Hyman's Asset Management v ABN 79 001 953 877

[2006] NSWSC 228

CITATION:	Hyman's Asset Management v ABN 79 001 953 877 [2006] NSWSC 228
HEARING DATE(S):	31 March 2006
JUDGMENT DATE :	3 April 2006
JURISDICTION:	Equity
JUDGMENT OF:	Austin J
DECISION:	See under heading "Conclusions"
CATCHWORDS:	CORPORATIONS - application to set aside creditor's statutory demand - plaintiff fails to establish genuine dispute based on counterclaims for auction services, when overwhelming evidence indicates that services were provided by another entity - no issue of general principle
LEGISLATION CITED:	Corporations Act 2001 (NSW), s 459H
CASES CITED:	Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 78
PARTIES:	Hyman's Asset Management Pty Ltd (P) ABN 79 001 953 877 (in liq)(Receiver & Manager Appointed) (D)
FILE NUMBER(S):	SC 3628/05
COUNSEL:	J T Johnson (P) D A McLure (D)
SOLICITORS:	Watson and Watson Solicitors (P) Henry Davis York (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

MONDAY 3 APRIL 2006

3628/05 HYMAN’S ASSET MANAGEMENT PTY LTD V ABN 79 001 953 877 PTY LTD (IN LIQ) (RECEIVER & MANAGER APPOINTED)

JUDGMENT

1 HIS HONOUR: By an originating process filed on 24 June 2005, the plaintiff seeks an order that a statutory demand dated 31 May 2005 be set aside under s 459G of the Corporations Act 2001 (NSW). Although the originating process refers to an off-setting claim and some other reason why the demand should be set aside (within the meaning of s 459J(1)), the only ground for relief advanced at the hearing was that there is a genuine dispute as to the amount of the debt to which the demand relates, for the purposes of s 459H(1).

2 The statutory demand was served on 3 June 2005. It is for the sum of $46,051.43, said to be made up as follows:

"Money due and payable as at 13 October 2004 with respect to loan moneys provided by the Creditor to the Debtor Company pursuant to Loan Agreement dated 1 July 2004 and recorded in loan account No 10101558 $54,615.55
"Less amount paid by Debtor Company to the Creditor on 10 February 2005 for invoices issued to the Debtor Company by the Creditor and numbered PS1515, AM107, AM106, AM155 and AM102 $8,564.43
Total Amount $46,051.43"

3 The statutory demand was supported by an affidavit sworn by David Winterbottom, in which he said he believed that there was no genuine dispute about the existence or the amount of the debt claimed.

4 The plaintiff and the defendant were in the same group of companies, linked together by the fact that Ian Hyman was interested in each of them. The defendant was previously called "Hymans Pty Ltd". One of its two shareholders, and its sole director, is Mr Hyman. Voluntary administrators were appointed to the defendant on 28 October 2004. On 10 November 2004 the Commonwealth Bank of Australia ("CBA") appointed Mr Winterbottom as its receiver and manager, pursuant to a registered charge. I shall refer to Mr Winterbottom as "the Receiver". On 19 January 2005 the voluntary administrators became the liquidators of the defendant.

5 The plaintiff is not in external administration. Its sole director is Mr Hyman and its sole shareholder is Hymans Investments Pty Ltd. Another company in the Hymans group is Hymans Professional Services Pty Ltd ("HPS"). Its sole director is also Mr Hyman and its sole shareholder is Hymans Investments Pty Ltd. As at 30 August 2005 it was not in external administration. The defendant operated and maintained loan accounts with both the plaintiff and HPS.

6 One or more entities within the Hyman group of companies carried on the business of providing valuations for insurance, tax consolidation, mergers and acquisitions, and other non-insolvency purposes; and also the business of conducting auctions when asked to do so by its clients. Mr Hyman gave evidence that a number of companies in the group performed similar services but for different categories of client, but he did not give any more detailed explanation. The plaintiff claimed that it carried on both valuation and auctioneering businesses, but as will be seen, identifying the entities within the group that carried on these businesses is not an easy matter.

7 The Receiver gave evidence, based on his investigations, that the defendant operated and maintained one bank account, an account with CBA, which he identified by number.

8 The plaintiff and the defendant entered into a loan agreement dated 1 July 2004, under which the defendant agreed to lend money to the plaintiff from time to time. The evidence includes a printout of the defendant's ledger for this loan account, No 10101558, which shows a debit balance, indicating that the plaintiff was indebted to the defendants as at 13 October 2004 in the sum of $54,615.55. The defendant's ledger for loan account to HPS, No 10101598, is also in evidence and shows a credit balance.

