FBM Corporation Pty Ltd v Redsilk Enterprises Pty Ltd
[2013] WASC 398
•5 NOVEMBER 2013
FBM CORPORATION PTY LTD -v- REDSILK ENTERPRISES PTY LTD [2013] WASC 398
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 398 | |
| Case No: | COR:157/2013 | 17 OCTOBER 2013 | |
| Coram: | MASTER SANDERSON | 5/11/13 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | FBM CORPORATION PTY LTD (ACN 147 739 795) REDSILK ENTERPRISES PTY LTD (ACN 091 377 838) |
Catchwords: | Corporations Act 2001 (Cth) Application to set aside statutory demand Turns on own facts |
Legislation: | Nil |
Case References: | Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302 Tired Horses Films Holdings Pty Ltd v Property About Pty Ltd [2012] WASC 478 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
REDSILK ENTERPRISES PTY LTD (ACN 091 377 838)
Defendant
Catchwords:
Corporations Act 2001 (Cth) - Application to set aside statutory demand - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr J M Healy
Defendant : Mr S J Penrose
Solicitors:
Plaintiff : MKI Legal
Defendant : Tottle Partners
Case(s) referred to in judgment(s):
Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302
Tired Horses Films Holdings Pty Ltd v Property About Pty Ltd [2012] WASC 478
1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. A copy of the demand appears as annexure KN3 to the affidavit of Kubashen Naidoo sworn 2 August 2013 and filed in support of this application. In the schedule to the demand under 'Description of the Debt' there appears the following:
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2 A copy of the Deed Poll referred to in the schedule is found as annexure GTP1 to the affidavit of Guy Touzeau Le Page sworn 20 August 2013 and filed in opposition to the application. For present purposes it is unnecessary to refer to the terms of the Deed Poll in any detail. It is sufficient to note that subject to certain conditions not presently relevant the repayment date of any loan was 30 June 2012. Further interest at the rate of 10% per annum calculated daily would be payable on the repayment date. Schedule 4 of the Deed Poll shows Barralong Capital Pty Ltd invested $250,000 in April 2012. So the initial investment was not made by the present defendant, the party who issued the statutory demand.
3 In further support of its opposition to this application the defendant filed an affidavit of Alistair Robert MacKinlay sworn 20 August 2013. Appearing as annexure ARM3 to that affidavit is a document entitled 'Notice of Assignment of Debt'. The notice is addressed to the plaintiff and advises the debt due by the plaintiff to Barralong Capital Pty Ltd has been assigned to 'Redsilk' - not Redsilk Enterprises Pty Ltd the defendant. The defendant relies upon this notice of assignment to claim it was entitled to issue the statutory demand.
4 It is common ground between the parties the time for repayment of the debt specified in the Deed Poll has passed without the debt being repaid. It is also clear, prima facie, the defendant had the right to issue the demand. The question then is whether the plaintiff can establish there is a genuine dispute with respect to the debt or whether there is some other reason why the demand ought be set aside. To answer these questions it is necessary to consider in detail the evidence of the plaintiff as put by Mr Naidoo.
5 What follows is taken largely from the affidavit of Mr Naidoo sworn 2 August 2013. Mr Naidoo says he invented a building panel, building system and method of constructing a building which is a replacement for traditional wall products. It is made of a two core compressed polyurethane and three cement fibre layered structures and is known as 'R9'. Mr Naidoo refers to this product as the 'R9 Product'. I will adopt that description. Mr Naidoo has filed patent applications with respect to the R9 Product. That was done in early 2011 and around the same time the plaintiff began trading and was in the business of supplying the R9 Product to construction projects in Western Australia. From early 2011 the plaintiff was the owner of all the intellectual property regarding the R9 Product.
6 In late 2011 Mr Naidoo met a Mr Barboutis who was a corporate advisor with RM Capital, a stockbroking firm. At the time RM Capital was providing financial advice to the plaintiff regarding a possible listing on the Australian Securities Exchange. By early 2012 Mr Barboutis started providing financial advice to Mr Naidoo personally and in his capacity as a director of the plaintiff. This advice also related to the possible listing of the plaintiff on the Australian Securities Exchange and obtaining capital investment in the plaintiff from investors.
7 It is clear from Mr Naidoo's evidence from early 2012 the company was in need of funds and various options were considered. In around April 2012 Mr Barboutis introduced Mr Naidoo to Mr MacKinlay. Mr Barboutis had previously advised Mr Naidoo that Mr MacKinlay was his business partner. Discussions took place. Mr MacKinlay indicated he was interested in investing $250,000 in the plaintiff by way of a convertible note. Mr MacKinlay is a solicitor with his own firm and he advised Mr Naidoo of that fact. After reviewing the plaintiff's finances Mr MacKinlay decided to make the investment and that led to the Deed Poll. Mr Naidoo confirms the money was advanced and received by the plaintiff pursuant to the agreement.
8 Up to this point the relationship between the parties appears to have been harmonious. Moreover there is nothing in Mr Naidoo's evidence as to how this transaction came about to suggest there is any dispute about the fact of the advance and the terms upon which it was made. There is nothing in the evidence to this point which would justify the statutory demand being set aside.
