Demlakian Engineers Pty Ltd v Priority Plus Capital Pty Ltd

[2009] NSWSC 155

CITATION:	Demlakian Engineers Pty Ltd v Priority Plus Capital Pty Ltd [2009] NSWSC 155
HEARING DATE(S):	11/03/09
JUDGMENT DATE :	11 March 2009
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	11 March 2009
DECISION:	Statutory demand set aside
CATCHWORDS:	CORPORATIONS - winding up - statutory demand - application for order setting aside - whether genuine dispute as to existence of debt
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 459G, 459H(1)(a)
CATEGORY:	Principal judgment
CASES CITED:	Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89
PARTIES:	Demlakian Engineers Pty Ltd - Plaintiff Priority Plus Capital Pty Ltd - Defendant
FILE NUMBER(S):	SC 6183/08
COUNSEL:	Mr A J Bulley - Plaintiff Ms T G Middleton, Solicitor - Defendant
SOLICITORS:	Wright Commercial Lawyers - Plaintiff Macquarie Legal Practice - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY 11 MARCH 2009

6183/08 DEMLAKIAN ENGINEERS PTY LTD v PRIORITY PLUS CAPITAL PTY LTD

JUDGMENT

1 The plaintiff makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 28 November 2008 served on it by the defendant. The debt or alleged debt to which the demand relates is in the sum of $36,180.11 and is described in the schedule to the document as follows:

“Overpayment of monies paid by Priority Plus Capital Pty Ltd to Demlakian for work performed between 24 April 2006 and 23 August 2006 by Demlakian for Priority Plus Capital Pty Ltd at 9-23 Bruce Ave, Killara such overpayments being the following amounts paid in excess of the settlement monies of $115,705.15 received by Demlakian Engineers Pty Limited on the 23 April 2008 from Bruce Avenue Pty Limited on the behalf of Priority Plus Capital Pty Ltd pursuant to Deed of Assignment dated 15 April 2008.

5 June 2007	$ 21,246.12
5 June 2007	$ 2,433.99
5 December 2007	$ 10,000.00
5 December 2007	$ 2,500.00
TOTAL DUE	$ 36,180.11

2 The plaintiff's challenge to the statutory demand is based on s 459H(1)(a). The plaintiff contends that there is a genuine dispute about the existence of the debt the subject of the demand.

3 The plaintiff carries on business as a structural engineer under the registered business name "Demlakian Consulting Engineers" and has done so since 1 July 2006. Mr Demlakian, a director of the plaintiff, is also a director of Wattle Investment Holdings Pty Limited (“Wattle”). Between about 1 July 2003 and 30 June 2006, Wattle carried on business as a structural civil engineer under the registered business name "Demlakian Consulting Engineers". It may, I think, be inferred that an engineering practice was conducted at all material times under the name "Demlakian Consulting Engineers" with the proprietor of the practice as Wattle until 30 June 2006 and the plaintiff from 1 July 2006. From that confusion might be expected to arise.

4 The potential for confusion may well have been increased by what may have been an arrangement with St George Bank under which account number 551157231 at branch BSB 332082 was the account of Wattle until 30 June 2006 and the account of the plaintiff thereafter.

5 The sum of $36,180.11 to which the statutory demand relates is said by the defendant to have been an over-payment made by it to the plaintiff for professional fees and related indebtedness. The sum of $36,180.11 represents four separate payments made by the defendant. The first was a payment of $21,246.12 made on 5 June 2007. This was made by internet transfer from an account of the defendant with National Australia Bank to the St George Bank account 551157231 at BSB 332082. The second payment was in the sum of $2433.99 and was made by internet transfer from another account of the defendant with National Australia Bank to the same account at St George Bank. The third payment was in the sum of $10,000 and was by cheque dated 5 December 2007 drawn by the defendant on an account with the ANZ Bank and payable to "Wattle Investment Holdings Pty Limited t/a Demlakian Consulting Engineers". The fourth payment was in the sum of $2500 and was made by cheque also dated 5 December 2007 drawn by the defendant on the same ANZ Bank account. This cheque was payable to “Wright Commercial Lawyers" who, it seems to be agreed, were solicitors who had acted for Wattle.

