Glenhawk Pty Ltd v Forty Second Maylux Pty Ltd
[2016] VSC 270
•20 May 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2015 01770
IN THE MATTER of GLENHAWK PTY LTD (ACN 135 659 086)
BETWEEN:
| GLENHAWK PTY LTD (ACN 135 659 086) | Plaintiff |
| v | |
| FORTY SECOND MAYLUX PTY LTD (ACN 005 737 959) TRADING AS HODGES CAULFIELD | Defendant |
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JUDGE: | Randall AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 July 2015 |
DATE OF JUDGMENT: | 20 May 2016 |
CASE MAY BE CITED AS: | Glenhawk Pty Ltd v Forty Second Maylux Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 270 |
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CORPORATIONS – Corporations Act 2001 (Cth) – s 459G application to set aside statutory demand – Graywinter principle – Failure to quantify off-setting claim – Whether fund to meet the debt held in trust account under the control of a director of the creditor – Constitutes some other reason as set out in s 459J.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr E W Moon | Belleli King & Associates |
| For the Defendant | M T LaPirow | Trumble Szanto Lawyers |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 1
The dispute.......................................................................................................................................... 2
Offsetting claims................................................................................................................................. 3
Genuine dispute – Lot 1 advertising costs..................................................................................... 3
Offsetting claim – Lot 3 advertising costs...................................................................................... 3
Section 459J – Some other reason.................................................................................................... 3
The size of Lot 6.................................................................................................................................. 4
HIS HONOUR:
Introduction
This is an application to set aside a statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) (‘Act’).
The statutory demand dated 30 March 2015 seeks the payment of $18,659.52 being the debt described in the schedule. A summary of what is set out in the schedule is that the sum of $18,659.52 comprises of commission, marketing expenses and furniture hire with respect to the sale of a property being 1/365 Hawthorn Road, Caulfield. The exclusive auction authority and the tax invoices relied upon were annexed to the statutory demand. The affidavit accompanying the statutory demand describes the debt claimed in different terms, namely:
In respect of a debt of $18,659.52 … owed by the company to the creditor in relation to amounts owed by the company to the creditor arising from the company’s breach of a lease of premises granted by the creditor to the company.
Surprisingly, no issue was taken with respect to the description set out in the affidavit accompanying the statutory demand.
Background
The plaintiff is a property developer. It developed the land situate at 365 Hawthorn Road, Caulfield South into seven apartments (‘the development’) and one retail shop. The defendant is a real estate agent.
The defendant was retained by the plaintiff to sell the residential units in the development. The defendant sold five of those seven apartments.
Subsequently in or about mid-September 2014, the plaintiff executed an exclusive auction authority in respect of lot 1 in favour of the defendant. Lot 1 was subsequently sold by the plaintiff after lot 1 had been withdrawn from auction about 10 days prior to 30 November 2014 when the auction was scheduled. Settlement of lot 1 took place on 30 January 2015.
The defendant had also been retained to sell lot 6. Settlement of the sale of lot 6 took place on 9 January 2015.
On 11 December 2014, the defendant issued its tax invoice in relation to the sale of lot 3. That invoice included the sum of $581 for advertising expenses.
On 23 February 2015, the defendant issued its tax invoice in respect of lot 1 in the sum of $18,659.52.
The dispute
On 2 March 2015, the plaintiff’s solicitors wrote to the defendant. That letter:
(a) Contended that no commission was payable as lot 1 was listed on the basis of an assurance that the property would be sold through an auction process;
(b) Advised that the defendant would only be paid if it was technically entitled to the sum;
(c) Noted that sufficient monies were held in trust but copies of all invoices for services rendered before the account is paid were required;
(d) Demanded copies of all invoices for out of pocket expenses;
(e) Noted that the authority for lot 3 did not entitle the defendant to charge $581 in advertising charges;
(f) Requested that the defendant provide a statement of what was said to the purchasers of lot 6 as one of the purchasers had alleged that the defendant made misrepresentations; and
(g) Stated that the plaintiff would consider paying monies into Court to be held pending the outcome of proceedings threatened by the purchasers of lot 6.
