Formosa House Propriety Limited v Mingh Chien Chang
[2010] VSC 652
•3 August 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
List E
No. S CI 2010 03045
| FORMOSA HOUSE PROPRIETY LIMITED (ACN 083 415 776) | Plaintiff |
| v | |
| MINGH CHIEN CHANG | Defendant |
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JUDGE: | Gardiner AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29 July 2010 | |
DATE OF JUDGMENT: | 3 August 2010 | |
CASE MAY BE CITED AS: | Formosa House Propriety Limited v Mingh Chien Chang | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 652 | |
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CORPORATIONS ― Statutory demand ― Application to set aside demand pursuant to s 459G of Corporations Act 2001 (Cth) ― Whether the application was filed and served within 21 days of service of demand upon the plaintiff ― Whether genuine dispute and offsetting claim ― Application made within time ― Finding of genuine dispute and offsetting claim ― Demand set aside.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Searle | Rigby Cooke Lawyers |
| For the Defendant | Mr R. E. Cook | Liberal Legal |
HIS HONOUR:
The plaintiff (Formosa House) makes application by an originating process filed on 3 June 2010 to set aside a statutory demand dated 10 May 2010 which was served on it by the defendant (Mr Chang).
The application first involves consideration of a threshold issue of whether the application has been filed and served within 21 days of service upon Formosa House. If that aspect of the matter is determined in favour of Formosa House, consideration is then required of whether it has established to the requisite standard that there is a genuine dispute concerning the debt the subject of the demand and, further, whether Formosa House is entitled to raise off‑setting claims.
The statutory demand claims that Formosa House owes $106,000 in respect of loans made by Mr Chang to it between 20 December 2007 and 12 November 2009. The demand is accompanied by an affidavit of Mr Chang in Form 7 to the Supreme Court Corporations Rules 2003.
In her affidavit of 20 June 2010, Melinda Li deposes that the statutory demand and affidavit in support were posted by ordinary prepaid post addressed to Formosa House’s registered office at 86 Springvale Road, Nunawading on the afternoon of 10 May 2010. Mr Cook, counsel for Mr Chang, contends that by operation of s 29 of the Acts Interpretation Act 1901 that service on Formosa House was affected when the letter containing the demand was received in the ordinary course of post; it is contended that in the ordinary course of post the letter would be expected to have been received by 11 May 2010 or perhaps 12 May 2010 at the latest. Mr Cook submits that the time for the filing and service of the application to set aside the demand therefore expired on either 1 or 2 June 2010 i.e. before the originating process was filed and served and that the application has not been made in accordance with section 459G of the Corporations Act and should be dismissed[1].
[1] David Grant v Westpac Bank Corporation Ltd (1995) 184 CLR 265.
In Mr Chang’s affidavit of 21 June 2010, he states that letters addressed to Formosa House are not delivered to its registered office at Springvale Road, Nunawading but, by arrangement with the post office, are retained at the post office at Nunawading. He states that the mail is collected every week or so by the manager of the restaurant, Alfred Ng, his sister, Lisa Chang (who is the director of Formosa House) or, on some occasions in the past, by him.
In an affidavit of Alfred Ng sworn 6 July 2010 and filed on behalf of Formosa House, he states that he has been employed as the restaurant manager of the restaurant conducted by Formosa House since September 2002. He confirms the arrangement described by Mr Chang in his affidavit and states that it has always been his responsibility to collect Formosa House’s mail from the post office, which he does once a week, usually on the way to work each Friday. Mr Ng says that on occasion the head waiter employed by Formosa House, Mr Stephen Kwong, has collected the mail when he has been unable to do so. This only occurs about twice a year. Mr Ng does not recall either Mr Chang or Lisa Chang collecting the post from the post office. He states that in the week commencing Monday, 10 May 2010 he only attended the Nunawading Post Office on Friday, 14 May to collect the mail. Prior to this date he had last collected the mail from the post office on Friday, 7 May 2010. He states that on Friday, 14 May 2010 he collected the mail in the morning, which he recalls included an envelope from Liberal Legal, Mr Chang’s solicitors, which he now knows to have contained the statutory demand. He states that when he arrived at the restaurant, he placed all of the unopened mail in a cabinet drawer and handed it to Lisa Chang at about 5.30 pm that day, shortly after her arrival at the restaurant.
