarms Australia, Osborne JA applied Robson J’s decision in Rhagodia Pty Ltd v National Australia Bank,[7] which in turn had referred to authorities that illustrate the application of the definition of ‘genuine dispute’. Those three authorities are TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[8] Eyota Pty Ltd v Hanave Pty Ltd,[9] and Re Morris Catering (Aust) Pty Ltd.[10]
[7][2008] NSWCA 73 (‘Rhagodia’), [91]-[94]; see also, Powerhouse Australasia; Spencer Constructions, 464.
[8][2008] VSCA 70 (‘TR Administration’).
[9](1994) 12 ACSR 785 (‘Eyota’).
[10](1993) 11 ACSR 601.
On the point of identifying, without resolving, a genuine dispute, in TR Administration Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:
No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised.[11]
Her Honour further outlined the evidentiary requirements with respect to making out a s 459H claim:
As the terms of s 459H (sic) of the Corporations Act 2001 and the authorities make clear, the company is required in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice…[12]
[11]At [57].
[12]At [71].
In the second authority, Eyota,[13] McClelland CJ of the Supreme Court of New South Wales clarified the meaning of ‘genuine dispute’:
It is … necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the ‘serious question to be tried’ criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit however equivocal, lacking precision, inconsistent with undisputed contemporary documents or other statements by the same deponent …
But if it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments[14] Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3:
These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.[15]
[13]787–8 (‘Eyota’).
[14]Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 270; (1993) 11 ACSR 362, 366-7.
[15]At [3] (citations in original).
In the third authority referred to in Rhagodia by Robson J, Re Morris Catering (Aust) Pty Ltd, Thomas J described the scope of the Court’s role in identifying a genuine dispute between the parties as an ‘essential task [that] is relatively simple — to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it)’:
There is little doubt that Div 3 ... prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court’s examination are the ascertainment of whether there is a “genuine dispute” and whether there is a “genuine claim”.
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it), the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.[16]
[16]Re Morris Catering (Aust) Pty Ltd, 605.
The plaintiff bears the onus of establishing the genuineness of the dispute or off-setting claim.[17]
[17]Powerhouse Australasia, [49].
Employee remuneration debt: identifying the genuine dispute
I accept the plaintiff’s submission (and the defendant’s concession) that there is a genuine dispute with respect to the employee remuneration debt. This dispute arises from the agreement between the parties upon the termination of the defendant’s employment. The defendant submits that while there is no dispute when the statutory demand was served the plaintiff owed the defendant $10,800 of which he had an absolute entitlement to receive at least $5,508, it is arguable that there is a genuine dispute with regard to the balance of $5,292. The defendant submits that the total of debts outstanding should be adjusted to reflect this, and it be a matter for costs as to whether the service of the statutory demand was warranted in the circumstances.
The parties do not dispute the following facts:
a. The defendant was entitled to remuneration of $400 per day for the period from 1 April 2014 — that is, the plaintiff owed the defendant $10,800;
b. The plaintiff did not pay any part of the $10,800 to the defendant until after he had served the statutory demand;
c. The plaintiff has not produced any evidence that it requested an ABN from the defendant to pay him the $10,800;
d. The plaintiff has not paid the withheld amount to ATO on the defendant’s behalf;
e. The defendant’s former employment contract with the plaintiff ended on 31 March 2014; and
f. The remuneration claim relates to the period between 1 April 2014 and 14 May 2014 (inclusive).
The plaintiff submits that it paid the remuneration, less amounts withheld for taxation purposes, in December 2014. It submits that in relation to the remuneration debt, the parties disagree on whether the defendant was an employee or contractor of the plaintiff from 1 April 2014 to the end of employment, and whether the daily remuneration amount of $400 was gross or net of tax. Both disputed issues arise from the terms of any agreement between the plaintiff and defendant upon the termination of the latter’s employment. The defendant submits that the agreement was ‘in principle’ and does not depose to the terms of the actual agreement. The defendant submits that the parties agreed to reducing his salary and employment entitlements to a figure of $400 per day worked, net of tax but inclusive of all entitlements, and that this was the agreed position for unit holders that took on operational responsibilities for the plaintiff. Whereas Mr Nikolas Makridis has deposed on behalf of the plaintiff, that the parties entered into an express agreement that the plaintiff would employ the defendant as a consultant at the rate of $400 per day after 31 March 2014.