The parties entered into a further discourse in relation to those matters.
Offsetting claims
The plaintiff contends that the defendant had ‘guaranteed’ that it would be able to sell lot 1 through an auction process. The plaintiff contends that the defendant’s conduct contravened s 18 of the Australian Consumer Law (Victoria). The powers of a Court upon making such a determination include orders declaring the whole or any part of the contract made between the parties void, void ab initio or from such times as specified in the order, varying a contract or arrangement, and making an order refusing to enforce any or all of the provisions of such contract or arrangement or ordering compensation.
The second offsetting claim arises pursuant to the contention that the defendant made representations to the purchaser of lot 6 regarding its size. The purchaser is entitled to seek compensation from the plaintiff and the plaintiff is entitled to be indemnified by the defendant. It is put, but not in the 21 day affidavit, that the purchaser’s claim of $71,520 comfortably exceeds the amount referred to in the statutory demand.
Genuine dispute – Lot 1 advertising costs
The plaintiff contends that the Court ought to find that there is a genuine dispute as to the sum of $2,194.50 alternatively, $1,265. The basis of the genuine dispute is that the defendant seeks to recover monies invoiced from the defendant’s related entities, the basis upon which it is not substantiated or particularised.
Offsetting claim – Lot 3 advertising costs
The plaintiff contends that the charge of $581 has no foundation. It does not relate to Lot 3 nor Lot 1.
Section 459J – Some other reason
The plaintiff contends that the defendant’s tax invoice of 23 February 2015 (being the tax invoice relied upon) totals $18,659.49 not the sum of $18,659.52. It is submitted that it leaves the plaintiff in an unfair and invidious position of not knowing with certainty how much it is expected to pay resulting in substantial injustice. I reject the argument completely. The difference is minute and the argument fatuous given that it involves 3 cents.
Additionally, the plaintiff submits that the statutory demand was issued for an improper purpose and/or is an abuse of process. It was submitted that:
(a) The alleged debt is small;
(b) The defendant was on notice that it would have to substantiate its advertising charges prior to the issue of the tax invoice on 23 February 2015;
(c) The alleged debt was disputed within seven days of the issue of the tax invoice;
(d) The alleged debt remained disputed at all times prior to the issue of the statutory demand;
(e) The defendant was aware at all times of the claims made by the purchaser of lot 6;
(f) The plaintiff’s solicitors held sufficient monies in its trust account to pay the disputed debt;
(g) The plaintiff is otherwise solvent; and
(h) The statutory demand was served when the plaintiff knew Mr Belleli was on vacation and out of the jurisdiction.
The size of Lot 6
The 21 day affidavit raises the issue with respect of the size of the apartment as follows:
[12]Upon the settlement of Lot 6 … in the Development, the purchaser of that lot complained to the plaintiff that the defendant and in particular Golan Flamm, had made false representations to them which had induced them into purchasing their property. I have endeavoured to obtain the defendant’s cooperation in providing me with information to respond to the claims made by the purchasers of Lot 6 in the development but the defendant has refused to provide me with any information as to the alleged representations made by them.
Exhibit JB-2 (the letter) to that affidavit relevantly sets out:
We also bring to your attention that we have now received a letter of demand from the purchaser of unit 6, 365 Hawthorn Road who had made allegations that Golan Flamm of your office made specific representations in relation to the unit which are alleged to be untrue. The alleged representations are stated to be separate and independent from the conduct documentation. As our client has been unable to obtain your cooperation as its agent, to clarify what if any statements were made we have been unable to refute or accept the veracity of the allegations. In the event that proceeds [sic] are issued by the owner of unit 6, it will be necessary for any monies payable to you upon receipt of an amended invoice, to pay those monies into Court.
We currently continue to hold monies in trust to satisfy any monies owed to you.
