Apex Minerals Nl v Ashley
[2012] WASC 411
•7 NOVEMBER 2012
APEX MINERALS NL -v- ASHLEY [2012] WASC 411
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 411 | |
| Case No: | COR:113/2012 | 15 OCTOBER 2012 | |
| Coram: | MASTER SANDERSON | 7/11/12 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | APEX MINERALS NL MARK JOHN ASHLEY |
Catchwords: | Corporations law Application to set aside statutory demand Turns on own facts |
Legislation: | Nil |
Case References: | Hoare Bros Pty Ltd v Deputy Federal Commissioner of Taxation (1995) 16 ACSR 213 Wobelea Pty Ltd v Deputy Commissioner of Taxation (1996) 20 ACSR 436 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
MARK JOHN ASHLEY
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr S J Davis
Defendant : Mr P G McGowan
Solicitors:
Plaintiff : Allion Legal
Defendant : Karp Steedman Ross-Adjie
Case(s) referred to in judgment(s):
Hoare Bros Pty Ltd v Deputy Federal Commissioner of Taxation (1995) 16 ACSR 213
Wobelea Pty Ltd v Deputy Commissioner of Taxation (1996) 20 ACSR 436
(Page 3)
1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. A copy of the demand appears as annexure MS2 to the affidavit of Matthew Richard Sheldrick sworn 18 July 2012 and filed in support of the application. The amount of the demand is $497,592. In the schedule to the demand under the heading 'Description of the Debt' the following appears:
By a deed of termination, settlement and release dated 24 February 2012 (Deed) made between the Company and the Creditor, the Creditor agreed to pay the sum of approximately $1,272,000 (before tax) (Settlement Sum) to the creditor.
A copy of the Deed is annexed to the Affidavit.
The Settlement Sum has been partly, but not fully, paid by the Company. As at 25 June 2012, the Creditor had received payments from the Company totalling $106,924.
The Company and the Creditor have also agreed that $250,000 of the Settlement Sum shall be set off against the Creditor's participation in a recent rights issue by the Company.
After deduction of tax and other deductions and payments made by the Company to the Creditor, the Debt owed by the Company to the Creditor (as at 25 June 2012) is $497,592.
2 As is required by the Corporations Act 2001 (Cth) an affidavit accompanies the statutory demand. The affidavit was sworn by the defendant on 25 June 2012. The affidavit goes into rather more detail than is generally the case with affidavits of this kind and given the way the plaintiff put its case it is worth looking at it carefully.
3 Paragraphs 1 - 3 of the affidavit deal with the deed. In par 2 the way in which the sum of $1,272,000 was calculated is set out. That is taken straight from the deed. Paragraph 2 also refers to an 'Entitlement Offer'. This refers to a renounceable rights issue which was to be undertaken by the plaintiff. It is clear the payments to be made to the plaintiff would be made once funds had been raised pursuant to the rights issue.
4 Paragraphs 4 - 5 refer to an announcement by the plaintiff to the Australian Stock Exchange that the rights issue had been successfully completed. Based upon the terms of the deed the defendant says he was entitled to be paid on or before 19 April 2012.
(Page 4)
5 Paragraphs 6 - 8 detail how the component of the sum in the deed for unpaid salary was calculated and also shows by reference to a letter from a firm of accountants what tax was to be paid on the retirement sum.
6 In pars 9 - 10 the defendant says he participated in the rights issue so that he was in effect paid $250,000 in shares - that is to say notionally he put $250,000 in the rights issue, this amount being deducted from his entitlement under the deed. The defendant then received shares in the plaintiff.
7 In par 11 the defendant details a payment of $106,923.90 that he was paid pursuant to the deed. After allowing for tax the defendant demonstrates what he says is owed. The remaining four paragraphs of the affidavit detail the efforts the defendant has taken to recover the amount he says he is owed. He swears the amount of the statutory demand is due and payable by the debtor company.
8 In the deed the 'Settlement Sum' as defined is made up of four components. They are:
(1) eligible termination payment - $720,000;
(2) accrued annual leave payable in accordance with the Directors Executive Services Contract - $79,000;
(3) additional annual leave payable for time in lieu (rostered days off) as agreed by the Board - $233,000;
(4) unpaid salary for the period 1 December through to close of the Entitlement Offer (estimated) $240,000.
9 The second and the fourth components of the settlement sum the plaintiff concedes are owing - subject to deduction of tax and payment of superannuation levy. It is in relation to the first and third components of the settlement sum the plaintiff says there is a genuine dispute. The plaintiff puts the position in this way.
10 Under cl 2 of the deed the defendant agreed to resign as a director of the plaintiff and each of its subsidiaries and the parties agreed to terminate the 'Employment Agreement'. This Employment Agreement was entered into between them on or about 13 April 2006 and the deed envisages payment of the settlement sum upon resignation of the defendant as a director.
