Clev-A-Garden Ltd v MCAD Pty Ltd
[2010] WASC 158
•1 JULY 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CLEV-A-GARDEN LTD -v- MCAD PTY LTD [2010] WASC 158
CORAM: ACTING MASTER CHAPMAN
HEARD: 15 APRIL 2010
DELIVERED : 1 JULY 2010
FILE NO/S: COR 246 of 2009
BETWEEN: CLEV-A-GARDEN LTD
Plaintiff
AND
MCAD PTY LTD
Respondent
FILE NO/S :COR 247 of 2009
BETWEEN :CLEV-A-GARDEN LTD
Plaintiff
AND
MARTIN COMPUTER AIDED DESIGN PTY LTD
Respondent
FILE NO/S :COR 248 of 2009
BETWEEN :CLEV-A-GARDEN LTD
Plaintiff
AND
MARTIN ORIENTAL CO LTD
Respondent
Catchwords:
Corporations - Statutory demands - Genuine dispute - Offsetting claim - Some other reason
Legislation:
Nil
Result:
Statutory demand set aside
Category: B
Representation:
COR 246 of 2009
Counsel:
Plaintiff: Mr R C Di Renzo
Respondent: Mr D W Thompson
Solicitors:
Plaintiff: Price Sierakowski
Respondent: Irdi Legal
COR 247 of 2009
Counsel:
Plaintiff: Mr R C Di Renzo
Respondent: Mr D W Thompson
Solicitors:
Plaintiff: Price Sierakowski
Respondent: Irdi Legal
COR 248 of 2009
Counsel:
Plaintiff: Mr R C Di Renzo
Respondent: Mr D W Thompson
Solicitors:
Plaintiff: Price Sierakowski
Respondent: Irdi Legal
Case(s) referred to in judgment(s):
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
John Shearer Ltd v Gehl Company (1995) 18 ACSR 780
Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743
Royal Premier Pty Ltd v Taleski [2001] WASCA 48
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
ACTING MASTER CHAPMAN: In COR 246 of 2009, the plaintiff by way of originating process filed on 21 December 2009 seeks to set aside a statutory demand served on 30 November 2009. Similar applications were filed in COR 247 & 248 of 2009.
The application is based on:
(1)a genuine dispute about the existence or amount of the debt the subject of the statutory demand (s 459H of the Corporations Act 2001 (Cth));
(2)an offsetting claim which exceeds the amount of the claim (s 459H(1)(b) and s 459H(5));
(3)some other reason (s 459J(1)(b)).
A supporting affidavit was filed with the application setting out evidence the plaintiff seeks to rely on. Further affidavits were filed outside this period.
Objection to an affidavit
At the outset counsel for the defendant took objection to the affidavit of Mr David Alexander James Copping sworn 21 December 2009 (the Copping 246 affidavit). He set out his objections in a schedule. The objections took counsel for the plaintiff by surprise. I gave the plaintiff leave to file further written submissions in relation to those objections which were filed on 24 April 2010.
I will deal with each objection. The first relates to pars 23 ‑ 35 and 37 ‑ 78. Mr Copping asserts he dealt with one company throughout the relationship which was Martin Computer Aided Design Pty Ltd. It is submitted therefore large portions of the affidavits are irrelevant because they simply do not address anything which happened with the companies which issued the statutory demands. Given the particular context in which the plaintiff alleges the business relationship existed, I consider these paragraphs have some relevance and would not strike them out on that basis.
I agree with the objection in relation to par 24 and would strike out that paragraph. In my view, the grounds of belief are adequately stated in pars 26 ‑ 27 and would not strike them out.
The words 'as they were contracted to do' in par 34 will be struck out. I would strike out the words 'contracted by CACPL' as appear in par 43 but otherwise consider pars 43 ‑ 44 adequate.
I would uphold the objection in relation to par 53 and would strike out the first sentence. At best, annexure DAJC8 referred to in par 54 supports a design target not a quote, and I would not strike it out. I consider pars 55, 63 ‑ 64 and 73 ‑ 74 adequate and would not strike them out.
Although the paragraph numbers may differ this also deals with the objections to Mr Copping's affidavits sworn on 21 December 2009 and filed in COR 247 & 248 of 2009.
Genuine dispute
The threshold test to be applied in assessing whether a genuine dispute exists has been expressed in various ways including:
(1)a plausible contention requiring investigation: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787;
(2)the question requires the dispute be bona fide and truly exist in fact; and the grounds for alleging the existence of the dispute are real and not spurious, hypothetical or misconceived: Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452, 464.
