Foley v Ellis

[2008] NSWSC 288

CITATION:	Vanuatu Indigenous Development Alliance Pty Ltd v Jezabelle Investments Pty Ltd [2008] NSWSC 288
HEARING DATE(S):	31/03/08
JUDGMENT DATE :	2 April 2008
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Statutory demand set aside
CATCHWORDS:	CORPORATIONS - winding up - statutory demand - application for order setting aside - whether genuine dispute - no matter of principle
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 459G, 459H(1)(a),
CATEGORY:	Principal judgment
CASES CITED:	Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411
PARTIES:	Vanuatu Indigenous Development Alliance Pty Ltd - Plaintiff Jezabelle Investments Pty Limited - Defendant
FILE NUMBER(S):	SC 5996/07
COUNSEL:	Mr A T Busby, Solicitor - Plaintiff Ms J F Merkel - Defendant
SOLICITORS:	PMF Legal - Plaintiff Hancocks Solicitors - Defendant

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

BARRETT J

WEDNESDAY 2 APRIL 2008

5996/07 VANUATU INDIGENOUS DEVELOPMENT ALLIANCE PTY LTD v JEZABELLE INVESTMENTS PTY LIMITED

JUDGMENT

1 The plaintiff applies under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 16 July 2007 served on it by the defendant.

2 The description of the debt or alleged debt in the statutory demand suggests that the defendant in fact asserts two debts, each for repayment of a loan together with interest. One alleged loan is in the sum of $180,000.00, the other in the sum of $10,000.00.

3 The plaintiff’s case is advanced on the ground in s 459H(1)(a), that is, that there exists a genuine dispute as to the existence of the debt or debts.

4 The plaintiff relies principally on an affidavit of Ms Gidley, one of its three directors. She says, quite simply, that the plaintiff has never requested or borrowed any money from the defendant and denies having entered into any loan agreement with the defendant or being indebted to it as alleged or at all.

5 Ms Gidley’s affidavit discloses the existence of a company incorporated in Vanuatu having a name virtually the same as that of the plaintiff. The plaintiff’s name is “Vanuatu Indigenous Development Alliance Pty Ltd”. The name of the Vanuatu company is “Vanuatu Indigenous Development Alliance Limited”. Ms Gidley’s annexes to her affidavit a copy of a demand by Philip Salvatore Deprima for payment by the Vanuatu company of A$246,779.00 “being monies advanced by him to the Company”. Ms Gidley states a belief that Mr Deprima’s demand “is for the same money claimed in” the statutory demand served by the defendant on the plaintiff. There is thus an allegation that any debt as described in the statutory demand is really owed by the Vanuatu company to Mr Deprima.

6 Mr Deprima is one of the three directors of the plaintiff. He is also a director of the defendant which he describes in his affidavit as “an investment company for my business dealings”. At paragraph 12 of his affidavit, Mr Deprima refers to a conversation on or about 10 February 2005 among Ms Gidley, himself and Mr Barber, the third director of the plaintiff (the reference to “VIDA Vanuatu” is a reference to the Vanuatu company I have mentioned):

“On or about 10 February 2005, Tony Barber (‘TB’), Isobelle Gidley (‘IS’) and I had a meeting at Gioa Restaurant in Leichhardt. During the meeting we discussed VIDA Vanuatu’s purchase of the farm on Malekula. We had a conversation to the following effect:
IS said: ‘ The position in Vanuatua is desperate; the vendor is going to terminate the contact for Malekula. We need $180,000.00 urgently to complete the contract.’
I said: ‘ I can obtain the funds but they need to be repaid in one month.’
IS said: ‘ That will be fine, we have lots of rice sales going through and the money can be repaid without a problem.’
TB said: ‘ I agree.’ ”

7 This suggests that it was the Vanuatu company, not the plaintiff, that needed money.

8 Paragraph 13 of the affidavit, omitting a passage not read, is as follows:

“The funds required were held by the Defendant, not by me in my personal bank account. I had previously put the funds into the Defendant for the purpose of a property investment … I saw no reason to transfer the funds from the Defendant into my personal account and then on to the Plaintiff. I arranged for the Defendant to transfer the funds to the Plaintiff directly expecting that the funds would be repaid within about a month.”