The defendant submits that he worked a total of 27 days from 1 April 2014 to 14 May 2014 in respect of which the plaintiff was required to pay him the total amount of $10,800, which the plaintiff has not paid. He resigned on 14 April 2014 with effect from 15 May 2014. To recover the unpaid wages, the defendant sought assistance from the Electrical Trade Union (‘ETU’), which wrote to the plaintiff on the defendant’s behalf to demand payment of the unpaid wages totalling $24,918.52 based on an enclosed reconciliation. On 20 November 2014, the defendant’s lawyers wrote to the plaintiff demanding payment of, inter alia, the $10,800. The lawyers also threatened that if the outstanding sum was not paid, then the defendant would issue a statutory demand.
The defendant served the statutory demand on 9 December 2014. On 14 December 2014, the plaintiff paid the defendant $5,508 of the $10,800 and has withheld a further $5,292 on the grounds that the defendant ‘had failed to advise the [plaintiff] of his Australian Business Number, which, pursuant to the taxation regulations, required the [plaintiff] to withhold a significant amount of the payment’.
As of 27 February 2015, the plaintiff had not paid the withheld amount to the ATO and there was no tax credit in favour of the defendant. There is no evidence that the plaintiff has since paid the withheld amount to the ATO on the defendant’s behalf.
If the plaintiff employed the defendant as an employee following 31 March 2014, the plaintiff would be obliged to withhold tax in the usual course of employment. Since the defendant was a consultant, the plaintiff was not obliged to withhold tax, unless in circumstances where the contractor does not quote the ABN, in which case the employer must withhold tax at the highest marginal rate. The defendant did not provide an ABN to the plaintiff, meaning that the plaintiff fulfilled its obligations by withholding the relevant tax amount from the payment. As a result, the defendant is entitled to a tax credit in relation to the withheld amount.
Given the defendant’s concession, I am satisfied that there is a genuine dispute as to whether the plaintiff is required to withhold the sum of $5,292.
Motor vehicle allowance
The defendant contends that he was short paid by $1,688.39 in relation to his scheduled day off pay that he received upon termination.
The plaintiff agrees that as part of his remuneration package, the plaintiff agreed to pay the defendant a motor vehicle allowance and a specified amount. The plaintiff also agreed to accumulate an additional day’s salary for any scheduled days off that the defendant worked. The disputed amount relates to an additional allowance that the defendant sought in relation to scheduled days off that he worked.
The 21 day affidavits set out:
In regards to the amount claimed as motor vehicle allowance, I say that when the defendant was employed by the plaintiff, the defendant’s remuneration package included a motor vehicle allowance. That allowance has been paid to the defendant as part of his package when he was employed by the plaintiff.
In the affidavit sworn 27 February 2015, Makridis, at paragraph 7, said as follows:
7.In response to the allegations made at paragraphs 15 to 19 of the defendant’s affidavit:
(a)I agree with the defendant that his employment agreement was varied in about October 2011 so that the defendant could reduce his working week to four days per week;
(b)Further, I agree with the defendant that if the defendant worked on a scheduled day off, the Company would accumulate a day in lieu which effectively is an extra day of salary for that day off work. Upon the defendant leaving the Company, the company paid the outstanding days in lieu on an equivalent basis to his salary (Scheduled Day Off Pay);
(c)However, allowances were excluded from the Scheduled Day Off Pay. Only a pro rata amount of the defendant’s salary was accumulated in relation to scheduled days off whe[n] the defendant was required to work;
(d)Accordingly, the defendant is not entitled to a further payment in relation to motor vehicle allowance as part of the Scheduled Day Off Pay;
(e)The amount calculated by the Company as payable to the defendant in relation to Scheduled Day Off Pay was $4,006.55. This amount was paid to the defendant on or about 29 Sept[ember] 2014.