6 On 3 March 2008 the plaintiff provided to the defendant what was described as a reconciliation of accounts outstanding together with interest and certain costs said by the plaintiff to be owing by the defendant. The total sum was $115,705.15. The reconciliation included sums for four invoices rendered to the defendant in 2006. Copies of these are in evidence. Three of the invoices, one for $34,122 dated 24 April 2006, the second for $24,988.65 dated 24 May 2006 and a third for $7,381 dated 23 June 2006 are invoices issued by Wattle, not the plaintiff. The fourth invoice dated 23 August 2006 in the sum of $5,995 is an invoice issued by the plaintiff.

7 A payment of $115,705.15 was made on or about 23 April 2008. Mr Demlakian testifies to this at paragraph 9 of his affidavit of 12 December 2008. He says that the payment was received from a company called Bruce Avenue Pty Limited. Mr Demlakian gives two accounts of the reason for this payment. At paragraph 9 of the affidavit just mentioned, as corrected by an affidavit of 24 February 2009, he says that the payment was:

"in consideration of the plaintiff granting a licence to Bruce Avenue Pty Limited to utilise engineering drawings owned by the plaintiff in respect to a development at 9-23 Bruce Avenue, Killara".

8 At paragraph 10 of the subsequent affidavit, however, Mr Demlakian refers to a statement he made to a Mr Zervos of Bruce Avenue Pty Limited in February or March of 2008 as follows:

“We want payment of an amount of $115,705.15 in order to discharge the debt outstanding by Priority Plus Capital and its directions and for us to authorise the use of our engineering drawings in connection with the Bruce Avenue project.”

9 There is here reference to the $115,705.15 being to discharge a debt to the plaintiff, presumably the debt shown in the reconciliation.

10 It is necessary to refer next to a deed entered into between the defendant and Bruce Avenue Pty Limited. By that deed the defendant agreed to assign to Bruce Avenue Pty Limited its interest in a development application. The assignment was to take effect on the day on which Bruce Avenue Pty Limited completed the purchase of the property to which the development application related and "provides to PPC [that is the defendant] evidence that BA [that is, Bruce Avenue Pty Limited] has paid the creditor is specified in the schedule".

11 The schedule to the deed is headed "Consultants to be paid by BA". There are eight items in the schedule, the third of these is "Demlakian Consulting Engineers (Wattle Investment Holdings Pty Limited t/as) $115,705.15".

12 The intention of the deed may have been, as between Bruce Avenue Pty Limited and the defendant, that Bruce Avenue Pty Limited would pay $115,705.15 to Wattle Investment Holdings Pty Limited and that that payment, together with others to be made by Bruce Avenue Pty Limited to persons named in the schedule, would be the consideration for the assignment by Bruce Avenue Pty Limited to the defendant to be effected by the deed. It appears, however, that Bruce Avenue Pty Limited did not pay Wattle. It paid the plaintiff. This is confirmed by Mr Demlakian in his second affidavit.

13 Let me go back at this point to the reconciliation. The plaintiff represented there that $115,705.15 was owing by the defendant to it. This included the particular invoice of $34,122.00, $24,988.65, $7,381.00 and $5,995.00 to which specific reference has already been made. But three of these, the first three, were, as I have said, invoices rendered by Wattle, not by the plaintiff. The $115,705.15 represented as owing to the plaintiff may thus well have been over-stated by the aggregate of the first three invoices, that aggregate being $66,391.65. If that were so, the $115,705.15 would be reduced to $49,314.50.