The response in relation to this argument is set out in the affidavit of Alex Flamm sworn 1 July 2015. Alex Flamm deposed that the purchaser of lot 6 bought ‘off the plan’. At that time the unit was yet to be constructed. The plans appended to the vendor’s statement had been prepared by the plaintiff’s architect, Belleli Design and depicted that unit 6 had an area of 72 square metres.
Exhibit AF-4 to that affidavit exhibits two email transmissions. The first is from Golan Flamm on 3 September 2012. That email transmission relevantly provided:
Can you please advise whether the sizes outlined in the plans for each apartment include the outdoor area. For example, apartment 1 shows that it is 81m2. Is that inclusive of the balcony!?
The response of the same day from Ariana Belleli relevantly provided:
The sizes outlined on the plans for each apartment do not include the outdoor area. The outdoor area is marked separately on the balconies.
Prior to the filing and service of the affidavit of 16 June 2015, there was simply no quantification or at least, an attempt to quantify the off-setting claim with respect to the size of unit 6. As that quantification was not included in the 21 day affidavit or even alluded to, that is the end of the matter. However, even if it were permitted to have regard to the subsequent material filed on behalf of the plaintiff, the failure to quantify any potential off-setting claim is still a vitiating impediment. In Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd[1] Burley J said:
…There needs to be evidence supporting the quantum of the offsetting claim so that the court may determine whether or not there is a genuine offsetting claim of a given amount. It is not necessary that the evidence be such as might be advanced at a trial but it is, in my view, necessary to adduce some evidence in that regard … In the absence of such evidence it is impossible for the Court to determine whether or not the statutory demand must be altered or set aside in accordance with the provisions of s 459H of the law (authorities omitted).[2]
[1](1997) 23 ACSR 339.
[2]Ibid 343.
In paragraph 35 of his affidavit sworn 16 June 2015, Jerry Belleli said:
To the best of my recollection, in or about February 2015, I spoke with Mr Moyal (the purchaser of unit 6) by telephone. During our discussion, Mr Moyal said that:
(a) he had been told by Golan Flamm unit 6 would be a certain size;
(b) he had measured lot 6 following settlement;
(c) lot 6 was smaller than represented; and
(d) he wanted compensation.
Prior to that conversation Mr Moyal had written to Mr Belleli and the other director of the plaintiff. That letter which appears to have been received on 21 January 2015 relevantly set out:
When settlement did finally take place, it occurred under great duress as in the days preceding it became clear that the property is approximately 10 square metres smaller than detailed in the contract of sale which severely impacts the liveability of the property.
Mr Moyal set out a number of other complaints.
Mr Moyal sought compensation based on the square metres missing. The letter was admitted into evidence without objection from the defendant. However, as the same was marked without prejudice save as to costs, I have my doubts about whether I should consider the sum, Mr Moyal has not waived the privilege, which he is entitled to claim. However, it is sufficient to say that the amount sought is well in excess of the amount claimed in the statutory demand and in line with what is set out in the K&L Gates letter, which is subsequently referred to.
On 16 March 2015, K&L Gates as solicitors for the purchaser of unit 6 wrote to the directors of the plaintiff. That letter raised issues with respect to the sale. Relevantly it set out:
By way of background we note:
1.Prior to their purchase of the Property, numerous detailed representations were made by or on behalf of Glenhawk to our clients that they the Property would be, at least, 71sqm excluding the balcony area. Such representations were written and oral and included (but were not limited to):
(a)Floorplans in the advertising materials;
(b)The provisions of the Contract prior to its execution;
(c)The planning documentation appended to the Contract prior to its execution;
(d)Information provided by Glenhawk’s appointed agents, Hodges Caulfield Pty Ltd (Hodges).
The letter then set out what could be characterised as a ‘Calderbank’ offer. Again, this letter was admitted into evidence without objection notwithstanding that the letter was marked ‘without prejudice save as to costs’. I am left in a difficult position as I would not normally admit Moyal’s letter and the K&L Gates’ letter unless the privilege had been waived. I will not admit each of those letters to evidence with respect to the truth of what is set out in the same but will do so on the basis that they are corroborative of or form the platform for the basis of the plaintiff’s apprehension that it is more likely than not that it will be sued in relation to the sale of unit 6 and that the likely quantum will be in the vicinity of $71,000.
