Birallee Centre Pty Ltd v Gateway Directions Pty Ltd
[1996] FCA 1095
•13 DECEMBER 1996
CATCHWORDS
CORPORATIONS - winding up - application to set aside statutory demand - whether genuine dispute as to existence of debt.
Corporations Law 459G, 459H
Federal Court of Australia Act 1976 (Cth) s35A(5)
Scolaro's Concrete Construction Pty Ltd v Schiavello Commercial Interiors (Vic) Pty Ltd (unreported, Full Federal Court, 8 March 1996)
Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601
Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1994) 15 ACSR 347
Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37
BIRALLEE CENTRE PTY LTD v GATEWAY DIRECTIONS PTY LTD
No NG 3637 of 1995
CORAM: Branson J
PLACE: Sydney
DATE: 13 December 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 3637 of 1995
)
GENERAL DIVISION )
BETWEEN:
BIRALLEE CENTRE PTY LTD
Applicant
- and -
GATEWAY DIRECTIONS PTY LTD
Respondent
MINUTES OF ORDER
CORAM: Branson J
PLACE: Sydney
DATE: 13 December 1996
THE COURT ORDERS THAT:
The statutory demand herein is varied by:
(a)deleting from paragraph 1 thereof the figures
"$53,200.00" and inserting in their place the figures "$50,200.00; and
(b)deleting from the Schedule thereof the figures "$53,200.00" and inserting in their place the figures "$50,200.00.
The demand, as so varied, is declared to have had effect as from when the demand was served on the applicant.
Subject to paragraph 1 and 2 of this order the decision of the Registrar is confirmed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 3637 of 1995
)
GENERAL DIVISION )
BETWEEN:
BIRALLEE CENTRE PTY LTD
Applicant
- and -
GATEWAY DIRECTIONS PTY LTD
Respondent
REASONS FOR JUDGMENT
CORAM: Branson J
PLACE: Sydney
DATE: 13 December 1996
This is an application under s35A(5) of the Federal Court of Australia Act 1976 for review of a decision of a Registrar of the Court.
On 14 November 1995 the applicant applied to the Court pursuant to s459G of the Corporations Law for an order setting aside a statutory demand served on the company. By order dated 28 June 1996 Registrar Quinn dismissed the application with costs.
The applicant contends that there is a genuine dispute between the applicant and the respondent about the existence of the debt to which the statutory demand relates.
The "genuine dispute" between the parties relied upon by the applicant relates to the identity of the counterparty to the agreement or agreements pursuant to which the respondent claims the debt referred to in the statutory demand. The applicant asserts that it is a member of the "Fyna Group of Companies". It further asserts that it was not a party to the relevant agreements upon which the statutory demand is based, but that another member of the Fyna Group of Companies, namely Fyna Constructions (Vic) Pty Limited, was a party to such agreements.
The evidence discloses the following. James Soong ("Mr Soong") is a director of the applicant. He is not shown by the evidence before me to be a director of Fyna Constructions (Vic) Pty Limited or otherwise involved in its management. Claus Nielsen ("Mr Nielsen") was from early 1993 to 27 June 1995 the business manager of the applicant and of Fyna Constructions (Vic) Pty Limited.
The applicant is the owner of a property situated at Melrose Drive, Birallee Centre, Wodonga, Victoria. In 1992 the applicant decided to extend and to renovate a shopping centre on the property. It retained Hames Sharley Australia, architects, in respect of the extension and renovation of the shopping centre project ("the project").
The respondent trades under the business name S.P.A. Consulting Engineers. By letter dated 31 January, 1992 addressed to Hames Sharley Australia, the respondent submitted a fee proposal in respect of certain preliminary work concerning the electrical, fire and mechanical works for the project. The copy of this letter placed in evidence by the applicant contains the handwritten notation:
"10/11/92
Fees acceptable
Instructed Mr Fung
to go ahead
with this proposal
J Soong"
By letter dated 11 February 1992 signed "S J Fung (ARAIA) Project Architect", Hames Sharley Australia advised the respondent that "we are pleased to confirm that [your] fee has been accepted by our client Mr J Soong". A copy of this letter is shown to have been provided to "Mr J Soong, FYNA Group of Companies".
By letter dated 8 June 1993 addressed to "Fyna Constructions" at the street address of the applicant, and marked to the attention of Mr J Soong, the respondent submitted its "fee for the design, documentation and supervision of mechanical, electrical, hydraulics (excluding stormwater) and fire sprinkler services" for the project. By a letter dated 22 June 1993 addressed to Hames Sharley Australia the respondent provided a reassessment of the fee specified in its letter of 8 June 1993.
