Green Pacific v TechCommGreen Pacific v TechComm - [2006] NSWSC 482

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CITATION: Green Pacific v TechCommGreen Pacific v TechComm [2006] NSWSC 482

HEARING DATE(S): 11 & 12 May 2006

JUDGMENT DATE :
29 May 2006

JURISDICTION: Equity Division

JUDGMENT OF: Associate Justice Macready at 1

DECISION: Paragraph 52

CATCHWORDS: Corporations. Application to set aside statutory demand. Demand reduced by a small amount. No matter of principle.

PARTIES: Green Pacific Energy Limited v TechComm Simulation Pty Limited
Green Pacific Energy Stapylton No 1 Pty Ltd v TechComm Simulation Pty Limited

FILE NUMBER(S): SC 5000 of 2005; 5001 of 2005

COUNSEL: Mr J Mitchell for plaintiff
Mr B Coles QC and J Gooley for defendant

SOLICITORS: Cateo Pty Limited for plaintiff
Swaab Attorneys for defendant

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Associate Justice Macready

Monday 29 May 2006

5000 of 2005 Green Pacific Energy Limited v TechComm Simulation Pty Limited
5001 of 2005 Green Pacific Energy Stapylton No 1 Pty Limited v TechComm Simulation Pty Limited

JUDGMENT

1 His Honour: This is the hearing of two applications to set aside statutory demands under section 459G of the Corporations Act 2001 (Cth). These matters have been heard together and I have ordered that the evidence in one be evidence in the other.

2 On 26 August 2005 Techcomm Simulation Pty Ltd (“TechComm”) served a statutory demand on Green Pacific Energy Stapylton No. 1 Limited (“GPE Stapylton”). On the same day TechComm served a statutory demand on Green Pacific Energy Ltd (“GPE”).

3 In both statutory demands TechComm seeks $960,857.57 as a debt due and payable by GPE Stapylton and GPE to TechComm.

4 In the GPE Stapylton statutory demand the debt is described in the Schedule to that demand as follows:

“Amount owed by the company on unpaid invoices rendered by the creditors during the period 29 October 2004 to 31 July 2005 … $969,586.07

Less credit

(a) 5% margin refund (incl GST) … $4,604.60
(b) maintenance charges as per the company’s invoice 3, 5 and 8 dated 13/8/2004, 3/9/2004 and 5/10/2004 …$4,123.90
Amount of debt $960,857.57 .”

5 In the GPE statutory demand the debt is described in the Schedule to that demand as follows:

“Amount due and payable by the company to the creditor pursuant to clause 18.3 of the Operations and Maintenance Agreement dated 11 December 2003 between the creditor, the company and GPE Stapylton No 1 Limited … $960,857.57 .

6 The amounts claimed in the GPE Stapylton statutory demand and the GPE statutory demand are the amounts said to be due and payable by GPE Stapylton in consequence of TechComm providing designated “Services” pursuant to an Operation and Maintenance Agreement (the “O & M Agreement”) dated 11 December 2003 between TechComm, GPE Stapylton and GPE. GPE was the guarantor of GPE Stapylton’s obligations under the O & M Agreement.

7 The O & M Agreement related to the operation and maintenance of the Stapylton 5 MW Power Plant located at 215 Burnside Road, Yatala South, Queensland. Pursuant to the O & M Agreement, TechComm was retained by GPE Stapylton to provide designated services at the Power Plant. Apparently TechComm has expertise in the operation and maintenance of power plants.

8 On 15 September 2005 GPE Stapylton filed an originating process in the Supreme Court and commenced proceedings No. 5001 of 2005 in which it sought to set aside the GPE Stapylton statutory demand. In addition, the Affidavit of William Lamont dated 14 September 2005 was served in support of the originating process. On the same day GPE filed an originating process in the Supreme Court and commenced proceedings No. 5000 of 2005 in which it sought to set aside the GPE statutory demand. An identical Affidavit of William Lamont dated 14 September 2005 was served in support of the originating process.

9 Those two identical affidavits constitute the only evidence that was served within the time prescribed by section 459G(2) of the Corporations Act 2001 (Cth).

10 Importantly, there are eight exhibits referred to in the affidavits, none of which were served with those affidavits and none of which were served within the twenty-one day period as prescribed by section 459G(2).