Although the content of Mr Belleli’s correspondence can be characterised as little more than contention with respect to this off-setting claim, I cannot ignore the letter from K&L Gates solicitors for Mr Moyal which, among other things, makes a clear allegation against the defendant in relation to the conduct of the sale.
It was submitted on behalf of the defendant that any claim, which the purchaser may prosecute, would be an apportionable claim and that it ensures that the plaintiff would not have any right of contribution, which could be characterised as an off-setting claim. Because of the issue raised by the defendant with respect to the ‘proportionate liability provisions’, negating any entitlement to contribution in respect of the purchasers’ claim, I requested that counsel file further submissions.
The gravamen of the defendant’s submission is that the defendant merely acted as a conduit for passing on details with respect to the size of the relevant apartment. Those details had been provided by Mr Belleli’s daughter and, thus, the chances of being held liable for any actionable wrong are so remote that they must be discounted in their entirety. In any event, any claim by the prospective plaintiff (Mr Moyal) that a misrepresentation was made by the defendant would not result in an off-setting claim by which the defendant would be indebted to the plaintiff, even if there were such a factual basis. It was put that:
16.Liability for a claim of this nature, if brought by a purchaser, as between the vendor and agent will be determined by Part IVAA s 24AF of the Wrongs Act which provides for a claim for economic loss or damage, whether in Tort, contract under statute or otherwise, arising from a failure to take reasonable care and a claim for contraventions of s 18 of the Australian Consumer Law (Victoria) are apportionable claims.
17.Pursuant to s 24AJ of the Wrongs Act, the postulated vendor’s action does not give the plaintiff a third party claim. No damages accrue as between the plaintiff and the defendant. The issues attempted to be raised by the plaintiff did not demonstrate a genuine dispute.[3]
[3]Defendant’s outline of submissions, 16–17.
Whilst I am sympathetic to Mr LaPirow’s observations about the merits of the off-setting claim I am bound to follow authority identifying the test involved. In TR Administration v Frank Marchetti & Sons[4] Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:
No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised.[5]
Her Honour further outlined the evidentiary requirements with respect to making out an s 459H claim:
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 off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting 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 fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice. …[6]
[4][2008] VSCA 70.
[5]TR Administration v Frank Marchetti & Sons [2008] VSCA 70 [57].
[6]Ibid [71].
In Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd,[7] Barrett J said:
…The [applicant] will fail in [the] task [of establishing a genuine dispute] only if … the contentions upon which it seeks to rely … are so devoid of substance that no further investigation is warranted. Once the [applicant] shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.[8]
[7][2002] NSWSC 411.
[8]Solarite v York [2002] NSWSC 411 [23].
Viewed in isolation, the contentions put on behalf of the plaintiff with respect to representations would remain unconvincing and remain characterised as ‘bluster or assertion’. However, I must have regard to the substance of the letter from K&L Gates dated 16 March 2015. The attribution of representations which were contended to be written and oral, to the defendant, is sufficient to elevate the off-setting claim to a claim which requires investigation.
The defendant’s submissions set out as follows:
3.On the evidence there is no allegation made by the third party against the defendant, or which in any way demonstrates any conduct on its part that was false or misleading. The material allegation by the third party, namely the discrepancy of the actual ‘as built’ internal demonstrations of the unit, from those represented on the plaintiff’s plan is the postulated cause of action.
4.The formulation of the plaintiff’s off-setting claim is not based on evidence, it is a theoretical construct, and as such is not maintainable.
