Globe Hill Construction and Mining Services Pty Ltd v PHBB Perth Pty Ltd - [2012] WASC 417

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: GLOBE HILL CONSTRUCTION & MINING SERVICES PTY LTD -v- PHBB PERTH PTY LTD [2012] WASC 417

CORAM: MASTER SANDERSON

HEARD: 15 AUGUST 2012

DELIVERED : 13 NOVEMBER 2012

FILE NO/S: COR 189 of 2011

BETWEEN: GLOBE HILL CONSTRUCTION & MINING SERVICES PTY LTD
Plaintiff
AND
PHBB PERTH PTY LTD
Defendant

FILE NO/S :COR 190 of 2011

BETWEEN :GLOBE HILL CONSTRUCTION & MINING SERVICES PTY LTD
Plaintiff
AND
PASCOE PARTNERS CUSTODIAN SERVICES PTY LTD
Defendant

FILE NO/S :COR 191 of 2011

BETWEEN :GLOBE HILL CONSTRUCTIONS & MINING SERVICES PTY LTD
Plaintiff
AND
JOHN ALEXANDER GRAY
Defendant

Catchwords:

Corporations law - Applications to set aside three statutory demands - Turns on own facts

Legislation:

Nil

Result:

COR 189 of 2011 & COR 190 of 2011
Statutory demands set aside

COR 191 of 2011
Statutory demand varied

Category: B

Representation:

COR 189 of 2011

Counsel:

Plaintiff: Ms E C Hensler
Defendant: Ms K E Roach

Solicitors:

Plaintiff: Lavan Legal
Defendant: Park Linfoot Legal Solutions

COR 190 of 2011

Counsel:

Plaintiff: Ms E C Hensler
Defendant: Ms K E Roach

Solicitors:

Plaintiff: Lavan Legal
Defendant: Park Linfoot Legal Solutions

COR 191 of 2011

Counsel:

Plaintiff: Ms E C Hensler
Defendant: Ms K E Roach

Solicitors:

Plaintiff: Lavan Legal
Defendant: Park Linfoot Legal Solutions

Case(s) referred to in judgment(s):

Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3
Bridges & Towers Pty Ltd v Surucic [2009] NSWSC 1180
Eastern Metropolitan Regional Council v Four Seasons Constructions Pty Ltd [2001] WASCA 299
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Radiomio Pty Ltd v Kendell [2011] VSC 511
Wildtown Holdings Pty Ltd v Rural Traders Company Ltd [2002] WASCA 196

MASTER SANDERSON:

Introduction

These reasons deal with three separate applications to set aside three separate statutory demands. Each of the demands relates to a different debt and it was appropriate for the separate defendants to issue the separate demands. The plaintiff is the same company in each case. While each matter has its own particular important facts, broadly speaking, the events which give rise to the alleged debts are the same in each case. So far as the plaintiff is concerned, the same persons have sworn affidavits in each of the three proceedings. In COR 191 of 2011, only the defendant has sworn an affidavit in opposition to the application. In the other two matters, there are two affidavits in opposition. Taken together, the affidavits run to many hundreds of pages with dozens of exhibits. Given the volume of material filed by the parties, it is open to question whether the statutory demand procedure was an appropriate vehicle for the defendants to attempt to recover these alleged debts.
At the commencement of the hearing, counsel for the defendants tendered a list of paragraphs of the plaintiff's affidavits which she said were objectionable. This was the first time any notice had been given that the defendants objected to parts of the plaintiff's evidence. The objections were extensive. I pointed out to counsel for the defendant, in fairness to the plaintiff, if she wished to proceed with her application to strike out the matter would have to be adjourned and the defendants would be responsible for the costs of the adjournment. Counsel said in the circumstances she would not press her objections. So all of the affidavit evidence lodged on behalf of the plaintiff was received into evidence. No objections were taken by the plaintiff to any of the defendants' evidence.
In COR 189 of 2011, the plaintiff relies on the following affidavits:
(a)an affidavit of Geoffrey Donald Saunders sworn 1 December 2011;
(b)an affidavit of Frances Anne Hayes sworn 1 December 2011;
(c)an affidavit of David John Borsic sworn 1 December 2011; and
(d)an affidavit of Martin Paul Langridge sworn 1 December 2011.
In addition, there is an affidavit of Andries Petrus Jacobus Ludik sworn 1 December 2011. However, this affidavit simply annexes a copy of the affidavit of Mr Borsic which was sworn 1 December 2011 and explains the affidavit was not able to be filed on 1 December 2011 as it was sworn in the eastern states. That affidavit can be put to one side.
In opposition to the application, the defendants rely on the following affidavits:
(a)an affidavit of Wayne Michael Cox sworn 9 March 2012; and
(b)an affidavit of John Alexander Gray sworn 20 March 2012.
In COR 190 of 2011, the plaintiff relies on affidavits sworn by Mr Saunders, Ms Hayes and Mr Borsic all sworn on 1 December 2011. In addition they rely on an affidavit of Michael Robert Gastevich sworn 1 December 2011. In opposition to the application, the defendants rely on an affidavit of Mr Cox sworn 9 March 2012 and an affidavit of Mr Gray sworn 20 March 2012.
In COR 191 of 2011, the plaintiff relies on affidavits of Mr Saunders, Ms Hayes, Mr Gastevich and Mr Borsic all sworn 1 December 2011. The defendants rely on an affidavit of Mr Gray sworn 12 March 2012.