Mr Searle, counsel for Formosa House, contends that service on Formosa House was effected when Mr Ng took the envelope to the registered office on Friday, 14 May 2010 and that Formosa House therefore had until 4 June 2010 to file and serve its application to set aside the statutory demand.
In making that submission, Mr Searle relied on the decision of White J of the New South Wales Supreme Court in Scope Data Systems Pty Ltd v David Goman (as representative of the partnership VDO Nelson Parkhill).[2] White J had to consider a very similar factual situation to that under consideration here. In Scope Data the statutory demand was sent to the plaintiff by post to its registered office which was that of its accountants. In a somewhat similar arrangement to that under consideration here, all mail addressed to the physical address of the accountants’ office at Manly was placed into a post office box.[3] A representative of the accountants collected the mail each day and took it to the registered office. The representative of the accountants had checked the post office on the previous working day and the letter was not in the post office box at that time. In Scope Data, as here, the actual date of service was significant because if the statutory demand was held to have been served before the day that the plaintiff in that case contended, i.e. when it was collected from the post office and taken to the registered office, the application was not made in accordance with s 459G of the Corporations Act and had to be dismissed.
[2](2007) 25 ACLC 721.
[3]Formosa House’s mail was apparently retained at the post office but was not placed in a post office box.
In Scope Data, White J surveyed in considerable detail the various authorities dealing with the subject of service and the legislative provisions which currently apply. The passages of the judgment dealing specifically with this issue are at paragraphs [11] to [98] of his Honour’s reasons. In his survey of the authorities, White J considered the decision of Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Limited,[4] a decision of the Full Court of the Supreme Court of South Australia, also a case in which the subject demand, which was addressed to the registered office rather than being sent directly to the registered office, was placed by the post office by prior arrangement in a post box. It was then collected and taken to the company’s registered office. In Derma, the Full Court considered that Burley J at first instance was correct when he stated:
Delivery to the post office by employees of Australia Post does not constitute delivery of the mail article to the registered office of the plaintiff. When considered as a matter of law, the question becomes: does delivery to a post office box retained by the addressee, whose street address constitutes the registered office of the company, constitute as a matter of law delivery to the registered office as contemplated by s 109X(1)(a) of the Corporations Act. In my view, on the proper construction of s 109X(1)(a), delivery to a post office box is not contemplated by the provision. It provides for the posting of a document to the registered office of the company. This in my view, means physical delivery to the actual registered office.
[4](2005) 188 FLR 373.
The Full Court of the South Australian Supreme Court upheld Burley J’s view at first instance in this regard but by reason of the facts in that particular case the plaintiff had not established that its application to set aside the demand was made within time.
White J considered other authorities, including Falgad Constructions Pty Ltd v Equity Australia Corporation Pty Ltd,[5] a decision of the Court of Appeal of the Supreme Court of New South Wales, which he declined to follow as he did not consider that the Court of Appeal had been informed of all the relevant authorities. He also declined to apply the decision of the High Court in Bowman v Durham Holdings Pty Ltd,[6] distinguishing it; in that case the contract permitted service of a notice exercising an option to purchase by post and provided that notice was deemed to be given at the time when it would have been delivered in the ordinary course of post. White J considered that this raised quite a different issue, stating that in that case there was no question of the rebuttal of a presumption of delivery in the ordinary course of post.[7] White J concluded at [98] of his reasons:
For these reasons, I conclude that service was not effected until the statutory demand was taken by Mr Tattam to the offices of Tattam and Co, which was the registered office of the plaintiff, after being collected from the post office box. …
[5][2006] NSWCA 259.