9 Unhappily this harmonious relationship did not persist. Mr Naidoo says that around the middle of 2012 Mr MacKinlay commenced providing him and the plaintiff with legal advice. The plaintiff was involved in a number of disputes and clearly there was concern about its solvency. Mr MacKinlay's role with Mr Naidoo and the plaintiff increased. He began to offer advice to the plaintiff with respect to its business operations. He provided similar advice to Mr Naidoo. In or around September 2012 Mr MacKinlay, Mr Barboutis and Mr Naidoo held discussions regarding restructuring of the plaintiff in order to list it on the Australian Securities Exchange. There were two key elements to these proposals. The first was a new company FBM Licence Ltd (FBML) would be the vehicle which would be listed on the Australian Securities Exchange. Second FBML would hold the rights to the R9 Product. By 23 October 2012 Mr MacKinlay, Mr Barboutis and Mr Naidoo had reached what Mr Naidoo describes as the 'Complete Agreement'. For present purposes I need not detail precisely its terms. They are set out in par 35 of Mr Naidoo's affidavit. As I understand his evidence at least up to this point Mr Naidoo was happy with the arrangements the parties had negotiated.
10 Mr MacKinlay was responsible for documenting the Complete Agreement. However it now appears Mr Naidoo believes the price the plaintiff was to be paid for the transfer of the R9 Product rights to FMBL was too low. He holds Mr Barboutis and Mr MacKinlay responsible for this sale at an undervalue. Between par 43 and par 59 of his affidavit Mr Naidoo details what he describes as 'After the R9 Product Transfer' events. Essentially Mr Naidoo maintains he was forced out of FMBL and because he held a minority shareholding he was unable to influence events. He says on behalf of the plaintiff he has sought advice from solicitors about unwinding all or parts of the Complete Agreement. As yet no proceedings have been issued.
11 Taking Mr Naidoo's evidence at its highest there is no evidence of a genuine dispute. There is one issue which requires comment. In par 8 of his affidavit Mr Naidoo refers to the Deed Poll and provides what is an incomplete copy of that document. Counsel for the defendant took objection to that evidence on the basis it was 'secondary evidence'. In my view there is no substance in that objection. Mr Naidoo is entitled to refer to any document which is in his possession. The fact the document is incomplete is relevant to the weight which might be attached to the evidence but it does not render the evidence inadmissible. In fact insofar as there is a suggestion in Mr Naidoo's affidavit there was some incompleteness in the Deed Poll that is answered by referring to Mr Le Page 's affidavit and the Deed Poll annexed thereto. It is worthy of note Mr Le Page was engaged by the plaintiff to look for sources of funds. The fact he was able to produce the complete document renders par 8 of Mr Naidoo's affidavit of no evidentiary value.
12 In his written and oral submissions counsel for the plaintiff went to some lengths in attempting to establish the complex matrix of facts, together with the extensive interaction between Mr Barboutis, Mr MacKinlay and Mr Naidoo, shows there is a genuine dispute which means the statutory demand ought be set aside. With respect there seems to be nothing in the evidence which suggests the Deed Poll was not in full force and effect. I am not satisfied there is any genuine dispute as to the debt due by the plaintiff to the defendant.
13 Counsel for the plaintiff also referred to the assignment of the debt being from Barralong Capital Pty Ltd to 'Redsilk'. It was submitted there was real doubt as to whether this meant there had been an assignment to the defendant. Even assuming there is some merit in that argument it is a matter which was raised after the 21 day period - it is not mentioned in Mr Naidoo's affidavit in support of the application. That being the case it is not a matter which can be taken into account and it provides no basis for concluding there is a genuine dispute.
14 The plaintiff maintained there was some other reason why the statutory demand ought be set aside under s 459J(1)(b) of the Corporations Act 2001 (Cth). As a statement of principle reliance was placed on Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302, 317 - 318 where it was said:
What is contemplated by s 459J(1)(b) of the Act is a discretion of broad compass which extends to conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice.
15 Counsel relied on two matters which he submitted gave rise to some other reason why the statutory demand ought be set aside. First it was said there was a complex web of transactions and to allow the statutory demand to stand in relation to the debt would be, if not unconscionable, at least unfair. It would be to isolate out one aspect of the relationship between the parties without examining the totality of the conduct. Second, and related to the first, counsel maintained if the statutory demand stood and was not complied with the plaintiff would be forced into liquidation. If that were to occur any rights the plaintiff may have against Mr MacKinlay or Mr Barboutis might not be enforced. It was hinted at, if not actually submitted, the statutory demand was issued for an improper purpose - that is to say, to protect Mr Barboutis and Mr MacKinlay from actions against them by the plaintiff.
16 In support of his submissions counsel referred to my decision in Tired Horses Films Holdings Pty Ltd v Property About Pty Ltd [2012] WASC 478. That case was somewhat different to the present. Proceedings had been issued and the action was about to go to trial. The statutory demand was issued by a party who was an associate of one of the defendants. Whatever else may be said about the decision in Tired Horses it does not stand for a general proposition where there is a complex commercial relationship the statutory demand procedure is inappropriate. Each case depends on its facts. In this case there is nothing which in my view would satisfy the requirements of 'some other reason'.
17 The application to set aside the statutory demand should be dismissed. Subject to hearing from the parties the proper order is the plaintiff pay the costs of the application including the reserved costs.
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