9 On 3 December 2004 the Receiver sent a letter of demand to the plaintiff claiming $54,615.55, the gross amount claimed in the statutory demand, giving the same particulars as are set out in the statutory demand. The letter threatened action for recovery.

10 On 21 December 2004 Mr Hyman wrote to the Receiver on behalf of the plaintiff, saying that due to the complexity of the affairs of the Hymans group, the loan account balances for each company had not "undergone their final review" for the financial statements for the period to 30 June 2004, nor for subsequent transactions. He said he had discovered a number of incorrect postings affecting the loan account between the defendant and the plaintiff, and when they were corrected the amount outstanding by the plaintiff would be significantly reduced or eliminated. He said a detailed review was being conducted and a summary would be provided.

11 Mr Hyman wrote to the Receiver again on 24 December 2004, saying that he had arranged to credit the sum of $9,020 to the company's CBA account (not identified by number). He continued:

"Whilst we have not completed our review of transactions between HAM and the [defendant] we are aware of two transaction [sic] that have been banked and processed to the same CBA bank account which in fact is contractually the property of HAM."

12 The letter then set out a table according to which income of $24,806.12 (presumably said to be the plaintiff's income) from the client Roboco Pty Ltd for "commission, buyers' premium and expense reimbursements" was transferred to the defendant on 9 September 2004, and income of $12,243 from the client Grimwood Heating Ltd for commission and expenses of the same kind was transferred to the defendant on 23 September 2004. The letter claimed that the balance of the amount claimed less of these two figures was $8,546.43.

13 The Receiver replied on 24 January 2005. He acknowledged that the deposits amounting to $9,020 claimed in Mr Hyman's letter had in fact been made. However, he said that his review of the CBA account did not indicate that the other two deposits had been made. He referred to the ledger of the loan account of HPS with the defendant, and said that the Roboco receipt had been recorded as a credit in that ledger. He invited Mr Hyman to provide "full substantiation" for the plaintiff's claim for any reduction in the balance outstanding to the defendant. He said Mr Hyman had previously told him that the plaintiff's business only related to insurance valuations, and therefore that he expected any receipts for the plaintiff to relate only to that business.

14 Mr Hyman replied on 31 January 2005. He said that while the major focus of the plaintiff was on valuations, it had the capacity through its own qualified staff to conduct auctions at the request of clients. He said the plaintiff had conducted auctions on behalf of only two clients, namely Roboco and Grimwood, the auctions in each case following on from valuations. He alleged that the Receiver had illegally removed the plaintiff's records and said that therefore the Receiver was in possession of the agency agreement between the plaintiff and Roboco. He said he enclosed with the letter copies of invoices for each of the valuations claimed. He also enclosed with his letter a cheque for an amount of $8,546.43, the amount he had calculated in his letter of 24 December as the balance owing.

15 Enclosed with the letter of 31 January 2005 was a tax invoice dated 18 June 2004 directed to Roboco Communications Pty Ltd for $2750, inclusive of GST, which invited electronic payment to a bank account with St George Bank. The invoice amount was said to be for professional fees for appraisal and report on some premises at Rydalmere. The invoice was on the Hymans letterhead but the plaintiff was identified in small print at the bottom of the page. Also attached were some pages of a "valuation of assets" for Roboco Communications, purporting to have been issued by the plaintiff on 16 June 2004 (although some other pages of the valuation, referred to below, suggest that the valuation was carried out by HPS).

16 The letter also attached a tax invoice, from HPS rather than the plaintiff, to a company called RBC Global Services Australia for professional fees for an appraisal and report for an unspecified property, and again requested deposit into a St George Bank account, though an account with another number. Also attached were invoices issued under the Hymans letterhead with the plaintiff named in small letters at the bottom, addressed to three other companies, Clark Equipment Australia Pty Ltd, Macquarie Goodman Management Ltd and Tenix Limited, the first two stipulating a St George account and the last stipulating a CBA account for payment. The number given for the CBA account was different from the number identified by the Receiver as the sole account of the defendant.

17 The Receiver replied by letter of 6 May 2005. He referred to Mr Hyman having provided "various documents" with his letter of 31 January, but he pointed out that some of the tax invoices he had provided had various ABNs including those of HPS and the defendant, and that the invoices apparently issued by the plaintiff required payment to the St George Bank and so would not have been paid into the defendant's CBA account (this was true of the invoices other than the one to Tenix, but that invoice identified a different CBA account). He denied having illegally taken company records. He said that Mr Hyman had not provided sufficient evidence to support the claim that the two deposits to the CBA account were the property of the plaintiff.

