Axs Access Management Pty Ltd -v- Stellec Pty Ltd - [2014] WASC 154

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: AXS ACCESS MANAGEMENT PTY LTD -v- STELLEC PTY LTD [2014] WASC 154

CORAM: MASTER SANDERSON

HEARD: 26 MARCH 2014

DELIVERED : 6 MAY 2014

FILE NO/S: COR 217 of 2013

BETWEEN: AXS ACCESS MANAGEMENT PTY LTD (ACN 126 708 736)
Plaintiff
AND
STELLEC PTY LTD (ACN 068 359 188)
Defendant

Catchwords:

Corporations Act 2001 (Cth) - Application to set aside statutory demand - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 459H(1)

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff: Mr B H Taylor
Defendant: Mr J G Kitto

Solicitors:

Plaintiff: Rockwell Olivier
Defendant: Kitto & Kitto

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

Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85

MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The application was supported by four affidavits. Two of these were sworn by Scott Vivian‑Williams; the first on 24 October 2013 and the second on 6 January 2014. There was an affidavit of Hsiang‑Wen Yang sworn 6 January 2014 and Janelle Helen Collins sworn 21 March 2014. The defendant relied on two affidavits. The first was an affidavit of Tracy Eldridge sworn 22 November 2013. The second was an affidavit of Clayton Ramsay sworn 17 March 2014.
A copy of the statutory demand appears as attachment SVW‑1 to Mr Vivian‑Williams' first affidavit. The amount claimed in the statutory demand is $175,000. In the schedule to the statutory demand under the heading 'Description of the debt' there appears the following:
The amount due and owing by the Company to the Creditor pursuant to a Contract for the Sale of Business, executed as an agreement by the Company on 8 February 2013, pursuant to which contract the Company was required to pay a deposit in the amount of $100,000 on 1 June 2013 and 12 instalment payments of $25,000 each on the first of each month thereafter.
The Company has failed to pay, by the date due, or at all:
(i)The deposit in the amount of $100,000; and
(ii)The $25,000 instalment payment due on 1 July 2013;
(iii)The $25,000 instalment payment due on 1 August 2013; and
(iv)The $25,000 instalment payment due on 1 September 2013.
The plaintiff said there was a genuine dispute as to the existence of the debt. They applied to have the statutory demand set aside under s 459H(1) of the Corporations Act 2001 (Cth). There was no dispute between the parties as to the applicable legal principles. It was agreed a 'genuine dispute' connotes a plausible contention which requires investigation: see Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 [44].
On 8 February 2013 the plaintiff entered into a contract to purchase the defendant's scaffolding business 'Workright Scaffolding'. A copy of that contract appears as attachment SVW‑4 to Mr Vivian‑Williams' first affidavit. The Workright business focused on the hiring of prefabricated scaffolding and associated labour to Perth builders. Clause f) in the 'Offer to Purchase' (attachment SVW‑3) makes it plain what the plaintiff was essentially purchasing was stock and plant. Nothing was allocated to goodwill. Annexure 'A' to the business sale agreement (page 39 of Mr Vivian‑Williams' first affidavit) lists all of the scaffolding equipment which was being purchased.
The plaintiff was to pay for the business by instalments. Once the agreement was entered into the plaintiff took the plant and equipment and effectively started to run the business. It has failed to pay the instalments as required.
The plaintiff's argument can be summarised in this way. The contract of sale contained the following clauses:
20.5The Vendor holds all material statutory licences, consents and authorisations necessary for the for the carrying on of the Business.
...
20.16Other than as disclosed to the Purchaser, all Stock, whether in hand, in transit or in bond, is of good and merchantable quality, fit for the purpose for which it is intended to be used and is capable of being sold or used in the ordinary course of the Business, in accordance with the Vendor's current price lists without rebate or allowance to a purchaser.
In his second affidavit Mr Vivian‑Williams says prior to the signing of the contract he had a meeting with two directors of the defendant, Mr Ramsay and Ms Eldridge. During the course of that meeting he was told Workright's scaffolding system had design approval and the drawings, specifications and approval of the Workright scaffolding system would be provided to the plaintiff. The fact of the meeting and what was said is confirmed in Ms Yang's affidavit (pars 5 ‑ 8). Although it is not entirely clear Ms Eldridge in her affidavit appears to contradict the evidence of Mr Vivian‑Williams and Ms Yang: see par 16. But for the purposes of this application it must be accepted the discussions took place as alleged by Mr Vivian‑Williams and Ms Yang.
The Occupational Safety and Health Regulations 1996 (WA) (the OSH Regulations) require Workright to have the design of its prefabricated scaffolding system registered before it can be supplied to customers for erection, installation or commission. The regulation is in the following terms:
4.2.Sch. 4.1 plant, design of to be registered etc.
(1)A person who manufactures, imports or supplies plant of a kind set out in Schedule 4.1 for erection, installation, commissioning or use at a workplace must ensure -
(a)that the design of the plant has been registered by the Commissioner or a regulatory authority; and
(b)that the registration is current; and
(c)that the plant is or has been manufactured in accordance with the current registered design; and
