Eco FX LED Pty Ltd v Van Den Berg
[2014] WASC 489
•18 DECEMBER 2014
ECO FX LED PTY LTD -v- VAN DEN BERG [2014] WASC 489
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 489 | |
| Case No: | COR:206/2014 | 15 DECEMBER 2014 | |
| Coram: | MASTER SANDERSON | 18/12/14 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Amount of demand reduced | ||
| B | |||
| PDF Version |
| Parties: | ECO FX LED PTY LTD ERIC VAN DEN BERG |
Catchwords: | Corporations law Application to set aside statutory demand Turns on own facts |
Legislation: | Corporations Act 2001 (Cth) |
Case References: | Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd [No 3] [2014] WASCA 132; (2014) 46 WAR 483 Zomojo Pty Ltd v Hurd (No 4) [2014] FCA 441 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ERIC VAN DEN BERG
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Result:
Amount of demand reduced
Category: B
Representation:
Counsel:
Plaintiff : Ms B S Giles
Defendant : Mr C McIntosh
Solicitors:
Plaintiff : Nova Legal
Defendant : CD Lawyers
Case(s) referred to in judgment(s):
Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91
Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1
Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd [No 3] [2014] WASCA 132; (2014) 46 WAR 483
Zomojo Pty Ltd v Hurd (No 4) [2014] FCA 441
1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The plaintiff's application is based on two grounds. First it is alleged there is a genuine dispute as to part of the debt. Second as to the remainder of the debt the plaintiff says it has an off-setting claim. The application is supported by an affidavit of Nigel Alastair McKay affirmed on 17 October 2014. That affidavit is supplemented by a further affidavit of Mr McKay affirmed on 4 December 2014, an affidavit of Raymond Jin Wen Tan affirmed on 5 December 2014, and an affidavit of Kim Taylor sworn on 9 December 2014. In opposition to the application the defendant relied on an affidavit of his sworn on 27 November 2014 and an affidavit of Desmond McGrath sworn on 10 December 2014.
2 A copy of the statutory demand appears as attachment NAM1 to Mr McKay's first affidavit. The amount of the demand is $115,805.98. Appearing in the schedule to the demand is the following:
Description of the Debt Amount of the Debt
Monies due and owing for payments by the
creditor to or on behalf of the company.
1. International Money Transfer 4/3/2011 $12,338.47
2. International Money Transfer 3/6/2011 $21,220.94
3. International Money Transfer 23/6/2011 $2,438.57
4. Bank Transfer 29/9/2011 $15,000
5. Bank Transfer 4/10/2011 $10,000
6. Bank Transfer11/5/2012 $5,000
7. Bank Transfer 31/8/2012 $1,080
8. Bank Transfer 5/9/2012 $2,500
9. Bank Transfer 19/9/2012 $8,500
10. Bank Transfer 15/10/2012 $10,692
11. Bank Transfer 23/10/2012 $6,000
12. Bank Transfer 24/10/2012 $3,000
13. Bank Transfer 31/10/2012 $4,000
14. Bank Transfer 19/11/2012 $5,250
15. Bank transfer 17/12/2013 $18,785
LESS
Payment received 4/1/2014 $10,000
TOTAL $115,805.98
3 The defendant has indicated it accepts item 15 is the subject of a genuine dispute and ought not to have been included in the statutory demand. Whatever the outcome of the application the statutory demand must be reduced by $18,785.
4 In his affidavit the defendant explains how he says items 1, 2 and 3 of the statutory demand are made up. I can do no better than quote his affidavit at pars 6 - 9. They read as follows:
6. As to Items 1, 2 and 3 on the Statutory Demand, I made those three payments from my personal account to pay for shipments of lighting products (Lighting Products) from Sheenly Lighting HK Co Ltd ('Sheenly'). The Lighting Products were manufactured in China and included LED Panel lights, lighting controls, LED down lights and similar products.
7. Sheenly supplied the plaintiff with the Lighting Products and the plaintiff has possession of all those items at the premises located at 168 Kewdale Rd, Kewdale. This premise is Eco FX's storage facility provided by Raymond Tan's family who own the Golden Boronia Nougat Factory there.