The response to the respondent's letters of 8 and 22 June 1993 respectively was provided by a letter dated 12 July 1993 on the letterhead of the applicant and signed for the applicant by "C Nielsen Business Manager". It is appropriate to set out the body of this letter in full:
"Re: Appointment as the Services Consultant for Birallee Park Redevelopment
We refer to your correspondence dated the 8th & 22nd June 1993 regarding the proposed fees for the total Design and Documentation for the project, Birallee Park Shopping Centre. We also acknowledge discussions held subsequent to those letters and hereby confirm your appointment as the Project Services Consultant.
The assistance rendered to date is appreciated and it is anticipated that the Documentation program nominated will be achieved. The fees as detailed below are accepted as the total fees payable in association with both the design, documentation associated with the project and the Coles Tenancy. The payment schedule is detailed below.
Fees Payable
Birallee Park Shopping Centre Extension $ 35,000
Coles Tenancy $ 16,000
We also note that should savings in excess of $20,000 be achieved with regard to the S.E.C.V. installations the benefit over and above the $20,000 would be shared equally between Birallee Centre Pty Ltd and S.P.A. Consulting Engineers.
Projected Payment Schedule
1. Payment No.1 27th August 1993 $ 10,000.00
2.Payment No.2 24th September 1993 $ 10,000.00
3.Payment No.3 29th October 1993 $ 10,000.00
4.Payment No.4 26th November 1993 $ 12,000.00
We trust that this is in accordance with our agreement. These payment projections are based upon the documentation and construction programs being achieved.
It is further noted that there is still an amount of $12,700 which is outstanding from works carried out under instruction in January 1993. We will endeavour to pay that amount as follows:
1.Payment No.1 16th July 1993 $ 4,000.00
2.Payment No.2 27th August 1993 $ 4,000.00
3.Payment No.3 24th September 1993 $ 4,700.00
Your assistance in this matter is appreciated and we look forward to successfully completing the Redevelopment of the Birallee Park Shopping Centre. We enclose a copy of the Design, Documentation and Construction Program provided by Hames Sharley for your information."
It is, of course, significant that by the above letter the applicant not only accepts certain fees as the fees to be payable to the respondent in relation to the project in "accordance with our agreement", it also acknowledges that an amount of $12,700 is outstanding which the applicant "will endeavour to pay" by a specified schedule.
By letter dated 20 July 1993, again addressed to "Fyna Constructions" at the street address of the applicant, but this time marked for the attention of Mr Claus Nielsen, the respondent responded to the applicant's letter of 12 July 1993. The first substantive paragraph of the letter is in the following terms:
"We thank you for our appointment to this project as Services Consultant. We are however, concerned about a number of items contained within your acceptance."
This letter then goes on to refer to a shortfall in the total of projected payments of $9,000 and to complain that the proposed payment schedule had the effect that the respondent would be financing its fees to a degree unacceptable to it. The letter proposed an alternative payment schedule. It indicated acceptance by the respondent of the payment schedule proposed by the applicant in its letter of 12 July 1993 for the payment of the respondent's January 1993 invoice.
By facsimile message dated 20 September 1993 sent to "Mr Claus Nielsen, Business Manager, Birallee Centre Pty Ltd" the respondent made complaint that the agreed schedule for the payment of the respondent's January 1993 invoice had not been met.
Almost a year later, by letter dated 6 September 1994 addressed to "Fyna Constructions Pty Ltd" at the street address of the applicant and marked for the attention of Mr Soong, the respondent indicated its preparedness to alter certain existing drawings for an additional fee of $6,000. The fee was offered subject to four specified conditions.
The response to the above letter was provided by a letter dated 18 October 1994 on the letterhead of Fyna Constructions (Vic) Pty Ltd. The letter indicated acceptance of the additional fee of $6,000 and proposed a time for the payment of the fee. The letter continued:
"The amounts outstanding, ie. $50,200.00 will be paid in two (2) equal instalments, the first at the end of December, 1994 and the second at the end of January, 1995. This is to fall in line with out draw downs on the project.
. . . . . .
You will find enclosed with this letter written advice from the Birallee Centre Pty Limited assigning full responsibility for the project to us ...".
The letter so enclosed is dated 5 October 1994. It is expressed to relate to the Birallee Park Shopping Centre Extension and Development and to have as its subject "Consultants". The body of the letter is in the following terms:
"Further to our letter of the 19th September, 1994 confirming your appointment as project manager for the above project, we wish to confirm the following:-
Birallee Centre Pty Ltd hereby authorises Fyna Constructions (Vic) Pty Ltd to take on the responsibility of liaison with existing and future consultants relative to the above project. Our letter of 19th September, 1994 confirms the current consultants for the project.
Birallee Centre Pty Ltd hereby authorises and agrees to Fyna Constructions (Vic) Pty Ltd negotiating both past and future requirements relative to consultants' performance for the above development.