(Page 5)
11 Under the terms of the Employment Agreement it may be terminated at any time by either party giving 12 months' notice to the other. However the plaintiff has the option in lieu of part or all of the notice period to pay the defendant an amount equal to the proportion of the defendant's total remuneration package at the time at which notice is given which corresponds to the period for which notice is not given. The eligible termination payment of $720,000 was intended to constitute payment in lieu of 12 months' notice. It would seem the sum of $720,000 represented 100% of the defendant's total remuneration package (inclusive of superannuation) as at November 2011.
12 Payments to directors and other company officers upon their retirement from managerial or executive office, or position of employment or 'termination payments' are regulated by div 2 of pt 2D.2 of the Corporations Act. Amendments to this part were introduced by pt 1 of sch 1 of the Corporations Amendment (Improving Accountability on Termination Payments) Act 2009 (Cth) (the Amending Act). Part 3(1) of the Amending Act provides:
The amendments made by Part 1 apply in relation to a retirement from an office, or position of employment, held under:
(a) an agreement entered into; or
(b) an agreement renewed or extended; or
(c) an agreement, for which a variation of a condition of the agreement happens;
on or after the commencement of that Part.
13 Part 1 of the Amending Act commenced on 24 November 2009. The Employment Agreement was entered into on 13 April 2006 for an initial term of three years. However the appointment was to continue from the expiration of that term until termination. The plaintiff does not argue the parties entered into a new Employment Agreement post 24 November 2009. Rather it is said there was a variation of the Employment Agreement such as would bring it under the rubric of the Amending Act.
14 A copy of the Employment Agreement appears as annexure MS4 to the affidavit of Mr Sheldrick. The plaintiff alleges there were variations to cl 4.1, cl 4.2 and cl 4.3 all of which appear under the heading 'Remuneration'. Dealing first with cl 4.1 that appears under the sub-heading 'Package'. By cl 4.1(a) the defendant would receive a minimum remuneration of $300,000 per annum base salary plus statutory
(Page 6)
- superannuation. On 7 December 2009 Mr Kim Robinson then, non-executive chairman of the plaintiff, wrote to the defendant informing him the board had approved two increases to his base salary:
(a) one immediate increase to $550,000 per annum including superannuation, backdated to 1 July 2009; and
(b) a further increase of the defendant's base salary component to $600,000 per annum from 31 March 2010 subject to certain conditions being met.
15 The plaintiff says first these salary increases constituted variations to cl 4.1(a) in that the defendant's salary was being very significantly increased. There is no merit in that submission. Under cl 4.1(b) the plaintiff undertook to review the defendant's salary annually. There is no limit in the clause as to what any increase might be made. The fact the increase was significant can hardly be seen as a variation of the contract.
16 Second it is said by the letter of 7 December 2009 the board was purporting to effect two reviews of the package at once, one to apply nine months after the other whereas cl 4.1(b) provided for one annual review. Once again that is a submission without merit. There was a review which looked backward and forward. That is not prevented by the terms of the Employment Agreement, and it does not amount to a variation of the contract.
17 On 3 December 2010 Mr Robinson again wrote to the defendant informing him the plaintiff had agreed to increase his base salary to $650,000 plus superannuation backdated to 1 July 2010 he was also to receive other benefits. These included a cash short-term incentive based on achievement of certain targets and a long-term incentive in the form of share options. This it is said amounted to a variation of the contract. In my view it was no such thing. What was anticipated under cl 4.1(b) was an annual review of the defendant's entitlements. What was done by the board was nothing more or less than fulfil their obligations. Another way of looking at the contract is to say it anticipated a variation of the defendant's package and that was built in to the terms of the Employment Agreement. There was no variation of the contract in the sense there was some novation or new arrangement entered into between the parties.
18 The plaintiff says pursuant to the review on 3 December 2010 the defendant would henceforth be entitled to a company car with an annual cost of $45,000. This it is said was a variation of the Employment Agreement because under cl 4.2 the plaintiff had been entitled to a car to
(Page 7)
- the value of $65,000. Once again it is difficult to see this as a variation of the contract. It is all part of the remuneration payable to the defendant. Perhaps there was a trade-off but there was no significant change in the relationship between the plaintiff and the defendant.
19 The same applies with respect to cl 4.3 of the Employment Agreement. That gives the plaintiff the entitlement to certain options. The plaintiff now says the introduction of the short and long-term incentives consequent upon the letter of 3 December 2010 amounts to a variation of the Employment Agreement. For the reasons I gave in relation to the motor vehicle I am not satisfied there is any argument available that this was a variation. It was part of a renegotiated salary package.