8. The plaintiff has sold all those items to various companies. In particular most of the items sold was sold to the Water Corporation.
9. Both directors said to me on numerous occasions that I will be reimbursed for the Lighting Products.
5 In answer to that claim the plaintiff makes a number of points. First it says the invoices dealing with those amounts are directed to Ecologic Facility Care Pty Ltd and not the plaintiff. The invoices appear as part of attachment NAM9 to Mr McKay's first affidavit. They do indeed refer to a company other than the plaintiff. Furthermore the sums in the invoices do not precisely match the amounts demanded in items 1, 2 and 3.
6 On balance I am satisfied there is a genuine dispute as to these three amounts. It is not entirely clear what the relationship was between the defendant and the plaintiff and how the company Ecologic Facility Care Pty Ltd fits in to the factual matrix. During the course of his submissions counsel for the defendant referred to bank statements of the plaintiff which showed payments received from the Water Corporation. The thrust of counsel's submissions was that if payments were received for the goods it was for the plaintiff to show where it had made payment for the goods purchased and then sold. While accepting there is some strength in that argument it still seems to me there is uncertainty as to whether or not the plaintiff is indebted to the defendant as alleged. On that basis the amounts demanded in items 1, 2 and 3 in the schedule ought be regarded as disputed and the amount of the demand varied accordingly.
7 Item 7 relates to an invoice rendered by Ms Taylor a bookkeeper engaged by the plaintiff between 23 November 2011 and 1 August 2013. Ms Taylor attaches to her affidavit a copy of an invoice rendered to the plaintiff which she says was paid by the defendant on or around 31 August 2012.
8 The plaintiff says the invoice does not appear in its records. Furthermore the invoice was not in the usual form as rendered by Ms Taylor. Finally it is said there was no agreement between the plaintiff and the defendant that the defendant would be reimbursed for any amount he paid to Ms Taylor.
9 In my view the evidence of Ms Taylor is conclusive. She was paid by the defendant for services she rendered to the plaintiff. On any reasonable assessment the defendant is entitled to be reimbursed for costs incurred on behalf of the company. I am not satisfied there is any genuine dispute as to item 7.
10 That leaves items 4 to 6 and 8 to 14. The plaintiff admits it is indebted to the defendant for these amounts. However it says it has an off-setting claim. That claim can be summarised as follows. The plaintiff says the defendant was employed by the plaintiff between July 2012 and November 2013. (In fact the defendant was employed by the plaintiff between 8 March 2011 and 3 October 2014. But for present purposes it is the more limited period which is of relevance.) During that period the plaintiff says the defendant was involved in the plaintiff's development of e-paper displays to be used as school zone signs in Western Australia. This involved liaising with Main Roads Western Australia and Mr Hans Jongedijk and Mr Kevin Fairman who between them had developed the system. In other words the plaintiff was looking to further develop and market a system that had been initially developed by third parties.
11 At around the same time the defendant's employment with the plaintiff ceased, Mr Fairman and Mr Jongedijk would not agree to the terms of a distribution agreement regarding the e-paper displays. That effectively meant the plaintiff could not market the system. The plaintiff says in January 2014, after the defendant had ceased employment with the plaintiff but while he still remained a director of the plaintiff, the defendant incorporated a company New Generation Signage & Lighting Pty Ltd the shareholders of which were the defendant, Mr Fairman and Mr Jongedijk. The plaintiff alleges New Generation engages in business in competition with the plaintiff and is in the business of developing and supplying e-paper products for use as school zone signs. This it is said means the defendant has breached his fiduciary obligations to the plaintiff and the plaintiff has a right of action against the defendant.
12 There are a number of difficulties with this argument insofar as it attempts to establish an off-setting claim. First if it can be made good and there was a breach by the defendant of his fiduciary obligations then the plaintiff would have the right to an account of profits from the defendant and New Generation: see Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1. There has been no attempt by the plaintiff to quantify its losses. All that Mr McKay can say in his affidavit is if New Generation were to supply signs to Main Roads Western Australia any contract might be valued at 'approximately $25,000,000 to $40,000,000 over five years' (par 36(b)).