18 The statutory demand gave credit for the payment of $8,564.43 (although the correct amount paid seems to have been only $8,546.43). It did not give credit for the sum of $9,020 that, according to Mr Hyman's letter of 24 December 2004, had been credited to the defendant's CBA account, but at the hearing counsel for the defendant informed the court that his client accepted that this credit had occurred (as the Receiver had said in his letter of 24 January 2005) and accordingly the defendant's claim against the plaintiff was reduced by that amount. At the hearing counsel for the plaintiff informed the court that, having regard to the court's rulings on the admissibility of the evidence of Mr Hyman, the plaintiff would no longer claim that the amount of $12,243 from Grimwood Heating should be deducted from the amount claimed. This left only the deduction for Roboco in dispute.

Roboco

19 The evidence includes a valuation of assets performed for Roboco Communications dated 16 June 2004. It appears that part of the valuation report was sent by Mr Hyman to the Receiver with his letter of 31 January 2005. But Mr Hyman attached what appears to be the full valuation document (except for the last page of the valuations of individual assets) to his affidavit. Although the cover sheet and the executive summary of the valuation report bear the plaintiff's name, the fuller report bears the name of HPS.

20 As I have said, Mr Hyman's letter of 31 January 2005 also enclosed a copy of an invoice to Roboco Communications for appraisal services, dated 18 June 2004. The invoice was on letterhead for "Hymans" which did not specify any corporate entity, but along the bottom of the invoice the plaintiff's name and ABN appeared in small type. I cannot determine from this evidence whether the Hyman entity that contracted with Roboco Communications to provide the appraisal was HPS or the plaintiff.

21 On about 26 July 2004 a facsimile transmission was sent to Roboco Communications Pty Ltd on Hymans letterhead. The facsimile cover sheet, which was dated 22 July, did not identify any corporate entity of the Hymans group, but it enclosed an auction proposal letter dated 22 July which identified HPS. The proposal was for HPS to conduct an on-site auction of items that had been listed in the previous valuation. The proposal letter set out a schedule for the promotion of the auction and stated that charges would be made for commission, labour costs and promotional costs to the vendor and buyer's premium to the buyers. In addition to the proposal letter, the facsimile transmission included an auction agency agreement, said to be between Roboco Communications and the defendant, although at the bottom of each page of the agreement were the words "Hymans Asset Management Terms and Conditions". The agreement was signed on behalf of Roboco Communications on 27 July.

22 The Receiver has put into evidence copies of the defendant's bank statements for its sole bank account, the CBA account, for the period from 1 July to 4 November 2004. They do not record any deposit from Roboco Communications of $24,806.12, which Mr Hyman alleged had been paid to the defendant on 9 September 2004. However, the defendant's ledger for HPS's loan account shows a credit to that account of $24,806.12 on 9 September 2004, with the description "SALE 4269 ROBOCO COMMUNI".

23 In his affidavit, after referring to the defendant's bank statements and the ledger for the loan account of HPS, the Receiver said:

"Accordingly, contrary to the allegation that the amount of $24,806.12 from Roboco was 'banked and processed' by the [defendant] when in fact it was the property of the plaintiff, the loan account appears to show a credit entry into the [defendant's] loan account with HPS of $24,806.12. The credit entry makes no mention of the plaintiff and is thus inconsistent with the plaintiff's allegation that the amount of $24,806.12 was the plaintiff's property."

24 I agree with this analysis. At the hearing, the plaintiff seemed to abandon any contention that the $24,806.12 had been wrongly "banked and processed" to the CBA account. It was submitted on behalf of the plaintiff that the credit entry of $24,806.12 had been wrongly made to the loan account of HPS and should have been made to the plaintiff's loan account.

25 The evidence includes two copies of an invoice issued by the plaintiff to Roboco Communications and dated 26 August 2004. One of the copies of the invoice was annexed to Mr Hyman's affidavit, made on 6 February 2006 ("the affidavit copy"). The other copy of the invoice ("the produced copy") was produced by the plaintiff in response to a notice to produce, and then tendered by the plaintiff at the hearing. The affidavit copy extends to six numbered pages, whereas the same information appears on the produced copy but is printed out on only five numbered pages. However, the produced copy has, at the end of the numbered pages, two additional unnumbered pages that are not part of the affidavit copy. Those two pages are identical in content, although the contents of one page are a little lower down on the page. I shall treat one of them as a copy of the other, and I shall refer to the unnumbered page as "the additional page".