9 Mr Deprima deposes, by reference to annexed bank statements, that $180,000.00 was deposited into the bank account of the plaintiff by the defendant on 11 February 2005 and that an equivalent (or slightly larger) amount was paid out on the same day to “Genesis”. There is also a record of a cheque No 24 for $10,000.00 drawn on the defendant’s account and paid on 23 March 2005, together with cheque butt No 24 showing $10,000.00 and “Vida”, with the date 12 March 2005.

10 Mr Deprima has put into evidence what he describes as “a true and accurate copy of one of the pages of the cash book” if the plaintiff that he showed Mr Barber in about March or April 2005. It shows entries on the “Cr” side of $180,000.00 and $10,000.00, the first on a date that is obscured and the second on 23 March 2005, each marked “Loan Jezabelle”. Three things need to be said about this. The first is that the annexure is handwritten and headed “Extract from Cash Book”, from which one would infer that someone has copied by hand from another document. Second, the document carries nothing that would identify it with the plaintiff, as distinct from any other entity (including the Vanuatu company). Third, an entry on the credit side of a cash book generally connotes a payment, not a receipt.

11 I refer next to the evidence of Mr Barber, the third director of the plaintiff. He says that he is unaware that the plaintiff ever borrowed money from the defendant. He also says that Mr Deprima told him on a number of occasions that the $180,000.00 he had lent to “VIDA” was his own money; also that Mr Deprima had said that he wanted the money back as he was going buy a property in the Snowy Mountains and “I need to get the money back into Jezabelle”.

12 Mr Barber accepts that Mr Deprima produced to him the cash book of the plaintiff or, at least, what Mr Deprima said was the cash book of the plaintiff. Mr Barber says that he made handwritten extracts from the book. These do not appear to contain any entries corresponding with those in the handwritten document annexed to Mr Deprima’s affidavit.

13 I refer finally to the second affidavit of Ms Gidley in which she says that Mr Deprima, who had also been the secretary of the plaintiff, produced in October 2007 various documents “that he purports [sic] to contain the books and records of the company”, from which she noted that “there are no proper cash books, invoices or receipts available”.

14 The principles upon which the present application is to be determined are not in doubt. In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, McLelland CJ in Eq considered the expression “genuine dispute” where it occurs in s 459H. His Honour said at p.787:

“In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit, ‘however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having ‘sufficient prima facie plausibility to merit further investigation as to [its] truth’ … or ‘a patently feeble legal argument or an assertion of facts unsupported by evidence’ …But it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute.”

15 See also Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605 per Thomas J.

16 In Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411, I said at [23] that:

“… the task faced by a company challenging a statutory demand on the ‘genuine dispute’ ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow.”

17 Mr Deprima’s evidence about the conversation on about 10 February 2005 is consistent with two possibilities: either that the defendant lent money or that Mr Deprima lent money (by demanding payment by the defendant of what was due by it to him and directing that the defendant make payment direct to the borrower). If the first version is correct, the defendant was the lender. If the second version is correct, Mr Deprima was the lender. The second possibility is consistent with what Mr Barber says he was told by Mr Deprima.

18 The borrower is not identified in Mr Deprima’s account of the conversation on or about 10 February 2005. But the Vanuatu company (not the plaintiff) is identified as the company urgently needing funds.

19 The bank statement evidence suggests that a payment of $180,000.00 was made by the defendant to the plaintiff. But that does nothing to make one of the above possibilities more likely than the other. The bank statement evidence, coupled with the cheque butt, suggests that the defendant later paid $10,000.00 to “Vida” (or “VIDA”), but whether this was the plaintiff or the Vanuatu company one simply cannot tell.

20 As to the supposed cash book evidence adduced by the defendant, I have referred at paragraph [10] above to three things tending to undermine its reliability. It is significant, in that connection, that Mr Barber’s evidence of what he extracted or copied from the supposed cash book of the plaintiff does not record amounts of the relevant magnitude. There is the added point that, according to Ms Gidley, there are no proper cash books of the plaintiff anyway.

21 It is not my function here to decide whether the alleged debts are or were owing by the plaintiff to the defendant. I merely have to say whether the plaintiff has shown that there is a genuine dispute as to the existence of the debts. The evidence to which I have referred shows quite clearly that a genuine dispute exists. If that evidence were before a common law court in a debt recovery action brought by the defendant against the plaintiff it is highly likely – even virtually certain – that the action would be dismissed.

22 I order that the statutory demand dated 16 July 2007 served on the plaintiff by the defendant be set aside.

23 I order that the defendant pay the plaintiff’s costs of the proceedings.

**********