[6](1973) 131 CLR 8.
[7]See [88].
Mr Searle submitted that the evidence of Mr Chang indicates an awareness on his part of the arrangements for collection of the mail every week and as such the reasoning in Scope Data applies a fortiori in this instance. In Scope Data the creditor who served the demand had no knowledge of the arrangements in respect of collection of mail. In my view, absent establishing an abuse of process arising by it being established that Mr Chang mailed the demand to the registered office with the intent or design that Formosa House be in some way impeded in reacting to the demand by making application to set it aside, I do not consider this to be a relevant factor.
Mr Cook submitted that I should not follow Scope Data and instead contended that I should apply the decision of Bowman v Durham Holdings Pty Ltd.[8] As I have observed above, White J considered Bowman in Scope Data and distinguished it.[9]
[8](1973) 131 CLR 8 at [14]-[15] per Stephen J.
[9]Scope Data at [88].
In my view, unless I consider that the reasoning of White J in Scope Data is plainly wrong, I should follow and apply it in this instance.[10] The case is exactly on point and considers at some length all the relevant legislation and authorities. I will apply it in this instance. This results in a finding that the statutory demand was served on Formosa House when it was collected by Mr Ng on 14 May 2010 and that the application is therefore within time.
[10]See Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 112 ALR 627
I note that the exhibits to the affidavit in support of the application were served a day after the affidavit and originating process but that day was the last day on which a valid application could be filed and therefore no issue arises from the failure to serve the exhibits with the originating process and affidavit in support.
I now turn to a consideration of the substantive aspects of the application, that is, is there a genuine dispute concerning the debt and does Formosa House have offsetting claims?
The principles to be applied when considering applications under s 459G of the Corporations Act2001 have been the subject of numerous authorities. These have been collected of relatively recent times in the decision of the Court of Appeal in Victoria in TR Administration v Frank Marchetti and Sons Pty Ltd[11] (“Marchetti”). Dodds‑Streeton JA referred to the well‑known formulation by McClelland CJ in Eyota v Hanare Pty Ltd,[12] where his Honour stated:
It is however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s 450H (sic). In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sorts of considerations as the “serious question to be tried” criterion which arise on an application for 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 … “
[11](2008) 66 ACSR 67.
[12](1994) 12 ACSR 785.
Dodds-Streeton JA goes on to say at paragraph 71 of Marchetti:
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or offsetting claim. It is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. The dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a full evidenced claim. Something between “mere assertion and the proof that would be necessary in the court of law” may suffice.
In Spencer Constructions Pty Ltd v G & M Aldridge[13] the Full Court of the Federal Court observed that for a genuine dispute to exist it must be “bona fide and truly exist in fact”, and the grounds for alleging its existence must be “real and not spurious, hypothetical or misconceived”. The dispute should have sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile.
[13](1997) 76 FCR 452 at 464.
In her first affidavit filed in support of the application, Ms Chang sets out the grounds for the dispute and offsetting claims. She states that she is the sister of the defendant, Mr Chang. She states that her late mother, who was a former director of Formosa House, requested Mr Chang to pay funds to Formosa House in the period 20 December 2007 to 11 June 2009. The amount of those funds was $85,000 and they were advanced over six separate payments. She states that throughout this period Mr Chang was living with her and her mother at the family home in Surrey Hills. Mr Chang worked one day a week for Formosa House at the restaurant and also at a local service station. Aside from these occupations, Mr Chang had no stable employment. She states that her mother told her, and she believes that during this period most of Mr Chang’s income including the funds which were advanced, would have been given to him by his mother out of the profits generated by Formosa House. She states that her mother informed her and she believes that in around December 2007 it had been agreed with Mr Chang that Formosa House would return the funds to Mr Chang when his wife moved to reside in Australia. She says that her mother told her that this arrangement was agreed to to address her mother’s concerns regarding Mr Chang’s lifestyle. She stated that she wanted to ensure that Mr Chang had some money to put towards his matrimonial home. This was said to be a “family arrangement” reached between them.