5.Section 24AF [of the Wrongs Act] contains the definition of an apportionable claim. The plaintiff’s postulated or imagined claim falls squarely within s 24AF(1)(a) and (perhaps more directly) (b). The operation of the regime is defined by ss 24AI and 24AJ so as to preclude the claim foreshadowed by Mr Belleli being a contribution or indemnity by way of third party action. If there was a factual basis for the third party to bring an action against the defendant, one may equally hypothesise it would do so. If the third party chose not to do so, s 24AL would be available to the plaintiff.
…
7.The plaintiff’s evidence does not adequately demonstrate the alleged wrong doing of the defendant nor does it address any reason why the plaintiff (as defendant in the postulated action) would not seek relief under s 24AL. This silence is indicative of there being no basis for a genuine off-setting claim.
The off-setting claim must be in existence at the time the s 459G application is heard by the Court. It cannot relate to a cause of action which is not presently in existence.[9] However, I determine that the factual matrix for the claim which might be prosecuted by the purchaser is already in existence and has been foreshadowed or threatened by the purchaser’s solicitors.
[9]Advance Ship Design Pty Ltd v DJ Ryan T/AS Davies Collision Cave (1995) 16 ACSR 129 at 136.
In Hell Colour Australia Pty Ltd v Everbest Printing Company Limited,[10] Gardiner AsJ had before him an off-setting claim which relied upon a third party filing suit. At the time of hearing of the application to set aside the statutory demand, the third party had not taken any action. Although there was a ‘state of détente’ between the third party and the plaintiff existed, the judge considered that there was a real possibility that tripartite proceedings would issue, the factual foundation for the same having been established. The judge also observed the following:
I do not consider that Hell Colour’s alleged claim has been, to use the expression of McPherson JA in JJMMR Pty Ltd v LG International Corp,[11] manufactured or got up simply for the purpose of defeating the demand made against the company.[12]
In those circumstances Gardiner AsJ set aside the statutory demand.
[10][2010] VSC 643.
[11][2003] QCA 519.
[12]Hell Colour Australia Pty Ltd v Everbest Printing Co Ltd [2010] VSC 643 [30].
In the same way, the elements of an off-setting claim have been established. The discrepancy between the plans and the ‘as built’ meterage is beyond dispute. The purchaser has taken the extra measure to make a complaint through solicitors. The purchaser’s solicitors have included allegations against the defendant in making demand. It is not appropriate for me to determine the efficacy of those allegations in this proceeding. That is a matter for a curial determination after cross-examination and weighing all the appropriate factors.
Relevant provisions of the Wrongs Act 1958 (Vic) (‘Wrongs Act’) are as follows:
Part IV – Contribution
Section 23B – Entitlement to contribution
Part IVAA – Proportionate Liability
Section 24 – Recovery of contribution
(2)Subject to sub-s (2A) and (2B), in any proceeding for contribution under s 23B the amount of the contribution recoverable from any person shall be such as may be found by the jury or by the Court if the trial is fixed without a jury to be just and equitable having regard to the extended person’s responsibility for the damage; and the jury or the Court if the trial is without a jury shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.
Section 24AF – Application of Part [Proportionate Liability]
(1)This Part applies to—
(a)a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care; and
(b)a claim for damages for a contravention of section 18 of the Australian Consumer Law (Victoria).
(2)If a proceeding involves 2 or more apportionable claims arising out of different causes of action, liability for the apportionable claims is to be determined in accordance with this Part as if the claims were a single claim.
…
Section 24AI – Proportionate liability for apportionable claims
Section 24AJ – Contribution not recoverable from defendant
Despite anything to the contrary in Part IV, a defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim—
(a)cannot be required to contribute to the damages recovered or recoverable from another concurrent wrongdoer in the same proceeding for the apportionable claim; and
(b) cannot be required to indemnify any such wrongdoer.
Section 24AP – Part not to affect other liability
Nothing in this Part—
(a)prevents a person from being held vicariously liable for a proportion of any apportionable claim for which another person is liable; or
(b)prevents a person from being held jointly and severally liable for the damages awarded against another person as agent of the person; or
…
In response to the issues raised with respect to the proportionate liability claim, the plaintiff relies upon the vicarious liability provisions of the Wrongs Act set out at s 24AP.