A payment of $4,006.55 was made after a calculation by Makridis in August 2014. This payment and calculation was made after a calculation submitted on behalf of the defendant in April 2014.
The defendant’s wife compiled a reconciliation in April 2014, which included a calculation for the amount owing for the 14 scheduled days off which was formulated using $545.21 x 14 days, totalling $7,632.94 less tax of $1,938, which arrived at the total of $5,694.94. The amount of $545.21 included the car allowance. That is a base rate of $400 per day together with the allowance of $145.21 per day. That reconciliation was submitted to the plaintiff. By two separate email transmissions dated 2 April 2014 directors of the plaintiff responded. The first response was from Sergio Galanti (‘Galanti’) to Gabriele Peroni (‘Peroni’) and relevantly copied to Makridis. That set out:
Gabe and Nick,
As per yesterday’s ‘tidy up’ action items attached is Angela’s reconciliation of balance outstandings for leave, salary and days off outstanding as at March 31st. In addition we have included superannuation.
The number[s] overall within a $1 of my estimate so I am good for those to be booked up, (refer summary). I have included them in the Balance Sheet and P&L for March where appropriate. Note the amounts included in the balance sheet are gross figures pre taxation.
Please advise if there are any concerns or questions, otherwise that action item can be closed off.
On the same day Peroni responded to Galanti and relevantly copied the email to Makridis. That email set out:
I have reviewed attached and agree with gross pay figures for March salary, payment of scheduled days off and annual leave.
All good to finalise.
Thank you [two] for work to prepare and simple presentation.
The plaintiff submitted the following in relation to the calculation and correspondence:
(a)The scheduled day off pay formed only one component of calculations that were sent by the defendant’s wife;
(b)Makridis deposed that ‘the defendant would have been aware that [Makridis] and not the other directors… was responsible for the internal accounting of the plaintiff’ and that the defendant would have been aware of that fact;
(c)The person responsible for calculating termination pay was Makridis of which the defendant should have been aware;
(d)Makridis prepared his own calculation on August 2014 which shows the discrepancy of $1,688.39; and
(e)The defendant subsequently sort assistance from the ETU to escalate the dispute over the termination pay, which led to various correspondence between the plaintiff and ETU in relation to the dispute.
In Eyota McLelland CJ said:
It is, however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s 450H [the predecessor of s 459H of the Act]. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” …
But it does not mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark on an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits’ or resolving, such a dispute.[18]
[18]At 787.
Notwithstanding what has been put on behalf of the plaintiff, the same does not constitute a genuine dispute. As to the plaintiff’s submissions, I note that the calculation was approved by two of the directors of the plaintiff at the time. Neither of those directors have sworn material as to the circumstances of their approval of the calculation. Further, in the end it is not an arithmetical exercise. The issue is whether allowances were excluded from the scheduled day off pay. Apart from the contention now propounded that it was never agreed that an allowance would be paid if the defendant worked on a scheduled day off:
(a) Makridis does not explain why he did not cavil with the email transmission sent by Peroni on 2 April 2014;
(b) Makridis does not explain why he did not cavil with the email transmission sent by Galanti on 2 April 2014;
(c) There is no explanation from directors Peroni, Galanti or Ubaldi as to why they had not agreed to the amount submitted nor why they were not authorised to agree to such amounts;
(d) The plaintiff did not raise this as an issue with the ETU; and
(e) Makridis’ own calculation in August 2014, some five months after the approval is an arithmetical exercise and does not address the issue of entitlements.
Accordingly, the contemporaneous material conclusively affirms the entitlement to the car allowance. The position now adopted by the plaintiff is nothing more than unsubstantiated assertion that does not support a contention that there is a ‘genuine dispute’.