The statutory demands

In COR 189 of 2011, the amount demanded is $89,650.11. The description of the debt is said to be 'Outstanding fees for the provision of accounting services'.
The affidavit accompanying the statutory demand is sworn by Mr Cox. He says he is a director of PHBB Perth Pty Ltd the party he describes as 'creditor'. Paragraph 2 of the affidavit details how the alleged debt arose. It is in the following terms:
The Creditor is owed an amount of $89,650.11 by the Debtor in respect of accounting services provided to the Debtor on or about May 2010 ‑ February 2011 ('Debt'). The Debt has been acknowledged by the Debtor as being a debt owing. There is a written costs agreement made between the Debtor and the Creditor made on or about 19 July 2010. Annexed hereto and marked WMC1 is a copy of the said costs agreement.
A copy of a letter from Pascoe Partners Custodian Services Pty Ltd (Pascoe Partners) to Ms Hayes, Mr Borsic and Mr Saunders is indeed annexed as WMC1. Whether it could be described as a costs agreement or a letter of engagement is an open question. Either way, it does have a section on fees. Relevantly, that section reads as follows:
Our fees will be billed as the work progresses will be based on a time required by the individuals assigned to the engagement plus any direct out of pocket expenses. Our terms are strictly 14 days and we advise that interest may be charged on accounts outside these terms.
Pascoe Custodian Services charges a 1% [sic] on deposits and a 0.5% per calendar month after the deposit.
In COR 190 of 2011, the amount of the debt is said to be $150,000. The description of the debt is in the following terms:
Funds lent to the Company by the Creditor under terms of an agreement made on or about 21 July 2010.
Again, the affidavit accompanying the statutory demand was sworn by Mr Cox. In par 2 of that affidavit he says:
The Creditor is owed an amount of $150,000 by the Debtor in respect of money loaned to the Debtor on or about July of 2010 ('debt'). The debt has acknowledged by the Debtor as being a debt owing. There is also interest payable on the Debt pursuant to a short term loan agreement made between the Debtor and the Creditor made on or about 21 July 2011. Interest is not claimed under the Statutory Demand but the right to claim it is reserved. Annexed hereto and marked WMC1 is a copy of the said loan agreement.
Annexure WMC1 is a document which is headed 'Short Term Loan Agreement'. It is dated 21 July 2010. By its terms, the plaintiff acknowledges an indebtedness to Pascoe Partners in an amount of $150,000. It would appear the term of the loan was 30 days. It is also not clear what interest rate would apply but it seems the plaintiff was obliged to pay 10% of the value of the loan for the one‑month term of the loan. In other words the annualised interest rate would be 120%. In addition to that, if the loan was not repaid within the specified period, there would be a 'late charge' in an amount of 10% 'compounded on balance of the delinquent every 30 day payment shall be AUD$15,000.00 on each delinquent installment'. What that means is anyone's guess.
There are other terms and conditions contained in the document none of which are presently relevant. The document is signed by Ms Hayes and Mr Saunders.
In COR 191 of 2011, the statutory demand is for an amount of $23,830.66.

Evidence of the plaintiff

Across all three matters much of the evidence filed on behalf of the plaintiff is common to all three matters. That is to say the background facts and the overall circumstances of the dealing between the plaintiff and the three defendants arises out of events and circumstances that are common. Of course certain matters are particular to each of the defendants. I will begin by providing a summary of the evidence of each of the deponents.

