Greenwood Manor Pty Ltd v Woodlock

[1994] FCA 84

up in insolvency. The Cor~orations Law specifies procedures by which

a company is deemed to be insolvent for the purposes of the Cor~orations Law. For present purposes, the relevant provision is called a statutory demand. Under section 4593, a person may serve on a company a demand relating to a single debt that the company owes to that person, being a debt which is due and payable and the amount of which is at least the statutory minimum. Section 4593 sets out what must be contained in the demand. Under subsection (3), the demand must be accompanied by an affidavit. Under section 459F, where the company served with such a demand fails to comply with the demand within a certain time limit, the company is deemed to be insolvent. Section 4596 enables a company to apply to the Court for an order setting aside a statutory demand served on the company. Such an application has been made in the present case. The application must be made within 21 days after the demand is served. In this case, the application was issued on 17 November 1993 being the 21st day after service of the demand. Therefore the application is within time. Any such application must be supported by affidavit served on the person who made the demand. Section 459H is crucial. The relevant part-of subsection (1) is as follows:

The effect of the other subsections of s459H is that when the Court is satisfied that there is such a genuine dispute, the Court

"459H(1) This section applies where, on an application under

section 459G, the Court is satisfied of either or both of the

following:

(a) that there is a genuine dispute between the company and the

respondent about the existence or amount of a debt to which

the demand relates;

(b) . . . "

must order that the statutory demand be set aside.

In the present case, the issue is whether there is a genuine dispute about the existence of the debt to which the demand relates the amount of which exceeds the statutory minimum. The amount of the debt, if presently payable, is not in dispute. The dispute is whether it is presently payable. The respondent, Barbara Ann Woodlock, is the executrix of Elsa Baumanis who was the person to whom the debt was allegedly owed in this case.

There have been a number of affidavits filed in this application covering a very wide range of matters, but in the event, it is not necessary to refer to or consider most of those facts. It may well be that if the matter went for trial, the respondent, Barbara Ann Woodlock, could establish that any variation agreement of Elsa Baumanis stating that she agreed to the delay of recovery of moneys was not valid because it had not been signed by her or she had not understood fully the terms of the variation agreement which she signed. These matters are dependent upon disputed questions of fact.

For the purposes of this application, it can be, and is, assumed that the document signed by Elsa Baumanis was signed by her and that she	knew and understood the contents of that document.
In order to understand the issue and to determine whether there is a genuine dispute between the company and the respondent as to the

I

existence of the debt, certain facts only, which are not really in dispute, need be referred to. For a number of years, a retirement village had been conducted at Dingley known as Greenwood Manor. Apparently, it ran into financial problems and the servicing company was placed in liquidation. A Mr Brendan Jones had been involved, for a number of years, as a consultant by those operating Greenwood Manor. Elsa Baumanis, an elderly person, became an occupier of a unit at that Manor pursuant to an agreement dated 11 September 1990 with Dingley Retirement Village Pty Ltd, the then operator of the Village. Under that agreement, she was required to pay a fee for the . right to use the unit, the fee paid being the amount of the debt in the present case, namely $126,000. Under that agreement, there were provisions in clause 5 relating to the term of the occupation agreement. There was to be a minimum period of 12 months and the agreement could be terminated upon the occurrence of a number of events, one being the death of the resident. Another one was upon

/I the giving of notice. Clause 6 provided for a departure fee, which in substance was a requirement imposed on the operator to pay back the ingoing contribution in full upon the termination of the occupancy. Clause 6 read:

"Upon the terminatiun of this Agreement the Resident or his legal representative shall be entitled to receive from the Operator the ingoing contribution in full, as detailed in the.

Sixth Schedule hereto annexed."

And as I said before, under clause 5, the occupancy was C

terminated on the death of the resident. In the present case, subsequent to the events which I shall relate shortly, Elsa Baumanis died and Barbara Ann Woodlock is the executrix of her estate. In August 1992, Brendan Jones commenced negotiations with the liquidator of the company then operating the Manor, that is Dingley Retirement Village Pty Ltd, for the purchase of the Manor in his name or that of his nominee. On 25 September 1992, Mr Jones wrote to the residents of the Manor, including Elsa Baumanis, saying in effect that his offer to purchase the Manor was conditional upon the residents agreeing to vary the occupation service agreements, two clauses of which I referred to a short time ago. That letter has certains unusual features about it in that it appears to be on the letterhead of Cain and Cleeves Pty of 381 Tooronga Road, Hawthorn East, Victoria, the solicitors for M r Jones, but it is signed by Brendan Jones who is not a solicitor. It is addressed to various occupants, and is headed:

"re Greenwood Manor, Dingley Retirement Village in Liquidation." The letter contains details of a long series of matters which make it clear that Mr Jones had been connected with Greenwood Manor for quite some time, the background material as to the negotiations with the liquidator for the purchase of Greenwood Manor and the fact that his offer to purchase was conditional upon certain variations to the occupancy agreements of the residents. For present purposes the relevant variation is contained in clause 2(iv) which states:

under the OSA [the service agreement] subject to the following	"For current residents my company will assume all obligations
variations.
(i) . . .
(iv) The original ingoing contribution is to be repaid on the subsequent resale and settlement of the apartment."

The effect of that, it is said, is that repayment is not to be made until after the particular unit has been relet or sold to an incoming person. There could be a long period between the time of the vacation of the particular unit and the new person coming in. At the same time, the letter says in a later paragraph:

"My of £er includes my return to the Manor. I believe that I have the necessary experience and expertise to ensure [among other things] that the ingoing contribution paid by the residents will be repaid on their vacating the premises."

I do not express any views about the proper construction of this document except that it relates to the original ingoing contribution which is to be repaid on subsequent resale and settlement of the apartment. The letter makes it quite clear that this is all part of the offer that was then under consideration by the liquidator under which Mr Jones offered to purchase the business, either in his own name or in the name of his nominee.

The next relevant event is that on 8 October 1992 Elsa Baumanis
signed an agreement to vary the senrice agreement. This is an

important document. It is headed Apartment Number 106, Greenwood

L

Manor, 52-70 Dandenong Road, Dingley, 3172. It had, obviously, been prepared as a proforma letter. It is addressed to Mr M. Hazelwinkle,

and Mr B. Jones, C/- Duesburys, Chartered Accountants, they being the	liquidators of Dingley Retirement Village Pty Ltd, and reads as
follows :

"RE: DIBGLEY VILLAGE PTY LTD (IN LIOUIDATION) DRV TRADING AS

GREENWOOD W O R

Please be advised that after considering the proposals to purchase and operate Greenwood Manor, I hereby advise my acceptance of the "Jones" offer, and agree to the eariations of my Service Agreement as detailed by Mr B Jones in his correspondence to me dated 25 September 1992, if the "Jonesn offer is accepted by the Liquidator.

Please treat this advise in the strictest confidence. No details of my decision are to be made available to any persons. "

There may be a questions as to whether this was in fact signed by Elsa Baumanis and whether she understood the contents of what she was signing, but, for present purposes, it is assumed that she both signed it and knew of and understood the contents. It is obvious that this acceptance was based upon a condition precedent, namely the Jones offer being accepted by the liquidator.

Thereafter, that offer by Jones was in fact rejected by the liquidator. This is made clear by a letter from Duesburys written to Barbara Woodlock dated 26 October 1992 stating that the liquidator had rejected the offer, being exhibit BAW3. That letter contains the following paragraph:

"The of £er received from Mr Jones was rejected by the Liquidator on 29th September 1992 on the basis that it contained many conditions which were unacceptable."

On the face of it, since the acceptance of the variations by Elsa Baumanis was on condition that Mr Jones' offer was accepted by the liquidator, the acceptance can have no effect whatsoever. The condition precedent was not fulfilled and therefore the variations were of no effect.

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Subsequently, there were other negotiations between Mr Jones and the liquidator, which eventually resulted in a contact of sale being entered into between the liquidator as vendor and Greenwood Manor Pty Limited, the present applicant, as the nominee of Mr Jones, as the purchaser.

At this stage, it should be noted that under s14 of the Retirement Villaaes Act 1986 (Vic), any contract entered into after the commencement of that Act between a resident and an owner of a retirement village continues to operate, for practical purposes, both in favour of and as against any subsequent purchaser of that retirement village. The Retirement Villaaes Act makes it clear that Greenwood Manor Pty Limited is bound by the agreement originally entered into by Elsa Baumanis and Dingley Retirement Village Pty Limited. That agreement contained provisions to the effect that upon her death the agreement was terminated and her executor was' entitled to the repayment of the ingoing moneys, namely, $126,000. During the course of submissions I made it clear that I rejected that the Retirement Villaaes Act contained the only proceedings by which a resident could enforce payment of the ingoing contribution.