20 The plaintiff says consequent upon the Amending Act for it to comply with the terms of the deed it would need to seek shareholder approval. It can be accepted if there was a variation to the Employment Agreement this would be the case. But in my view it is not arguable there has been such a variation. Interestingly enough the plaintiff's present solicitors were of the same view prior to the parties entering into the deed. When the deed was contemplated both the plaintiff and the defendant took legal advice. The solicitors were in agreement - shareholder approval was not required. It was only after that advice was taken the deed was drawn and signed. It seems the plaintiff's solicitors have now recanted. In my view they were right in the first place and wrong now.
21 In relation to the third component of the settlement sum the arguments are much the same. The plaintiff says the defendant had no underlying entitlement to payment of this component under the Employment Agreement. As I understand the plaintiff's argument it is said this constitutes a variation to the Employment Agreement and is caught by the provisions of the Amending Act because it is a benefit given on retirement. In my view as there has been no variation to the contract the provisions of the Amending Act do not apply.
22 In reaching this conclusion I have determined there is no genuine dispute between the parties. There are any number of cases where the meaning of the phrase 'genuine dispute' has been considered. In this case there was no disagreement between the parties as to the applicable test. But it is clear the dispute must be 'genuine'. It is difficult to see that is the case here. What seems to have happened is that the management of the plaintiff changed perhaps because of a change of share ownership. The new management did not want to pay out the defendant. So they looked
(Page 8)
- around for any means they could find to manufacture a dispute which would allow them to resist a statutory demand. This is a case where there is a concocted or manufactured dispute not a genuine dispute.
23 There are three further grounds upon which the plaintiff seeks to set aside the statutory demand. First the plaintiff says it is unsure of what amount it was liable to pay the defendant because it was not sure how much tax should be withheld. The argument was developed in this way. Any payment to the defendant by the plaintiff pursuant to the Employment Agreement or the deed was subject to first withholding the correct amount of income tax in accordance with sch 1 to the Taxation Administration Act 1953 (Cth) and the appropriate withholding schedule. The plaintiff claims there is doubt as to how the amount of tax ought be calculated. Without going into details the amount to be withheld prior to 30 June 2012 was different to the amount to be withheld subsequent to 2012. The statutory demand was served on 27 June 2012. The plaintiff therefore says the amount it was to pay pursuant to the demand was uncertain and that constitutes some other reason why the demand ought be set aside under s 459J(1)(b) of the Corporations Act. See Hoare Bros Pty Ltd v Deputy Federal Commissioner of Taxation (1995) 16 ACSR 213; and Wobelea Pty Ltd v Deputy Commissioner of Taxation (1996) 20 ACSR 436.
24 When looking at s 459J the discretionary nature of the section needs to be borne in mind. As Olney J said in Hoare:
The general 'flavour' of section 459J is one of a section which gives the court a discretion to set aside a statutory demand when the justice of the case demands that a company which is otherwise likely to become deemed to be insolvent should be relieved of that possibility either completely or subject to it complying with conditions imposed pursuant to s 459M (219).
25 In this case the defendant went to some lengths to establish what tax needed to be retained. If the plaintiff had decided to make payment after 30 June 2012 it could easily have ascertained what different amount of tax was to be withheld. There is no injustice visited upon the plaintiff. Any doubts they had as to precisely what payment was to be made could have been simply resolved.
26 The second submission put by the plaintiff is it has an off-setting claim. This off-setting claim is said to arise in a number of different ways. For instance the plaintiff alleges the defendant breached his duty in relation to the rights issue. Without going into detail and without referring to all of the plaintiff's complaints it says there was a material
(Page 9)
- misstatement in the prospectus issued in relation to the rights issue. Counsel for the defendant maintained by reference to documents annexed to various affidavits there was no evidence of any misstatement. But even if there had been such a misstatement (and I am making no finding to that effect) any loss to the plaintiff is unquantified. The prospectus raised the amount of money it was intended to raise and no party has complained. So no quantification of any off-setting claim is possible. Indeed none has been attempted. There is no basis for setting aside the demand.
27 Finally it is said the plaintiff has an off-setting claim in relation to the car allowance paid to the defendant, a potential overpayment of expenses, payment to a company associated with the defendant's wife, payment for flights between Perth and Wiluna for the defendant's wife and insurance expenses. Some of these are quantified. But in my view there is nothing in the evidence which would justify a conclusion there are genuine off-setting claims. There is simply nothing to establish payments made to the plaintiff were not properly made. In the circumstances there is no warrant for varying the amount of the statutory demand.
28 The plaintiff's application will be dismissed. The plaintiff ought pay the defendant's costs of the application including the reserved costs.
2
3
1