I was then taken to the explanatory memorandum to the Wrongs Act and Limitation of Actions Act (Insurance Reform) Act 2003, which relevantly sets out:
Section 24AP provides that nothing in this Part effects the vicarious liability of a person, or the joint and several liability of a principle for damages awarded against an agent, or the joint and several liability of a partner for the proportion of a an apportionable claim awarded against another person.
I was taken to Miletich v Murchie,[13] where Gray J made observations which included at [117]:
Even if [the agent] could have limited its liability by establishing that [the developer] was a concurrent wrongdoer with it, [the developer] is precluded from doing so in relation to [the agent’s] conduct, by reason of the vicarious liability of [the developer].
[13][2012] FCA 1013.
It was put that any judgment entered against the plaintiff at the suit of the purchaser would not be entered as a ‘concurrent wrongdoer’ within the meaning of s 24AJ. That was because the judgment will be entered against the plaintiff for the entire amount of the purchaser’s loss and damage including in respect of that portion of the loss and damage which would be attributable to the defendant if the plaintiff and defendant were concurrent wrongdoers. In those circumstances s 24AJ does not apply and the plaintiff is free to seek contribution of the defendant under Part IV of the Wrongs Act.
Section 23B and s 24(2) preserve recovery of contribution as it stood prior to the introduction of the proportionate liability provisions.
I was referred to Pricom Pty Ltd v Sgarioto,[14] in which Eames J considered the Wrongs Act in the context of the Fair Trading Act1985 (Vic) as it was then in force. Eames J said at [57]:
In my opinion, the Wrongs Act, unlike the New South Wales Act, would permit such a claim for contribution to be based on the terms of the Fair Trading Act (but arguably not with respect to the Trade Practices Act, on the basis that the Wrongs Act provision might be regarded as being capable of providing a remedy where the Commonwealth act itself denied that remedy). Unlike the equivalent section of the New South Wales Act, the Wrongs Act s 23A was not confined to torts, but referred to damage for which liability arose and ‘whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise. In my opinion that phrase is wide enough to encompass a claim under the Fair Trading Act. I therefore conclude that provided the same damages involved (as I consider it is), the agent is entitled to seek contribution against the engineer for a breach of that Act. …
[14](Unreported, Supreme Court of Victoria, Eames J, 6 December 1994) 57–58.
What is discussed in the previous paragraph is not necessarily good law any longer. The assessment of damages arising from a breach of s 18 is specifically dealt with at s 24AF of the Wrongs Act.
Whether the claim the purchaser made bring, whether at common law or under the Australian Consumer Law (Victoria) or other legislation, is apportionable by virtue of s 24AP seems to be irrelevant in the end. Accordingly, I will not embark upon an analysis of whether or not any such claim might be a single apportionable claim or constituted by several claims with varying consequences such as in Wealthsure Pty Ltd v Selig.[15] Whether or not the claim is apportionable, by s 24AP the rights of the purchaser to claim the full amount against the plaintiff in this proceeding are preserved by virtue of its position as principal in the transaction. Hence, the provisions of s 24B are enlivened. Although it is difficult to envisage a fact scenario where the defendant will be held liable for a substantial part of the claim by the purchaser, that is a matter for the trial judge.
[15](2014) 312 ALR 183.