Birallee Centre Pty Ltd hereby authorises Fyna Constructions (Vic) Pty Ltd to act as project managers both for the development and on behalf of Birallee Centre Pty Ltd."
By an invoice dated 15 September 1995 directed to "Birallee Centre Pty Ltd c/- Fyna Constructions" at the street address of the applicant, the respondent claimed $53,200 for work done on the project. The statutory demand in this matter claims payment of a debt of $53,200 said to be "[m]onies owing for professional services rendered during the period from in or about the month of January, 1995 to in or about the month of October, 1993".
The "genuine dispute" between the parties put forward by the applicant is a dispute as to whether the applicant or Fyna Constructions (Vic) Pty Ltd was the party with whom the respondent entered into relevant agreements to do work with respect to the project. The respondent has identified those agreements as an agreement of July 1993 as to a balance sum of $50,200 plus a further $3,000 being the balance of a sum of $6,000 payable under a variation of the July agreement effected in October 1994.
Mr Soong swore two affidavits in support of the application. By his first affidavit he gave evidence that the applicant retained the services of Fyna Constructions (Vic) Pty Limited to design and construct the new section of the Birallee shopping centre, and to undertake certain related tasks, and that the applicant did not authorise Fyna Constructions (Vic) Pty Limited to engage consultants or contractors on behalf of the applicant, nor did the applicant hold out Fyna Constructions (Vic) Pty Limited as entitled to do so. By his second affidavit Mr Soong gave evidence that in about July 1993 he instructed Mr Nielsen that Fyna Constructions (Vic) Pty Limited would be the company responsible for negotiating a contract with the respondent in respect of the Birallee shopping centre.
Mr Soong makes no reference in his affidavits to the letter dated 5 October 1994 from the applicant to Fyna Constructions (Vic) Pty Ltd, nor to the letter dated 12 July 1993 from the applicant to the respondent. No evidence, other than the above assertions made by Mr Soong in his affidavits, has been placed before the Court on behalf of the applicant of the alleged retainer between the applicant and Fyna Constructions (Vic) Pty Limited or as to its terms.
Part 5.4 of the Corporations Law, pursuant to which this application is brought, is concerned with the winding up of companies in insolvency. Its structure and operation were considered by Sheppard J in Scolaro's Concrete Construction Pty Ltd v Schiavello Commercial Interiors (Vic) Pty Ltd (unreported, Full Federal Court, 8 March 1996). His Honour pointed out that:
"Obviously enough, the policy of the legislature was to bring about a situation in which debtors owing money to companies could not unduly delay matters by putting on colourable defences to liquidated claims in courts of ordinary jurisdiction. Unless the debtor demonstrated that there was a genuine dispute about the claim the inevitable result would be a prima facie conclusion of insolvency if the amount of the demand were not paid. The public interest is served by these provisions because they tend to bring about a situation in which insolvent companies are either discouraged from or prevented from continuing to trade."
His Honour noted, as well, the other side of the coin. That is, the potential abuse, by persons claiming that a company owes them money, but knowing that there is a genuine dispute about the claim, of statutory provisions which allow prima facie evidence of insolvency to be established by proof of failure to comply with a notice served upon a company. His Honour went on:
"Courts dealing with applications under s459G need to be careful to see that their proceedings are not being abused by one party or the other. In some cases this
will be difficult to do, especially when it is likely that the evidence which is led in relation to a particular matter will be sketchy and may not represent the whole of the evidence that one or other party will eventually have available, particularly after discovery, in a full hearing."
Division 3 of Part 5.4 of the Corporations Law is a code concerning applications to set aside statutory demands (Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605). Section 459G authorises a company to apply to the Court for an order setting aside a statutory demand served on the company. Sections 459H and 459J set out the grounds upon which the Court may set aside a statutory demand. The ground invoked by the applicant in this case is that set out in s459H(1)(a), namely that the Court is satisfied that there "is a genuine dispute between the company and the respondent about the existence or the amount of a debt to which the demand relates".
Lindgren J reviewed the authorities with respect to the expression "a genuine dispute" within the meaning of s459H of the Corporations Law in Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1994) 15 ACSR 347 at 352-354. He noted that this Court has on a number of occasions referred with approval to the following passage from the reasons for judgment of Thomas J in Re Morris Catering (Australia) Pty Ltd at 605:
`The specified limits of the court's examination are the ascertainment of whether there is a "genuine dispute" or 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 ...'
His Honour further noted that in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39 Lockhart J expressed the position as follows:
`Certainly the court will not examine the merits of the dispute other than to see if there is in fact a genuine dispute. The notion of a "genuine dispute" in this context suggests ... that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. ... On the other hand the court must be careful, because if all an applicant has to do is to assert both a claim and some basis for it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect. Plainly that is not what the legislature intended by introducing this new regime.'