26 On the pages numbered 1-5 of the produced copy, the invoice lists the sale proceeds for each item sold, the total amount being $75,147.60 inclusive of GST. On page 5 of the produced copy deductions are made from total sales for auction sale commission, promotional and labour costs and other expenses, totalling $15,412.32, giving a net amount of $59,735.28 for which a cheque is said to be enclosed. The additional page identifies Roboco Communications and bears the same sale number and date as the numbered pages. It appears to be a statement showing the amounts paid to Roboco Communications and the costs, as shown on page 5, and then an additional item of $9,419.88 for "buyer's premium". The additional page was relied on by the plaintiff to show that its total fees and expenses were the sum of the commission and expenses shown on page 5 plus the buyer's premium (the total of those two amounts is $24,832 20, but the additional page shows an "adjustment: rounding" of $26.08, so as to produce the figure of $24,806.12 which corresponds with the amount shown on the ledger for the HPS loan account.

27 There are some peculiarities about the additional page that lead me to conclude, for the purposes of the present proceeding, that it should not be treated as part of the invoice or as a document created contemporaneously with the invoice. First, it is unnumbered whereas all the pages of the invoice are numbered. Secondly, the additional page was not annexed to Mr Hyman's February affidavit, and the plaintiff's evidence did not purport to explain the discrepancy. Thirdly, the additional page makes an adjustment to the total of the buyer's premium and the other costs of $26.08 for "rounding", without any explanation by the plaintiff's evidence. Fourthly, the figures on the additional page for "gross sales" do not quite correspond with the total of the individual sales figures on the numbered pages. Fifthly, the additional page refers to "amount banked as per bank rec" in the sum of $84,491.40, a figure substantially higher than the total sales given in the numbered pages although the difference does not correspond to the buyer's premium.

28 Mr Hyman said in his affidavit that the CBA account was conducted by the Hyman group and that the account had "a number of sub-accounts", although he did not give any specific information to explain this statement. He said that the sales proceeds from the auction for Roboco Communications were $84,541.40 and that they were deposited into the CBA account on various dates commencing 4 August 2004, though he did not identify specific deposits by reference to the bank statements. He annexed to his affidavit a "Vendor Cheques Listing" which he did not endeavour to explain. That document seems to show that cheque No 26185 was drawn in favour of Roboco Communications for $59,735.28. That correlates to the invoice dated 26 August 2004 and to bank statement No 124, page 7, which is part of Exhibit D1. The Vendor Cheques Listing also shows there was an "EFT" of $24,806.12 to "Hymans General Account". That figure does not appear in the bank statements that are in evidence, as far as I can see - it should not appear in the bank statements if it merely represented an inter-company accounting for amounts of sale proceeds already placed in the account. Those two sums make the total of $84,541.40. Mr Hyman said "it was the practice within the Hyman's Group for monies to be deposited in the master account and for the senior financial accountant to dissect and allocate the funds to sub-accounts".

29 Mr Hyman's evidence raises some issues, that need not be further explored here, about inter-company accounting in the Hyman group and the relationship between that accounting and the CBA bank statements. It is consistent with other evidence indicating that the commissions and expenses for the Roboco auction were deducted from sale proceeds and accounted for to Roboco Communications, rather than invoiced separately to and received from Roboco Communications and banked. Although the invoice for commission and expenses and the statement of account for the sale proceeds were issued by the plaintiff, Mr Hyman's evidence does not explain how it was that the proposal letter was made by HPS and the auction agency agreement was in the name of the defendant. The fact that the plaintiff's name appears at the bottom of the agreement (though it is not mentioned anywhere in the proposal letter) cannot support an inference that the plaintiff was the true contracting party, as the appearance of the plaintiff's name as a footer to the document is consistent with other explanations.

30 In summary, the evidence shows that:

· one of the Hyman group companies performed valuation services for Roboco Communications in June 2004, but it is unclear whether the entity that was engaged to provide the services, and did so, was the plaintiff or HPS;

· one of the Hyman group entities conducted an auction of assets for Roboco Communications on about 3 August 2004 for which it was entitled to charge vendor's commission, buyer's premium, promotional and labour costs and other out-of-pocket expenses;

· Roboco Communications was invoiced on 26 August 2004 by the plaintiff;

· a facsimile transmission dated 26 July 2004 from one of the Hyman group entities sent Roboco Communications the proposal letter by HPS and the auction agency agreement in the name of the defendant;

· the auction agency agreement with the defendant was signed on behalf of Roboco Communications on 27 July 2004;

· contrary to the suggestion in Mr Hyman's letter of 24 December 2004, the fees and expenses earned for the Roboco auction were not deposited to the CBA bank account, but they were deducted from the proceeds of sale;

· the additional page of the invoice of 26 August 2004 cannot safely be relied on to indicate that the total commissions and expenses from the transaction were $24,806.12, but that amount was credited to HPS's loan account with the defendant.