Evidence of Mr Saunders

Mr Saunders says along with Ms Hayes and Mr Borsic he is a director of the plaintiff. The plaintiff is a wholly owned and operated indigenous company providing engineering construction and mining services to the Australian mining sector. By trade Mr Saunders is a boilermaker/welder and he has a mechanical engineering degree from Central Queensland University. Since around 2008 he has worked extensively in the mining sector mainly in the Pilbara region.
In or around 2009, Mr Saunders met Mr Borsic. At the time Mr Borsic was the indigenous liaison officer for BHP Billiton and Global Mining Services Pty Ltd, a company for whom Mr Saunders worked, was working on a project for BHP Billiton. The two men came up with a business idea. They would set up a company that would meet demand for labour in the Australian mining sector and at the same time create job opportunities for indigenous people. In particular, Mr Saunders was aware of a contract to provide dewatering services to the Fortescue Metals Group that was coming up for tender.
Mr Borsic introduced Mr Saunders to Ms Hayes. Ms Hayes was and is a respected member of the Thalanyji People whose traditional lands cover a large area of land around the town of Onslow. The Thalanyji People have various companies and trusts to protect and manage the Native Title rights of the Thalanyji People.
Mr Saunders discussed with Ms Hayes the prospect of setting up the mining services company. Ms Hayes was enthusiastic about the idea. It was she who suggested the name of the company. It was agreed professional assistance would be needed to start the business and she suggested contacting the accountants Pascoe Partners. The plaintiff was incorporated on 15 March 2010.
On or about 4 June 2010, the plaintiff entered into a heads of agreement with Modern Industries Australia Pty Ltd now Hertel Modern Pty Ltd (Modern). The aim was to pursue jointly, projects in the mining sector, in particular, mine, water and dewatering projects through Fortescue Metals Group. It would appear the plaintiff only ever entered into one contract pursuant to this joint venture. That was a contract with Chicchester Metals Pty Ltd, which commenced about July 2010. As part of the joint venture arrangement, the plaintiff had to contribute about $60,000 as start‑up capital. The precise amount actually contributed is uncertain but Mr Saunders thinks it is around $55,000.
In early 2010, Ms Hayes arranged for Mr Saunders and Mr Borsic to meet with Pascoe Partners to discuss the set up of the plaintiff. They met with Mr Gray in Perth. From then on Mr Gray was the main contact person at Pascoe Partners for the plaintiff. On or about 19 July 2011, Mr Saunders signed a letter of engagement with Pascoe Partners. A copy of that letter appears as annexure GS9 to all of Mr Saunders' affidavits. That letter is the same as the letter which appears as annexure WMC1 to the affidavit of Mr Cox accompanying the statutory demand and forming the basis of the application in COR 189 of 2011. Mr Saunders acknowledges Pascoe Partners had been engaged by the plaintiff prior to the letter of engagement being signed.
On 20 July 2010, a bank account was opened at the National Australia Bank in the name of the plaintiff. Remarkably enough this bank account was controlled by Pascoe Partners and in particular Mr Gray. Sometimes Mr Gray would seek authority to pay various bills or tell the directors what he was intending to do. On occasions money would be transferred out of the account and Mr Gray would tell the directors at some time later. The plaintiff also had an account with the ANZ Bank. The directors controlled this account. It would seem that it was used for very limited purposes.
In or about May or June 2010, Mr Gray suggested to Mr Saunders the plaintiff should approach the Thalanyji People for a loan for the purposes of providing funds for the joint venture and as working capital. However as this would take some time, Mr Gray said he would look around for other sources of funding. On or about 20 July 2010, Mr Gray informed Mr Saunders he had heard from private investors in relation to a private loan to the plaintiff. The investors were looking at a 30‑day turnaround on 10% - that is, if $150,000 was lent, then $165,000 would have to be paid back 30 days later. Mr Saunders and Ms Hayes agreed to this arrangement and this led to the signing of the loan agreement. Appearing as annexure GS15 to Mr Saunders' affidavit is a copy of that loan agreement. It is in the same terms as annexure WMC1 to the affidavit of Mr Cox accompanying the statutory demand in COR 190 of 2011.
Mr Saunders says he understood the loan agreement meant the plaintiff would be lent a cash amount of $150,000 and the funds would be paid into the plaintiff's account. He further understood the company would have to pay back $165,000 one month after the advance with the money received from the Thalanyji People. He now says based upon investigations of Mr Gastevich an accountant, he is not sure the money was advanced. This point will be further developed when the evidence of Mr Gastevich is considered. However, Mr Saunders does acknowledge that probably some amount although he is not sure how much is owed by the company to the lender.
On 19 July 2010, Mr Gray wrote to the Thalanyji People seeking their assistance for the plaintiff and suggesting two options as to how they might help. First, was the prospect of a loan to the company of $300,000 with an interest component. As an alternative, an overdraft facility could be obtained from a bank with a guarantee provided by the Thalanyji People, After some negotiation the second of the two options was approved by the Thalanyji People.
Initially negotiations were conducted with the National Australia Bank but they were reluctant to lend with the backing of the guarantee. Eventually an arrangement was concluded with Westpac. The negotiations were undertaken by Mr Gray. Mr Saunders is now unaware whether or not any funds were ever advanced by Westpac to the company.
Mr Saunders says by September 2010 the company had cash flow difficulties. It was not receiving payments from the joint venture and it had a number of pressing creditors. Two terminated employees were seeking payments of their entitlement and payroll tax was outstanding. The $150,000 loan had not been repaid. An attempt was made to withdraw some funds from the joint venture but this appeared to come to nothing.
Mr Saunders says he did not ask Mr Gray to advance any money to the plaintiff, however he does acknowledge he was sent documents by Mr Gray which were referred to as 'promissory note' and he did sign these documents and return them to Mr Gray. He is not in a position to say whether any money was advanced or whether any money has been repaid by the company.
On or about 18 November 2010, Mr Gray advised Mr Borsic and Mr Saunders the company was insolvent and owed creditors between $800,000 and $1 million. This disclosure came as a shock to both Mr Saunders and Mr Borsic. A meeting was hastily convened at the home of Ms Hayes. Initially Mr Saunders was excluded from the meeting. After Mr Borsic, Ms Hayes and Mr Gray had met for approximately an hour, Mr Gray emerged from the meeting to advise Mr Saunders should not only exclude himself from management of the company but should return to his home state of Queensland. Mr Saunders is somewhat unclear as to what else transpired subsequent to the meeting. However he understands Mr Borsic had given Mr Gray a cheque for $149,000 apparently in repayment of the loan. Mr Saunders is not sure what became of that cheque.
Despite Mr Gray's suggestions, Mr Saunders did not return to Brisbane. Some time after 18 November 2010, the plaintiff approached the accounting firm Deloitte to act as its accountant. On 25 February 2011, the company through Mr Saunders sent an email to Mr Cox terminating the retainer of Pascoe Partners. Mr Cox responded saying, amongst other things, they (presumably Pascoe Partners) would be commencing legal action if 'full payment of our account, Loan and interest is not received by 4 March 2011'. On or about 25 February 2011, Deloitte wrote to Pascoe Partners asking for the relevant books and records of the company to be made available to them. Despite various email exchanges between Deloitte and Pascoe Partners, no books were produced. Eventually the company instructed solicitors. Further correspondence took place. On 12 April 2011, Mr Cox in an email to Deloitte, indicated the files would be released. That is what happened.

