Green Invest Limited v Filippo Pty Ltd
[2011] VSC 388
•19 August 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST E
No. S CI 2011 02036
IN THE MATTER OF GREEN INVEST LIMITED
(ACN 119 031 462)
| GREEN INVEST LIMITED (ACN 119 031 462) | Plaintiff |
| v | |
| FILIPPO PTY LTD (ACN 086 696 759) | Defendant |
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JUDGE: | Gardiner, As J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28 June 2011 | |
DATE OF JUDGMENT: | 19 August 2011 | |
CASE MAY BE CITED AS: | Green Invest Limited v Filippo Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 388 | |
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CORPORATIONS – Application to set aside statutory demand pursuant to section 459G of the Corporations Act 2001 (Cth) on basis of genuine dispute and offsetting claim – finding that there was genuine dispute on the evidence - plaintiff failed to demonstrate that offsetting claim exists – statutory demand set aside.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr St John Hibble | Gadens Lawyers |
| For the Defendant | Mr Matthew Stirling | Marshalls & Dent |
HIS HONOUR:
On 2 May 2011, the plaintiff (“Green Invest”) made application pursuant to s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand dated 8 April 2011 which had been served on Green Invest by Filippo Pty Ltd (“Filippo”) on 11 April 2011.
Green Invest relies on the affidavits of Ron Glen Lunt sworn 2 May 2011 and 7 June 2011 and an affidavit of Michael Kirby sworn 7 June 2011. Filippo relies on an affidavit of Giovanni Filippo (also known as John Filippo) sworn 27 May 2011 in opposition to the application.
The demand claims the sum of $334,876.60 for fees owing for work done pursuant to the terms of engagement letters issued by Filippo on 9 September 2009, 28 January 2010 and 28 September 2010. Those fees are said to amount to $303,671.80. Filippo also claims interest pursuant to the terms of the engagement letters of $31,204.80.
Some of the invoices the subject of the demand and which are set out in a spreadsheet attached to the demand were directed to Green Invest itself with the balance being directed to various associated companies. The invoices date from 1 August 2009 to 14 February 2011.
Mr Filippo, who is the sole director of Filippo, was a director of Green Invest from 23 December 2009 to 19 January 2011. He has also acted as an alternate director of Green Invest. He has served a statutory demand in respect of unpaid director’s fees which is also the subject of an application in a related application by Green Invest that it be set aside. That application was heard at the same time as this proceeding.
Green Invest contends that Filippo was engaged to provide financial services to it for the period 12 September 2010 to 12 October 2010 whilst its chief financial officer, Michael Kirby was absent overseas. Mr Lunt says that the primary function of Filippo during Mr Kirby’s absence was to complete Green Invest’s audit for the year ended 30 June 2009. Mr Kirby had completed much of the work involved in that audit but some additional information was required to be provided to the auditors, PKF. Mr Lunt says that any financial services provided to Green Invest before or after this period were predominantly provided by Mr Filippo during the period of his directorship of Green Invest.
Under the listing rules of the Australian Stock Exchange, the finalisation of the 2009 accounts was required to be completed by 30 September 2010, however this did not occur and Green Invest was suspended from trading.
Green Invest contends that the engagement letters which are referred to in the statutory demand as being the basis for Green Invest’s liability to Filippo were never signed and returned to Filippo and that Filippo was not engaged on the terms set out in the engagement letters. In addition, Green Invest states that it has never received 13 of the invoices mentioned in the schedule to the statutory demand and these invoices total $44,495. It also says that certain of the invoices were withdrawn by Filippo.[1] In addition, Mr Filippo signed a document entitled “Director’s Confirmation” setting out the financial position for Green Invest for the financial year ended 30 June 2010 and it is said that that document does not conform and is not consistent with the invoices referred to in the demand.
[1]Invoices numbered 4578,4821, 5240, 5268 and 5270.
