DUBUR Nominees Pty Ltd v Erwin SPERL (T/As E SPERL and CO)

[1998] FCA 490

FEDERAL COURT OF AUSTRALIA

CORPORATIONS LAW - application for review of decision of Registrar to refuse to set aside statutory demand - s 459H Corporations Law - whether “genuine dispute” between parties about the existence or amount of debt.

Corporations Law: s 459G, s 459H(1)(a), s 459H(4)

Spencer Constructions Pty Ltd v G & J Aldridge Pty Ltd (1997) 147 ALR 444 - applied

DUBUR NOMINEES PTY LTD v ERWIN SPERL (T/AS E SPERL & CO)
VG 3334 of 1997

GOLDBERG J
MELBOURNE
8 MAY 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3334 of 1997

BETWEEN:	DUBUR NOMINEES PTY LTD (ACN 005 819 152) Applicant
AND:	ERWIN SPERL (T/as E SPERL & CO) Respondent
JUDGE:	GOLDBERG J
DATE OF ORDER:	8 MAY 1998
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. Pursuant to s 459H(4) of the Corporations Law, the statutory demand dated 17 October 1997 served on the applicant be varied from the amount of $14,900 to the amount of $11,700 and declares that the demand to have had effect, as so varied, as from the date upon which the demand was served on the applicant.

1. The application to set aside the demand otherwise be dismissed.

1. The applicant pay the respondent’s taxed costs of and incidental to the application.

Note:Settlement and entry of orders is dealt with in O 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3334 of 1997

BETWEEN:	DUBUR NOMINEES PTY LTD (ACN 005 819 152) Applicant
AND:	ERWIN SPERL (T/as E SPERL & CO) Respondent

JUDGE:	GOLDBERG J
DATE:	8 MAY 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Introduction and background

The applicant applies to the Court pursuant to s 459G of the Corporations Law to set aside a statutory demand served on it and dated 17 October 1997 on the ground that there is a genuine dispute between the applicant and the respondent about the existence or amount of the debt to which the demand relates. The debt claimed in the statutory demand is $14,900 being the total of the amounts of the debts described in the schedule to the demand. The schedule is in the following form:

Balance of November 1993 with respect to preparation of income tax returns for the year ended 30 June 1992, statutory

accounts, minutes of meetings and ASC annual returns
less cheque paid 12 November 1993

BALANCE

$3,800.00
  1,900.00

1,900.00

Invoice dated 23 January 1995 with respect to preparation of income tax returns for the year ended 30 June 1993, statutory

accounts, minutes of meetings and ASC annual returns

less cash paid 25 September 1995
less cash paid 14 July 1995

BALANCE

3,800.00
200.00
   200.00

5,300.00

Account dated 17 January 1996 with respect to preparation of income tax returns for the year ended 30 June 1994, statutory

accounts, minutes of meetings and ASC annual returns

BALANCE

 3,800.00

9,100.00

Account dated 31 July 1996 with respect to preparation of income tax returns for the year ended 30 June 1995, statutory

accounts, minutes of meetings and ASC annual returns

BALANCE

  3,800.00

12,900.00

Account dated 10 October 1997 for completing general ledger, reconcile bank statements and ASC 1996 annual return

BALANCE DUE

   2,000.00

$14,900.00
_________

The application initially came on for hearing before Registrar Efthim who, on 6 April 1998 dismissed the application on the basis that there was nothing before him to show a genuine dispute and that the applicant had not satisfied him that he had a claim which may have some substance.  The application now comes before the Court by way of review of the decision of the Registrar.

In accordance with s 459G(3) of the Corporations Law the application to set aside the statutory demand was supported by an affidavit sworn by Mr Raymont Atkinson, a director of the applicant. Mr Atkinson acknowledged that the respondent rendered accounting services for the applicant for relevant periods but said that accounts were not rendered, that the applicant had paid the fees identified in the schedule to the statutory demand as having been paid which exceeded the amount to which the respondent was entitled and that the amount claimed by the respondent bore no correlation to the services actually rendered. However, in a later affidavit, Mr Atkinson acknowledged that it was not correct to say that no accounts had been received. In any event, the true position emerged in subsequent affidavits.

In or about 1989 or 1990 the applicant, through Mr Atkinson, asked the respondent to act as its accountant in place of the applicant’s previous accountant Horwarth & Horwarth as Mr Atkinson had become concerned about the level of fees the applicant was being charged.  Mr Atkinson explained the nature of the applicant’s business interests to the respondent and Mr Atkinson and the respondent agreed that the respondent would provide accounting services to the applicant for the sum of $3,000 per annum.  The applicant says that the respondent “seemed to pluck a figure of $3,000 out of the air as being an appropriate fee” and that this amount could not reflect the actual value of the work ultimately to be performed.  However, Mr Atkinson agrees that he accepted the figure proposed by the respondent because it was less than the amount charged by his previous accountant.  There is therefore, no dispute between the parties that there was an agreement entered into for the provision of accounting services for the specified sum of $3,000 per annum.