13 In fact counsel did not advance this argument in support of the off-setting claim. What she submitted was that the measure of damage is what has been called the 'value of services he did not give'. That is to say the plaintiff alleges any damages claim would be the $69,000 in wages paid by the plaintiff to the defendant during the time he was dealing with the e-paper system.
14 Counsel in making this submission relied on the Federal Court case of Zomojo Pty Ltd v Hurd (No 4) [2014] FCA 441.
15 This case does provide some authority for the submission made by counsel. Jessup J put the position as follows:
This claim gives rise to questions in three areas: first, the legal question whether the applicant, which in fact suffered no direct pecuniary loss from Mr Hurd's failure to devote himself fully to its business, is entitled to quantify its damages by applying his salary rate to the amount of time which he spent on other activities; secondly, the contractual question as to which of the provisions of cl 3 of the service agreement should be regarded as relevant to a damages claim of this nature; and thirdly, the factual question as to what that amount of time was. There is no issue as to the rate of salary that Mr Hurd received in the employ of the applicant: it was $400,000 pa.
Dealing first with the legal question, counsel for Mr Hurd argued that, where an employee, in breach of his or her contract, has either been absent from work or failed to work for all or part of the contracted period, the measure of the employer's damages is the pecuniary loss which it suffered as a result of the work in question not having been done, or done completely. Counsel for the applicant did not suggest that this approach would not be available and appropriate where there was evidence of such loss, but they argued that, in other situations, the employer's loss, and thus the damages to which it would be entitled, might be measured, at least as a sufficient approximation, by the remuneration which it paid in respect of the time when no work was done: since the payment would be for no consideration received, it was necessarily a loss which the employer suffered because of the employee's breach. Counsel for Mr Hurd submitted, in effect, that such an approach did not constitute a proper reflection of the employer's actual, as distinct from its notional, loss.
As stated by Mason CJ and Dawson J in The Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64 at 80:
'The general rule at common law, as stated by Parke B in Robinson v Harman [(1848) 1 Ex 850, 855], is "that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed".'
See also the concurring observations of Deane, Toohey, Gaudron and McHugh JJ (174 CLR at 116, 134, 148 and 161 respectively).
In the facts of the present case, however, to say that the applicant should be placed in the situation it would have occupied had Mr Hurd given undivided attention to its business leaves unaddressed the critical question of how to calculate, or to assess, the monetary award that would achieve that objective. As it happens, although there appears to be no Australian authority on the subject, such English authority as exists provides a clear indication of the approach that should, or at least might, be taken.
The leading case is National Coal Board v Galley [1958] 1 WLR 16. There, the defendant was employed as a deputy in the Board's mine. It was a term of his contract of employment that he work such days or part days each week as may reasonably be required. As part of a campaign by his trade union, the defendant refused to work Saturday voluntary shifts, as did the other deputies at the mine. It was held that the Board's requirement that the deputies work these Saturday shifts was a reasonable one, and that the defendant was, therefore, in breach of his contract by refusing to do so. The first Saturday on which the defendant so refused to work was 16 June 1956, and the writ in the action for damages by the Board was issued on 21 June 1956. Although the Board eventually made arrangements for substitute deputies, who were prepared to work on Saturdays, to be employed, that had not been possible on 16 June (the trade union's notice of industrial action having been given only on 14 June).
With respect to the calculation of damages (and ignoring for the purpose of analysis the complication introduced by the circumstance that the defendant was one only of a number of deputies who had refused to work), the Court of Appeal held ( [1958] 1 WLR at 29) that the measure of damages would be the net value to the Board of the work which the defendant would have performed if he had worked the shift which he should have worked on 16 June. Pearce LJ said:
'The question in each case must be: what would his services have contributed to the net value of the output of the shift if the deputy concerned had duly worked it? That is in each case a question of fact.'
However, on the facts of the case, had the defendant worked on 16 June, he would have been engaged 'doing safety work'. His failure to do that work was not responsible for the Board losing any output, and it had not, therefore, made good its case for damages based on loss of output.