The statutory demands issued in relation to COR 246, 247 & 248 of 2009 all arise out of the same subject matter. At par 3.5 of its written submissions the plaintiff makes the following submission:
The affidavits filed in these proceedings on behalf of both parties establish that there is a genuine dispute between the parties as to the amount of debt. The following issues remain to be determined:
(a)work performed by MCAD, for which CLEV‑A‑Garden was invoiced, was performed in order to rectify defects in the design of the 9 unit product ('Product') and that the Product did not work to the specifications required by CLEV‑A‑Garden (paragraphs 46-72 of the First Copping Affidavit and paragraph 11 of the Second Copping Affidavit); and
(b)a repudiatory breach by unlawful termination of the Heads of Agreement as between CLEV‑A‑Garden and Martin Computer and Design Pty Ltd (paragraphs 31 ‑ 36 and 58 ‑ 64 of the First Copping Affidavit and paragraph 11 of the Second Copping Affidavit).
Annexure DAJC6 to the Copping 246 affidavit is a document titled 'Heads of Agreement'. This is referred to in par 31 of the affidavit. It is an agreement between the directors of a company called Clev‑A‑Co Pty Ltd, and Martin Computer Aided Designs Pty Ltd (Martin CAD).
As to the identity of the plaintiff, Mr Copping in the Copping 246 affidavit states that Clev‑A‑Co Pty Ltd was an Australian proprietary company registered on 18 July 2004. It was de‑registered on 11 November 2007. Clev‑A‑Garden Pty Ltd was registered on 2 February 2007 and subsequently became an Australian unlisted public company with the name Clev‑A‑Garden Ltd on 1 August 2008 (CAGL). This is supported by the relevant ASIC company extracts annexed to the affidavit. He further states that Martin CAD continued to send invoices to CAGL for work that had previously been performed which CAGL rejected as the work was not correctly performed and did not work to the required specifications. Mr Christopher Neill Martin in his affidavit sworn on 24 February 2010 (the Martin No 1 affidavit) says he does not agree with this.
I will refer to the identity of the defendants in relation to each application.
COR 246 of 2009
At pars 35 ‑ 36 of the Copping 246 affidavit he deposes as follows:
No other agreements either written or verbal were entered into as between CACPL or CAGL and Martin or Martin CAD or any other entities either related to or controlled by Martin.
CAGL did not enter into any agreement either express, implied or oral with MCAD Pty Ltd (the Defendant in these proceedings) under which it would have liability to pay the invoices rendered by MCAD Pty Ltd as referred to in the Statutory Demand, or at all.
As to that Mr Martin at par 47 in the Martin No 1 affidavit, deposes as follows:
I refer to paragraph 35 of Mr Copping's affidavit, in which he states that:
'No other agreements either written or verbal were entered into as between CACPL or CAGL and Martin or Martin CAD or any other entities either related to or controlled by Martin'
I disagree with that statement. (original emphasis)
The fact that he disagrees with the statement really does not take matters very far. At pars 4 ‑ 5 of his affidavit sworn on 13 April 2010 (the Martin No 2 affidavit), Mr Martin deposes as follows:
I refer to paragraph 36 of the Affidavit of David Alexander James Copping sworn 21 December 2009, and state that in or about March 2007, I emailed Mr Copping and notified him that I would no longer be trading as Martin Computer Aided Design Pty Ltd but MCAD Pty Ltd. I referred to Martin Computer Aided Design Pty Ltd as 'MCAD' in that email.
In or about that date, Mr Copping responded via email to me, stating:
'Good to hear from you. Your account is as we agreed some months ago. I have passed your statement on to Tony Armenti, Clev‑A‑Co's Company Secretary for his attention. He informs me this payment has been scheduled for settlement in July 07 or when the Petite becomes commercialized as per our original agreement'. (original emphasis)
The statutory demand the subject of this application is found at DAJC1 of the Copping 246 affidavit. It alleges that Clev‑A‑Garden Ltd owes MCAD Pty Ltd certain sums of money. Thus, neither party is the same as those mentioned in the Heads of Agreement. The statutory demand refers to two invoices, number 968 dated 21 November 2007 for $49,054.78; and number 976 dated 2 January 2008 for $5,064.69. The two invoices are attached as CNM‑2 to the Martin No 2 affidavit and are clearly from MCAD Pty Ltd and addressed to Clev‑A‑Garden Pty Ltd. Annexure CNM‑1 to the same affidavit contains an email from Mr Martin of an unknown date, which in part states:
As you know I am no longer trading as MCAD as I will be trading as MCAD Pty Ltd.