Evidence of Frances Anne Hayes

Ms Hayes is employed as an indigenous training and employment consultant for a company called Eurest Support Services (ESS) which is a subsidiary of the Compass Group. ESS provides hospitality trained indigenous employees to a number of large mining companies in the Pilbara region of Western Australia. In or about February 2010, Ms Hayes attended a meeting of the Buurabalayji Thalanyji Aboriginal Corporation which was also attended by a Mr John Pascoe of Pascoe Partners. Mr Pascoe spoke at the meeting and outlined investment opportunities for indigenous people as a result of the mining boom. Clearly Ms Hayes was impressed by Mr Pascoe and in a week subsequent to the meeting, she discussed with others the prospect of developing new businesses. The name 'Globe Hill' was selected as a suitable name for the venture although she did not have a specific idea of what the business would actually do. She spoke with Mr Gray at Pascoe Partners. He agreed to assist and the company was brought into existence.
In early 2010, Ms Hayes discussed business opportunities the plaintiff may undertake with Mr Borsic. Through Mr Borsic, Ms Hayes was introduced to Mr Saunders. In February or March a meeting between the three took place and eventually all three became directors of the plaintiff. They then considered a number of possible business opportunities. Concerned they were a small operation with limited experience, they entered into the joint venture arrangement referred to by Mr Saunders. That was in June 2010. By mid‑2010, the company in joint venture with Hertel Modern Pty Ltd had secured a contract with the Fortescue Metals Group.
Ms Hayes explains Mr Saunders was based in Perth and attended to the day to day administration of the company. Mr Borsic was often on site and Ms Hayes lived and continued to work full‑time with ESS in Newman. The financial affairs of the company were managed by Mr Gray. Instructions to Mr Gray were given by Mr Saunders and occasionally by Mr Borsic and Ms Hayes. Ms Hayes confirms she understood Pascoe Partners were handling the financial affairs of the company through Mr Gray. Ms Hayes was satisfied with this arrangement because she understood the finances were 'in safe hands'.