Green Invest says in regard to the issue of the engagement letters that a triable issue arises as to whether those documents are the proper foundation for its contractual liability to Filippo. It was also submitted on its behalf that there is a genuine dispute as to whether the scope of works mentioned in the engagement letters was outside that for which Filippo was retained by Green Invest.
Filippo for its part contends that the engagement letters contained a provision whereby they became automatically binding, even if they were not signed and returned by Green Invest. Green Invest says that, for the purpose of present context, it is insufficient for Filippo to rely on the engagement letters in circumstances where its own representatives were communicating with Green Invest in such a way which revealed that if the letters were not signed and returned, then Filippo would no longer continue to act for Green Invest. Green Invest contends that Filippo understood that if the engagement letters were not signed and returned that they had no binding effect on the engagement of Filippo; this is said to be evidenced by the email of Ms Danielle Stukenbog on 1 October 2010. In that email, Ms Stukenbog stated:
Please review, sign where indicated and return to our office as soon as possible as a signed engagement letter must be on the file for our firm to continue work for these companies.
Mr Lunt states that because of the circumstances referred in Green Invest’s affidavit material, Green Invest did not sign the engagement letters.
In his affidavit of 2 May 2011, Mr Lunt also contends that Green Invest has an offsetting claim against Filippo for approximately $40,000 which it says arises from overcharging by Filippo. Mr Lunt says that Green Invest retained Mr Graeme Knott, a chartered accountant, who conducted a review of the accounting services provided by Filippo which confirms that the services provided to Green Invest, for which it was paid approximately $120,000, were worth approximately only $80,000.
In his affidavit, Mr Kirby states that he personally undertook a significant amount of the work said to have been carried out by Filippo for Green Invest for the financial year ending on 30 June 2010. Mr Kirby deposes that a significant amount of the work undertaken by Filippo was not requested by Green Invest and that Filippo has issued invoices to Green Invest for work that was never completed. It is also said that the majority of the tasks that Filippo claims to have carried out for Green Invest were undertaken as part of Mr Filippo’s directorship of Green Invest for which he was paid a salary.
The withdrawal of the invoices numbered 5240, 5268 and 5270 was said to have taken place as a result of a meeting of the plaintiff’s board of directors in early December 2010 at which Mr Filippo was present, together with Mr Lunt and Mr McCoy. At that meeting, the nature of the services alleged to have been provided by Filippo was discussed and Mr Lunt states that Mr Filippo “took back these invoices from the plaintiff” and that they have not been re-issued.
The circumstances of withdrawal of invoice numbers 4578 and 4821, totalling $50,020.31 are not described beyond an assertion that they were withdrawn. Mr Lunt states, however, that Mr Filippo executed a director’s confirmation that the financial year ended 30 June 2010 in which it was stated that the total amount charged for accounting services by Filippo to Green Invest for that period was $46,615, a figure which does not conform with the invoices referred to within the demand. Mr Lunt contends that this supports his contention that the invoices were withdrawn by agreement.
At a subsequent board meeting on 11 January 2011, in which Mr Filippo, Mr McCoy and Mr Kirby and Mr Lunt was present, the financial report of Green Invest as at 31 December 2010 was tabled. Mr Lunt contends that it is evident from the accounts that the invoices were not within the accounts payable section of the accounts and Mr Filippo did not raise any concerns as to the content of that report at that meeting or subsequently.
The total of the amounts of the invoices which Mr Lunt contends have either not been received by Green Invest or which have been withdrawn by agreement of Filippo total $298,786.03.
As to the invoices directed to the related entities, Mr Lunt deposes that they cannot give rise to indebtedness by Green Invest to Filippo. He states that none of the invoices, which are set out in paragraph 44 of his affidavit, formed part of the retainer arrangement between Green Invest and Filippo. Those invoices total $79,553.93. He says that, in any event, eight of those invoices have never been received by the plaintiff.
The offsetting claim to which I have referred above is not developed beyond an assertion that the accountant engaged, Mr Knott, reported that the work performed was worth approximately $80,000. Further it is asserted, without any particularisation, that the quality, delivery, efficiency and overall accuracy of the services provided by Filippo was unsatisfactory. Mr Lunt states that Green Invest is considering issuing proceedings to recover the overpayment of these fees.