11 Since the expiry of the 21 day period, GPE Stapylton and GPE served additional affidavits which have been read in these proceedings. In the additional affidavits, the plaintiffs’ raise a number of issues, which were not raised in the earlier. This lead to evidentiary rulings rejecting parts of those affidavits. Notwithstanding these evidentiary rulings the plaintiffs’ made submissions in relation to those issues and attempted to base their case on such matters which were not raised in the affidavits filed within time or which did not fairly alert TechComm to those issues within the mandatory 21 day period. The issues that were raised in the additional affidavits included the following:

(a) GST issues;
(b) Charging for expenses incurred prior to the O&M agreement;
(c) Terms of charging for casual labour;
(d) Exceeding the budget for staff salaries.

12 I accepted in the various evidentiary rulings that those parts of the additional affidavits referring to such matters were rejected inter alia because they did not fairly alert or “flag” the nature of the dispute to TechComm.

13 The plaintiffs claim that there is a genuine dispute in respect of the amounts said to be owing to the defendant. I had the benefit of having a number of submissions in respect of the principles to be applied and I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671-2 his Honour made the following comments respect of the expression "genuine dispute":

Eng Mee Yong v Letchumanan

South Australia v Wall

Mibor Investments

“These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.”

Re Morris Catering (Australia) Pty Limited

'There is little doubt that Division 3 prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a ‘genuine dispute’ and whether there is a ‘genuine claim’.

It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simply - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).”

I respectfully agree with those statements."

14 Apart from a more general question of whether the course of events between the parties demonstrated that there was a genuine dispute in respect of the whole amount claimed I endeavoured in the submissions at the conclusion of evidence to have identified to me the amount of what was shown to have been disputed on the admitted affidavit evidence that was then in evidence before me. That effort proved unsuccessful and the plaintiffs’ submissions trespassed into areas on which I had ruled against the plaintiff. I therefore gave leave to file further written submissions.

15 In those the written submissions the plaintiffs identified the following areas in respect of which it quantified the extent of the genuine dispute. These were:

(a) the extent to which the labour charges during the course of the agreement exceeded the budget contained in the agreement the amount of the excess being A$519,843.20;

(b) failure to verify material costs the amount being $24,644.49;

(c) costs incurred prior to commencement of the operation and maintenance agreement the amount being $16,335.73; and

16 It is necessary to examine these to see whether the claims were properly identified in the affidavit, which was filed in time.

17 In respect of the first matter the O & M agreement provided for the payment to TechComm of verified costs. “Verified Costs” were defined as:

“Those costs actually incurred by TechComm in performing the Services and verified by invoice and receipt. Verified costs for the following items however shall not exceed those costs set out in the preliminary budget.

18 The preliminary budget costs for staff salaries was $483,000. The plaintiffs in their submissions identified the total labour costs charged during the relevant period in the sum of $1,002,843.22. These amounts included casual labour. The excess of $519,843.20 was submitted to be in dispute.

19 On its own case the plaintiffs conceded that there was an agreement for the employment of casual labour. However the details of that agreement were not in evidence. It could possibly be a variation of the O & M agreement. The affidavit filed in time raised a number of matters but exceeding the budget for staff salaries was not flagged as an issue. In paragraph 18 of his affidavit Mr Lamont set out the terms in a general way of a facsimile of 19 August 2005 from Mr Wong of the plaintiffs to the defendant. That description did not refer to this aspect of the dispute. Although a copy of the facsimile is exhibited and was admitted into evidence it was not served within time. If it had been it would have fairly alerted the defendant to the nature of this problem. In these circumstances I do not think that it is open to the plaintiffs to raise this particular dispute.

20 Items (b) and (d) were certainly flagged in the affidavit filed in time but item (c) was not so flagged and must be disregarded. The total of the quantified disputed items is thus $79,040.23

21 Stepping back from the detailed to the more general level it is necessary to look at the history of the matter to see whether there is a genuine dispute about this quantified amount or about the whole of the claim. I have been assisted in preparing this history by the detailed submissions of the defendant which I will incorporate where relevant into this history with some amendments.

22 Prior to the commencement of the O & M Agreement, TechComm provided labour to assist GPE Stapylton in commissioning the power plant. The commissioning services did not form part of the Services to be provided under the O & M Agreement. TechComm was paid periodically for the commissioning services.

23 On about 28 May 2004 TechComm commenced the provision of the Services pursuant to the O & M Agreement. Thereafter TechComm rendered invoices to GPE Stapylton in relation to the Services that TechComm provided pursuant to the O&M Agreement.