Irrespective of analysis of the right to contribution and whether such is abrogated by the provisions of Part IVAA, a more fundamental impediment exists. Firstly, I refer to and repeat my observations about the non-quantification of any off-setting claim in the 21 day affidavit as being fatal. Secondly, even if I were to accept that the plaintiff is entitled to rely upon the quantification of $71,520 as set out in the K&L Gates letter, there is simply no material put to me which would enable the Court to quantify the extent of the plaintiff’s right of contribution against the defendant or even what percentages would be awarded on an apportionable claim. In Federico’s Restaurant Pty Ltd v Warwick Entertainment Centre Pty Ltd,[16] Lehane J was faced with the difficulty in assessing an off-setting claim. Lehane J said:
…[T]hat I must be satisfied for the purposes of the calculation required by s 459H(2) of the existence of an off-setting claim. The difficulty, however, is that the calculation requires the attribution of the off-setting claim of an amount. The particular difficulty is that this claim in any ordinary sense of the word does not have an amount. Its amount or value is on the material before me indeterminate. The provisions of the Corporations Law do not give me any clear guidance as to what in these circumstances I should do, particularly as to what, in which the word is used in the provisions, the amount of this particular off-setting claim is. I do not believe, however, that that difficulty means that I must take the amount of the claim as nil. That conclusion, seems to me, would be almost a perversion of what the statutory scheme is intended to do.
…
I have of course as yet said nothing, about value to be attributed to the goods themselves. This is perhaps one of the most difficult aspects of this case, to the point almost of impossibility. Unfortunately, I do not think that the statute allows me simply to throw up my hands and say, as I might be tempted to, it is impossible...[17]
[16](1995) 18 ACSR 702.
[17]Federico’s Restaurant Pty Ltd v Warwick Entertainment Centre Pty Ltd (1995) 18 ACSR 702, 709–710.
I am faced with the same difficulty. However, this is one case where contrary to what is set out by Lehane J, I must ‘throw up my hands and say…it is impossible’. The starting point is that the plaintiff is vicariously liable for the conduct of its agent, the defendant. Although I have identified that K&L Gates makes a complaint against the defendant as agent, the complaint by K&L Gates on behalf of its client relates to the build size of the unit as compared to the planned size. The complaint made against Hodges at paragraph 7 of K&L Gates letter of 16 March 2015 relates to a period after the submission of an offer by or on behalf of the purchaser. I cannot determine that any conduct of the agent could be relied upon in those circumstances Alternatively, the reference to the agent in paragraph 1 of that letter fits into the category of de minimis when what is really set out is the difference between the contractual documentation and attended documentation and the actual build size. I note that:
The criterion is what the person engaging in the conduct gives the other person to understand or what is to be taken from that conduct rather than what understanding the acts were intended to convey. There need be no intention to mislead or deceive, the effect of the prohibition being to establish a norm of conduct which is a species of strict liability. Intermediaries who do no more than merely pass on information supplied by another person, however, will not be taken to have engaged in misleading or deceptive conduct. [18]
[18]Lexis Nexis, Halsbury’s Law of Australia (at 28 April 2015) 110 Contracts ,‘IV Vitiating Factors’ [110-5320].
I am at a loss to determine that any Court or Tribunal would attribute any blame or determine any contribution, if required, on the part of the defendant agent. Further, I was not addressed on that point and will not embark upon an analysis leading to a hypothesis of my own. It is sufficient to say that even if the sum of $71, 520 is accepted as the starting point, the plaintiff has not provided any basis upon which I could conclude that the defendant might be liable to contribute any particular percentage. Hence, the off-setting claim remains unquantified.
I determine that there is no genuine off-setting claim founded upon misleading and deceptive conduct in relation to the ‘guarantee’ that the property would sell at auction.
(a) There is nothing in the material which raises such a contention to anything more than ‘puffery’;
(b) The property was withdrawn from auction by agreement;
(c) There is no contention that any detriment was suffered by advertising the property for auction or, at least, no quantified loss which might be attributable to advertising the property for auction;
(d) There was no contention that any expense incurred was of no utility given that the plaintiff was able to sell by private treaty in a few months;
(e) To the extent that any relief claimed might involve damage rather than a claim for rewriting of the sale authority, there was no quantification within the 21 day period or at all.
Accordingly, I cannot envisage that a Court or Tribunal would take any step to make any orders to rewrite the auction authority or impose any other order. The mere prospect that it might, does not elevate the assertion to a genuine off-setting claim. Even if it is arguable that what I have characterised as ‘puffery’ could constitute a representation and even if any Court or Tribunal was satisfied that the defendant did not discharge the reasonable grounds onus, the other elements required before the same is actionable have not been demonstrated so as to constitute a genuine off-setting claim. Further, insofar as any loss might have arisen by virtue of the withdrawal from auction, the same was not quantified within the 21 day period or at all.