Mr Filippo’s affidavit in opposition to the application is a lengthy document when one has regard to the nature of the present application; it is 28 pages in length and exhibits 26 documents, some of which are in excess of 30 pages in length. It descends to very considerable detail as to the background of the matter and puts Filippo’s position comprehensively. It details the work which is said to have been undertaken by Filippo for the 2009 and 2010 financial years. It describes other work undertaken by Filippo on behalf of Green Invest. It exhibits time billing reports for the employees of Filippo who performed work for Green Invest and contends that no complaints were received as and when invoices were sent to Green Invest.
Mr Filippo’s affidavit chronicles Filippo’s demands for payment. He states that the demands were responded to by promises for payment with no complaint being made as to the services which had been provided or the invoices issued in respect of them. He exhibits an email sent by Mr Lunt on 25 February 2011. This document is significant as the email, by its terms, appears to contain an admission of indebtedness and a promise to make payments, albeit of an unspecified sum. It states:
I have been advised we will start making some payment next week. But the bulk may need to wait until some rebates come in. There may be some delays by ATO over the last two weeks.
We need that the 2010 ITR lodged ASAP mate. Do you have all the information? Do you have a target when you can lodge?
If you do not want to do 2010 ITR – I can understand. Please let us know?
Regards
Ron
PS: We probably need a coffee at some time next week.
Mr Filippo provides a detailed rebuttal of the matters referred to in Mr Lunt’s affidavit of 2 May 2011. Among other things, he states that the invoices which Green Invest contends have not been received were all sent to the same address and no claim has been made prior to Mr Lunt’s affidavit that such invoices were not received. Despite such invoices being referred to in other materials, no query was raised or copy of such invoices called for. It was submitted that this smacked of recent invention. As to the contention by Green Invest that it has no liability for payment of invoices which relate to work done for other members of the Green Invest group, Mr Filippo points to the fact that Green Invest has paid such invoices in the past without complaint, leading he says to the inescapable conclusion that it did so because of a recognition of its liability to do so. Mr Filippo denies withdrawing the invoices which are said to have been withdrawn. As to the report of Mr Knott, Mr Filippo states that the mention of this in Mr Lunt’s affidavit is the first he has heard of such a review. He states that Mr Knott did not have access to Filippo’s records with respect to the work it undertook for Green Invest. Filippo did not provide any information to Mr Knott as to the extent or nature of the work performed by Filippo for Green Invest.
In his affidavit in reply of 7 June 2011, Mr Lunt joins issue with various matters raised in Mr Filippo’s affidavit. Like his earlier affidavit, it descends to comprehensive detail. Mr Lunt states that he cannot recall ever being involved in a conversation with Mr Filippo regarding any delay on Green Invest’s part to pay specific invoices. He states that Mr McCoy informs him, and he believes, that he too cannot recall any such conversations taking place.
As to the email of 25 February 2011 which is referred to above, Mr Lunt states that it was not sent in the context to which Mr Filippo contends. Mr Lunt says that the email was sent by him on the basis that there was an agreement in place between Green Invest and Filippo whereby certain invoices had been withdrawn. Mr Lunt says that he considered it would be beneficial for both parties to meet to finalise all matters between them and put the engagement of Filippo as its financial services provider at an end.
Legal Principles to be Applied
The approach to be taken in the consideration of applications under s 459G of the Act has been the subject of numerous authorities. It is sufficient for current purposes to make reference to the decision of the Court of Appeal in TR Administration v Frank Marchetti & Sons Pty Ltd.[2] Dodds-Streeton AJ made reference to the statement by McLelland CJ in Eyota v Hanare Pty ltd,[3] one of the earliest authorities considering the issue, 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 an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit ‘however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having ‘sufficient prima facie plausibility to merit further investigation as to [its] truth …’.