Between April and June 2010, Ms Hayes suffered ill health and was resident in Perth. Up to that point she had not been receiving any income from the company. At Mr Gray's suggestion, she began to receive approximately $4,000 per fortnight from the company. Given Mr Gray's close involvement with the company, Ms Hayes believed the company was in a position to make those payments.
Some time around May or June 2010, Ms Hayes was advised funds had to be injected into the company to sustain the joint venture. Approaches to various banking institutions were unsuccessful. However Ms Hayes was aware that the Thalanyji People had agreed to provide security in an amount of $300,000 to the company. She was clearly not across the mechanics of how this would work in relation to the bank facilities.
In July 2010, Ms Hayes attended a meeting at Pascoe's offices. Also present were Mr Saunders and Mr Gray. Mr Borsic was working on site. A loan agreement was produced. Ms Hayes quickly read its contents but says she did not fully understand the document. She was aware the sum of $150,000 was being advanced. She trusted Mr Gray and accordingly she signed the loan document.
Ms Hayes confirms on or about 18 or 19 November 2010, a meeting took place at her residence between Mr Gray, Mr Borsic and Mr Saunders. She confirms the three men arrived together and Mr Saunders was asked to wait outside while she had discussions with Mr Gray and Mr Borsic. Mr Gray was somewhat agitated. He said the company was in serious trouble. He said it had almost $1 million worth of debt. He suggested the company had been trading while insolvent and outlined the consequences of such action for the directors.
Ms Hayes asked Mr Gray to explain how it was the company was insolvent. Mr Gray blamed Mr Saunders. Ms Hayes does not make plain how Mr Gray held Mr Saunders responsible. In any event after some discussion Mr Gray and Mr Borsic departed and Ms Hayes discussed the position with Mr Saunders. Mr Saunders was able to offer no explanation as to how the dire financial position of the company had come about.
Later that same day a further meeting took place again at Ms Hayes' residence. Mr Saunders and Mr Borsic were present. Mr Borsic had with him a cheque for $140,000. Mr Gray arrived to attend the meeting. Further discussions took place. Ms Hayes understands Mr Borsic did not hand over the cheque to Mr Gray although for reasons which are not entirely clear, the cheque was photocopied by Mr Gray and he retained that photocopy.
The following day Mr Gray telephoned Ms Hayes. He said the debt position of the company was not as bad as he thought and it might be possible to get 'the debt down to $350,000 or so'. Ms Hayes was still anxious about the company's debt position. She voiced her concerns to Mr Gray. She says Mr Gray told her:
Wayne has told me to work free of charge, for as long as it takes, until I sort this mess out.
Ms Hayes confirms in or about November/December 2010, Mr Saunders suggested the company seek independent accounting advice. Deloitte's were approached. She confirms various demands were served upon the company. Ms Hayes appears to have had little involvement with events thereafter.

Evidence of David John Borsic

Mr Borsic is a qualified boilermaker/welder with extensive onsite experience in the mining industry. He confirms he and Mr Saunders together with Ms Hayes resolved to form a company to take advantage of opportunities occasioned by the mining boom and in the process to support indigenous employment. He confirms the three are directors of the plaintiff and in or about June 2010, entered into a joint venture agreement with Modern Industries Australia Pty Ltd, now Hertel Modern Pty Ltd. He confirms soon thereafter the joint venture obtained a contract with the Fortescue Metals Group. Mr Borsic performed technical rather than administrative functions for the company. Accordingly he has limited firsthand knowledge of the administrative and financial affairs of the company.
Mr Borsic confirms a bank account was opened with National Australia Bank but he had no involvement with the account. He confirms it was controlled by Mr Gray at Pascoe Partners. He confirms Mr Saunders told him start up capital of $300,000 was needed. He was kept abreast of the difficulties in obtaining bank finance. He was aware an approach was made to the Thalanyji People for support. He was aware funds had been raised by Mr Gray for the plaintiff and was under the impression a loan had been made by or secured from the Thalanyji People.
In November 2010, Mr Borsic was contacted by Mr Gray who advised the company was in urgent need of funds. In particular, money was needed to repay a loan of $150,000 advanced to the company by Pascoe Partners. This was the first time Mr Borsic had become aware of the loan. He did not know when the loan was entered into or where the money had gone. Mr Gray suggested to Mr Borsic that he (Mr Borsic) should apply for a short-term loan using his residence as security. The funds raised would then be used to settle debts incurred by the company. After discussions with Mr Gray, Mr Borsic agreed to endeavour to raise funds with his property as security. He discussed the position with Ms Hayes and Mr Saunders. As a consequence of those discussions and on certain undertakings from his co‑directors, he agreed to attempt to raise capital.
By mid‑November 2010, he had obtained a loan of $140,000. He attended the meeting at Ms Hayes' residence taking with him the cheque for the money raised. Mr Borsic confirms he met with Ms Hayes and Mr Gray while Mr Saunders remained outside. Mr Gray advised the plaintiff was insolvent and may have been trading while insolvent. The company had no money and was indebted to Pascoe Partners and to Mr Gray personally. Mr Borsic says when the meeting was terminated he and Mr Gray went to the offices of their joint venture partner where Mr Gray advised officers of Modern the plaintiff was insolvent to the tune of between $800,000 and $1 million. This was the first time Mr Borsic had become aware of the alleged extent of the insolvency.
Later that same day a further meeting was held at Ms Hayes' residence. Mr Borsic still had the cheque for $140,000. Mr Gray suggested the cheque be given to him to offset the Pascoe Partners loan. Mr Borsic said he was uncertain - he knew nothing of the details of the loan, even to the point of not knowing whether it was still outstanding. At this point Mr Gray advised Mr Borsic that he (Mr Gray) had personally made two loans both for $10,000 to the company. The meeting broke up with Mr Borsic still in possession of the cheque.
The following morning a meeting was held at the offices of Pascoe Partners between Mr Gray, Mr Cox and Mr Borsic. By this stage Mr Gray was in a rather more optimistic mood. He suggested alternative financing might be available. But Mr Gray still wanted the $140,000 from Mr Borsic. Mr Borsic handed over the cheque. He then left the offices of Pascoe Partners but had a change of heart. He contacted Mr Gray and asked for the cheque back. Mr Gray agreed after taking a photocopy of the cheque. Mr Borsic repaid the loan he had taken out, but with interest and early repayment penalties, he was considerably out of pocket.
Mr Borsic confirms in or about January 2011, the company terminated the retainer of Pascoe Partners. As with Ms Hayes, Mr Borsic appears not to have taken any further part in the events thereafter.