In addition, between 30 July 2009 and 12 November 2009, Ms Chang states that she requested Mr Chang to pay further funds to Formosa House in the same terms to those agreed between him and their mother. These further payments are the final two amounts listed in the table at paragraph 3 of Mr Chang’s affidavit in support of the statutory demand. Ms Chang states that at the time her affidavit was sworn Mr Chang’s wife had not moved to Australia and that he had not made any attempts to purchase a matrimonial home. She says that since neither of the events that trigger the repayment of the funds have occurred, the loan is not yet repayable.
Objection was taken by Mr Cook to Formosa House adducing the evidence in respect of the alleged agreement struck between Ms Chang’s mother and the defendant on the basis that it was hearsay. In response, Mr Searle referred to s 63 of the Evidence Act 2008, which he submitted would allow the admission of such evidence when the person making the representation is not available to give evidence about the asserted fact. I express no concluded view on the applicability of that provision. Applications to set aside statutory demands are considered in this state at least to be interlocutory in nature. Hearsay evidence can be adduced and is commonly allowed in these types of applications[14].
[14] Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd (2007) 63 ACSR 300; [2007] VSCA 121 at [5] per Maxwell P and Neave JA; at [81] per Chernov JA; at [108] per Nettle JA and at [126] per Ashley JA.
Mr Chang, in his affidavit in opposition to this application dated 21 June 2010, denied that the funds would only be repaid when his wife moved to and resided in Australia. He states that it was never certain that his wife would move to and reside in Australia. The affidavit does not develop the denial and merely ‘joins issue’ on the contention by Formosa House.
Ms Chang filed a further affidavit in support of Formosa House’s application on 7 July 2010. In that affidavit she elaborates on the background to the making of the agreement described in her earlier affidavit. She states that on a number of occasions prior to Mr Chang’s wedding to his current wife she was involved in conversations with their mother and Mr Chang in which their mother reiterated the terms of the arrangement and, on each occasion this was discussed, Mr Chang acknowledged and agreed with the terms. After the wedding of Mr Chang there were several more occasions where the matter was raised. The conversations were said to be usually in the context of Ms Chang or her mother questioning Mr Chang as to when Mr Chang’s wife would be moving to Australia. On these occasions Mr Chang again acknowledged and agreed to the provisions whereby the moneys would not be repayable by Formosa House until the agreed events had occurred.
It has to be said that the alleged agreement is very unusual. The moneys advanced by Mr Chang are only repayable when his wife comes to this country and a matrimonial home is purchased. This may never occur. In this regard, Mr Searle makes a number of submissions. He points to the evidence of Ms Chang where she states that the origin of the funds which were advanced to Formosa House was Formosa House itself and Mr Chang had no other significant source of income. In addition, he observes that the demand has been served in the context of litigation being threatened by Mr Chang about the estate of the mother and the circumstances by which Ms Chang become executrix of the estate and that the subject of this application is part of a wider controversy within the family. Mr Searle observes that, aside from the denial that such an agreement was ever struck, Mr Chang does not develop by contradicting evidence the existence of such an agreement.
The determination of this issue really depends on the consideration of whether the evidence put forward by Ms Chang is implausible and ought not to be accepted. Other than Mr Cook’s submission that the evidence is implausible, it is not contradicted by any contemporaneous documentation or other evidence. While the agreement is a most unusual one, it is struck in the context of close family financial arrangements and I could not safely conclude that the evidence in this regard should be rejected. As such I find that there is a genuine dispute concerning the debt the subject of the demand. The existence of the agreement contended for by Ms Chang although denied by Mr Chang warrants further investigation.