Directors’ remuneration
The plaintiff submits that the Unit Holders Agreement does not state:
a. When the fee is payable;
b. How it is paid;
c. Whether it is subject to withholding tax;
d. Whether it is payable in relation to a financial year or calendar year; or
e. Whether it is payable in relation to a partial year and whether such payment is pro-rata to the days the individual acted as director.
The plaintiff submits that the matters outlined in the previous paragraph would be expected to be covered in the individual remuneration agreements with each director. The defendant’s employment agreement does not mention director’s fees.
Since August 2011, the directors have agreed to not take a director’s fee; none of the directors have been paid a director’s fee; and unpaid director’s fees have not been accrued in the accounts of the plaintiff. Therefore, the plaintiff submits that the director’s remuneration debt is either not payable, or is genuinely disputed.
The defendant, however, submits that his entitlement to the $6,000 is ‘clear and unambiguous’, especially since there is no evidence that any unit holders agreed in writing or otherwise to modify the Unit Holders Agreement. The defendant has given direct evidence that he did not attend and was not involved in any meeting to change the Unit Holders Agreement in this respect. It is not put on behalf of the plaintiff that any relevant meeting of the unit holders was convened or held.
The draft books of account for the financial year ending 30 June 2014 exhibited to Makridis’ Second Affidavit (prepared after the defendant had left his employment with the plaintiff) disclose that each of Galanti, Makridis and Ubaldi has an outstanding entitlement to directors’ fees of $6,000 each. This is consistent with entitlements under the Unit Holders Agreement. The defendant had become a director of the plaintiff on 23 June 2010, the same day as Messrs Galanti, Makridis and Ubaldi. The plaintiff has not tendered evidence to explain this inconsistency of directors’ entitlement to fees.
I am not satisfied that there is any genuine dispute arising with respect to the entitlements to the director’s fee. Insofar as the unit holders agreement does not specify a day for payment, I am satisfied that it is be paid within a reasonable time after it is incurred. A reasonable time had elapsed prior to the service of statutory demand and the same was due and payable at the day of signing and service of the statutory demand.
Offsetting claim
The parties are in dispute over a commercial gate removed by the defendant from the premises on or about 28 October 2014. Since that date, correspondence has arisen about the dispute. On 11 November 2014 the defendant transmitted an email to Makridis regarding a pair of wing gates that the defendant had removed and returned:
I have looked through the stock list you forwarded last week and am satisfied that; and as you informed me, the pair of wing gates removed by me are in fact the property of AAA, and were incorrectly removed from 92 Bakers Road, Coburg North. I would like therefore to return them towards the end of this week if this is suitable to you. Please let me know a suitable time and date.
In a letter dated 12 December 2014 from the plaintiff’s solicitors to the defendant’s solicitors, the former set out the following:
We are instructed that on or about 28 October 2014 your client wrongfully and without the consent or knowledge of our client took for his own use from our client’s premises at 92 Bakers Coburg a commercial gate described as a TT series cantilever sliding gate with motor drives and inverter and new guide rails and ertalon strip…We are instructed that the gate has a monetary value of $20,746.00.
… our client has attempted to discuss the return of the gate but regrettably to no avail on your client’s part.
In the circumstances, we are instructed that our client sees no option other than to take this matter further. Given the deliberate conduct of your client in taking the gate for his own use to the detriment of our client, and the subsequent lack of remorse of your client when found out our client is considering reporting your client’s conduct to the local police for further investigation and action.
In the meantime, we are instructed to commence Court action against your client.
The defendant argues that the gate is the property of Thermo Electronics, the vendor in the business sale agreement in 2010. The plaintiff submits that if that is the case, then the gates, which were not listed as an excluded asset in the business sale agreement, should have been so listed.
The defendant does not deny that he personally removed the gates. The Magistrates’ Court proceeding has accordingly been brought against him personally alleging trespass, detinue and conversion.