Evidence of Martin Paul Langridge

Mr Langridge is a chartered accountant with the firm Deloitte. Deloitte became the plaintiff's accountant in March 2011. Mr Langridge sets out the difficulty the plaintiff and Deloitte have had in obtaining the financial records from Pascoe Partners. It was not until about 14 April 2011 that records of any significance were obtained.
Mr Langridge sets out a number of concerns he has about the accounts made available to him. His affidavit is not and does not purport to be an audit of these accounts. But he does highlight a number of concerns. These are:
(a)the invoices rendered to the plaintiff are from an accounting firm Pascoe Partners while the account name for payment is noted as being PHBB Perth Pty Ltd;
(b)the invoices provided in support of the fee demand total $82,562.81 which is $7,087.30 less than the amount stated in the fee demand;
(c)the invoices rendered date from early February 2010, whilst Mr Langridge understands a retainer was not entered into until July 2010;
(d)there is no evidence of Pascoe Partners advising the plaintiff of applicable rates and charges for work undertaken;
(e)there appears to be a significant difference between hourly rates charged for individuals pre‑31 July 2010 and post‑31 July 2010 without any explanation as to why the rates increased;
(f)there are a number of entries on invoices claimed in the fee demand which relate to entities other than the plaintiff;
(g)a significant amount of time charged by Mr Gray relates to administrative tasks, these being tasks which could have been undertaken by a less expensive employee; and
(h)a charge is applied for drawing the fee notes which is not common in accounting practices.
Mr Langridge makes the point he has only undertaken a preliminary view. However, that preliminary view suggests an amount of $16,028.65 at least should be shaved off the fee demand. That does not take into account the potential overcharge associated with routine administrative work being undertaken by Mr Gray.