31 In my opinion, the overwhelming evidence indicates that the entity providing auction services to Roboco Communications was either the defendant or HPS, not the plaintiff. I regard the auction agency agreement and the proposal letter as having particular significance. The fact that the transaction was invoiced by the plaintiff cannot, in my view, override the clear terms of those documents which imply that the plaintiff was not the contracting party. Consequently, if the amount credited to the HPS loan account represented commissions and expenses for the Roboco auction, the evidence does not provide a plausible basis for believing that this amount was incorrectly credited to the HPS loan account and should have been credited to the plaintiff's loan account.

32 Section 459H of the Corporations Act provides that the court must set aside a statutory demand if there is a "genuine dispute" between the company and the respondent to the proceeding about the existence or the amount of a debt to which the demand relates, if the "substantiated amount" of the debt is nil or less than the statutory minimum. The "substantiated amount" is calculated by taking the "admitted total" and subtracting the "offsetting total", the latter comprising "genuine claims by way of counterclaim, set-off or cross-demand”. In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, at 787, McLelland CJ in Eq explained the concept of "genuine dispute" as referring to "a plausible contention requiring investigation" which raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. The threshold is not high, but in my opinion, for the reasons I have given, the plaintiff has failed to cross it. There is no genuine dispute with respect to the amount claimed for the Roboco auction.

Grimwood Heating

33 As I have mentioned, at the hearing counsel for the plaintiff withdrew the plaintiff's contention that there was a genuine dispute with respect to the amount of $12,243 said to have been paid by Grimwood. He based the withdrawal on the court's rejection of part of Mr Hyman's affidavit, although Mr Hyman's affidavit does not specifically address the Grimwood transaction. In my opinion the evidence would not reveal any plausible contention that there was a genuine dispute about this amount even if the rejected parts of the affidavit had been allowed into evidence.

34 As I have said, the defendant's bank statements for the period from July to November 2004 for its sole account, the account with the CBA, are in evidence. They do not record any deposit of $12,243 from Grimwood, alleged by Mr Hyman to have been made on 23 September 2004.

35 The Receiver's lawyers contacted Graeme Clark, finance director of Grimwood Heating, and Mr Clark provided an affidavit. Mr Clark said that Grimwood had made no payment of $12,243 or any other amount to the plaintiff, or to the defendant, or to HPS. He said that Grimwood engaged the Hyman group to carry out a valuation of plant and machinery assets, for which $6,512 was paid in July 2003. Subsequently, he said, Grimwood engaged "Hyman's" to sell surplus assets. Although he did not provide any auction agency agreement, he annexed two invoices to his affidavit. One is an invoice issued by the defendant to Grimwood Heating and dated 29 June 2004. It identifies proceeds of an on-site sale of $30,805 inclusive of GST, from which were subtracted auction sale promotional and labour costs, leaving a balance of $21,867.50 for which a cheque was enclosed. The other is an invoice dated 20 September 2004 itemising sales, and labour and promotional costs, and referring to the payment of any $21,867.50 as a progress payment. Mr Clark explained that, as some of the assets were released late, Grimwood received four payments for the net auction proceeds.

36 The two invoices identify the defendant and make no mention of the plaintiff. However a letter was written to Grimwood on behalf of the plaintiff on 12 August 2005 explaining the steps that had been taken for marketing the sale and recommending a new telemarketing campaign for some specialised higher-value assets that remained unsold.

37 My opinion is that there is no plausible contention that the entity engaged to conduct the auction and account for proceeds to Grimwood was the plaintiff. I rely on the invoices. The fact that a letter was written more than a year later in the name of the plaintiff is immaterial. There is no genuine dispute with respect to the amount claimed for the Grimwood auction.

Conclusion

38 I shall make an order under s 459H(4) varying the statutory demand by reducing it by the amount of $9,020 to $37,031.43, and declaring that the demand has had effect, as so varied, from when the demand was served on the plaintiff, that is 3 June 2005.

39 I shall hear the brief submissions of the parties on the question of costs. It may be relevant that, although the amount claimed in the statutory demand included the sum of $9,020, the Receiver made it clear in his letter of 24 January 2005 that this amount should be deducted from the total amount of loan monies that he claimed.

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