To this point, Galley would be the source of some encouragement for Mr Hurd in the present case, where it likewise has not been established that the applicant lost any output as a result of his dereliction of duty. However, Pearce LJ's reasons concluded as follows ([1958] 1 WLR at 29):
'In these circumstances we do not think it can be said that any damage has been proved against him beyond the cost of a substitute, say £3 18s 2d.'
That is to say, the cost of a substitute was, it seems uncontroversially, used as a proxy for the Board's loss. In fact, no substitute had been employed on 16 June. The inescapable implication of an award of damages in the sum of £3 18s 2d was that the wages cost attributable to the time that the defendant should have worked, at least, represented the loss to the Board arising from his breach of contract.
In Giedo van der Garde BV v Force India Formula One Team Ltd [2010] EWHC 2373, Stadlen J said (at [424]):
'In my judgment a more precise formulation of the proposition for which [Galley] is authority is that in a contract for services where there is no proof of consequential financial loss by reason of the breach, the claimant is nonetheless entitled to damages for breach of contract, the measure for which is the value to the claimant of the services which were not provided. In an appropriate case the measure of the value to the claimant of the services which should have been but were not provided may be the notional cost to the claimant of obtaining those services elsewhere, it not being a conditional precedent for the award of such damages that equivalent services were in fact purchased elsewhere.'
I would add that the fact that, in Galley, the sum of £3 18s 2d was arrived at by reference to the Board's later outlays on substitutes, rather than by reference to the defendant's own hourly rate of pay, is a distinction which does not affect the principle involved - if anything, one would expect damages calculated in the way proposed by the Court of Appeal in Galley to be somewhat greater than those that were based only on the rate of pay of the employee concerned [5] - [12].
16 The difficulty for the plaintiff in this case is that there is no evidence the defendant did not actually do the work he was contracted to do during the period in question. Paragraph 36 of Mr McKay's first affidavit puts the position in this way:
It is my honest belief that the defendant:
(a) by incorporating New Generation and engaging New Generation in the business of developing and supplying e-paper products while he was a director of Eco FX, was not acting in the best interests of Eco FX;
(b) used information obtained by him by reason of his position as director of Eco FX to gain advantage for New Generation and himself, Mr Jongedijk and Mr Fairman as its shareholders and the value of this benefit, should New Generation submit a tender and win that tender to Main Roads Western Australia, is approximately $25,000,000 to $40,000,000 over five years; and
(c) used, without authority, confidential information obtained by him by reason of his employment with Eco FX to pursue the business of New Generation; and
(d) as a result of the defendant's conduct, Eco FX has suffered a loss in the sum of at least $92,015.38, being the costs it wasted to pursue the Project.
17 It must be accepted that in many cases - and this is one of them - quantifying an off-setting claim is difficult. The authorities clearly establish the plaintiff must show the off-setting claim was genuine and made in good faith: see Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 and Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd [No 3] [2014] WASCA 132; (2014) 46 WAR 483. But there must be some evidence which allows the amount of the off-setting claim to be estimated. In this case there is no such evidence. If the measure of damages was to be the profit obtained by New Generation as a consequence of the breach of the defendant's fiduciary duty there would need to be at least some evidence of what that profit might be. In fact in his affidavit the defendant says neither New Generation or any company associated with him tendered for work with Main Roads Western Australia and consequently obtained no benefit. Accordingly the plaintiff suffered no loss. There is no evidence to the contrary.
18 The defendant says in his affidavit apart from his work on the e-paper system he had other duties with the plaintiff which he discharged. As I have indicated there is no evidence to the contrary. No reasonable estimate could be made of what loss, if any, the plaintiff may have suffered. Accordingly I am not satisfied there is any off-setting claim in relation to items 4 to 6 and 8 to 14 of the statutory demand.
19 There is one final point. The defendant sought to amend the statutory demand to add in a payment which had previously been credited. Counsel for the plaintiff made the point there is no power in s 459G of the Corporations Act 2001 (Cth) to increase an amount of a statutory demand. In my view that submission ought be accepted. Accordingly the statutory demand will be amended by eliminating items 1, 2 and 3 and the conceded item 15.
20 I will hear the parties as to the precise form of orders and as to costs.
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