Evidence of John Alexander Gray

Mr Gray has sworn three affidavits in COR 189 of 2011 and COR 190 of 2011 the affidavits were sworn on 20 March 2012. In COR 191 of 2011 the affidavit was sworn on 12 March 2012. What follows is an amalgam of all the evidence contained in those three affidavits.
Mr Gray is an accountant. It would appear (although it is nowhere stated) at all material times Mr Gray was an employee of the firm Pascoe Partners. (The actual ownership of the trading name 'Pascoe Partners' is somewhat complicated and is dealt with by Mr Cox in his affidavit evidence. I will detail the corporate structure when dealing with Mr Cox's evidence.)
Mr Gray says he first met with Ms Hayes, Mr Saunders and Mr Borsic in February 2010. The meeting was of a general nature discussing the possibility of a new business venture in the north‑west. Mr Gray indicated he could provide accounting advice and assistance through Pascoe Partners. He was instructed to register 'Globe Hill Construction & Mining Services' as a company. This he did.
Mr Gray says on 19 July 2010 Mr Saunders attended his office. Mr Saunders signed a Letter of Engagement on the plaintiff's behalf as a director of the plaintiff. A copy of that letter is annexure JAG1 to Mr Gray's affidavit of 12 March 2012. The letter engages Pascoe Partners to provide general accounting advice and preparation and lodgment of various returns required by law. No fee scale is included with the letter of engagement.
Between August 2010 and mid‑September 2010 Mr Gray became aware of increasing demands upon the plaintiff for payment of outstanding invoices. This culminated on 16 September 2010 when Mr Gray had a meeting with Mr Saunders. Mr Gray pointed out the plaintiff was under heavy financial pressure. Two statutory demands had been issued against the plaintiff and a number of employees had not been paid for some time. Mr Gray indicated to Mr Saunders he would transfer $10,000 to the plaintiff. This was done on 16 September 2010. There is no doubt the money was advanced by Mr Gray. However no documentation was prepared setting out the terms and conditions upon which the advance was made.
The plaintiff was still under financial pressure. Mr Gray offered to advance another $10,000 to the plaintiff. This was done on 24 September 2010. Again there is no doubt the money was advanced. On 24 September 2010 Mr Gray sent to Mr Saunders two documents he described as 'promissory notes'. These notes are in identical terms save for the 'date of making' - which presumably means the date of making the advance. One is dated 16 September 2010, the other is dated 24 September 2010. Each of the documents refers to a debt of $10,000. The body of the document then reads:
The value received, I, Geoff Saunders of 27 Dalloway Court, Arundel, Queensland 4214, as a director of Globe Hill Pty Ltd promise to pay $15,000 AUD On or Before 31 January 2011. If payment has not been received then a 10% cumulative interest penalty will be incurred per Calendar Month after the due date.
Each of these 'promissory notes' is signed by Mr Saunders. There is also provision for signature by Mr Gray but it appears neither note has been signed.
Mr Gray says he made a further advance of $2,000 to the plaintiff on 29 October 2010. That is in addition to other payments he made for and on behalf of the plaintiff in an amount of $3,830.66 between 18 August 2010 and 4 November 2010. Mr Gray says he now wants to be repaid the money he has advanced. He says he has not given up any entitlement to interest but will not pursue it in these proceedings.
Mr Gray denies that he ever 'managed or controlled the financial affairs of the plaintiff'. He says whenever he took any steps in relation to the plaintiff's affairs it was on the instruction of the plaintiff's directors. He points out to open a bank account each of Mr Saunders, Mr Borsic and Ms Hayes were required to provide 100 points of identification. None of them could meet that requirement. Consequently Mr Gray arranged for a bank account in the name of Pascoe Partners. He says it was intended in due course to transfer this account into the name of the plaintiff.
Mr Gray says between June and July 2010 he approached the National Australia Bank in an attempt to obtain finance for the plaintiff. Mr Gray indicates the bank was not prepared to lend funds.
Mr Gray confirms the meeting in mid‑November referred to by the plaintiff's witnesses. He also confirms it took place at Ms Hayes' home unit in Inglewood. He further confirms Ms Hayes, Mr Borsic and Mr Saunders were present. He says he asked Mr Saunders to leave before the meeting started because he was of the view Mr Saunders was mismanaging the funds of the plaintiff and was responsible in large measure for its difficulties.
Mr Gray then gives his version of what took place at the meeting. Essentially he says he advised the plaintiff was seriously in debt and there was a real risk it was trading while insolvent. The meeting broke up without any strategy being agreed.
Mr Gray and Mr Borsic then drove back to the offices of the plaintiff's joint venture partners. Mr Gray goes into some detail as to how efforts were made to manage the financial crisis. This evidence need not be detailed. However Mr Gray does deny he ever said to Ms Hayes he had been instructed by Mr Cox to work free of charge for as long as it takes (see par 46 of Mr Gray's affidavit of 20 March 2012).
Mr Gray deals with Mr Borsic's evidence. He confirms he did urge Mr Borsic to obtain some form of finance to assist Globe Hill. He confirms Mr Borsic subsequently produced a cheque. He did not take any steps to bank it. Rather he held it in his office. Mr Borsic subsequently asked for the cheque back and after some discussion Mr Gray provided it to him.
In relation to the debt allegedly owed to Pascoe Partners (COR 190 of 2011) Mr Gray says in July 2010 he had a discussion with Mr Cox. Mr Gray says Mr Cox consulted his partners and it was agreed a loan of $150,000 would be made. The documentation was drawn up. He then met with Mr Saunders and Ms Hayes. He spent about an hour with them. He explained the nature of the loan and how it would operate. His evidence is to the effect both Mr Borsic and Ms Hayes clearly understood the liability the plaintiff had taken on as a consequence of entering into the loan agreement.

Evidence of Wayne Michael Cox

Mr Cox begins both his affidavits by setting out the corporate structure behind Pascoe Partners. It is appropriate to quote in full what Mr Cox says:
I am a director of PHBB Perth Pty Ltd and Pascoe Hudson Broom & Blythe Pty Ltd and Pascoe Partners Custodian Services Pty Ltd. Pascoe Hudson Broom & Blythe Pty Ltd is the company that licences the use of the trading name 'Pascoe Partners'. PHBB Perth Pty Ltd holds a tax agents licence, and provides accounting advice and services to clients of the 'Pascoe Partners accounting practice'.
Mr Cox confirms he was approached by Mr Gray about the prospect of setting up the plaintiff and of Pascoe Partners providing accounting services. He confirms the signing of the 'terms of engagement'. It is clear Mr Cox did not have day to day involvement with the plaintiff's affairs. He did become aware eventually of the dissatisfaction the plaintiff had with the advice provided by Pascoe Partners. He confirms the retainer was terminated. He says at that stage Pascoe Partners was owed the amount in the statutory demand in COR 189 of 2011. He denies that at any stage he indicated to any of the directors of the plaintiff that Mr Gray would work free of charge.
Mr Cox says he is also a director of Pascoe Partners. He confirms he had a discussion with Mr Gray during the course of which he was advised of the difficulty of the plaintiff securing finance. He agreed to approach his partners with a view to a short term loan. Subsequently a loan of $150,000 was made. Mr Cox explained to Mr Gray that the terms of the loan should be explained to the directors of the plaintiff. It was his understanding this was done. He confirms no repayments have ever been made.