14 There is then a large question about the four payments made by the defendant. Two of these, according to the banking records, went on 5 June 2007 to the St George account, which by then appears to have been the plaintiff's account for something like 11 months. The other two payments, which were by cheque, went to Wattle or, in the one case, Wattle's lawyers. There must be a question whether, as the defendant maintains, the third and fourth payments were payments on account of indebtedness of the defendant to the plaintiff reflected by the reconciliation even when the reconciliation is potentially adjusted in the way I have suggested.

15 The mystery about the four payments, or at least the first three of them, deepens when one reads paragraph 7 of Mr Demlakian's first affidavit. He says there that the two payments of 5 June 2007 and the payment of $10,000 on 5 December 2007 were received by Wattle from the directors of the defendant, not the defendant itself "in partial satisfaction of the judgment referred to in paragraph 6 above", that is, a judgment obtained by Wattle against the defendant in February 2007. What Mr Demlakian may have intended to say is that the payments were received by Wattle from the directors of the defendant pursuant to a deed (not so far mentioned) under which, in effect, the directors had undertaken to Wattle to pay the judgment debt owed by the defendant to Wattle.

16 I referred to the mystery concerning the four payments of June and December 2007. The primary evidence of payment suggests that two payments were made by the defendant to the plaintiff and two were made by the defendant to Wattle or its lawyers. If that is correct, the thesis on which the statutory demand is based is faulty, since it proceeds on the basis that all four payments were made to the plaintiff; although it might be possible, I suppose, that Wattle was to receive moneys on behalf of the plaintiff.

17 Mr Demlakian says that all four payments were received by Wattle and that it received them from the directors of the defendant, not from the defendant itself. That, too, is inconsistent with the thesis on which the statutory demand is based.

18 The state of the account between the plaintiff and the defendant is, to say the least, clouded. The reconciliation is not a correct reflection of that account, it seems – if only because it contains items of indebtedness which appear to be owed by the defendant to Wattle. The role of Wattle after 30 June 2006 is unclear. The purpose of the payments of June and December 2007 is unclear, as are the payment obligations they were intended to discharge. The identity of the party to which the $115,705.15 was paid by Bruce Avenue Pty Limited is unclear. According to the deed between the defendant and Bruce Avenue Pty Limited, that sum was to be paid to Wattle. According to Mr Demlakian that sum was received by the plaintiff; and this seems to be confirmed by the banking information in annexure J to Mr Fleiter’s affidavit of 18 February 2008 – at least if it is the case that the St George account, to which I have referred, was at that time solely the account of the plaintiff and all moneys received into it were moneys of the plaintiff.

19 An application under s 459G based on the genuine dispute ground in s 459H(1)(a) is not the occasion for definitive findings about the state of the account between the parties. In Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89 Brooking and Charles JJ said at paragraphs [3] and [4]:

“[3] The only question for us is whether the judge erred in determining that there was no genuine dispute. One can of course differ from the judge without deciding that the debt did not exist. A great range of states of mind on what we might call the ultimate question - the existence of the debt - may accompany the view that there is a genuine dispute, ranging from a clear conviction that the debt does not exist to the opinion that the genuine dispute hurdle has only just been cleared.

[4] We think, if we may say so, that, except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), judges should, in general at all events, in dealing, whether at first instance or on appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes.”

20 I therefore refrain from expressing any final opinion as to the existence of the debt the subject of the statutory demand. But what I do say with complete confidence is that inconsistencies in the evidence, inconsistencies between the content of documents and things apparently done and the confusion that appears to have arisen from the change in proprietorship of the engineering practice under the ongoing business name - that all these things lead very clearly to a situation of doubt amply justifying the conclusion that there is a genuine dispute as to the existence of the debt claimed in the statutory demand.

21 I therefore make the following orders:

1. Order that the statutory demand dated 28 November 2008 served by the defendant on the plaintiff be set aside;
2. Order that the defendant pay the plaintiff's costs of the proceedings.

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