Although it is not strictly necessary to do so I now turn to the question of the offsetting claims. Ms Chang contends in her first affidavit that Formosa House has two types of offsetting claim. The first of those is described in paragraphs 11 to 17 of her affidavit of 30 May 2010. She contends that Formosa House made payments to reduce the balance of Mr Chang’s ANZ credit card between October 2003 and November 2009 on the express agreement that these payments would eventually be repaid. She states that she was informed by her late mother and believes that this agreement was made between Mr Chang and her late mother on behalf of Formosa House in or around October 2003. She states that during that period of October 2003 to November 2009, Formosa House transferred over $100,000 to the credit card and there have been no repayment of those moneys. She says that during that period Mr Chang used the credit card to pay for Formosa House expenses. By reference to credit card statements she has been able to calculate that between 17 October 2003 and 18 April 2006 Formosa House transferred a total of $28,765.47 to Mr Chang’s credit card which related to non‑Formosa House expenses, i.e. Mr Chang’s personal expenses for which repayment is required. She states that between August 2006 and November 2009 Formosa House has transferred a further $72,403.57 to the credit card. Formosa House does not have access to Mr Chang’s credit card statements for the period so she has not been able to discern what proportion of this amount are non‑Formosa House related expenses. Despite requests from Formosa House’s solicitors to Mr Chang’s solicitors for provision of those statements to enable this to be done, they have not been provided. Mr Searle says that no reason has been put forward for the failure to provide them. Ms Chang contends that the amount of the offsetting claims in respect of the credit cards may be as high as $102,151.52.
There are aspects of this offsetting claim which give rise to interesting issues. If the amounts advanced under this arrangement more than six years ago have not been the subject of proceedings, some or all of this offsetting claim may well be statute barred.[15] This is because in the absence of a written agreement the amounts were considered to be repayable on demand when they were advanced and the limitation period began to run at that time. It is not possible to discern from the evidence what part if any is so statute barred. I consider that an offsetting claim for at least the sum of $28,765.47 has been made out or at least meets the requisite standard of being a genuine offsetting claim. Further intrigue arises by reason of the unexplained failure by Mr Chang to produce the subsequent credit card statements to enable an analysis of the balance of the offsetting claim and as such while it is not necessary for me to express a concluded view about it leads me to a conclusion that there is at least an arguable offsetting claim for the $72,403.57. Mr Searle points out that Mr Chang must be in a position to provide such statement as he asserts in paragraph 2(d) of his affidavit that only $12,747 relates to his personal expenditure, which suggest he has access to the requested documents.
[15]See Ogilvie v Adams [1981] VR 1041
Ms Chang also contends that Formosa House has an offsetting claim in respect of the provision of BMW and Toyota motor vehicles by Formosa House to Mr Chang. It is contended that the lease payments which were paid by Formosa House in respect of these vehicles, which total $38,161.16, gives rise to an offsetting claim against Mr Chang. I am not at all convinced of the argument in this regard. The picture which emerges is the provision of these motor vehicles to Mr Chang, an employee of Formosa House, a very common arrangement in small family company structures. I am asked to conclude by Mr Searle that a loan account has accrued in the books of Formosa House in respect of the total of those lease payments, which is repayable by Mr Chang. Formosa House is not able to point to any formal agreement in regard to the provision of the motor vehicles and I do not consider that it has established that it has an enforceable offsetting claim in this regard.
Accordingly, I conclude that Formosa House has made application within the requisite 21 day period to set aside the statutory demand. I find that there are genuine disputes in respect of the debts the subject of this statutory demand for the reasons given. While it is not necessary for me to do so, I consider that Formosa House has established to the requisite standard that it has an offsetting claim against Mr Chang in respect of the credit card payments but I would, if I was required to do so, find that it has not established that it has an offsetting claim in respect of motor vehicle payments. Accordingly, I will make orders that the statutory demand dated 10 May 2010 and served on Formosa House by Mr Chang be set aside. I will order that Mr Chang pay Formosa House’s costs of this application including reserved costs.
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