Ansett Resources and Industries Pty Ltd v Wavenet International Ltd - [2009] WASC 181

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ANSETT RESOURCES & INDUSTRIES PTY LTD -v- WAVENET INTERNATIONAL LTD [2009] WASC 181

CORAM: MASTER SANDERSON

HEARD: 19 MAY & 3 JUNE 2009

DELIVERED : 26 JUNE 2009

FILE NO/S: COR 40 of 2009

BETWEEN: ANSETT RESOURCES & INDUSTRIES PTY LTD (ACN 116 913 663)
Plaintiff
AND
WAVENET INTERNATIONAL LTD (ACN 087 139 428)
Defendant

Catchwords:

Corporations law - Application to set aside statutory demand - Claim of genuine dispute as to debt subject of demand - Turns on own facts

Legislation:

Nil

Result:

Demand set aside

Category: B

Representation:

Counsel:

Plaintiff: Mr D K Skender
Defendant: Mr P A Tottle

Solicitors:

Plaintiff: McKenzie Moncrieff Lawyers
Defendant: Tottle Partners

Case(s) referred to in judgment(s):

Bentley v Nelson [1963] WAR 89
McDermott v Black (1940) 63 CLR 161
Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11

MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. It is the plaintiff's position that there is a genuine dispute about the debt the subject of the demand. While such arguments are not unusual this case does raise an evidentiary issue which is unique. Before dealing with that issue I should set out the plaintiff's position.
In support of the application the plaintiff relies on two affidavits of Terence John Byrt, the first sworn 27 February 2009 and the second sworn 13 May 2009. The plaintiff also relies on an affidavit of Haylie Jayne Pepper sworn 14 May 2009. Mr Byrt's first affidavit has attachment TJB2, a copy of the statutory demand. The demand is for an amount of $2,209,979.76. In the schedule to the demand under the heading 'Description of the Debt' there appears the following:
Moneys owing by the Company to the Creditor under an agreement recorded in a letter from the Creditor's solicitors, Steinepreis Paganin, to T Byrt and the Company dated 13 November 2008 and varied by the letter from Steinepreis Paganin to T Byrt and the Company dated 28 November 2008. The amount of the debt comprises the total of the principal amounts referred to in Tables A, B and C below, and the interest on the principal amounts calculated in the manner set out in Tables A, B and C below.
There then appears the three tables referred to and when the amounts referred to in these tables are totalled up the amount of the debt the subject of the statutory demand is reached. So it is clear that the alleged debt is said to arise out of two letters sent by the defendant's solicitors to Mr Byrt and the company in November 2008.
Mr Byrt in his first affidavit sets out the background in this way. On or about 27 June 2008 the plaintiff, the defendant, Trident Capital Pty Ltd (Trident), Wave Connect Pty Ltd (Wave Connect) and Mr Byrt in his personal capacity entered into an agreement pursuant to which the plaintiff and Mr Byrt agreed to sell to Wave Connect certain mining tenements in Queensland for a consideration of $4 million plus goods and services tax. A copy of this agreement appears as attachment TJB3. This sale agreement was varied by a Deed of Variation of Sale Agreement between the parties dated on or about 11 August 2008. A copy of that variation appears as attachment TJB4 to Mr Byrt's first affidavit. Throughout the argument the sale agreement of 27 June 2008 and the variation were referred to collectively as the 'sale agreement'. I will adopt that description.
The sale agreement recites in recital A that Mr Byrt and the plaintiff together held 100% of the beneficial and registered interests in the property sold. This property was mining tenements (tenements). The definition of tenements described the property as 'tenements held 100% by both Byrt and [the plaintiff]'. By cl 5.1 of the sale agreement Mr Byrt and the plaintiff agreed to sell all of their respective rights, titles and interests in the tenements to Wave Connect.
The sale agreement did not indicate the respective rights and interests of Mr Byrt and the plaintiff in the tenements. It was the plaintiff's position that it was open to infer that Mr Byrt beneficially owned such of the property sold which was registered in his name. Mr Byrt had registered in his name three of the five tenements. The other two tenements were registered in the name of the plaintiff.
Pursuant to the sale agreement no money was payable to the plaintiff. Mr Byrt was to receive on or before 28 June 2008, initially at least, a deposit of $1 million. This was payable pursuant to cl 3.1(1) of the sale agreement. On 11 August 2008 Mr Byrt was to receive a further $1 million pursuant to cl 5.4(a) of the sale agreement. At settlement Mr Byrt was to be paid $1 million less interest and costs pursuant to cl 5.4(b) of the sale agreement on the basis that the two payments of $1 million were to be regarded as a loan in the event shareholder approval was not obtained by the defendant to the transaction. At settlement Wave Connect was to receive $1 million pursuant to cl 5(c) of the sale agreement.
Two million dollars was actually paid by the defendant to Mr Byrt. No money was paid to the plaintiff. Of the first $1 million paid to Mr Byrt $300,000 was expressed to be and acknowledged by the defendant and Mr Byrt to be a loan by the defendant to Mr Byrt. It was repayable only if a condition precedent to the settlement of the sale agreement - that is, approval by the shareholders of the defendant - was not fulfilled. The second payment of $1 million was all said to be a loan - again repayable if shareholder approval was not forthcoming.
The defendant purported to terminate the sale agreement on 18 September 2008. A copy of the letter purporting to terminate the loan agreement is to be found as annexure TJB5 to Mr Byrt's first affidavit. It is the plaintiff's case that the defendant had no grounds for terminating the agreement. This submission needs to be explored a little further.