I am now finalizing all projects under MCAD this includes Clev‑a‑co.
I have created 2 invoices.
It is far from clear which invoices are referred to in the exchange of emails but given the emails appear to have been exchanged on or before 2 March 2007 those referred to by Mr Copping could not have been those the subject of this statutory demand. It is also not clear what entity issued the invoices nor which entity is said to have owed any monies.
At best the exchange of emails states that Mr Martin would be trading as MCAD Pty Ltd, and without more it does not seem to me that this exchange creates any binding agreement between the plaintiff and MCAD Pty Ltd. However, at pars 7 ‑ 10 of the Martin No 1 affidavit he deposes as follows:
I incorporated MCAD on or about 20 February 2007, after I separated from my wife Genny Karina Martin, so that I could continue to pursue my profession of industrial designer apart from Martin CAD, in which she had an interest and of which she was a director.
At around the same time, I also incorporated Martin Oriental. I incorporated Martin Oriental in Hong Kong because I planned to base myself there or nearby for the foreseeable future and needed a local company as a vehicle for my business there.
I informed Mr Copping of the incorporation of MCAD shortly after it had been incorporated, saying to him words to the effect:
'Because Karina and I have split up, I have started a new company, called MCAD. All design work I do from now on will be done through MCAD, including work for Clev‑A‑Co'
To which he responded in words to the effect:
'That's fine'.
After that date, all design work I did for Clev‑A‑Co Pty Ltd ('CACPL') and its successor company Clev‑A‑Garden Pty Ltd ('CAG') was done through MCAD, and invoiced through that company. (original emphasis)
It is not clear if this conversation preceded the exchange of emails but, if on the evidence, this conversation is established it would appear to support the proposition put forward by Mr Martin. However, on the basis of the evidence before me I consider there is a plausible contention which requires investigation.
COR 247 of 2009
The statutory demand in this matter relates to invoice 967 dated 24 October 2007. This is annexure CNM‑17 to the Martin No 1 affidavit in this action.
The invoice refers to invoices numbered 956 and 957 which are respectively annexures CNM‑14 and CNM‑15 of the same affidavit. Neither of those invoices bear the name of the company which it is said issued them, but both have a logo on them which appears to read 'MCAD', and the name MCAD appears with the ACN number at the end of the invoice. Each invoice was issued on 1 March 2007. The logo appears to be the same logo which appears on the invoice numbered 968 which is the subject of the statutory demand issued in COR 246 of 2009 where it alleges the money is due to MCAD Pty Ltd. However, at pars 45 ‑ 46 of the Martin No 1 affidavit in this action Mr Martin deposes as follows:
After that date, all further design work I did for CACPL and its successor company was done through MCAD, and invoiced through that company.
On 18 April 2007 Martin CAD rendered two invoices (invoice no. 956 and invoice no. 957) to CACPL, in respect of computer‑aided design work performed for CACPL between January 2006 and February 2007. Annexed hereto and marked with the letters 'CNM‑14' is a true copy of invoice 956. Annexed hereto and marked with the letters 'CNM‑15' is a true copy of invoice 957.
Given the lack of clarity which exists as to the true relationship between the parties I consider there is a plausible contention which requires investigation.
COR 248 of 2009
At pars 35 ‑ 36 of the Copping 248 affidavit, Mr Copping deposes as follows:
No other agreements either written or verbal were entered into as between CACPL or CAGL and Martin or Martin CAD or any other entities either related to or controlled by Martin.
CAGL did not enter into any agreement either express, implied or oral with Martin Oriental Co Ltd (the Defendant in these proceedings) under which it would have liability to pay the invoices rendered by Martin Oriental Co Ltd as referred to in the Statutory Demand, or at all.
Mr Martin in the Martin No 1 affidavit (in this action) deposes at pars 16 ‑ 17 and 20 as follows:
During April and early May Martin Oriental sent numerous estimates and terms to CAG refining the [sic] its estimates to suit CAG's needs.