In the present case, the applicant claims that it has a genuine

dispute as to whether it is bound to repay that money or whether the

variation I have referred to entitles the applicant not to pay until	after that particular unit has been relet or sold to another person.
The provisions of the Cor~orations Law under which this application has been made are of recent origin. As yet there is not much authority on the question of what is meant by the words "genuine dispute" about the existence of a debt. It is quite clear that the

"Court is not entitled to look at and decide whether the claim for the debt would succeed or not. In Re Morris Caterina Australia Pty Limited (1993) 11 ACLC 919 Thomas J, of the Supreme Court of Queensland, expressed helpful obiter on these words. In that case, the parties had agreed that there was a genuine dispute about the existence of the debt to which the demand related. The question was what was the substantiated amount of the debt. This, essentially, depended upon an offsetting claim by the respondent. By way of obiter at page 922, Thomas J said, and I quote:

"There is little doubt that Division 3 is intended to be a complete code which 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 "gerluine 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 the other.

The essential task is relatively simple - 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)."

Reference is also made to the Victorian case of Mibor

Investments Ptv Ltd v Commonwealth Bank of Australi3 11 ACSR 362, a judgment of Hayne J of the Supreme Court of Victoria. His Honour, very helpfully, sets out the requirements of the Division and quotes the words of the section but does not attempt to analyse what is meant by a the words "genuine dispute". The word "genuine" has many different meanings, as is apparent from references to the Oxford Shorter English Dictionary and the Macquarie Dictionary. "Genuine",

essentially in this context, means not spurious; being as represented; represented, real or true. "Spurious" means resembling or simulating something; not true or genuine; false; sham; counterfeit.

Although it is true that the Court, on an application under sections 4596 and 459H is not entitled to decide a question as to whether a claim will succeed or not, it must be satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt. If it can be shown that the argument in support of the existence of a genuine dispute can have no possible basis whatsoever, in my view, it cannot be said that there is a genuine dispute. This does not involve, in itself, a determination of whether the claim will succeed or not, but it does go to the reality of the dispute, to show that it is real or true and not merely spurious.

On the facts that I have outlined, in my opinion, there is no
basis 'in law in which Greenwood Manor Pty Ltd can rely upon the

document signed by Elsa Baumanis as constituting a variation of the

The variation was accepted upon a condition precedent, as I agreement for the repayment of the ingoing contribution made by her.	indicated, of the offer to purchase being accepted by the liquidator.
The offer was rejected. Therefore the variation has no effect whatsoever.

It was further submitted on behalf of the respondent that subsequent action by M r Jones and by his solicitors supported this view. There is much force in this, particularly where, in the agreement which was eventually entered into between the liquidator and the nominee of M r Jones, there was a further reference to variations of the existing terms in relation to the repayment of the contributions made. I do not propose to go through those in detail, but the correspondence makes it quite clear that Mr Jones set about starting again, as it were, to seek variations to the existing terms of the agreement and Elsa Baumanis certainly did not agree to any of those variations. This was known both to Mr Jones and to his solicitor who also forwarded a further variation form to Elsa Baumanis to be signed. This form was not signed by her. I put to one side the question of whether b i r Jones, as agent for a company not yet incorporated, namely Greenwood Manor Pty Limited, could have entered into any contract, binding Elsa Baumanis and Greenwood Manor Pty Limited. This matter was not argued fully, but in accordance with normal principal and agent law, such an agreement could not be made unless ratified and there certainly is no evidence of any 'ratification.

In all the circumstances, I base my decision solely on the fact
that the terms of the variation were subject to the condition

precedent, which was not satisfied. Therefore the claim by the

on the material before the Court, there is no genuine dispute within	applicant that there is a genuine dispute must fail. In my opinion,
the meaning of section 459H(1) of the Coruorations Law about the existence of the debt the subject of the statutory demand.
Therefore the application for an order setting aside the statutory demand served on the company is refused. Normally, if an application like this is dismissed, it is dismissed with costs. I see no reason why there should be a departure from the normal type
of case and accordingly, it is ordered the application be dismissed

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with costs.

I certify that this and the preceding eleven (11) pages are a true

copy of the Reasons for Judgment of The Honourable Mr Justice R.M.

Northrop .

Associate:

Date:  / &W&