In the Rohalo Case Lindgren J considered an analogy between the requirements of s459H and those facing a creditor seeking summary judgment for the amount to be useful.
Bearing firmly in mind that it is not the role of this Court on this application to "treat the exercise as one involving the final determination of the rights and obligations of the parties in relation to the claim" (Scolaro's Concrete Construction Case per Sheppard J), I turn to consider the evidence before the Court.
It is undisputed that the applicant is the owner of the Birallee shopping centre and the moving force behind the project. Mr Soong, a director of the applicant, is shown by the evidence to be the individual who assumed principal responsibility with respect to the project. The respondent's fee proposal of 8 June 1993, although addressed to a non-existent entity "Fyna Constructions" was sent to the street address of the applicant and marked to the attention of Mr Soong. The respondent's letter reassessing its fee proposal of 8 June 1993 was forwarded to architects retained by the applicant. The response to the two letters concerning the respondent's fee proposal was provided by the applicant. By its letter of 12 July 1993 the applicant confirmed the respondent's appointment as the Project Services Consultant in respect of the project, indicated acceptance of fees specified in the letter, and acknowledged an earlier contractual obligation of the applicant to the respondent.
The significance of the letter of 12 July 1993 is, in my view in no way diminished by the fact that by letter dated 20 July 1993 the respondent again wrote to the non-existent entity "Fyna Constructions" querying the fees specified in the letter of 12 July 1993 and setting out an alternative payment schedule. The letter of 20 July 1993 is expressed to be "[f]urther to your letter dated 12 July", it was sent to the street address of the applicant and it is marked to the attention of the signatory of the applicant's letter of 12 July 1993. Complaint concerning failure by the applicant to comply with an undertaking set out in its letter of 12 July 1993 was made by the respondent unambiguously to the applicant.
Similarly, in my view, nothing in the letter dated 5 October 1994 from the applicant to Fyna Constructions (Vic) Pty Ltd diminishes the significance of the letter of 12 July 1993. The letter dated 5 October 1994 relates to matters remote in time from July 1993.
As is mentioned above, Mr Soong by his affidavit of 11 March 1996 deposes to having instructed Mr Nielsen in July 1993 that Fyna Constructions (Vic) Pty Limited would be the company responsible for negotiating a contract with the respondent in respect of the project. Even if one places to one side the inherent uncertainty of meaning of such instruction, particularly as Mr Soong is not shown by the evidence to have been a director of Fyna Constructions (Vic) Pty Limited or to have taken any part in its management, the correspondence in evidence before me suggests against any such instructions having been complied with. As mentioned above, Mr Soong has not by his affidavit evidence made any reference to the applicant's letter to the respondent of 12 July 1993. It is, in my view, a critical document.
I accept that an exercise such as this calls for caution so as to avoid possible injustice. I have sought to be cautious. I have, nonetheless, reached the conclusion that the applicant has failed to establish that there is a genuine dispute about the debt to the extent of the $50,200 claimed under the agreement of July 1993.
As to the sum of $3,000 claimed pursuant to an asserted variation effected in October 1994 of the earlier contract, the evidentiary picture is, in my view, less clear. Fyna Constructions (Vic) Pty Limited did play a significant role with respect to the acceptance of the respondent's proposed fee for alteration work to existing documentation at a time when it apparently held an appointment as project manager for the project. The nature of its authority as such project manager, as evidenced by the letter dated 5 October 1994 from the applicant to Fyna Constructions (Vic) Pty Ltd, is open to debate. In view of the need for caution in matters of this kind, I have concluded that the asserted dispute in respect of this aspect of the respondent's claim is not plainly vexatious or frivolous.
As I am thus satisfied that there is a genuine dispute between the applicant and the respondent about the amount of the debt to which the demand relates. I am required to calculate the substantiated amount of the demand in accordance with the formula set out in s459H(2) of the Corporations Law. The substantiated amount of the demand calculated in accordance with such formula is $50,200. This amount exceeds the statutory minimum amount of $2,000.
There will be an order pursuant to s459H(4) varying the demand to reflect the substantiated amount and declaring the demand to have had effect, as so varied, as from when the demand was served on the applicant.
Subject to the above, the decision of the Registrar is confirmed.
I will hear counsel as to costs.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Branson.
Associate:
Dated:
Counsel for the Applicant : Mr P. Walsh
Solicitors for the Applicant : Blackshaw Lindsay and LePage
Counsel for the Respondent : Mr J. Nolan
Solicitors for the Respondent : Webeck Farland Pender
Hearing Date : 22 November 1996
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