24 On 24 September 2004 Mr Whan who was a director of TechComm had a telephone conversation with the managing director of GPE Stapylton and GPE, Peter Gan, during which it was agreed that interest would be paid on the outstanding invoices and that by 15 October 2004 TechComm would receive a repayment schedule dealing with the outstanding invoices from GPE.

25 On 28 September 2004 Mr Whan wrote to Mr Gan confirming that GPE had undertaken to provide a plan for repayment of outstanding invoices “within three weeks” which plan would be faithfully executed and noted the agreement that interest would be charged on outstanding amounts.

26 On 29 October 2004 a copy of a letter dated from GPE to TechComm enclosing a proposed plan for payment of outstanding TechComm invoices and an agreement to pay interest on outstanding invoices was received by TechComm. The then outstanding amount was $670,817.

27 On about 17 March 2005 Mr Whan had a telephone conversation with Mr Gan in which he said words to the following effect to Mr Gan: “TechComm audit is presently being prepared. We are going to have problems if you don’t pay some of the outstanding accounts. Please make some payments before our audit is completed.” According to Mr Whan, Mr Gan said that he would look into it. Mr Gan did not give evidence in the proceedings and thus did not refute this conversation.

28 On 17 March 2005 Mr Whan received an email from Mr Gan. Upon receipt of that email Mr Whan says that he telephoned Mr Gan and had a conversation to the following effect:

29 On 18 March 2005 Mr Gan sent a letter to Mr Whan with respect to “outstanding accounts”. In that letter it was indicated that GPE would continue to pay interest on outstanding amounts on a monthly basis and pay all outstanding invoices by the end of April 2005 “if equity negotiations were not completed”.

30 On 28 February 2005 the plaintiffs’ former managing director, Mr Peter Gan, confirmed for “audit purposes“ to Price Waterhouse Coopers, the auditors for TechComm, that GPE owed TechComm $1,113,628.05 “as at 28 February 2005”.

31 On 22 April 2005 TechComm sent a letter to GPE Stapylton requesting that all outstanding invoices be paid as soon as possible. TechComm subsequently received the following payments, in relation to the services provided to GPE Stapylton:

2 May 2005 $30,000.00

12 May 2005 $200,000.00

20 May 2005 $200,000.00

32 On 6 June 2005 TechComm sent a letter to GPE Stapylton in which it was stated that almost $1 million remained outstanding, requesting a repayment plan for the outstanding invoices by 9 June 2005 and requesting payment of $400,000.00 in June 2005 and the remaining outstanding amount in July 2005.

33 On 8 June 2005 TechComm received an email from Mr Gan in response to the 6 June 2005 letter from TechComm to GPE Stapylton. In that letter Mr Gan stated that it would be irresponsible on GPE’s part to indicate to TechComm that it had a conclusive strategy for reducing overdue accounts today. Further, it was noted that:

“our very best efforts have been expended to enable payment of TechComm’s outstanding invoices”.

34 TechComm then received a letter dated 27 June 2005 from GPE Stapylton purporting to be a notice of intention to suspend the O & M Agreement. The letter did not make any complaint about the performance of TechComm and the proposal seems to have been prompted by the fact that the operation of the plant was not economically viable.

35 On about 1 July 2005 TechComm received a letter dated 30 June 2005 from Mr Gan requesting TechComm to confirm that the balance of the outstanding invoices totalled $1,144,556.91. On about 11 July 2005 TechComm amended the amount recorded by GPE Stapylton in the document and indicated that the correct balance of the outstanding invoices was $1,149,135.68. It was sent to BDO Chartered Accountants GPE’s auditors.

36 On 5 July 2005 Mr Whan had a telephone conversation with Mr Wong, the chairman of directors and executive director of GPE and director of GPE Stapylton during which Mr Wong sought an extension of time to provide a proposal for repayment of the outstanding invoices. In an email dated 5 July 2005, which Mr Whan received from Mr Wong following that telephone conversation that day Mr Wong says that “there was not much point for me to agree on things that we might have a problem honouring”.

37 On 5 July 2005 Mr Whan sent an email to Mr Wong in which he complained about GPE’s promises to pay.

38 On 11 July 2005 TechComm received payment of $250,000.00 from Great Pacific Finance Pty Limited. This was the last payment made by the plaintiffs to TechComm. On 12 July 2005 Swaab Attorneys, TechComm’s solicitors, sent a letter to GPE demanding payment of $899,135.68 being the amount outstanding by GPE Stapylton.