The defendant submits that if the Court determines that the offsetting claim is genuine, which the defendant does not admit and denies, then there is no evidence presented by the plaintiff as to its value.
In Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd,[19] Burley J considered whether the plaintiff had an off-setting claim. The contention was that the off-setting claim amounted to $50,000 in the context of statutory demand for $15,699.60. Burley J said:
While I am satisfied, on the basis of the affidavit evidence filed by the plaintiff, that a genuine offsetting claim exists, I am not satisfied that the claim amounts to $50,000 or any other amount. To support the genuineness of an offsetting claim amounting to $50,000, the plaintiff relies upon the unsubstantiated assertion of Mr Taylor, a director of the plaintiff, that the offsetting claim amounts to $50,000. That in my view is not sufficient. There needs to be evidence supporting the quantum of the offsetting claim so that the court may determine whether or not there is a genuine offsetting claim of a given amount. It is not necessary that the evidence be such as might be advanced at a trial but it is, in my view, necessary to adduce some evidence in that regard…In the absence of such evidence it is impossible for the court to determine whether or not the statutory demand must be altered or set aside in accordance with the provisions of s 459H of the Law. For these reasons the ground relied upon by the plaintiff in relation to the offsetting claim must fail.[20]
[19](1997) 23 ACSR 339.
[20]At 342–3.
I accept the defendant’s submission that the plaintiff has made unsubstantiated allegations (repeated in correspondence and affidavit) that the TT Gate is worth $20,746. The defendant has produced evidence of quotations and invoices for different specifications of TT Gate, none of which reflect the value of $20,746:
a. Quotation of $21,890 (5m TT Gate) and $21,538 (7.8m TT Gate) sent to Austrak from the plaintiff dated 15 June 2005;
b. Purchase order of $43,428 from Austrak to the plaintiff dated 1 August 2005;
c. Tax invoice of $43,428 to Austrak from the plaintiff dated 5 September 2005;
d. Quotation of $59,345 (10.5m TT Gate) sent to Austrak from the plaintiff dated 7 June 2007; and
e. Tax invoice to Austrak from the plaintiff dated 2 August 2007 for a 10.5m TT Gate worth $59,345 including GST.
The defendant has also given evidence that the owner of the TT Gate was given a credit refund of $3,500 in June 2007, and that now (some almost eight years later) the TT Gate is worth less than $4,000.
The defendant also submits that he has produced persuasive evidence of ownership of the TT Gate, whereas the plaintiff has not done the same. He has also given evidence of admissions made by Mr Makridis that go toward the issue of ownership. Mr Makridis has had ample opportunity to respond to that evidence. He has not denied the conversations took place or their content. The defendant has given evidence and provided photographs evidencing that the TT Gate was marked with a yellow sticker as being his property and not that of the plaintiff. The plaintiff has not responded to this.
The plaintiff submits that when it purchased the business from Thermo Electronics a TT series cantilever sliding gate (‘TT gate’) was on the premises from which the business operated and continues to operate (which is owned by a company controlled by the defendant). The plaintiff submits that it purchased the TT gate as part of the stock of the business. It has produced the sale of the business agreement and states that the TT Gate was not expressly listed in the schedule of ‘Excluded Assets’. The plaintiff submits that therefore it owned the TT Gate and the defendant was not entitled to remove it from the premises following the termination of his employment, when he removed other items that did not belong to the plaintiff. The plaintiff submits that the TT Gate is worth $20,746 and that therefore it has an offsetting claim in respect of the value of the TT Gate.