The defendant alleged that it had the right to terminate the sale agreement based on certain representations concerning a coal resource on the tenements sold allegedly made by a Mr Adam Sierakowski, an officer of Trident. Mr Sierakowski is not an officer of the plaintiff. The defendant alleges that Mr Sierakowski was acting as the agent of Mr Byrt and the plaintiff.
The allegations are denied. The basis of this denial is set out in par 17 of Mr Byrt's first affidavit. Without going into detail it is enough if I say that Mr Byrt disputes that Mr Sierakowski was the plaintiff's agent. Mr Byrt says the plaintiff did not know of the alleged representations until after the sale agreement was entered into. Further, the sale agreement by cl 24 had an 'entire agreement provision' to the effect that the sale agreement itself comprised the entire agreement between the parties and no earlier agreement, understanding or representation was to have any effect from the date of the sale agreement. Without in any way purporting to decide this issue it is clear from Mr Byrt's evidence that it is arguable that the purported termination of the sale agreement was ineffective.
Be that as it may as a result of the letter the plaintiff, Mr Byrt and the defendant were in dispute. They attempted to resolve the matter on a without prejudice basis. During the course of these negotiations two letters dated 13 and 18 November 2008 which are referred to in the statutory demand were sent direct by the defendant's solicitors to Mr Byrt. The two letters were not attached to either of Mr Byrt's two affidavits. It was said that they were headed 'without prejudice' and as they were part of settlement negotiations they were privileged.
In answer to the plaintiff's application the defendant filed an affidavit of Michael Petrus Hendriks sworn 3 April 2009. In the first seven paragraphs of that affidavit Mr Hendriks identifies the parties and confirms the two payments made to Mr Byrt. He also confirms the purported termination of the sale agreement by letter dated 18 September 2008.
The rest of Mr Hendriks' affidavit is concerned with negotiations which took place with Mr Byrt and which on Mr Hendriks' evidence resulted in settlement of the dispute. Counsel for the plaintiff objected to the whole of Mr Hendriks' affidavit. It was his submission that as it detailed without prejudice negotiations the evidence was privileged from disclosure unless both parties waived that privilege. The plaintiff and Mr Byrt would not waive the privilege and therefore the affidavit ought be excluded. The two letters of November 2008 referred to in the statutory demand appear as attachments MPH6 and MPH8 to Mr Hendriks' affidavit.
A succinct statement of the principles relating to without prejudice negotiations and when evidence of them will be admissible is to be found in the judgment of McLure J in Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11. Her Honour said at [91] ‑ [95]:
Statements made without prejudice in an attempt to settle a dispute or action are privileged. Without prejudice privilege is a joint privilege and thus cannot be waived without the consent of the negotiating parties. The mere fact that a document is or is not marked 'without prejudice' is not decisive. The test is whether the communication was part of a genuine attempt to settle a dispute: Rodgers v Rodgers (1964) 114 CLR 608 at 614. If so, the whole course of the negotiations is privileged: South Shropshire District Council v Amos [1987] 1 All ER 340.
A binding contract brought into existence as a result of without prejudice negotiations is not protected by the privilege. Although the resulting contract is not privileged, the negotiations leading to the agreement remain privileged: Biala Pty Ltd v Mallina Holdings Ltd (1990) WAR 174 at 180; Bentley v Nelson [1963] WAR 89 at 93.
However, without prejudice negotiations leading to an agreement can be considered where there is a dispute as to whether or not an agreement to settle was made: Tomlin v Standard Telephones & Cables Ltd [1969] 1 WLR 1378; Unilever Plc v Procter & Gamble Co [2000] 1 WLR 2436 at 2444.
The authorities establish that the without prejudice rule is not absolute and resort may be had to without prejudice material for a variety of reasons when the justice of the case requires it: Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 per Lord Griffiths at 1300.
Thus, without prejudice negotiations may be 'pleaded into evidence' in such a way that the privilege is no longer available, by analogy with the rule concerning legal professional privilege: Western Australia v Southern Equities Corporation Ltd (in liq) (1996) 142 ALR 597 at 601‑602. The principle is not confined to the case where the party seeking to assert privilege raises a positive case: Data Access Corporation v Powerflex Services Pty Ltd (1994) AIPC 91-112.
Her Honour then went on to point out that the contents of without prejudice communications was an issue in the case. Her Honour then said at [97]:
Thus, the focus on whether there was a settlement agreement pursuant to which the respondents consented to the original works resulted from the way the parties pleaded their cases. That in turn affected what was relevant and admissible to prove the agreement and its terms. The appellant claimed that the only contractual document was the letter of 27 April 1999 and that evidence of prior (and subsequent) communications as an aid to construction of the agreement was inadmissible. The appellant's submissions proceeded on the false premise that the letter on 27 April was an agreement in writing to which the parole evidence rule applied. The 27 April letter is not and does not purport to be the agreement. The letter refers to agreements and consents previously reached and given. Whether there was an agreement and if so its terms can only be resolved by reference to the chain of correspondence. Further, it would be unfair and unjust to attempt to interpret the letter of 27 April 1999 in a vacuum without reference to the communications preceding it. The without prejudice communications are directly relevant on the pleadings and the justice of the case required that they be admitted. The same analysis is equally applicable to the question whether the respondents had given non-contractual consent to the Improvements.