On May 7, 2007 I received an email from Mr Copping stating that 'Victor and myself are delighted to inform you that Martin Orient has been selected and will be appointed to manufacture Clev-A-Garden Petite subject to final tooling, injection and electronics prices and a satisfactory production schedule.' A true copy of that e‑mail message is annexed hereto and marked with the letters 'CNM-3.'
…
On May 15, 2007 Mr Copping informed me he would send Martin Oriental a letter to use a Purchase order Number. Martin Oriental never received this letter.
The contents of annexure CNM‑3 read:
Hi Chris
Well it's taken a few more days than anticipated to select the successful manufacturer for the Clev-A-Garden Petite!!
Victor and myself are delighted to inform you that Martin Orient has been selected and will be appointed to manufacture Clev-A-Garden Petite subject to final tooling, injection and electronics prices and a satisfactory production schedule.
Congratulations to all your staff and associates who help while we were in China. We will need to work together and quickly as a team to meet our marketing deadlines.
Kindest regards
--
David Copping
Clev-A-Garden Pty Ltd
Creative & Marketing Director
The affidavit goes on to depose to the fact that certain payments were made by the plaintiff to this defendant. Mr Copping did not address this issue in his affidavit sworn on 29 March 2010. It is argued by counsel for the defendant that a contract was entered into. If that is so, what were the terms of the contract, was it conditional and if so, have the conditions been met?
Finding
On the evidence before me I accept that work was done by the Martin entities. What is not clear is:
(1)which of the entities could properly invoice the plaintiff for work performed; and
(2)the scope of the work performed and whether it fell within the terms of any contract which existed between the parties or could correctly be classified as remedial work which may form the basis of an offsetting claim.
Counsel for the plaintiff submitted that the plaintiff engaged Mr Martin and his related companies and dealt with those entities as though they were one and the same, even though they may have been separate entities. On the evidence that would appear to be so. It seems to me that the Heads of Agreement outlined in general terms a relationship which would exist between the parties and the relationship has evolved without a great deal of thought or attention being given to the contractual relationships which followed. On what is before me the true position is far from clear.
Some of these issues also flow into the submission by the plaintiff that there is an offsetting claim which exceeds the amount claimed by the defendant. Indeed counsel for the defendant submits that the issues advanced in par 71 of the Copping 246 affidavit are not genuine disputes. If anything it is said they are offsetting claims as they are not questions about whether or not the company was entitled to certain monies under its contract. I consider some of these matters could fall within the category of a genuine dispute but that might well depend on the facts as they are established after an analysis of the evidence led and tested by cross‑examination.
Offsetting claim
Pursuant to s 459H(1)(b) the plaintiff claims an offsetting claim against the defendant in COR 246 of 2009 in the sum of $191,350.49. I accept that an offsetting claim must be genuine in the sense of being authentic or bona fide: see John Shearer Ltd v Gehl Company (1995) 18 ACSR 780.
In Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, Palmer J says:
In my view, a 'claim' for the purposes of CA s 459H(1) and s 459H(2) means not just a cause of action, so that once a genuine cause of action for unliquidated damages is shown by a plaintiff, the Court is compelled to accept at face value the damages claimed by the plaintiff as the amount of the offsetting claim for the purpose of the calculation required by s 459H(2). As has been said in Jesseron Holdings Pty Ltd v Middle East Trading Consultants (1994) 12 ACLC 490, an action for damages will often include what is described as an 'ambit claim', that is, a sum which is in excess of what the claimant realistically expects to recover.
In my opinion, a genuine offsetting claim for the purposes of CA s 459H(1) and s 459H(2) means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. 'Good faith' means arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s 459H(1) and s 459H(2) [17] ‑ [18].
I accept that a cause of action needs to be advanced in good faith and the plaintiff is required to adduce some evidence to show the basis upon which the loss is said to arise and how the loss is calculated. This view is supported in the decision of Royal Premier Pty Ltd v Taleski [2001] WASCA 48, where Ipp J says:
There is another supervening and fundamental problem with the appellant's contentions, namely, there is no evidence of any damages that the appellant might have suffered in consequence of the alleged negligence or misleading or deceptive conduct on the part of the respondent. Of course, at this stage, it is not necessary for evidence as to damages to be given in meticulous detail. But there must be at least some material upon which the court can conclude that some damage has been sustained and which will enable the court to make a reasonable assessment as to the amount thereof. In this case, however, there is simply no way of determining whether damage was suffered by the appellant in consequence of the alleged negligence or misleading or deceptive conduct, and there is no evidentiary material from which damage suffered by the appellant can be calculated. This absence of evidence as to damage is itself fatal to the appellant's arguments [57].