[2](2008) 66 ACSR 67 (“Marchetti”).
[3](1994) 12 ACSR 785.
Her Honour made similar observations as a member of the Trial Division of this Court in Powerhouse Australasia Pty Ltd v Viarc Pty Ltd,[4] where she observed at [49]:
“The dispute or offsetting claim should, as has been recognised, have some objective existence, and the [plaintiff] bears the onus of establishing the genuineness of the dispute or offsetting claim.”
[4][2006] VSC 508.
In the decision of the Full Court of the Federal Court of Australia in Spencer Constructions Pty Ltd v G&M Aldridge,[5] it was observed that:
“For a genuine dispute to exist, it must be ‘a bona fide and truly existing 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.”
[5](1997) 76 FCR 452 at 454.
In Panel Ttech Industries (Australia) Pty Ltd v Australian Skyreach Pty Ltd (No. 2), Barrett J observed:
“Once the [plaintiff] 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 company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.”
In JJMMR Pty Ltd v LG International Corporation,[6] the Court of Appeal of the Supreme Court of Queensland described the task of the Court as being to decide was whether there is a dispute or offsetting claim “such as would warrant subsequent adjudication.”
[6][2003] QCA 519.
In Yoogalu Pty Ltd v Intentia Australia Pty Ltd,[7] Barrett J observed:
“[The Court’s] sole function is to determine whether or not the state of account between the parties is (as to the particular matters referred to in s 459H(1)) so clear cut and uncontroversial that non payment of the sum demanded by the defendant should, entirely of itself and without further enquiry, mean that the plaintiff must, in a subsequent winding up proceeding, be regarded as insolvent unless it can itself affirmatively prove its solvency.
[7]Butterworths Cases 2006 05795.
Consideration
In my view, Green Invest has established to the relevant degree that it has genuine disputes in respect to the debts claimed in the statutory demand which involve the terms of Filippo’s engagement, the alleged withdrawal of invoices and liability for payment of invoices for other members of the Green Invest group. There are elements of the case it puts up which are by no means strong and which are responded to robustly by Fillipo. An example of this is Mr Lunt’s explanation of the context of the email of 25 February 2011 which I consider to be unconvincing and which does not credibly explain why he indicated that “we will start making some payment next week”. However, as the authorities referred to above reveal, an applicant in Green Invest’s position will fail only if it is found that the contentions upon which it seeks to rely in meeting its challenge to the demand are so devoid of substance that no further investigation is warranted.[8] Once an applicant shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. A balancing exercise between the strengths between competing contentions is not carried out or appropriate.
[8]Solarite Airconditioning Pty Ltd v York International (Aust) Pty Ltd [2002] NSWSC 411 at [23].
In forming that view, I have taken into account Mr Filippo’s somewhat convincing and comprehensive rebuttal of the matters raised by Mr Lunt but the effect of his evidence is not, in my view, such as to render Green Invest’s contentions as to the disputes it raises so “hypothetical, spurious, or so devoid of substance” as to not warrant further investigation. Despite the detail descended to in Mr Filippo’s affidavit, it does not overwhelm the position being put by Green Invest or demonstrate that Green Invest’s position is implausible, incredible, illusory or misconceived. While both parties have descended to considerable detail in their affidavit evidence, it is not useful or appropriate for me to a view about who would be likely to succeed in any proceeding involving Filippo’s claim.
Although it is not necessary to do so in the light of the finding that there are genuine disputes, I now turn briefly to a consideration of Green Invest’s alleged offsetting claim which is said to arise from Filippo overcharging for the work that is paid for. I do not consider that Green Invest has met the requisite standard required to establish an offsetting claim. The material in regard to the offsetting claim is not developed beyond assertion and despite the fact that it is said that Mr Knott conducted a review over three days, no particularisation or evidence in support of that assertion is provided nor any documentary material exhibited in support of it.
I will order that the statutory demand dated 8 April 2011 and served on Green Invest by Filippo be set aside.
I will hear the parties on the question of costs.
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