39 Following the letter from Swaab Attorneys TechComm received a disingenuous email from Mr Wong on 12 July 2005.

40 On 19 July 2005 Mr Whan received an email from Mr Wong concerning a proposed further payment of $250,000.00 to TechComm.

41 On 27 July 2005 Mr Whan received an email from Mr Wong acknowledging that GPE had no cash income apart from relying on a loan facility and requesting a period of grace for payment of the outstanding invoices.

42 On 9 August 2005 Mr Whan received an email from Mr Lamont requesting an undertaking from TechComm not to take further action to collect outstanding money if a further $250,000.00 was paid on the outstanding invoices. This was responded to on 10 August 2005 by Swaab Attorneys who sent a letter to GPE Stapylton demanding payment of $969,586.07 and stating that the O & M Agreement would be terminated if payment was not made.

43 On 10 August 2005 Swaab Attorneys sent a demand to GPE pursuant to the guarantee in the O & M Agreement.

44 Between 16 August 2005 and service of the statutory demand on 26 August 2005 correspondence was sent between the parties in relation to aspects concerning invoices and about the lack of payment in relation thereto. Included in that correspondence was a letter dated 19 August 2005 from GPE Stapylton complaining about amounts charged and in relation to TechComm’s performance under the operation and maintenance agreement. The plaintiffs were under a new management team at this time with Mr Gan having been replaced by Mr Lamont.

45 Importantly, in that letter Mr Wong admits that even on his interpretation GPE Stapylton owed TechComm $175,054.55 and even that was based on the premise that somehow TechComm had to provide a credit note in the amount of $669,401.66. Further, Mr Wong invited TechComm to agree to “a preliminary sum to settle outstanding invoices” and he indicated that he would “arrange for GPE Stapylton to pay up to $250,000.00 upon signing of a settlement deed … with the balance to be paid after the shareholders of Green Pacific Energy Ltd have approved the granting of a charge by Green Pacific Energy Ltd to secure advances to be made by Richland Investment (Australia) Pty Ltd to Green Pacific Energy Ltd, which advances will be applied to pay the balance”. Further, Mr Wong stated that if they were unhappy with the preliminary sum the parties could meet and reach agreement on a settlement sum. Mr Wong threatened that he would raise TechComm’s performance under the O & M agreement “in any litigation”. According to Mr Whan this was the first time that GPE Stapylton or any of its officers had raised these issues. It certainly appears so from the correspondence

46 On 22 August 2005 Mr Whan sent an email to Mr Wong refuting the allegations about performance. In that response Mr Whan stated that as not even the $175,054 had been paid that it appeared that GPE Stapylton and GPE were “insolvent”. That only prompted a call for a meeting but no payment.

47 The demand was served on 26 August 2005.

48 At another level in the organisation there was communication concerning the outstanding invoices. On the plaintiffs’ part these communications were mainly with Ms Prasidhi the accountant for the plaintiffs. She confirmed that from time to time she would raise discrepancies, where for example an invoice was not supported by third party invoices from TechComm. The nature of these difficulties would not seem to be unusual and it is something which would normally be checked by those at an accounts level. Sometimes appropriate information was not provided to her and the extent of these complaints seem to be included in the quantified matters which are referred to above. It is plain that once there was a change in the management team she was directed to review all invoices over the period of the agreement in order to prepare summaries of what was said to be problems with invoices.

49 In the defendant’s submissions the following factors were said to be important in deciding whether or not there was a genuine dispute. They submitted:

“First, the management of the plaintiffs under Mr Gan had acknowledged the plaintiffs’ indebtedness to TechComm. This was certainly the case as at 28 February 2005 when Mr Gan acknowledged to auditors that GPE was indebted to TechComm in the amount of $1,113,628.05. A similar admission was made on 29 March 2005 by Ms Prasidhi. In addition, on 1 July 2005 Mr Gan requested that Techcomm confirm to it’s auditors that the amount owed was $1,144,556.91. By failing to call Mr Gan to contradict this evidence these admissions must be regarded as made voluntarily and are reflective of the true indebtedness of the plaintiffs.

Secondly, throughout 2005 a number of emails or letters were sent by the plaintiffs to TechComm in which they acknowledged indebtedness and the plaintiff’s failure to pay in a timely manner. The evidence is that numerous compromises and alternate payment regimes were implemented in relation to debts owed by the plaintiff. Illustrative is the correspondence from both Mr Gan and Mr Wong to TechComm referred to in these submissions. There is no evidence that these compromises were the result of some uncertainty surrounding what was owed to TechComm.