The question of an offsetting claim was raised in the Copping 246 affidavit. At pars 75 ‑ 76 Mr Copping deposes as follows:
As a result of Martin and Martin CAD's inability to efficiently manage and complete the tooling manufacture and production of the Project, CAGL incurred the following additional costs and losses:
(a)additional costs from Mr Luo and his Factory Team in rectifying faults in the Project totalling US$84,000. which have been paid by CAGL;
(b)costs incurred by CAGL from Gecko Global ('Gecko') in rectifying design and manufacturing faults in the Solar and Solenoid tooling and assembly totalling AUD$40,700. Annexed hereto marked 'DAJC11' are true copies of invoices from Gecko, which have been paid by CAGL;
(c)costs incurred by CAGL from ABN Design Services ('ABN') in rectifying faults in the mechanical drawings and modelling totalling AUD$27,432. Annexed hereto marked 'DAJC12' are true copies of invoices from ABN;
(d)costs incurred by CAGL from Reto Truninger of Brain Systems in rectifying design faults with the electronic operation and components of the solar cell and solenoid totalling AUD$39,218.49. Annexed hereto marked 'DAJC13' are true copies of invoices from Brain Systems;
(e)losses incurred as a result of CAGL not being able to meet the Delivery Timeline for Bunnings Christmas Order under the Supply Agreement. Further particulars of this loss can only be properly particularised if this matter is litigated in a Court with civil jurisdiction and after discovery by the parties; and
(f)loss of commercial opportunity to exploit CAGL's Invention and in particular the 9 Pot Unit. Further particulars of this loss can only be properly particularised if this matter is litigated in a Court with civil jurisdiction and after discovery by the parties.
By reason of the matters deposed to in paragraph 75, the Plaintiff has a claim against the Defendant in the sum of at least $191,350.49 which it intends to offset against the sum referred to in the Statutory Demand.
It is true there is no reference in those paragraphs of the question of warranties and in any event Mr Copping concedes that the quantum of any loss and damages as a result of the warranty claims has not yet been quantified and at its highest he says it is a further potential claim as against the Martin entities. I would agree with counsel for the defendant that the potential warranty claim would not be sufficient by itself to set aside the statutory demand.
Although the paragraph numbers may differ between the supporting affidavits of Mr Copping filed in each application, the wording is the same and the amount of the offsetting claim against each defendant is the same, namely $191,350.49. The material included in the affidavits is not sufficient to determine what, if any, amounts of the $191,350.49 can be attributed to any of the three defendants. This is yet another example of the identity of the parties being blurred. In my view, the evidence filed by both parties contributes to this.
On the evidence before me I consider the true position between the parties is far from clear on issues such as the identity of the parties, the work undertaken, whether it be that agreed to or remedial work, and the quality and the fitness of some of the work. In my view there are serious questions which need to be resolved after the relevant evidence is properly tested. The contention is plausible and requires further investigation.
Repudiatory breach
In support of a submission that there had been a repudiatory breach of any contract, at pars 60 ‑ 62 of the Copping 246 affidavit, Mr Copping deposes as follows:
During that meeting, Martin announced to the gathered Suppliers, and myself, that he was unable to complete the work on the 9 Pot Unit project due to medical grounds. However, Martin gave no further explanation as to how his medical problems prohibited him from completing the work.
Martin then said words to the effect that he had to go to Hong Kong immediately with his girlfriend for medical treatment. This led me to believe that he was very ill, and was unable to complete the 9 Pot Unit project that Martin and Martin CAD was engaged to complete.
During that meeting, Martin also informed the Suppliers that he was handing the entire project over to me. Martin then immediately and abruptly left the meeting with his girlfriend without any further discussion.
Counsel for the defendant submits that all the agreement required of the defendant was to provide all conceptual time and of travel time if the defendant's services were sought but in fact the plaintiff was not obliged to use the services of the defendant. It is submitted there is no evidence as to exactly where the contract stood at the time the repudiatory breach is relied on. That would depend upon whether or not any agreement was entered into other than the Heads of Agreement. There is evidence to suggest there had been an agreement with Martin Oriental. However, I agreed with counsel for the defendant that there is no realistic evidence before me to support a claim of a repudiatory breach.
Conclusion
Based on my findings I am of the view that plausible contentions exist which require further investigation and for that reason would set aside the statutory demands.
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