(d)while the plant is under the person’s control, that the design registration number issued by the Commissioner under regulation 4.10 or by a regulatory authority is within the vicinity of the plant and is readily accessible.
Penalty: the regulation 1.16 penalty.
(2)For the purposes of this regulation, a plant design is to be treated as being registered if -
(a)the Commissioner or a regulatory authority, as the case requires, has registered the design on the basis that there will be a modification; and
(b)the modification is in accordance with the specifications of the Commissioner or the regulatory authority.
Under reg 4.10(1) of the OSH Regulations if the Commissioner registers a prefabricated scaffolding system design the Commissioner is to issue a design registration number for the prefabricated scaffolding system design and provide the applicant with evidence of the registration of an approved form. Under reg 4.10(2) a person who sells or otherwise disposes of the prefabricated scaffolding system must give the person who acquires the prefabricated scaffolding system the design registration number of the prefabricated scaffolding system. A monetary penalty is imposed for failing to do so.
The plaintiff says at the time of entering into the contract it had no reason to doubt that Workright's scaffolding system had design approval and the defendant would provide it (the plaintiff) with the design approval. In fact a meeting took place at which Mr Vivian‑Williams and Ms Yang say they raised this issue with Ms Eldridge. They were assured by Ms Eldridge the design approval would be provided to the plaintiff. Ms Eldridge confirms a meeting took place between herself, Mr Vivian‑Williams and Ms Yang but at least by implication she says the question of certification was not discussed. Either way the plaintiff's version of events must be accepted.
The defendant has been unable to provide the plaintiff with a copy of the appropriate registration. This matter was listed and vacated on a number of occasions to allow the defendant to produce evidence of the registration. It has not done so. It would appear that no such registration exists.
Based upon these facts the plaintiff's position is so clear it hardly needs to be articulated. It says there has been a fraudulent misrepresentation by the defendant allowing it to rescind the contract, a step it has now taken. Alternatively, it says it would be entitled to relief under the Competition and Consumer Act 2010 (Cth) because the defendant has engaged in misleading and deceptive conduct. It was further submitted (in oral submissions but not in written submissions) that the contract may be illegal and void.
In submissions which can be best described as heroic counsel for the defendant pressed two points. First it was said the plaintiff continued to use the scaffolding and to run the business it acquired and it could not be heard to say that any lack of approvals was adversely affecting the plaintiff. That submission entirely ignores the complaints the plaintiff has made about the lack of approvals. If the contract is void or has been rescinded or some other form of relief is available to the plaintiff then the contract itself has or will come to an end. It may be the plaintiff will be liable to account to the defendant for any profits it made from the business during the time the plaintiff operated the business. But that will not alter the fact that the contract itself will come to an end. There is clearly a serious question to be tried as to whether that will be the outcome of any proceedings which might take place.
The second point goes to credibility and what might be called 'recent invention'. This is an argument which, in various guises, is frequently put in applications of this sort. In this case the defendant says the plaintiff never raised any issue about regulatory approvals prior to the issue of the statutory demand. Rather Mr Vivian‑Williams discussed with Ms Eldridge financial difficulties the plaintiff was having and the consequent failure to make instalment payments. In other words the plaintiff says at all times prior to the issue of the statutory demand the only issue between the parties was the desperate financial position of the plaintiff. It was only when the statutory demand was served and the plaintiff consulted its lawyers the regulatory issue was raised. It was submitted on behalf of the defendant no weight should be given to the plaintiff's evidence about the reasons for not making payment of the instalments.
The question which has to be answered in a case such as this is whether or not there is, at the time the application is heard, a genuine dispute. It may be of marginal relevance the dispute was not raised between the plaintiff and the defendant prior to the application to set aside the statutory demand. It is also true the court is not bound to unequivocally accept evidence from the plaintiff no matter how inherently improbable that evidence might be. Perhaps in a rare case it may be the failure to raise a point run at the hearing in prior discussions will tip evidence led by a plaintiff into the realm of being improbable. But generally speaking the fact what is said at the time of the hearing to be a genuine dispute was not raised in earlier negotiations or correspondence is of no moment. It is certainly of no moment in this case.
There is clearly a genuine dispute in this matter as to the validity of the contract between the plaintiff and the defendant. That being so the statutory demand ought be set aside. I will hear the parties as to the form of orders and as to costs.