In the end, this was merely a matter of contract. The correspondence, in effect, recognises the liability on the part of the plaintiff to pay if there were a legal requirement. The plaintiff did not make any submission that the terms of the authority precluded the entitlement to commission in circumstances where the plaintiff itself had procured the sale. In effect, the argument put was that it was ‘unfair’ or ‘inequitable’ that the defendant should maintain the claim. Accordingly, I do not have regard to any of those arguments.
As to the claims in respect of advertising costs, I determine that there is no arguable dispute with respect to the same. With respect to Lot 1, all the invoices were provided by the defendant. I find nothing untoward in the defendant being invoiced by related entities. Merely raising the issue or questioning the basis upon which the related entity invoiced the defendant does not lead to the conclusion that a genuine dispute ensues.
As to the lot 3 advertising costs in the sum of $581, the defendant conceded that such sum was wrongly attributable to unit 3 and then, not attributable to unit 1. In contrast to the claim for advertising with respect to unit 1 dealt with in the previous paragraph, this is a matter where the defendant was plainly wrong in the way it formulated its claim. Given the explanation that it might have been attributable to the totality of advertising costs in relation to all the remaining units, I accept that there is a genuinely arguable dispute as to whether the sum is payable at all. Accordingly I will reduce the statutory demand by that amount.
The statutory demand was dated 30 March 2015. Prior to its service on 2 March 2015 and on 19 March 2015 the plaintiff raised the issue of available funds being held in trust.
On 2 March 2015, the plaintiff’s solicitors set out:
We have withheld in our trust account from the sale proceeds of settlement of the above apartment [being lot 1] sufficient monies to pay any monies outstanding to your firm but first require from you copies of all invoices for services rendered before your account is paid.
…
In the circumstances our client may need to consider paying into Court monies owed to your firm pending the outcome of proceedings which have been threatened by the purchasers of the apartments. It appears that any proceedings commenced by the purchasers could only be based on statements made by your firm the details of which are unknown to our client whilst you continue to refuse to cooperate.
On 19 March 2015 the plaintiff’s solicitors sent an email to Alex Flamm stating:
In the event that proceeds [sic] are issued by the owner of unit 6, it will be necessary to ay [sic] monies payable to you upon receipt of an amended invoice, to pay those monies into Court.
We currently continue to hold monies intrust [sic] to satisfy any monies owed to you.
Subsequently, Mr Belleli deposed in support of the originating process:
I have retained from the proceeds of sale of lot 1 in the Trust Account of Belleli King & Associates the solicitors for the plaintiff, sufficient monies to pay the full amount claimed by the Defendant for commission and marketing expenses in excess of the amount claimed in the statutory demand.
Whilst I accept that the plaintiff evinced a willingness to maintain a fund to meet liabilities, I accept the defendant’s submission that Mr Belleli, as a principal in Belleli King & Associates and as a director of the plaintiff, well knows that he is able to direct the repayment from the trust account at any time. In the absence of an undertaking given to the defendant prior to the service of the statutory demand not to dissipate the trust fund I do have regard to such willingness to maintain the funds. In practical terms, the relationship between Mr Belleli, the firm and the plaintiff does not elevate the fund to any particular status. Further, what is set out in the correspondence of 2 March and 19 March 2015 must be viewed in circumstances where I have determined that there is no genuine dispute or off-setting claim (save as to the sum of $581) which would justify the retention of any amount.
Accordingly, I find that the admitted total is $18,078.49. The off-setting total is 0. Accordingly, the substantiated amount is $18,078.49.
I extend the time for compliance with the demand until 4pm on 27 May 2016.
The plaintiff pay the defendant’s costs including reserved costs on a standard basis.
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