Legal basis for setting aside a statutory demand

There was no dispute between the parties as to the applicable legal principles in a case such as this. It is the plaintiff's contention in relation to each of the three demands there is a genuine dispute. A number of cases were referred to in particular Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785. Essentially what the plaintiff must establish is whether there is a serious question to be tried. The issue has been formulated in a variety of ways but for the purposes of this application it is enough if I quote the one authority.
The plaintiff also contends there is some other reason why the demand ought be set aside under s 459J of the Corporations Act 2001 (Cth). The plaintiff says there are at least five grounds upon which a statutory demand will be set aside under this section. They are:
1.Where a deponent does not state the source of their knowledge and belief the amount demanded is owing: see Eastern Metropolitan Regional Council v Four Seasons Constructions Pty Ltd [2001] WASCA 299;
2.The deponent does not say they are authorised to swear the affidavit in support of the statutory demand on behalf of the asserted creditor: see Bridges & Towers Pty Ltd v Surucic [2009] NSWSC 1180;
3.The statutory demand does not inform the company in unambiguous terms how the amount demanded is composed or calculated: see Radiomio Pty Ltd v Kendell [2011] VSC 511;
4.The amount demanded is not verified or there are unexplained inconsistencies between the amount demanded by the statutory demand and the supporting affidavit or invoices served with the statutory demand where there are unexplained inconsistencies are more than a minor misstatement: see Wildtown Holdings Pty Ltd v Rural Traders Company Ltd [2002] WASCA 196; and
5.There has been conduct that may be described as unconscionable, an abuse of process or which gives rise to substantial injustice: see Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3.

The PHBB Perth Pty Ltd demand (COR 189 of 2011)

In her submissions counsel for the plaintiff in each matter raised a series of points which she submitted either alone or taken together was sufficient to require the demand to be set aside. Helpfully counsel for the defendants in her submissions followed the same line and answered each of the points made by the plaintiff. However it is unnecessary to deal with each of the matters raised. Insofar as the PHBB Perth demand is concerned it is unclear how the amount demanded is calculated. It can be accepted it is for accounting fees. But there is nothing to show the plaintiff agreed to any fee structure. For instance there is nothing to indicate Mr Gray's hourly charge‑out rate. When the account was rendered to the plaintiff by PHBB Perth they surely were obliged to provide some detail in relation to the account. There is nothing to suggest they provided interim accounts. This is one of those cases where it would be entirely proper for the plaintiff to plead (if the matter were being conducted as an action commenced by writ):
We deny we are indebted to the plaintiff as alleged or at all. Further particulars will be provided after discovery.

I am satisfied there is a genuine dispute in relation to this amount and the demand ought be set aside.

The Pascoe Partners demand (COR 190 of 2011)

In my view there are two difficulties with the defendant's case. First the loan agreement makes no reference to 'Pascoe Partners Custodian Services Pty Ltd'. The loan agreement refers to 'Pascoe Partners Pty Ltd'. That company was not registered as at the date of the loan agreement. In my view there is an issue as to who actually lent the funds and to whom repayment must be made. That would amount to some other reason why the demand ought be set aside.
Further there is in my view a question of whether a loan at the interest rate provided for in the agreement would be enforceable. The agreement may be unconscionable. It is not appropriate to explore this issue further on this application. Suffice it to say I am satisfied there is a serious question to be tried on this issue.
The demand ought be set aside.

The Gray demand (COR 191 of 2011)

In my view there can be no doubt $22,000 was advanced by Mr Gray to the plaintiff. The other amounts he says he paid for and on behalf of the plaintiff are more problematical. Some evidence would need to be produced to establish these were amounts owing to Mr Gray by the company. But so far as $22,000 is concerned in my view there can be no dispute.
Counsel for the plaintiff did raise a point going to an alleged fiduciary relationship between Mr Gray and the plaintiff. She put the position in this way (par 16 of the submissions):
The circumstances described in Mr Gray's affidavit sworn 12 March 2012 and the affidavits filed on Globe Hill's behalf suggest that a fiduciary relationship may have arisen between Globe Hill and Mr Gray in that he agreed to act for and on behalf of or in the interests of Globe Hill in the exercise of powers or discretions which affect Globe Hill in a legal and practical sense: Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 96 - 97. In that context, conduct relating to the amount demanded in the PHBB demand may have been unconscionable or such as to give rise to substantial injustice.
With respect whether or not there was a fiduciary relationship between Mr Gray and the company does not seem to affect in any way the relationship of debtor and creditor. It may be based upon that relationship a demand for interest at the rates referred to in the 'promissory note' would be impermissible. But that does not alter the fact a loan was made and Mr Gray is entitled to have the capital sum repaid. In my view any fiduciary relationship does not alter that position.

Conclusion

For these reasons I would set aside the statutory demands in COR 189 of 2011 and COR 190 of 2011. I would amend the demand in COR 191 of 2011 to an amount of $22,000. I will hear the parties as to the form of orders and as to costs.