The respondent undertook accounting work for the applicant for the financial years ended 1989/1990 and 1990/1991 and for each of those years he rendered an account for $3,000 which were duly paid.

The respondent says that in conversations in or about November 1993 Mr Atkinson agreed that the applicant would pay the respondent an additional sum for his services for the 1991/1992 year because the applicant would no longer provide the respondent with written up cashbooks which had greatly assisted him in the preparation of the applicant’s returns.  To reflect the additional work which the respondent was required to perform he charged the applicant an additional $800 for the financial year 1991/1992 and rendered an account for $3,800 in November 1993 for which he received a cheque in part payment of $1,900.  The respondent says that during late 1993 and early 1994 he made repeated requests of Mr Atkinson to pay the balance of the account and that Mr Atkinson apologised for not paying the balance and promised that he would see to it once the applicant’s cashflow improved.

The applicant, through Mr Atkinson, denies that there was any agreement to pay any additional amounts and it denies that it failed to provide written up cashbooks.  Mr Atkinson said that the increase in fees occurred without any discussion with him and the increase was not justified.  Mr Atkinson said that the reduced payment of $1,900 was made because he had a growing concern that the fees he had been charged were exorbitant.

However, the applicant did not terminate the respondent’s retainer nor did it terminate the agreement to pay $3,000 per annum for the accounting work.  Mr Atkinson said that he recalls:

“Having expressed discontent to the respondent about the size of his fees in relation to the work actually performed by him”.

However, Mr Atkinson does not suggest that he ever told the respondent either not to carry out further work or that the applicant was not prepared to pay the $3,000 previously agreed.

Indeed, the applicant had further accounting work carried out.  The applicant’s income tax returns for the year ended 30 June 1993 became due and Mr Atkinson provided source documents in relation to the applicant’s business to the respondent in late 1994 and requested that the respondent complete the applicant’s accounting work for the 1992/1993 year at no increase in fees from the year before; that is, no increase in the amount of $3,800.  The respondent accepted this request, carried out the relevant accounting work and on 23 January 1995 forwarded an account for $3,800 plus the unpaid $1,900 from the previous account.  Even if Mr Atkinson’s request be understood to mean no increase in the agreed fee of $3,000 then there is still no dispute as to the agreement to pay $3,000.

Mr Atkinson acknowledges the respondent continued to do the accounting work for the applicant but says that at no stage had agreement been reached on the amount of the respondent’s fees.  However, as I have noted, there was no termination of the retainer of the respondent nor was there any countermanding or termination of what had been the agreed basis for that work.  On the material before me, to the extent to which there was any dispute between the parties by the beginning of 1995, there was no more than a dispute as to the liability of the applicant for the extra payment of $800 per annum.

However, in relation to the account forwarded on 23 January 1995 for $5,700, the applicant only paid $200 on 14 July 1995 and a further $200 on 25 September 1995.  The applicant’s explanation for these payments was that they were made:

“as a gesture of goodwill in the hope that agreement could be reached on outstanding matters”.

However, at that time the only outstanding matter was the liability to pay the extra $800 per annum.

Mr Atkinson says that after he spoke to the respondent to express his concern after receiving the December 1993 account for $3,800 he made enquiries of other persons as to what would be a reasonable fee for him to be charged by the respondent.  However, I consider these matters, even on the applicant’s own version, irrelevant as there had been an agreement to pay $3,000 per annum which had not been terminated.  At this point of time a quantum meruit claim had not been made nor was such a claim in issue.

In late 1995 the respondent completed the applicant’s financial statements and income tax returns for the year ended 30 June 1994 and rendered an account on 17 January 1996 for $3,800 for that work plus the outstanding $5,300.  The respondent complained to Mr Atkinson about the unpaid accounts in or about mid 1996 and the respondent says that Mr Atkinson asked him to carry the applicant a little longer until the cashflow improved.  This is not disputed by Mr Atkinson but even if it was disputed such dispute would not detract from the proposition that the accounting work done up to that point in time had been carried out pursuant to the original agreement to pay $3,000 per annum for the accounting work and the disputed agreement to pay an extra $800 per annum. 

The applicant, through Mr Atkinson, agrees that the respondent continued to do accounting work for the applicant but says that at no stage had an agreement been reached on the matter of the respondent’s fees.  As I have noted earlier there was a continuing agreement at least for the payment of the $3,000 per annum.  The respondent says that Mr Atkinson requested him to complete the applicant’s income tax returns and financial statements for the year ended 30 June 1995 which he did and on 31 July 1996 forwarded an account for $3,800 plus the outstanding balance of $9,100.  Finally the respondent undertook work for the applicant for the income year ending 30 June 1996 and rendered an account for the work then done on 10 October 1997 for $2,000 plus the outstanding balance of $12,900.  Thus, by this time there was $14,900 outstanding in respect of work carried out for five separate financial years.  Even allowing for the applicant’s claim that there was never an agreement to pay the extra $800 there is, in my view, no genuine dispute about $11,700 of that account.