In this case of course there are no pleadings. That gives rise to the question of by reference to what is it to be determined whether all or part of the without prejudice negotiations and the correspondence which form part of those negotiations are to be admitted into evidence. It is always to be borne in mind that what I am to determine is whether there is a genuine dispute in relation to the debt. If I were to conclude there was a genuine dispute then quite possible at some stage in the future a court would have to determine one way or another whether there was a settlement of the dispute as a consequence of the without prejudice negotiations. As part of making that final determination the court would have to decide whether the November letters said to comprise the agreement were admissible and whether evidence of the surrounding without prejudice negotiations were admissible. In resolving this present application I need to ensure that so far as possible I am not making a decision on the admissibility of evidence in such a way as to usurp the function of the court which has eventually to decide any issues between the parties.
In determining what if any part of the without prejudice negotiations are to be admitted some assistance is gained from the decision in Bentley v Nelson [1963] WAR 89, and referred to in her Honour's judgment. The facts in that case taken from the headnote were as follows:
The respondents were the lessees of hotel premises owned by the appellant. Disputes arose between them.
The appellant purported to re‑enter into possession, and the respondents resisted. Negotiations at the hotel then took place between the solicitors for the parties and a document headed 'Without Prejudice' was prepared wherein it was agreed that upon conditions therein set out the appellant's agent could have the right to enter upon the premises pending the matters in dispute being determined by a judge of the court.
In an affidavit in support of an ex parte application on behalf of the respondents seeking to restrain the appellant from entering onto the premises no mention was made of the 'Without Prejudice' agreement, although the existence of it was disclosed to the chambers judge without its contents being made known to him. That judge granted an ex parte order for three days with liberty to apply for an extension. Upon the motion to extend the existence of the 'Without Prejudice' agreement was made known to the then chambers judge and its full contents disclosed to him. The injunction was continued until trial. The appellant appealed against both orders.
The appeal was successful. The Full Court held the 'without prejudice' agreement should have been disclosed in its entirety to the chambers judge when the ex parte application was before him and as it was not the injunctions should be discharged. In Bentley v Nelson there was no dispute but that a concluded agreement had been reached. That agreement was reduced to writing and was signed by the solicitors for the parties. Here it is submitted that the November letters do not constitute an agreement and there is a genuine dispute on this issue. In my view that question cannot be resolved without reference to the two letters. According to the schedule to the statutory demand it is these two letters that constitute the contract. In the circumstances the two letters ought be admitted into evidence. But I am not satisfied that the rest of Mr Hendriks' affidavit should be admitted into evidence. It relates to the without prejudice negotiations which background the letter and the alleged agreement. In making that ruling I am not purporting to determine this question once and for all. If this matter were to go to another court the admissibility or otherwise of the without prejudice negotiations would depend upon many factors including the way the parties cases were pleaded. But all of that is for another day. I am satisfied that in this case the two letters in question ought be admitted into evidence. Otherwise all of Mr Hendriks' affidavit from par 9 onwards is excluded.
Because of the importance of these two letters I will quote them in full. Both letters were from the plaintiff's solicitors Steinepreis Paganin. Both were addressed to Mr Byrt and the plaintiff. The first letter of 13 November 2008 was in the following terms:
Dear Sir
SALE AGREEMENT - WAVENET INTERNATIONAL LIMITED
We act for Wavenet International Limited (Company) and refer to our letter dated 18 September 2008 providing notice of termination of the Sale Agreement previously entered into between the Company, yourself, Ansett Industries and Resources Pty Ltd (Ansett) and Trident Capital Pty Ltd (Trident Capital).
We also refer to recent discussions held between you, Mr Mike Hendriks, director of the Company and Mr Clive Triplett, director of Ansett in relation to the progress made by you and Ansett in obtaining finance to fund the repayment of the amounts owing to our client under the terminated Sale Agreement.
As a result of these discussions, we provide confirmation of the following agreed outstanding amounts to be repaid to the Company:
(a)$1,000,000 (as advanced on 27 June 2008) due for repayment on 18 September 2008 (being the date of the notice of termination of the Sale Agreement), plus interest at the rate of 12% p.a. capitalised on a monthly basis in arrears from 18 September 2008 to the date of repayment.
(b)$70,000 (as paid in July 2008) due for repayment on 18 September 2008 (being the date of the notice of termination of the Sale Agreement), plus interest at the rate of 12% p.a. capitalised on a monthly basis in arrears from 18 September 2008 to the date of repayment; and
(c)$1,000,000 (as advanced on 15 August 2008) due for repayment on 25 September 2008 (being 7 days after the date of the notice of termination of the Sale Agreement), plus interest at the rate of 18% p.a. capitalised on a monthly basis in arrears from 15 August 2008 to the date of repayment.
If the outstanding amounts are not repaid in full by 5.00 pm (WDST) on 1 December 2008, the Company will have no alternative but to commence court proceedings against you, Ansett and its directors and also Trident Capital to recover its money and also to recover compensation for additional loss and damage our client will suffer.
Please acknowledge acceptance of the amounts outstanding and payable to the Company and the time period in which to provide these payments as set out in this letter by counter‑signing a copy of this letter and returning to us on facsimile number +61 8 9321 4333 or the Company on facsimile number +61 8 9388 6456 by 5.00 pm (WDST) on 17 November 2008.
If you have any queries in relation to this matter, please contact Peter Wall or Rhys Waldron.
Yours faithfully,
STEINEPREIS PAGANIN
At the foot of this letter there was a space for Mr Byrt to sign both on his own behalf and on behalf of the defendant. This he did. The date appearing next to Mr Byrt's signature is 17 November 2008.
The second letter is dated 28 November 2008. Again it is on the letterhead of Steinepreis Paganin. It reads as follows:
Dear Sir
SALE AGREEMENT - WAVENET INTERNATIONAL LIMITED
We refer to our letter dated 13 November 2008 (Letter) and subsequent discussions between you, Mr Mike Hendriks, director of Wavenet International Limited (Company) and Mr Clive Triplett, director of Ansett Resources and Industries Pty Ltd (Ansett) in relation to the progress made by you and Ansett in obtaining finance to fund the repayment of the amounts owing to our client under the terminated Sale Agreement.
As a result of these discussions, the Company has agreed to provide an extension to the deadline stated in the Letter in relation to repayment of the outstanding amounts referred to below. The extension of time is conditional upon:
(a)the Company being satisfied (in its sole and absolute discretion) that the assets of Byrt Holdings (ACN 126 350 874) (Byrt Holdings) are adequate to cover the outstanding amounts owing to the Company; and
(b)you procuring that Byrt Holdings executes, or arranges for the execution of, all relevant documentation (Security Documents) to allow the Company to register a fixed and floating charge against Byrt Holdings to secure the outstanding amounts referred to below by 5.00 pm (WDST) on 5 December 2008,
(together the Conditions).
It is agreed the outstanding amounts to be repaid to the Company are as follows:
(a)$1,000,000 (as advanced on 27 June 2008) due for repayment on 18 September 2008 (being the date of the notice of termination of the Sale Agreement), plus interest at the rate of 12% p.a. capitalised on a monthly basis in arrears from 18 September 2008 to the date of repayment;
(b)$70,000 (as paid in July 2008) due for repayment on 18 September 2008 (being the date of the notice of termination of the Sale Agreement), plus interest at the rate of 12% p.a. capitalised on a monthly basis in arrears from 18 September 2008 to the date of repayment;
(c)$1,000,000 (as advanced on 15 August 2008) due for repayment on 25 September 2008 (being 7 days after the date of the notice of termination of the Sale Agreement), plus interest at the rate of 18% p.a. capitalised on a monthly basis in arrears from 15 August 2008 to the date of repayment; and
(d)legal expenses incurred by the Company in relation to recovery of the outstanding amounts described in this letter from and including the letter dated 13 November 2008 until the date of repayment.
If the Conditions are not satisfied by 5.00 pm (WDST) on 5 December 2008, or such later date as notified to you in writing by the Company, the Company will have no alternative but to commence court proceedings against you, Ansett and its directors and also Trident Capital Pty Ltd to recover its money and also to recover compensation for additional loss and damage our client will suffer.
Alternatively, if the Conditions are satisfied by the due date, but the outstanding amounts are not repaid in full by 5.00 pm (WDST) on 30 January 2009, the Company will have no alternative but to:
(a)enforce its rights under the Security Documents; and/or
(b)commence court proceedings against you, Ansett, and its directors and also Trident Capital to recover its money and also to recover compensation for additional loss and damage our client will suffer.
Please acknowledge acceptance of the amounts outstanding and payable to the Company, the obligations with respect to the Security Documents and the time period in which to satisfy the obligations set out in this letter by counter‑signing a copy of this letter and returning to us on facsimile number +61 8 9321 4333 or the Company on facsimile number +61 8 9388 6456 by 5.00 pm (WDST) on 28 November 2008.
If you have any queries in relation to this matter, please contact Peter Wall or Rhys Waldron.
Yours faithfully,
STEINEPREIS PAGANIN
Again, there was a place for Mr Byrt to sign on his own behalf an on behalf of the defendant. Mr Byrt did sign although this time he did not fill in the date.