Thirdly, as noted above, the plaintiffs have not seen fit to call Mr Gan to give evidence. This is despite the fact that he dealt with TechComm in relation to its work under the O & M Agreement and in relation to outstanding invoices. It was he that volunteered the amount of indebtedness as at February 2005.

Jones v Dunkel

Browne v Dunn

Corporations Act

Fifthly, Mr Gan’s actions cannot be ignored or discounted simply because the plaintiffs have a new management team. It is submitted that in the circumstances the new management team has reconstructed and fabricated a dispute despite there being substantial substantiation of invoices. It would appear that the new management team at GPE under Mr Lamont have decided to ignore the previous representations made by the former managing director and have embarked upon a course designed to avoid making payments. This course however can only be accepted if one ignores all of the correspondence between the parties and the representations made by relevant officers to both TechComm and to auditors.

Sixthly, at no time up until 19 August 2005 did the plaintiffs raise with TechComm their concern in relation to TechComm’s performance under the O & M Agreement. There is no coincidence in the fact that it was not until after the letters of demand from Swaab Attorneys did the plaintiffs attempt to introduce this allegation into the equation. This is an indicator that the dispute is not genuine.

Seventhly, the Lamont affidavits appear to agitate a dispute in relation to some invoices which have been paid or on which credit notes have been given. This must demonstrate a lack of genuineness.

Eighthly, the quantum disputed is small in comparison to what is claimed in the statutory demands. There has been no sign of good faith by the plaintiffs by paying what they have admitted is owing.

Ninthly, the various emails sent by Ms Prashidi during 2005 overwhelmingly make it clear that she was aware that the plaintiffs owed money to TechComm. Further, when one reads her correspondence it is manifestly clear that she had concerns in relation to a small number of benign and uncontroversial items. Illustrative was her acknowledgment that as at 29 March 2005 the plaintiffs owed TechComm $1,113,628.05 and on 12 May 2005 she only requested spreadsheets for March and April. Clearly the inference must be that she was satisfied in relation to other months. At no stage did Ms Prashidi write to TechComm and indicate that the plaintiffs were not so indebted

Tenthly, on 19 July 2005 the Chairman of the plaintiffs even offered to put in his own money to pay TechComm by way of part-payment.

Eyota Pty Ltd

Re Morris Catering

50 There is no doubt that the acknowledgments of indebtedness are not conclusive but are important admissions. These admissions combined with the negotiations for repayment by instalments without complaint about any substantial matter in respect of the invoices also strongly indicates that there was no genuine dispute in connection with the outstanding amounts. The failure to pay even agreed amounts of a moderate amount strongly suggests that the funds were not available as appears to be conceded in correspondence. The last-minute attempt to make allegations of lack of performance and a complete review of the invoices suggest a last-minute attempt to avoid what appears to be a solvency problem.

51 Although there has been this last-ditch effort to a raise disputes about the invoices the evidence discloses only minor amounts in respect of which there maybe some dispute. On the material before me there is an argument that some material charges have not been substantiated in accordance with the contract and there is an arguable question about whether the appropriate percentage mark up has been charged. I am prepared to accept that these are genuine disputes but I do not accept that there is a genuine dispute in respect of the balance. Accordingly the demand will be reduced by $79,040.23.

52 The orders and declarations that I make are as follows:

53 Subject to submissions I propose to order that the plaintiffs pay the defendant’s costs as the plaintiffs have largely been unsuccessful.

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Citations

Green Pacific v TechCommGreen Pacific v TechComm [2006] NSWSC 482

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CITATION:	Green Pacific v TechCommGreen Pacific v TechComm [2006] NSWSC 482
HEARING DATE(S):	11 & 12 May 2006
JUDGMENT DATE :	29 May 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Associate Justice Macready at 1
DECISION:	Paragraph 52
CATCHWORDS:	Corporations. Application to set aside statutory demand. Demand reduced by a small amount. No matter of principle.
PARTIES:	Green Pacific Energy Limited v TechComm Simulation Pty Limited Green Pacific Energy Stapylton No 1 Pty Ltd v TechComm Simulation Pty Limited
FILE NUMBER(S):	SC 5000 of 2005; 5001 of 2005
COUNSEL:	Mr J Mitchell for plaintiff Mr B Coles QC and J Gooley for defendant
SOLICITORS:	Cateo Pty Limited for plaintiff Swaab Attorneys for defendant

2 May 2005	$30,000.00
12 May 2005	$200,000.00
20 May 2005	$200,000.00