In one of his affidavits Mr Atkinson said that the applicant was “created in 1982/1983 for taxation purposes”.  He said the applicant was not operational during relevant periods.  Mr Atkinson says that there was a button business which was active and which was controlled by the R L Atkinson Trust.  In response the respondent has produced an Australian Securities Commission search which discloses that the principal activity of the applicant is to be “Button Retailers/Wholesales”.  The respondent also produces a number of company taxation returns which show that the applicant is the trustee of the R L Atkinson Family Trust.  In an affidavit in reply Mr Atkinson explains what he meant by his assertion that the applicant was not operational during relevant periods.  The Registrar believed on the basis of the documents produced that the applicant did trade but, in my opinion, that issue is irrelevant to the central issue before the Court, namely whether there was an agreement by the applicant to pay the respondent $3,000 per annum for accounting work, which agreement was not terminated or countermanded in any way. 

I should briefly refer to some other matters raised by the applicant.  Mr Atkinson says that in 1993 he developed a medical condition which has prevented him from “resolving matters in dispute in a more resolute manner”.  I can understand the difficulties which such a medical condition may create but they do not bear upon the central issue in the proceeding, namely whether the agreement to which I have referred continued in operation.

Mr Atkinson says that the fees allegedly owed by it should be more correctly “attached to the R L Atkinson Family Trust”.  Even accepting that proposition as being relevant, it follows that the fees should be paid by the trustee of that trust, namely the applicant.  However the evidence is undisputed that the initial agreement was made between the applicant and the respondent.

The applicant also produces what Mr Atkinson calls an estimate of appropriate fees from a chartered accountant, Mr Bruce Sivewright.  However, that estimate is irrelevant in circumstances where there has been an agreement to pay a specified sum for accounting work and the accounting work has been carried out.  In such circumstances the extent or amount of a quantum meruit claim is irrelevant having regard to the agreement reached.

It was submitted on behalf of the applicant that the respondent’s attack on the credit of the applicant was unfounded and that the inconsistencies in the affidavits disclosed a genuine dispute.  However, there is no genuine dispute in relation to the payment of at least $3,000 per annum for the work in fact carried out.

In argument Mr Lancy, who appeared for the applicant, submitted that the facts and circumstances raised arguments of unjust enrichment and negligence but I can see no basis in the evidence before me on which such principles might operate.

There have been a number of formulations of what is required in order to establish “a genuine dispute” for the purposes of s 459H(1)(a) of the Corporations Law. Some of these formulations are collected and analysed in Spencer Constructions Pty Ltd v G & J Aldridge Pty Ltd (1997) 147 ALR 444 at 454 ‑ 455. Having analysed those formulations the Full Court of the Federal Court (Northrop, Merkel & Goldberg JJ) concluded that a genuine dispute required that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.

On the basis of this formulation the only aspect of the amount claimed in the statutory demand which falls into this category is the sum of $3,200 representing the extra amount of $800 said to be agreed and claimed in respect of four years.  The respondent says there was such an agreement and the applicant denies that such an agreement was entered into.  The fact that the work, the subject of the alleged agreement, was carried out points towards the fact that the respondent might be correct in his allegation but without hearing the witnesses and subjecting them to cross‑examination, I cannot conclude this issue:  Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787. Although there have been a number of inconsistencies in Mr Atkinson’s affidavits, it is not possible for me at the present time to form a judgment as to whether he should be disbelieved when he says no agreement was entered into.

However, as I have already found there is no dispute as to the amount of $11,700 claimed in the statutory demand, it is therefore appropriate, in my opinion, that I should vary the demand in accordance with the provisions of s 459H of the Corporations Law. It follows from my findings that the “admitted amount” for the purpose of s 459H(5) is $11,700. I therefore calculate the substantiated amount of the demand in accordance with the formula contained in s 459H(2) as being $11,700. It follows then, in accordance with s 459H(4) of the Corporations Law that I may make an order varying the demand to claim the amount of $11,700 and declare the demand to have had effect, as so varied, as from when the demand was served on the applicant. I so order. The applicant should pay the respondent’s taxed costs of the application.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg

Associate:

Dated:             8 May 1998

Counsel for the Applicant:	Mr R S Lancy
Solicitor for the Applicant:	O’Callaghans
Counsel for the Respondent:	Mr M Worsnop
Solicitor for the Respondent:	Kahn & Clahr
Date of Hearing:	4 May 1998
Date of Judgment:	8 May 1998