The question then is whether or not these two letters constitute a binding agreement between the plaintiff and the defendant. It is important to note that the question is not whether there was a binding agreement between the defendant and Mr Byrt. The question is whether or not there was an agreement between the plaintiff and the defendant.
At this point the defendant encounters a difficulty. It is common ground that payments made under the sale agreement were made to Mr Byrt. How then does the plaintiff become liable to repay any amount to the defendant? There is nothing in the letters themselves which answers that question. It was submitted by counsel for the defendant that it was implicit in the letters that the consideration for the plaintiff agreeing to repay the defendant was the defendant's forbearance to sue Mr Byrt. While it might be arguable that this is the proper interpretation of the letters it is not so obvious that it can be said there is not a genuine dispute on this issue. That I think is sufficient to dispose of this application. There is a genuine dispute as to whether or not the plaintiff is liable to the defendant based upon the November letters. There are other difficulties with these two letters all of which were dealt with by counsel for the plaintiff in his written and oral submissions. I do not need to go through these submissions in detail. It is sufficient if I say that I accept that even putting the most positive interpretation on these two letters so far as the defendant is concerned there remains a real doubt as to whether or not a contract was concluded and what the terms of that contract might be.
As an alternative argument counsel for the plaintiff submitted that the two letters amounted to an accord executory. In support of this submission counsel referred to the decision of Dixon J in McDermott v Black (1940) 63 CLR 161 where his Honour said:
The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim. The distinction between an accord executory and an accord and satisfaction remains as valid and as important as ever. An accord executory neither extinguishes the old cause of action nor affords a new one (183 ‑ 184).
Without taking this submission any further and analysing what was a detailed exposition of the applicable principles it is sufficient if I say it is at least arguable that the two letters in this case constitute an accord executory. That being so it is arguable that those two letters could not found a claim for a debt as set out in the statutory demand. There is a genuine dispute on that question. This is a further reason why the demand ought be set aside.
In summary then I would set aside the statutory demand. I will hear the parties as to the form of orders and as to costs.