The defendant, on the other hand, submits that the TT Gate was not sold to the plaintiff as part of the sale of the business. He contends that when the business was sold to the plaintiff, an independent valuer was engaged to prepare a comprehensive final stock list of the goods to be sold as part of the sale of business. The stock list was prepared on 27 June 2010 by an independent valuer and did not include the TT Gate. It did not include other gates that were part of the stock sold to the plaintiff (‘it was expressly stated by [Makridis] at the time of the sale that the gate would not form part of the sale “as it was useless to them”. Therefore, I say that title to the Gate did not pass to the Plaintiff as the time of the sale’). I note that the TT Gate was second hand and had been specially manufactured for a customer, Austrak, some four years earlier (October 2006). It had been removed from the customer’s site in June 2007 because it had encroached onto neighbouring land, and Thermo Electronics had provided Austrak with a credit refund of $3,500. Mr Taglieri has given evidence that the TT Gate is worth less than $4000.
The defendant says that he had a discussion with Makridis about the TT Gate at the time of the sale of the business, and that Makridis said he did not want the TT Gate ‘as it was useless to them’. Makridis does not dispute that this conversation took place or that he told the defendant that he did not want the TT Gate at the time that the sale of the business took place. He accepts that the TT Gate was not included in the final stock list (but says that other items were also missing from the list — ‘there w[ere] numerous items of stock (including other gates) that were missing and not included in the list’). Makridis submits that the TT Gate is worth $20,746, which the defendant denies. If that sum is correct, then the TT Gate would be the most valuable item in the stock list out of a total stock value of $121,000 (Calculated total 121,622.08; Angelo’s total 121,222.08). It is highly unusual that the most valuable item would be omitted from the final stock list.
The definition of ‘offsetting claim’ in s 459H of the Act is germane to the plaintiff’s allegedly offsetting claim:
“Offsetting claim” means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
This is an application where the plaintiff has not demonstrated that the offsetting claim has ‘a sufficient objective existence and prima facie plausibility to distinguish it from…assertion’ as referred to by Dodds-Streeton J in TR Administration.[21] I accept the defendant’s submission that the plaintiff has not discharged its onus of establishing that the offsetting claim is genuine. It was only after the defendant had issued the statutory demand that the plaintiff’s lawyers made a formal demand for the return of the TT Gate. This suggests that the ‘offsetting claim’ is not genuine and the subsequent steps a contrivance to give weight to an unmeritorious claim. Since the service of the statutory demand, the plaintiff commenced a Magistrates’ Court proceeding against the defendant on 9 January 2015 in relation to the dispute, seeking $20,746 plus costs. I do not consider that the filing of such claim provides any gravitas to the contention that there is an offsetting claim.
[21]At [71].
Since I hold that the plaintiff does not have an offsetting claim, I need not determine the whether the value of the offsetting claim should be no more than $4,000.
Abuse of process as ‘some other reason’ to set aside the demand
The plaintiff submits that the defendant, by serving the statutory demand and later failing to withdraw the same, engaged in an abuse of process for the following reasons:
a. The defendant was aware that the plaintiff disputed each of the debts claimed in the demand;
b. The parties dispute the issues from which potential offsetting claims arise; and
c. The plaintiff’s solicitors raised the issues in points a. and b. above with the defendant’s solicitors via email and post one week after the plaintiff received the statutory demand.
Section 459J of the Act provides as follows:
Setting aside demand on other grounds
(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
…
(b) there is some other reason why the demand should be set aside.
…
I reject the plaintiff’s grounds for submitting that the plaintiff engaged in an abuse of process by serving the demand. Olney J in Hoare Bros v Deputy Commissioner of Taxation, Olney J said that:
The “other reason” [in s 459J of the Act] … could hardly have been intended to refer to a genuine dispute between the company and the person making the demand about the existence or amount of the debt.[22]
[22](1995) 16 ACSR 213, 219.
The plaintiff also submits that the debts claimed in the statutory demand should be pursued in the Magistrates’ Court proceeding, but I need not make a determination on that particular submission.
Order
The Court orders that:
a. Pursuant to s 459H(5) of the Act the admitted amount is $7,688.39.
b. The period for compliance with the demand as so varied be extended to 2 October 2015.
c. The plaintiff pay the defendant’s costs, including reserved costs, on a standard basis.
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